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35 mil Restructured Loans-53% Redefault

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  • 35 mil Restructured Loans-53% Redefault

    So where does 50% "success" rate fall on the grading scale? Not to mention there is still plenty of time for others to fall as they lose their jobs.


    http://money.cnn.com/2008/12/08/news...ion=2008120815

  • #2
    Re: 35 mil Restructured Loans-53% Redefault

    Originally posted by sirbrian82 View Post
    So where does 50% "success" rate fall on the grading scale? Not to mention there is still plenty of time for others to fall as they lose their jobs.


    http://money.cnn.com/2008/12/08/news...ion=2008120815
    How not-surprised I am.

    Dugan said the Office of the Comptroller of the Currency is asking servicers for more details on these loans to determine what went wrong.
    I'll tell you what went wrong, there was no way those people could afford their mortgages. The "modifications" made little difference.

    Comment


    • #3
      Re: 35 mil Restructured Loans-53% Redefault

      Originally posted by zoog View Post
      How not-surprised I am.

      I'll tell you what went wrong, there was no way those people could afford their mortgages. The "modifications" made little difference.
      As a landless peon, I'm actually somewhat relieved that these restructured loans are failing. Housing prices have to come down, and too much support from restructuring and government intervention will slow that process and prolong the agony. These folks don't need a mortgage they can't afford adjusted to one they can barely afford -- they need to replace a mortgage they can't afford with a rent that they can easily afford. The personal loss that may come with foreclosure (assuming they had any equity to begin with) needs to be balanced by losses sustained by the FIRE economy -- for instance, a much lower return from the properties. I think the banks that are going to end up owning these foreclosed houses need to get into the rental property management business pronto, and accept the delta between unaffordable mortgage payment and affordable rent. The resident won't be accumulating equity in the home and the bank will be receiving smaller payments, but at least the houses won't sit empty and the family won't be out on the curb.

      Easy for me to say as a renter (or should I say "parrot", since I didn't think of this myself), but I think both the home-"owner" and the bank are to blame for this mess, and this is a way that both could take their lumps.

      Comment


      • #4
        Re: 35 mil Restructured Loans-53% Redefault

        Gubmint policy is plain and simple: keep people paying SOMETHING so they don't walk away, and so the loan can somehow remain "performing."

        They will modify a loan with someone without a pulse, just to buy some extra time to accomplish that.

        All along in this housing bust, they have not done two things:

        1. They have not made short sales easy, as they should be.

        2. They have not made principal reductions possible except in very select cases.

        It is #1 above that is especially galling. Most folks trying for loan mods really can't afford their house. They should move. They should sell. The collateral will be on the market, re-priced at maybe 50% of what it was worth before. And the market can re-adjust with new, poorer people being able to afford to buy a house.

        But that won't happen because the lenders put every obstacle possible in the way of short sales. There is no government support for short sales.

        Principal reductions also are basically not happening.

        So these loan mods are a big joke...

        Comment


        • #5
          Re: 35 mil Restructured Loans-53% Redefault

          Here in Orange County there are some interesting distortions that I can see.

          1) Housing is beyond stuck - houses are vacated and they sit without ever being brought to market. In fact, I don't ever see some of these properties appear on sites like Foreclosure Radar. A number of multi-million dollar homes have been boarded up once the exterior shell is completed. Homes are still sometimes listed at 30% premiums to the prices of homes in the neighborhood that have been on the market for a year or more - this I don't understand.

          2) Foreclosures are coming too quickly for even last ditch attempts at turning them into rental properties. Solvent landlords are able to pick the cream of the crop for tenants with stable incomes. While they may not have pricing power, rents are not dropping like I would have expected.

          3) Local corporate rental properties have increasing vacancies and the turnover is high. My friend who works maintenace says that the quality of tenants is low and has been moving lower for the last year.

          By my estimation, we're about 1/2 down EJ's housing ski slope and if the homes in our area were competitively marketed, we'd be 2/3 to 3/4 of the way through the necessary correction.

          Hoo



          Originally posted by ASH View Post
          As a landless peon, I'm actually somewhat relieved that these restructured loans are failing. Housing prices have to come down, and too much support from restructuring and government intervention will slow that process and prolong the agony. These folks don't need a mortgage they can't afford adjusted to one they can barely afford -- they need to replace a mortgage they can't afford with a rent that they can easily afford. The personal loss that may come with foreclosure (assuming they had any equity to begin with) needs to be balanced by losses sustained by the FIRE economy -- for instance, a much lower return from the properties. I think the banks that are going to end up owning these foreclosed houses need to get into the rental property management business pronto, and accept the delta between unaffordable mortgage payment and affordable rent. The resident won't be accumulating equity in the home and the bank will be receiving smaller payments, but at least the houses won't sit empty and the family won't be out on the curb.

          Comment


          • #6
            Re: 35 mil Restructured Loans-53% Redefault

            Can't disagree that modification programs are not the answer. The only answer is to allow the market to continue on its corrective path until real estate values are in line with wages and rents. But nobody has the gonads to state the obvious.

            Many loan servicers are stuck between a rock and a hard place (granted many deserve to be exactly in that position). One one side they are bound by the servicing and sale agreements that dictate policy with securitized mortgages. And on the other side are state attorneys general, legislators, city and county governments and main stream media. Navigating in that environment is a no win situation.

            One interesting blip on the radar is the possibility of bankruptcy legislation that would enable cram-downs. See http://www.housingwire.com/2008/11/18/mortgage-cram-down-legislation-resurfaces/

            In a cram-down, the bankruptcy judge could bifurcate the mortgage debt between secured and unsecured amounts. The secured amount would be relative to the property value. The unsecured portion would be either discharged outright or uncollectable as a practical matter.

            The Mortgage Bankers Association naturally opposes such legislation arguing that it would significantly increase future borrowing costs to the consumer. It would at the very least clog the bankruptcy courts and bring them to a standstill I suspect.

            It may be the only mechanism by which principal reductions might take place.

            Comment


            • #7
              Re: 35 mil Restructured Loans-53% Redefault

              Originally posted by swgprop View Post
              It may be the only mechanism by which principal reductions might take place.
              burn the lenders
              http://www.youtube.com/watch?v=zvK99O22Ooc

              http://online.wsj.com/article/SB1228...googlenews_wsj
              On Monday, a fund set up by Mr. Frey's Greenwich Financial Services LLC became the lead plaintiff in a lawsuit challenging an $8.4 billion settlement between Countrywide Financial Corp. and state attorneys general. The agreement, which was hailed as a milestone at the time it was announced, calls on Bank of America Corp., which acquired Countrywide in July, to modify roughly 400,000 mortgages, most of which are owned by investors. In settling, Bank of America neither admitted nor denied guilt.

              http://www.reuters.com/article/marke...63751820081208
              NEW YORK, Dec 8 (Reuters) - A fund representing bond investors seeking to force Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz)-owned Countrywide Financial to repurchase thousands of mortgages failed to satisfy requirements to sue under contracts governing the securities, according to Countrywide attorneys.
              John Beisner, a laywer at O'Melveny & Myers LLP, in a Dec. 8 letter asserted Greenwich Financial Services "lacks standing to sue" under contracts that limit lawsuits unless conditions are met, including that 25 percent of bondholders request such litigation.
              http://online.barrons.com/article/SB...lenews_barrons
              Yet the securitization trusts wouldn't get off scot-free for our full-price purchase. They would have to shoulder, say, the first 25 cents on the dollar of any losses our entity suffered from foreclosures and other credit losses. Thus the government's effective exposure would be capped at 75 cents on the dollar.

              Comment

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