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16 years ago

If I had just been laid off,
If I had just been laid off, my new loan amount would be zero? What if I had been working 2 jobs, as well as my spouse, to make payments, I would be a fool not to stop working immediately. How many lenders are going to voluntarily write down their loans to some unknown level? Can you imagine the staffing needs to make that determination? This is supposed to be a cheaper alternative to foreclosure?

The new loan amount must be agreed upon by the lender and FHA. If “the amount the borrower can afford to repay” is lower than the amount that the lender can recover via foreclosure, they will foreclose instead of participating.

The only thing I don’t understand is why they need to involve FHA in all this, and why they can’t just let banks write down mortgages on their own.

Before participating in this program, all subordinate liens must be extinguished. This will have to be done through negotiation with the first lien holder. I have no idea what they are suggesting here, probably neither do they. Who is extinguishing the junior liens, the first lien holder? May be the junior liens voluntarily extinguish themselves?

They expect FHA to act as a middle-man in this negotiation. Maybe to offer cash in the amount of 10-20% of balance to every junior lien holder in exchange for signing off on the deal.

16 years ago
Reply to  Eugene

It’s an election year and the
It’s an election year and the media always likes to trot out the old/mentally impaired/weak/ESL borrowers who will lose it all as justification for spreading their pain around to everyone.

16 years ago

Esmith the whole point is to
Esmith the whole point is to keep the banks from going under. None of these types of proposals will do so. They don’t fundamentally alter the fact that millions of people cannot afford the mortgages they took out. This is just more lipstick on the pig. If debt cannot be paid back, it must be defaulted on. Its that second part thats the bitch.