[quote=Huckleberry]Just saw an snippet on CNBC regarding this.
Per BoA, it’s not going to help very many people. It’s only targeted at sub-prime and pay-option ARM’s, NO prime loans. BoA stated it projects only helping about 45,000 qualifying loans of it’s more than 1 mill.
They may modify the program further but remember, the banks only do what’s in THEIR best interest. I’m sure they have figured out what local RE markets are their worst performing (down 30-50%) and most underwater, only offering these mods to them, as they don’t want these people walking away. Banks have become pretty RE savvy over the last two years…
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IMHO, they are only saying this because they are afraid of EVERYONE demanding a principal reduction. I think we’re going to see this made available to all conforming borrowers (GSE-owned/controlled loans). That’s why they’ve been trying to hold down rates, and that’s why they’ve had all these “foreclosure moratoriums,” and that’s why the govt took control of the GSEs. They’ve been trying to get everyone refi’d into GSE loans, so the govt can take the hit, not the banks. They’ve been setting this up for a long time, IMHO. From the thread linked earlier:
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Also, IF they are only mailing these out to borrowers with conforming mortgages, might it be related to this (bold is mine):
At the time the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship in September 2008, Treasury established Preferred Stock Purchase Agreements (PSPAs) to ensure that each firm maintained a positive net worth. Treasury is now amending the PSPAs to allow the cap on Treasury’s funding commitment under these agreements to increase as necessary to accommodate any cumulative reduction in net worth over the next three years. At the conclusion of the three year period, the remaining commitment will then be fully available to be drawn per the terms of the agreements.
Neither firm is near the $200 billion per institution limit established under the PSPAs. Total funding provided under these agreements through the third quarter has been $51 billion to Freddie Mac and $60 billion to Fannie Mae. The amendments to these agreements announced today should leave no uncertainty about the Treasury’s commitment to support these firms as they continue to play a vital role in the housing market during this current crisis.
The PSPAs also cap the size of the retained mortgage portfolios and require that the portfolios are reduced over time. Treasury is also amending the PSPAs to provide Fannie Mae and Freddie Mac with some additional flexibility to meet the requirement to reduce their portfolios. The portfolio reduction requirement for 2010 and after will be applied to the maximum allowable size of the portfolios – or $900 billion per institution – rather than the actual size of the portfolio at the end of 2009.
Treasury remains committed to the principle of reducing the retained portfolios. To meet this goal, Treasury does not expect Fannie Mae and Freddie Mac to be active buyers to increase the size of their retained mortgage portfolios, but neither is it expected that active selling will be necessary to meet the required targets. FHFA will continue to monitor and oversee the retained portfolio activities in a manner consistent with the FHFA’s responsibility as conservator and the requirements of the PSPAs.
Treasury is making two additional changes to the PSPAs. Treasury will delay setting the Periodic Commitment Fee by one year to December 31, 2010. Treasury will also make technical changes to the definitions of mortgage assets and indebtedness to make compliance with the covenants of the PSPAs less burdensome [anyone know what that’s about? -car] and more transparent in light of impending accounting changes.
