Mortgage mess rescue discussions continue

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Services for Real Estate Pros

Washington is in high gear again, after a long hot summer, immersed in talks about how to deal with the current mortgage dilemma. The latest round this week involved the Congress and some of the key players in the government, like the Fed chief Bernanke and Treasury Secretary Paulson.

The flavor seems to be that lawmakers are under serious pressure from the public and special interest groups to legislate a lot to help homeowners in trouble. On the other hand, the government and the lending industry favor a less interventionist approach, the basic preference being to rely more on the marketplace to nurse itself back into good health. I think we need a little bit of both.

One crucial point to come up in this week's hearings was that troubled borrowers should definitely call their lenders to discuss possible solutions to their difficulties. As it stands now, 50% of foreclosures take place with the homeowners never contacting the lenders. That is a bothersome figure and you wonder why is it so? Besides that, lately the banks have been calling delinquent borrowers to offer help and seldom do the calls get returned. Another puzzling development.

Lawmakers are also eager to increase the limits on the loans Fannie Mae and Freddie Mac, the so-called government-sponsored enterprises or GSEs, can purchase on the secondary market. Supposedly that'll ease pressure on homeowners in distress. But Bernanke urges caution on this, saying that as more mortgages will enjoy government backing, making them virtually risk-free, that in turn will erode market discipline. And he's right. Lenders would continue acting with less than proper oversight on their loan portfolios since there is very little to worry about. If such a change is enacted to improve market liquidity, Bernanke would prefer it to be only temporary.

While the decision makers over in Washington are seriously tackling the current lending issues, we in the field hope they don't overreact and make matters worse.

 

 

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Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst 

www.BluefoxToday.com - syndicated mortgage, housing and property management blog

eskokiuru@gmail.com
My cell: 702-499-1006

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Tags:
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Rainmaker
148,436
Tom Plant
WINEormous.com - Murrieta, CA
Esko - You make some excellent points.  So much of this mess is a result of a failure to communicate.
Sep 21, 2007 06:56 PM #1
Rainmaker
325,147
Esko Kiuru
Bethesda, MD

Tom,

Let's see what they can come up with out there in Washington. At least they are talking now.

Sep 21, 2007 09:08 PM #2
Rainer
5,024
Jefferson Otwell
Homestar Financial Corporation - Atlanta, GA

I could not agree with you more on two of your points:

1.  Borrowers in trouble absolutely should contact their lenders before foreclosure, and

2.  I really hope that the politicos don't overreact and make things worse.

Sep 21, 2007 09:09 PM #3
Rainmaker
325,147
Esko Kiuru
Bethesda, MD

Jefferson,

It's disturbing that more people don't contact the lender to seek help or advise.

Sep 21, 2007 09:15 PM #4
Rainmaker
289,863
Kate Bourland
Marketing with Kate - Redding, CA
Onlilne Marketing Mobile Marketing

I think that people are afraid and embarrassed to return calls to the lenders.  The media doesn't help.  I recently read an article that indicated the mortgage companies talk a good talk but when it comes time to deliver on forbearance or negotiating that they don't deliver.

It's a balancing act because there are no standards and consumers are afraid.

 I wish there were an easy way to communicate to consumers and even better to provide an affordable intermediary to negotiate with the mortgage companies.

These are very sad statistics.

Sep 21, 2007 09:22 PM #5
Rainmaker
325,147
Esko Kiuru
Bethesda, MD

Kate,

You make a good point. Lenders themselves are part of the reason homeowners don't call them because they don't trust them.

Sep 21, 2007 09:44 PM #6
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Rainmaker
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Esko Kiuru

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