Mortgage & Loan: Foreclosure Fight Forward!

The news that foreclosure in California is reaching record highs is the latest volley in the war between the merciless entropy that is the housing slump and homeowners' desire to hang in no matter what the cost. For a while there, it seemed like most of the folks who made the mistake of buying too much home with too little money would be left to twist in the wind.

But as with all previous bubbles, some genius finally realized that this will threaten the bottom line of many prominent financial institutions, and as such, the forces of finance are stepping up to offer favorable terms for owners on the verge of delinquency:

The agencies advised lenders that prudent workout arrangements that are consistent with safe and sound lending practices are generally in the long-term best interest of both the financial institution and the borrower...Examples of constructive workout arrangements include modifying loan terms, and/or moving borrowers from variable-rate loans to fixed-rate loans. Bank and thrift programs that transition low- or moderate-income homeowners from higher-cost loans to lower-cost loans may also receive favorable consideration under the Community Reinvestment Act (CRA), provided the loans are made in a safe and sound manner.

No less than Fannie Mae and Freddie Mac have stepped up and offered their own products to help people stay in their homes. My one caveat is that simply extending the "teaser" period for an ARM is like giving a cancer patient morphine rather than chemo--it may hurt less, but it won't solve the problem. The 30-year-fixed is the way to go, always.

Still, it's a good start. Let's see more of that, and soon. God knows it's needed.

Posted at April 18, 2007 11:41 AM

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The news that foreclosure in California is reaching record highs is the latest volley in the war between the merciless entropy that is the housing slump and homeowners' desire to hang in no matter what the cost. For a while there, it seemed like most of the folks who made the mistake of buying too much home with too little money would be left to twist in the wind. But as with all previous bubbles, some genius finally realized that this will threaten the bottom line of many prominent financial institutions, and as such, the forces of finance are stepping up to offer favorable terms for owners on the verge of delinquency: The agencies advised lenders that prudent workout arrangements that are consistent with safe and sound lending practices are generally in the long-term best interest of both the financial institution and the borrower...Examples of constructive workout arrangements include modifying loan terms, and/or moving borrowers from variable-rate loans to fixed-rate loans. Bank and thrift programs that transition low- or moderate-income homeowners from higher-cost loans to lower-cost loans may also receive favorable consideration under the Community Reinvestment Act (CRA), provided the loans are made in a safe and sound manner. No less than Fannie Mae and Freddie Mac have stepped up and offered their own products to help people stay in their homes. My one caveat is that simply extending the "teaser" period for an ARM is like giving a cancer patient morphine rather than chemo--it may hurt less, but it won't solve the problem. The 30-year-fixed is the way to go, always. Still, it's a good start. Let's see more of that, and soon. God knows it's needed.