Posted on 09/08/2005 3:26:08 PM PDT by Maria S
NEW YORK -- In what may be a first for the U.S. housing market, banks are being encouraged to return the most recent mortgage loan payments from people displaced by Hurricane Katrina.
Freddie Mac, one of two government housing agencies, said Thursday it has asked banks to return September mortgage payments already made by anyone in the stricken areas. Also, the housing agency has asked lenders to return any September mortgage payments if borrowers ask for their money back.
"It is unprecedented," said Nicolas Retsinas, at Harvard University's Joint Center for Housing Studies. "It is one more option for people who have fewer and fewer options." "I am not aware that it has occurred before," said Douglas Duncan, chief economist at Mortgage Bankers Association. "At the end of the day, everyone hopes all the borrowers will be able to return to a home and meet their mortgage payments on time and be re-established in their housing," he said.
Duncan added that "their incentives are aligned. If the borrower loses, then the lender loses and the investors lose."
Freddie Mac made its recommendation to banks in an advisory letter. That letter was sent to 2,300 loan servicers, bank arms that collect monthly principal and interest payments.
The housing agency, based in Washington, also asked that lenders extend the length of time borrowers can forgo monthly mortgage payments, known as forbearance, to a full year.
If, for example, a mortgage payment was automatically drawn from a borrowers account, Freddie Mac has asked servicers to return that money to the borrower's bank account. If payment was made by check or by other means, Freddie Mac is asking the lender to send it back upon borrower's request. The policy applies to homes in disaster areas designated by the Federal Emergency Management Agency.
"We will follow Freddie Mac's proposed guidelines. We encourage our customers to reach out to us and contact us," said Alan Gulick, spokesman for Washington Mutual which is in the process of identifying what loans were affected by the disaster.
Fannie Mae, at midday Thursday, was unable to respond to inquiries from the Associated Press asking if it would follow by encouraging similar policies.
Freddie Mac and Fannie Mae are housing agencies created by Congress to encourage home ownership. Both sell guarantees to mortgage lenders. The guarantees of timely principal and interest payments allow lenders to resell their home loans as securities to a wide range of investors like mutual funds, central banks, insurers and hedge funds.
The new policy being encouraged by Freddie Mac applies only to loans for which it provides guarantees. So, any investors holding securities pooling Freddie Mac guaranteed home loans would not be affected by any problems borrowers encounter.
According to a Freddie Mac spokesman, servicers can suspend loan payments for the first 90 days. During that time Freddie Mac advances the monthly payments to investors holding securities backed by the loan payments.
After 90 days, lenders will decide whether to extend the forbearance period to as long as a full year.
After that first 90 days, Freddie Mac will be responsible for principal payments and bank loan servicing arms will be responsible for payment of interest on loans each month that will be passed on to investors holding the mortgage backed securities, according to a spokesman with the housing agency.
At the conclusion of the forbearance period, borrowers will have a new pay plan that will allow the borrower to catch up with their payments, according to a Freddie Mac spokesman.
The new plan could involve lengthening the life of the loan or increasing monthly loan payments.
In the case of a default, Freddie Mac will pay off the loan and absorb the loss. The housing agency will try to minimize its loss by collecting any mortgage insurance the borrower had or collecting from any flood insurance policy, a Freddie Mac spokesman said.
On Thursday the U.S. Labor Department said an estimated 10,000 workers who lost their jobs because of Hurricane Katrina filed for unemployment benefits last week, the first of what likely will be hundreds of thousands of displaced workers seeking benefits.
The Mortgage Bankers Association, an industry trade group, estimated that 360,000 single-family mortgages in the four states were affected by the hurricane and the ensuing floods.
© 2005 The Associated Press
All aboard the Gravy Train! All aboard! Tickets, please! We accept $ 2,000 debit cards!
Are the victims of all the hurricanes in Florida going to start complaining? They have a legitimate gripe - just like the the OK City bombing families.
The abuse potential from this storm will be mind blowing.
Does this include Trent Lott?
This is absolutely the most insane idea to date. Can you say major depression to hit US?
I dread to think who will come out of the woodwork to make their claims for God knows what catastrophe they will claim the govt owes them for, they are starting a precedence with all this that will start a firestorm and flood of attorneys suing for every known and unknown claim.
Imagine every home that is destroyed in any hurrucane, tornadoe, flood etc will now expect the same treatment.
What is wrong with our govt have they all taken leave of their senses or have the socialists taken over the govt and we haven't been told??
Conservatives need to get a grip and start acting like conservatives!
hurrucane = hurricane
Katrina the hurricane that caused a conservative meltdown....
That check represents the last dime the bank is likely to see on property that is now worthless. So can a multi-billion dollar bail out of the banks and mortgage companies be far behind?
I can see where this comes from - and if a bank so desired to do this of their own free will - that's their choice.... BUT...
Legally, no-one is entitled to their September morgage payment back. That's what homeowners and/or flood insurance is for. I believe that most (probably all) mortgage lenders REQUIRE flood insurance if your property is a flood zone. Every square inch of NO is in a flood zone - and I'm pretty much certain that most of the worst damaged zones in the gulf all are on flood prone zones.
What web-site are the forms on?...My elbow bends at the elbow joint..do I get double?
I would love to hear the long term effects from an economist and how all this will affect all of us in the end.
Banks, returning mtge payments, banks and finance companies not getting car payments, credit card companies not collecting payments, health insurance companies extending coverage for 30 days and not receiving premiums. AND the govt giving all these people money and supporting their every need for years to come.
WHERE is all this money going to come from?
Who will really pay for all this in the end??
Socialist crap.
If the borrower loses, the house gets a new owner and a new mortgagee that will make payment.
"Who will really pay for all this in the end??"
Who do you suspect is going to pay for it in the end?
Those of us who get up, suit up, go to work every day, pay our taxes on time, keep up our house payments, car payments, and keep putting one foot in front of the next.
Yup, that's true.
The taxpayer is left footing the bill as usual.
I can truly understand helping those people who did just like we did, work to support our families and worked to buy those homes and cars, they should be offered some relief, we know they will pull them selves up and rebuild and I can understand helping people like that gladly!
Given the mongo donations to the Katrina victims already, it would seem reasonable to use part of those to meet the mortgages, assuming the owner wants to rebuild on the same spot once reclaimed. At $500K a head and still growing that should be a no brainer, shoot most people with that could buy out their mortgage and have plenty left over.
However, I don't think most banks there are going to exactly lose their shirts if they forgive the mortgages, because there is going to be a land office business in financing rebuilding.
There ought to be 100 senators lined up to halt this idea...because this opens tremendous doors. Only a fool in business would go along with this idea. You are asking for major structural issues that people can't calculate...why even bother loaning any money to a zone near the coastline for house construction? I'd take every penny out and require a customer to live 20 miles inland. Anybody that wants to play this game...will destroy the economy rather quickly.
"Conservatives need to get a grip and start acting like conservatives!"
And therein lies the problem.........
At the suggestion of writer Michelle Malkin last Friday, I have cobbled together a blogsite called Texas Clearinghouse for Katrina Aid to serve as a clearinghouse for refugee efforts in Texas.
Texas is getting more refugees than any other state -- that's fine, we'll take them all -- but we need help providing them with food, clothing, medicine, and shelter. We need help taking care of their pets, too.
If you are a refugee, you can information that will help you find relief. If you want to donate or volunteer, you can find someone who needs you. Believe me, there are a lot of organizations who need your help.
Right now the site mostly covers Houston, San Antonio, and Dallas but I'm adding more every night. My wife was down at Reunion Arena in Dallas Tuesday handing out care packages and spiritually ministering to the refugees as a representative of her employer. She says that the situation is tragic and that there's a lot of work to be done. There are so many children who don't know where their parents are or even if their parents are still alive.
There are a lot of churches and other organizations in Texas that need help in dealing with the problem and I would appreciate it if you would get the word out.
Many thanks,
Michael McCullough
Stingray blogsite
Local news just showed a segment from Baton Rouge, the real estate there is booming, the price of homes increased 20%, they had 3500 homes few months ago and just have 500 currently available for buyers. That's encouraging news. The person said that they are actually going house to house asking people to sell there is that much demand for housing there.
Sounds like they will be the next CA real estate boom ;)
I was hoping that would happen in our city here in TX, I would consider selling for the right price.
All we are seeing here in Dallas TX are the people screaming in the camera that they are angry because they are standing in the heat waiting for their debit cards. Supposedly the Fed Govt is supposed to reimburse Dallas to cover 60 days of bills for housing the evacuees and than Dallas is on their own and will have to pay.
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