Foreclosures: Alliance Takes Steps To Curb New Foreclosures
The Hope Now alliance, which is a partnership between non-profit housing counselors and mortgage companies backed by the White House, was created specifically to ward off a rising wave of mortgage foreclosures. Next week, 300,000 letters from the Hope Alliance will be posted to homeowners who may be having difficulty meeting their monthly mortgage payments. The letters will urge homeowners to find out the options available to them to prevent defaulting on their mortgages.
The letters provide homeowners with a toll-free number (1-888-995-HOPE) where homeowners can readily obtain information about options such as repayment plans, modification of their mortgage terms and other alternatives that they may be elegible to take advantage of. Treasury Secretary Robert Steel commented that this first round of letters will be followed by additional outreach efforts in the months ahead. He added that foreclosure serves no one’s interest.
Congressional Democrats have criticized the current administration for moving at a snail’s pace to put a halt to the current foreclosure crisis. Financial industry experts and government agencies have predicted that 2-million additional subprime mortgages will go onto foreclosure between now and the end of 2008. When that occurs, homeowners with weak credit histories will be faced with the resetting of their adjustable rate mortgages and skyrocketing monthly payments.
The Chairman of the House Financial Services Committee, Barney Frank, D-Mass., and others, have urged the administration to quickly endorse a proposal made by the head of the Federal Deposit Insurance Company (FDIC) which would have lenders consider making widespread conversions of ARMs to fixed-rate loans provided that the borrowers are current on their monthly payments.
At the same time some are working toward solutions, problems continue to worsen. Today, Ohio officials announced that crime in neighborhoods is rising as the foreclosures do. One neighborhood, Slavic Village, is said to have more than 800 homes now vacant and serving as homes to looters and squatters. These homes have also sustained considerable damage from intruders. Foreclosure Prevention Program Director Mark Wiserman said today that in the inner city of Cleveland, it only takes about 72 hours for looters to enter a home after the homeowners have left. People also dump garbage on the property to avoid paying for haulage to a dump.
The Governor of the Federal Reserve Board recently said that conditions for subprime borrowers are going to get worse before they get better and that the majority of the resets for adjustable rate mortgages are still to come. He added that on an average, nearly 450,000 subprime mortgages are scheduled to reset in each quarter of 2008. This will raise the borrower’s monthly payments by about $350.00, or 25%.
At the same time, declining home prices and the limit on the increase of home equity will prevent these homeowners from being able to refinance into less costly loans and an increasing number will end up with a mortgage balance greater than the value of their home. As a result of all this, commercial property values have also begun to decline.
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“Hope Now Alliance:” Banks hoping for more money NOW!
As I understand it, currently in California borrowers who have not refinanced have NON-RECOURSE LOANS.
The FB’s (f’ed borrowers) with these loans have the right to walk away and mail the keys to the bank.
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Definition of non-recourse loan: A secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender’s recovery is limited to the collateral. If the property is insufficient to cover the outstanding loan balance (for example, if real estate prices have dropped), the lender is simply out the difference.
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HOWEVER, IF the FB refinances, they LOSE their NON-RECOURSE status.
I would assume that if a FB takes the bail-out bait and calls the lender to get their interest rate increase frozen, then this revision in the contract would switch their mortgage from NON-RECOURSE to RECOURSE.
After their interest rate is frozen the FB cannot walk away from their home without losing everything: money in savings, 401k, cars… and having their wages garnished. Seems similar to the new BK laws. It’s the new indentured servitude (but didn’t the servant get their freedom after they paid for 7 years, rather than 30 years or more paying on an inflated mortgage?).
I am wondering if one reason that these bail-out plans have been announced with such vague language is to test the waters to see if the public catches on about the downside for the FB’s.
FB’S: Don’t take the bait! Preserve your right to walk away from an upside-down mortage. This right is the most valuable thing you have in this uncertain time. Be sceptical! When was the last time a bank just did you a favor without something in it for them??!!