I was scanning today's online Wall Street Journal today, and spotted a post by Emily Friedlander on the "Developments" blog discussing plans by Giant Loan Investors and Guarantors Fannie Mae and Freddie Mac (now government entities), as well as financial giant Citigroup.
These organizations have proposed to offer modification programs to dozens of home borrowers across the country who have either defaulted on their home mortgages, or would soon be likely to default.
Recently, Bank of America agreed to modify many of the risky Option ARM Loans originally written by its recently-acquired Countrywide Home Loans business by reducing the rates on these loans - but not the outstanding principal balance - to as low as 2.5% in some cases, to reduce the chance these loans will go into foreclosure.
IndyMac Bank of California, recently seized by the Federal Deposit Insurance Corporation, has stalled all of its foreclosures, instead opting more aggressively for workout arrangements with its delinquent home borrowers.
The Citigroup program will cost $20 Billion . It is targeted at those in danger of falling behind in their mortgage payments, but current at the present time. Foreclosures would be stalled as long as borrowers are making a good faith attempt to renegotiate their loan into a more affordable loan product requiring monthly house payments no more than 40% of their monthly family income.
Fannie Mae and Freddie Mac will attempt workout arrangements with certain borrowers at least three months behind on their payments. Qualifying borrowers must still live in their homes as their principal residence, must not have filed for bankruptcy protection, must owe at least 90% of the home's present market value, and be currently employed.
Opponents of such plans feel they might actually ENCOURAGE loan delinquency, in order to get out from under too much debt they willingly took on. They contend that individual borrowers should not be rewarded for such bad judgment.
Those favoring the plan point to the likely 8.5 Million Homeowners going into default between now and 2010, according to research by Moodys.com, and the massive strain these potential foreclosures will put on the U.S. Housing and Credit Markets, as well as the likely chilling effect that thousands of new, foreclosed, boarded-up homes will have on the livability of neighborhoods across the country.
It goes without saving that the impact of these modification programs will transcend the waning days of the Bush Administration and dog the new Obama Administration for months to come.
Friedlander's Journal post had dozens of spirited comments, some in favor of, but many opposed to, large U.S. or bank-sponsored loan modification programs.
What say you? Please share!
Click to our post on BlogChicagoHomes.com for more, as well as the link to Emily Friedlander's post.
DEAN & DEAN'S TEAM CHICAGO