The answer to debt is more debt

[Capricious]

The Fannie Mae way to deal with delinquent loans:



http://tinyurl.com/3269q9



"...servicers can now offer an unsecured, personal loan that will enable a qualified borrower to cure the payment default on a mortgage loan.."

"Fannie Mae anticipates that [this service] will reduce the number of delinquent mortgage loans it purchases from its mortgage-backed securities trusts and the fair value losses it would record in connection with those purchases..."


In other words, get the losses off the books.

 

[scooterbug44]

WTF - an unsecured loan to someone who can't pay their mortgage?

 

[YoungFT]

Some more information...


"The advance requires the borrower to sign a promissory note for the funds, payable over 15 years at a fixed interest rate of 5 percent. No payments are required for the first six months nor does interest accrue during that period so the advance is amortized over 14.5 years.


There is a $600 workout feepaid to the servicer. Delinquent home-owners can borrow the lesser of $15,000 or 15 percent of the original unpaid balance and the money is applied directly to the arrearage. The homeowner never receives the money in hand."

Clearly not for everyone, but should it be dismissed out of hand as bad for everyone?

If you reach the point that you need to consider this what's the current alternative?
1. Walk away
2. Hope for a government bail out
3. Work with the lender

For the segment of at-risk homeowners who find themselves in trouble because of a temporary hardship this seems to be a welcome alternative.

I suppose it's only natural, in the current environment, to look at everything with a skeptical eye - but this option has its merits.

 

[Mango]

For the segment of at-risk homeowners who find themselves in trouble because of a temporary hardship this seems to be a welcome alternative.

I suppose it's only natural, in the current environment, to look at everything with a skeptical eye - but this option has its merits.

I concur, albeit slightly skeptical. With current economic conditions and excessive job losses, if someone finds themselves in financial doo doo for a while, this could be beneficial, and keep even more foreclosures from hitting the books. It's a quick and inexpensive alternative to loan modifications. One could take a cynics view and look at it as Fannie trying to limit their losses and to avoid buying delinquent mortgages out of MBS, which is what they are doing. I'm not denying that, but they have done similar workouts in the past, and had a reasonable success rate with it. The only factor is in considering loss mitigation. They haven't encountered anything of the like as far as this meltdown. So, are they delaying the envitable? I could see this working with certain folks only.----Job loss or health issues who can't sell and change their lifestyles even if they wanted to, and that includes second homes and investments.

 

[YoungFT]

Mango was more articulate. And I agree.

My hope is that lenders, bankers, Fannie / Freddie, MBS investors, hedge funds, etc. will see the wisdom in developing creative alternatives before our imperial federal government can come up with some hair brain scheme to encourage moral hazard.

If the donnybrook brewing over the seating of Florida and Michigan delegates in the Democratic nomination is any indication of our future leadership, I can only encourage the private market to move with all speed in trying new things to help all parties get through the current mess before the next government gets in place and tries to do too much.

(PS - Greg Biffle #16 Ford looks good in Atlanta)