Mortgage Renegotiation
 

A friend of mine bought a new motorcycle last week, so Saturday he was visiting most everyone he knows, showing it off.
He rode down to Delaware to visit a friend that was up to his ears with an ARM mortgage that was approaching 20%, and in danger of losing the house.

The guy told him the mortgage company (CITI I think) had contacted him to renegotiate the mortgage. They said it was part of the "bailout" deal and gave him 2% for three years and 4% after that on a fixed rate mortgage.

He also had a home equity loan with the same company, and they gave him the same 2%/4% deal on that.
Now he won't lose his home and his wife is smiling again.

This is the first positive result of the "bailout", I've personally heard of.

That's a great deal for your mates mate Bruce.

Maybe the bailout will help those it's meant to help after all.

Have heard on the news about a local bank, Banner Bank, offering 30 fixed first mortgages at ... are you sitting down? 3.875%. Wow.

The catch is this rate is only available to customers with good credit, and only on select properties. Namely, properties whose construction has been financed by Banner Bank. The contractors/homebuilders are on the hook at the same bank and the bank doesn't want to own the houses first. So they're doing to get the money and the inventory moving.

Call your lender. Do it today.

Trust me.

Almost makes me wish I had a mortgage... almost. :rolleyes:

It still begs to ask, why are we helping so many people who made bad decisions when all those who pay on time are still screwed with the deals they made?

There was a letter in my parents' horrible right wing paper the other day. I rarely agree with anything written in it, but this one made me smile.

It suggested that the Government gives everyone over the age of 18 £500 to be spent in this country in the next three months. It claimed that this would be a far better deal that bailing out hundreds of different companies (and more specifically the banks) would cost less and would give the economy the boost it needed without printing more money.

It couldn't work of course - for a start you could never police the conditions, and the infrastructure needed would cost a fortune. But I liked the idea. Of course I did! £500? Yes please. I would spend it all on me & Diz. After all, everyone I know would have the same amount.

Anyway, glad that someone has had some joy out of the economic downturn though Bruce*. And that companies are acting responsibly now. Funny how news travels isn't it? Almost like in ye good olde days, when people would ride from farm to farm. Except this horse runs on petrol. And the internet thing... Nope, can't think of an analogy. Pigeon post?!

* Actually I have too. No-one seems to think it's weird that I am living with my parents again. Mum's friends do not ask "What's wrong with her?" Everyone assumes because I previously lived in London I had a high powered job in banking or finance and am just weathering the storm here. Which gratifies Mum more than me, but in doing so makes my life easier ;)

We could give every American two million dollars and not approach the level of money being thrown at big business.

That would be $600 trillion. It'll be a few more years before even our debt reaches that.

I understand the argument to be it would take too long to sort the wheat from the chaff, they need to get things stabilized ASAP.

It's sucky but it's the bitter pill.

Keeping people in their homes by re-structuring their mortgages isnt welfare or helping only those people who made bad decisions...it seems like good business sense considering the alternative.

Part of me wishes I could renegotiate, but I've been far too responsible and taken far too few risks so even though each month I barely scrape by (just sent my mortgage payment this morning with only five days to spare!) I doubt I could qualify for a restructure, and frankly with only 14 years left at 5.5% I'm not sure it wouldn't put me in a worse position if I did.

So I just have to hope I can keep scraping up that mortgage payment every month for 14 more years.

Yeah, without enough income, all the restructuring in the world wouldnt help us either. If hubby loses his job, we lose the home.

The new "Making Home Affordable" mortgage assistance program is not only (or not even primarily) for those who "made bad decisions."

It is for those who "pay their mortgages on time but are not able to refinance to take advantage of today’s lower mortgage rates perhaps due to a decrease in the value of their home"

And those homeowners "struggling to make their monthly mortgage payments either because their interest rate has increased or they have less income."

More on the FinancialStability.gov website.

Including self-assessment tools to see if you are among the 7 to 9 million homeowners who did not necessarily "make bad decisions" and are paying their mortgage on time or who might be struggling to meet payments because of recent job loss.

The Fact Sheet (pdf) has more details.

That was useful to know... I might even go for it, thank you!

The money isn't going to come out of thin air - either way, we all will bear a portion of the economic contraction.

Think of it as shoplifting or insurance fraud. The loss gets capitalized into the rates that everyone pays.

There's two ways to get to your neighbor's house: you can walk out your front door and take a left and you're there or you can walk out your front door, take a right and walk all the way around the block. Either way you end up at your neighbor's house but one way is a little shorter.

If you think you can "teach these irresponsible, deadbeats a lesson they won't soon forget", you are just kidding yourself. The money is going to come from somewhere. When times are good, we all benefit more than we deserve (stocks appreciate, homes appreciate, wages increase, prices drop - whatever). When times are bad, you don't get to carve out an exception for yourself. Times are bad for everyone.

So why can't we just let them go bankrupt in the cases of bad decisions and live in a box for punishment?

I think you would be surprised. If you're paying more than 1/3 of your income, you might qualify for one of the programs. You may not be able to get that 2% deal, but most lenders are willing to work with people right now who are struggling, even if they HAVE been making payments on time. Check out these links: http://www.financialstability.gov/ma...nance_yes.html
http://www.treas.gov/news/index1.html
http://www.treas.gov/press/releases/...es_summary.pdf
http://www.treas.gov/press/releases/...guidelines.pdf

I know someone who is in the process of getting refinanced. She didn't have an ARM and when she got the loan she could afford it. Since then, her husand passed away so she no longer has his income, and she had a heart attack, so she can no longer work. She tried to get refinancing last summer and they said no, and she had her house on the market for over a year trying to get into something smaller. She doesn't really owe that much anymore, but the payments are high and since her situation has changed so drastically, she really does need the help, or she could end up losing her home.

I would say call anyway and see what they say. It can't hurt. Lenders are more open to helping people right now, because they almost have to be.

Because some of the people getting hurt now really didn't do anything wrong. Refinancing people's loans shouldn't bother you if it keeps them in their homes. It will help calm the housing market and eventually stop prices from falling, something people are very concerned about. Less forclosures DOES help YOU, whether you realize it or not.

Your anger is aimed at the wrong people. You should be angry at all the bankers and investors and lenders who caused the problem by creating unethical structures that would increase their wealth even though they knew wouldn't work. It never ceases to amaze me how you pick on the little people and never point the blame where most of it should go, corporate greed and excess and corruption.

yea, those evil Corps. People have no personal responsibility in this. Just blame some esoteric entity.

PEOPLE ran those corporations. PEOPLE made decisions that put the world economy at risk. MOST OF THE PEOPLE WHO DID THAT were the people who worked at banks, mortgage companies and other lending institutions. They did things that straddled the line of illegality, and were certainly unethical. And they KNEW IT. I have a feeling a lot of people will be going to prison when this is over. And rightly so.

Bernie Madoff is finally in prison. Next I hope they start looking at the people running the institutions that caused the financial meltdown, like Richard Fuld, the people running AIG and Citigroup, the people at Countrywide, etc etc etc.

And the elected officials in charge of oversight like Barney Frank & the
Committee Members

Them too.

:D

The R's too Merc - Every fuckin one of them. Their oversight was apparently as useless as a rainstorm over the ocean. We have justifiably been very critical of mgmt at these companies, well lets look at this group too. Seems to me they have been getting a free pass.

Gotta go with sugarpop on this one. The mortgage structures that paved the way for the mess we are in should never have been allowed to exist.

Once they hit the market, Fannie and Freddie had no choice but to buy the damn things since they were targeted at folks who could not otherwise have purchased a home otherwise they would have been criticised for not fulfilling their charter of expanding home ownership.

Trouble is, those instruments were abused. They were used to buy more house by people who didn't need the extra help. That's why housing prices skyrocketed and the collapse of these time-bomb mortgages is a big part of why the housing market and nearly the entire international financial market almost collapsed.

These risky instruments were not only created in the mortgage market but in every kind of credit market. Across the globe. A lot of people saw how bad an idea this was but nobody could stop it. One could even make the case that this economic collapse was inevitable. Kind of like a fault line that never eeks out periodic mini-quakes of tolerable magnitude but continues to build pressure until the inevitable 9.5 continent-crusher.

the govt has done that twice in the time we've been here. Each time we've said thanks very much and squirrelled it away :D

oh wait, and it would be easy to add a time limit. use debit/gift cards instead of checks.

Saving it is actually the same thing as spending it. In the long-run, its better. When savings go up, the cost of credit goes down which leads to more investment which leads to... you get the pic.

And paying down debt is economically similar to saving.

oh good, I'll stop feeling guilty about it then!

And the legislation that enabled them is at fault, no?

There was no enabling legislation - there was also no legislation prohibiting lending institutions from orginating the stuff.

There's no law against making risky loans. Nor will there be. Free market thing and all.

Perhaps I worded that poorly, no I know I did.

And smarter.

This is the reason why I said (somewhere) that I don't think mortgages should be traded. If you have to hold on to a mortgage, then you are more likely to make good, sound loans. I never even knew mortgages WERE traded until recently. Really, who came up that genius idea? that is the STUDIEST thing I've ever heard. Well, not really, but close.

Yeh they just started trading them last year or so. :eyebrow:

Mortgages aren't really traded. A small number are but the vast majority are combined with other mortgages into mortgage securities. While its tempting to blame this idea for the economic downfall, it is precisely this idea (that has been around since the 1970s) that has allowed the vast majority of Americans to obtain affordable mortgages.

Its only the recent development of the uber high-risk stuff that is to partially blame for the economy. The underlying secondary mortgage market is really a thing of beauty and remarkable efficiency.

Thanks Beestie. My understanding (and believe me, while I have very strong opinions around this issue, I don't understand most of it) is that they were bundled and sold, and that happened so many times, in some cases they don't even know who owns the mortgage.

What is the credit default swap?

tw will have a field day with that one. n Thats gotta be worth at least 500 words. :3_eyes:

It ought to be appalling to more than just tw.

My mortgage was sold to a different lender a half dozen times. But not being bundled into a package, each buyer had to look at it by itself, and judge it's merit as an investment for them. When they are bundled, the buyer is buying a surprise package.:gift:

Why? I am not supposed to have opinions about things that are happening because I don't understand some of the finance stuff? The more I learn about some of the things traders do on Wall Street, and things people do who work in related fields, the more I think we need to pass laws to stop it. I'm furious that those people get away with doing things that cause damage to society as a whole. You should be furious too. Sorry, I'm not telling you how to feel, but damn...

And that's the way it should be. The more you fume without knowing the facts, the less seriously people are going to take you.

Your loan was sold once - maybe twice. What was sold over and over was the servicing rights - collecting the payments.

Unless your loan was one of the few that don't get carved up, it was put into a pool of other similar loans, and the combined payments from you and your pool-mates are split up into all sorts of interesting structures. However, as complicated as the structures are, all the payments to all the structures have to equal all the payments by all the borrowers for any given month. And that can get incredibly complicated.

I know I am opinionated, and that may rub some people the wrong way (especially on a forum where you can't hear me/see me), but most of the things I say are based on facts that I know are facts, or things that I've read/heard from other knowledgable people. I usually do some research into things before I form an opinion. Just because I don't understand some of elements involved doesn't mean I can't understand the bigger picture. and, I know I am not always right. I am usually willing to admit when I'm wrong.

In addition, I would like to add that, just because two people have different points of view doesn't necessarily mean one is right and one is wrong. They can both be right, from their own perspective. If ten people witness an accident, there will probably be ten different versions of what happened. Are they all lying?

hmmm. Maybe when I used the "traded" it was wrong, but from this description, can you understand how I made that mistake? What do you mean by "carved up" and"interesting structures?" I am trying to understand this. Thanks!

Damifino? Several times I got notices from different places saying they now held my mortgage. It was a pain in the ass because they would invariably say the last guy wasn't collecting enough escrow. :haha:

But then the letters would start, do you know you live on a 100 year flood plain? Who wrote the flood insurance policy? Who wrote the homeowners policy? Why doesn't your mailing address match the deed address? Blah, blah, blah, every damn time. I was glad to be done with it.

Definitely servicers. Not a very sophisticated lot.

Years ago I used to be the guy at Fannie Mae all the servicers would send the monthly servicing data and payment to for loans Fannie Mae actually bought and held onto (as opposed to securitizing). I was responsible for validating the data and the payment before uploading it to to make sure everything checked out. It usually did except for one servicer. Their data was always full of errors and the payment was always wrong. Serious errors. After months and months of looking at their servicing data and seeing things that I could not believe I was seeing, I told Fannie that the servicer was basically making shit up.

The year? 2003. The servicer? Countrywide.

Nobody listened.

WOW. That is crazy Beestie.

CMO
REMIC
MBS
CDO

Quiz on Monday. :speechls:

You mean this whole financial debacle is your fault because you didn't go on 60 minutes? :haha:

:D

It's Beestie's Fault!

:Headspinning:

Thanks Beestie. It's still confusing, and frankly I think some of that stuff should be outlawed. I did watch the Dateline special last night on this whole mess. It was very apparent that certain mortgage lenders were mostly to blame (although there is plenty of blame to go around), and actually committed fraud, and used intimidation to try and force some people to get with the program, damn the consequences. The more I learn, the more I think a whole shitload of people should go to prison. And it was laughable that some of those people thought they could afford the houses they were buying. How in the hell could a personal trainer making $20k/year, who was basically homeless, think they could possibly afford a $250k condominium? Clueless.

Link

Wow - thats a situation that isn't going to be fixed no matter how much money you throw at it.

Any thoughts on the idea of refinancing these types of mortgages at something closer to the current value of the home? IS that a feasible option? Logistically or financially? Would the lenders have to wipe the monetary differential off their balance sheet? Would that amount just vanish?

It's already vanished, mostly because it never existed, except in the bubble.

I know Bruce, but I would venture a guess that a house that was assessed at $500,000 3 years ago is still on the books for that amount - even though (assuming) its present value is 1/2 that.

You mean the tax books or the mortgage books? The tax thing would require a reassessment. The mortgage thing, poof, now you see it, now you don't. It only existed on paper and never was tangible. Probably that mortgage was folded, spindled and mutilated too. That's why so many people have been successfully fending off foreclosure by demanding the company trying to foreclose produce the signed mortgage papers.

if you're asking whether it makes sense for lenders to write off money owed because the collateral is no longer worth its initial value, then no.. that won't happen....and it doesn't make any sense. would you allow them to increase your debt if the place appreciated?

They are renegotiating terms (interest rate & time), though, to prevent having to take possession of properties they don't want.