On Jan 9, 4:51*pm, jimmyaramb...[at]gmail.com wrote:
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Sure. When 10% of all mortgagees are both upside down and non
performing, the banks are going to be more flexible. When 10% are
upside down, but 90% of those are still paying, the bank would be
crazy to be willing to let those 90% reduce their loan balances for
the sake of the 1% that can't pay AND are upside down. This is a huge
game of chicken. Blinking first is a losing strategy.

Banks are only modifying balloon loans only because the federal
government can label that loan not valid and cause more of a loss for
the bank due to predatory lending practices not regulated. The banks
got away with murder allowing these practices and selling homes way
over their value, because of this anyone who purchased in the past
couple years is now upside down. Then they have the nerve to pin it on
the consumer. The banks are acting like being upside down are normal
terms when in reality its not. I reside in florida and it came a time
when a one bedroom 700 sq ft condo was costing 300,000. Yet the
unemployment rates are sky high and will go more up in the second
quarter, banks are failing to see that if the unemployed homeowners
mortgages aren't modified then they will continue to suffer. This is
what's causing people to rip off there kitchen, bathroom and whatever
they can take leaving the home worthless. So in reality when its all
said and done the banks will lose more taking over these properties
than working with the consumer.

On Dec 20, 6:54*pm, dan <dan.gos...[at]gmail.com> wrote:
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They may belatedly realize that many of their borrowers are hopelessly
uncreditworthy and that the choice is not between foreclosure or
slightly lower payments from a modified loan but between foreclosure
now and foreclosure six months from now after missed payments, as
described in the article quoted below.

Here is another consideration. Obama talked during the campaign about
a 90-day foreclosure "moratorium" for homeowners "who are acting in
good faith." Litigating what is meant by "good faith" is not something
lenders are eager to do, so it may be safer for them to foreclose
before the incoming president tramples on their property rights.

http://www.bloomberg.com/apps/news?p...v5o&refer=home
Majority of Modified Loans Fail Again, Regulator Says
By Alison Vekshin

Dec. 8 (Bloomberg) -- Most U.S. mortgages modified in a voluntary
effort to keep struggling borrowers in their homes and stem
foreclosures fell back into delinquency within six months, the chief
regulator of national banks said.

Almost 53 percent of borrowers whose loans were modified in the first
quarter were more than 30 days overdue by the third quarter, John
Dugan, head of the Treasury Department’s Office of the Comptroller of
the Currency, said today at a housing conference in Washington.

“The results, I confess, were somewhat surprising, and I say that not
in a good way,” Dugan said, citing a third-quarter survey his agency
plans to release next week.

Lenders and loan-servicing companies have been modifying mortgages by
lowering interest rates or creating repayment plans through the
voluntary Hope Now Alliance. The group, which includes Citigroup Inc.,
JPMorgan Chase & Co. and Bank of America Corp., said last month it
helped 225,000 borrowers keep their homes in October.

Foreclosures rose to a record in the third quarter as one in 10 U.S.
homeowners fell behind on payments or were in foreclosure, the
Mortgage Bankers Association said last week.

“Our third-quarter report will show many of the same disturbing trends
as other recent mortgage reports,” Dugan said. “Credit quality
continued to decline across the board, with delinquencies increasing
for subprime, Alt-A and prime mortgages.”

The OCC’s survey represents institutions that service more than 60
percent of all first mortgages, or 35 million loans worth $6 trillion,
Dugan said.

On Dec 21, 12:57*pm, "Elizabeth Richardson"
<erich...[at]worldnet.att.net> wrote:
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Slipery slope.

"dan" <dan.gosser[at]gmail.com> wrote in message
news:a3c00049-e7cb-4e6e-83eb-0ca9edf0579e[at]17g2000vbf.googlegroups.com...

- quote -

There are many banks starting to do this. I know because my daughter is
going to do it.

Elizabeth Richardson

On Dec 20, 6:54*pm, dan <dan.gos...[at]gmail.com> wrote:
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Because if they did this for the 1% (or 2% or 5% or 10%) of their
loans that are going into foreclosure, the rest of their portfolio
would start sliding downhill fast. When the word gets around that if
you are upside down on your mortgage, you can get a modification if
you start missing payments, their phones will be ringing off the hook
and their cash flow will dry up. Not to mention the number of loans
that will actually be in a non-performing status will skyrocket, which
is really poisonous for a bank. I am sure lots of people will be
willing to trash their credit for a fixed rate loan that they could
never now qualify for, plus a reduction in the principal, which might
be worth tens or even hundreds of thousands of dollars to the
borrower.

On Dec 20, 6:54*pm, dan <dan.gos...[at]gmail.com> wrote:

- quote -

Because they don't want to take the loss twice. If you have a really
high rate of interest, the payments will be so high that you actually
drive up the probability of default and another foreclosure. You can't
set the rate of interest high enough to cover the probability of
default for the riskier borrowers. The problem is that when people can
buy with 5% or 2% down, they have so little skin in the game, the bank
practically owns the house. And if the interest rate is in double
digits the borrower never really builds meaningful equity for a long
time, so that the first thing that goes wrong, the homeowner is
tempted to walk away. If the thing that went wrong is that the value
of the house declined even further, then they are doubly likely to
just walk, but in effect they have no equity at all.

We all know that banks are taking huge losses on foreclosed homes.
However, I don't understand why they aren't modifying more loans to
create either temporary or permanent terms that work for the home
owners.

Sure, they may need to reduce the interest rate or throw some of the
reinstatement amount to the back of the loan, but isn't that better
then taking a 20-30% loss when the property is sold as a bank REO?

If it's a portfolio lender I'd imagine that it would be pretty easy.
However, I am curious about the process for approval for a
modification when it's a loan that is bundled and sold on the
secondary market. Wouldn't investors who bought these securities be
better off with slightly modified loans?

AND... when a bank has an REO, why won't they offer financing, even at
a very high rate to riskier borrowers, just to get the home sold at
full market value. I know banks aren't in the business of real
estate, but even if they have to take the property back and try again
it seems like it would be a better option than just taking that huge
loss up front.

I know that I'm no expert on this, but I'm really curious what
everyone thinks.