Posted on 12/07/2007 5:57:26 PM PST by jiggyboy
A day after the White House unveiled a program to salvage the mortgage market, people are already talking about how borrowers might game the system.
To qualify for the fast-track program, borrowers must have a FICO score of less than 660 and it can't have increased by more than 10% since they took out their original subprime mortgage.
Because income isn't checked, some experts worry that borrowers who might otherwise be able to afford higher payments will try to lower their FICO score to qualify for a rate freeze.
"The message here is to get your FICO score down," Mark Adelson, a structured finance expert, said. "Don't pay some bills, but keep up with mortgage payments."
(Excerpt) Read more at marketwatch.com ...
I find it funny that you feel that THIS will have a worse end result than these properties being foreclosed.
First off, the qualifications given here guarantee it’s probably less than about 2% of all mortgage holders that qualify anyway...secondly, even if it prevents half of the homes that would have been foreclosed from being foreclosed, then it’s a win for the banks, not a lose.
Well isn't that special! 3% of what? If Joe McMansion owes 300K on his transitional colonial ranch, against what value shall we measure his equity? Against what he (over)paid? Against what he could sell it for in a forced sale? This scheme is a half-baked mess which only preserves the mortgage processors' flow. I'm confident that the next bailout for people who owe more than their homes are worth will be better conceived.
BTW, what's so wrong with foreclosure on people who bought and borrowed too much house? It's not like they're going to lose an arm or go to debtors' prison. So they have to move to a rental. Big deal. Be smarter next time.
It’s a small number, I’d guess less than 2%, of all the mortgages out there that are even affected.
Hardly a bane.
Many loan processors could care less, though, and even encourage applicants to be dishonest.
You can bet your bottom dollar that interstate commerce was involved in this housing market mess.
Actually the government is not using any authority and passing no law or providing no funding. All the government did was provide cover so these banks/fund managers can change loan terms without getting in trouble with their investors.
Many do. I choose to be above-board.
>>Just wait til housing becomes a federal entitlement.
It’s not? I thought that was what Section 8 was about.
I didn't say it would be worse financially. It is worse in terms of moral hazard.
It is the banks and investors who make out on this deal, that's the real secret.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
Keep in mind the Fed is officially trying to break legal contracts. Not an area to tread lightly.
The real question is, How does someone sitting on cash make some money on all this?
Yes. That I’ll agree with.
However, to be frank, it’s a rather small number of people.
Here’s how I view it. And, yes, I am a mortgage loan officer, but I’m not just looking for self-interest here, because with my client base, there are actually more buying opportunities for them (and therefore more opportunity for me) in a market with more foreclosures.
I’m speaking pragmatically. In today’s political environment, you and I both know that they “had to do something.” Sad, but true.
This is preferable to what a potential (but still hopefully not something that will happen) Democrat administration would do that would take real taxpayer’s money. This did not.
That part I have issue with and I don’t know how it will shake out.
Strictly mathematically, it’s probably better for the investors, as they’d lose more money selling at 65 cents on the dollar in foreclosure than doing this...legally, not so sure.
I am not sure on this deal, but there will be good money to be made on all the foreclosed homes over the next couple of years. If you can find one in good shape, they generally sell for 15-50% less than market value.
I don’t think this is a move Ron Paul would try. Somehow I just don’t think he would.
As the details of this plan ooze out, it's apparent that the plan benefits the mortgage service companies, principally, and that it screws mortgage purchasers. You should spend some time reading the details and understanding how the flows work.
The mortgage holders are not the ones making adjustments to the terms. it's the mortgage servicers, whose skin in the game is 0 from a credit extension perspective. Their interests are aligned with keeping the junky (Joe McMansion) paying his mortgage at whatever rate of interest, because the servicer is earning fees for processing. The mortgage holders will likely sue the servicers over this, but it's probably moot: workouts of subprime have been very poorly received by borrowers who wish not to compound the frauds they originally committed in lying on loan docs. So in the end, this appealing plan will have little meaningful effect, other than to serve as an exclamation point to this sad administration.
True enough, but there are lots of other things he wouldn’t try either...defending our nation against terrorism being one.
Play credit savior face to face.
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