Reflections of the Subprime Aftermath Loan Modification is the Light at the End of the Tunnel
Loan modification is a new way of saving your home with out utilizing the usual debt remediation/loss mitigation techniques of previous years. Never before have we seen such a surge in foreclosures and pre-foreclosures. The old saying "power in numbers" is holding true for distressed homeowners.
Many Americans have been left seething with the recent $700 Billion bailout/stimulus plan. You and I, the tax payer ultimately are left to foot the bill for the banks mistakes. Good,bad,or indifferent to the situation, no one was complaining about getting their stimulus checks. I didn't get a stimulus check, and I agree with the goverment for not giving me one. Sure, an extra $600.00 would have been nice but I did not need it. I exceeded the income threshold for my filing status.I do belive my taxes should go to help those who have made less, and has a family that may be losing their home. The stimulus check of $600.00 surely helped a struggling homeowner, but likely would not get them caught up with their bills. In there current economic times it is very easy to get caught in debt. The credit gravy train has stopped.Now the goverment is stepping up and doing what americans are supposed to do. Help the poor,the tired,the hungry and those that may be facing foreclosure. When I asked one of my clients "Why would you borrow 450K against your house when you only make 45k per year?" His reply was simple " I did not think the bank would let me borrow more than I could afford." I would have thought that that too If I didn't have the benefit of being a banking insider. The whole scenario is remincient of the "Friends dont let friends drive drunk" ad campaigns. One would think your bank wouldn't let you borrow more than you could afford, Right? Just like the friend that wouldn't let a friend drive drunk Right? Wrong. The banks are not your friends, they are in the business of taking your money and making more of it. In the early stages it was lucrative to allow people to borrow more than they could afford. Banks made money hand over fist selling these loans as mortgage backed securities on the secondary market. Why? Because the investors had no Idea what exactly they were buying or the risk. They only knew they had derivative to protect them on a default and could swap loans. After all, the bond ratings on these securities were AAA stautus. Fast forward to ING's near collapse,Bear Stears,Merryl, etc... They were the underwriters of the derivatives. So If they become insolvent, there is no choice but to go back, and rework the loan portfolios.
The choice is clear for the banks, negotiate with the mortagagor and secure the debt ,or take a loss and lose more money. The bank are reluctantly stepping up and helping out. If this didn't happen the financial markets would have collapsed. 401k's depleted,equity depleted, and a new scary great depression. A loan modification has a specific guideline for approval. Not everyone will qualify for a loan modification ,and many will still lose their home. But If you had a temporary set back like an illness or job loss you may qualify. You must have some form of current income.
Many Americans have been left seething with the recent $700 Billion bailout/stimulus plan. You and I, the tax payer ultimately are left to foot the bill for the banks mistakes. Good,bad,or indifferent to the situation, no one was complaining about getting their stimulus checks. I didn't get a stimulus check, and I agree with the goverment for not giving me one. Sure, an extra $600.00 would have been nice but I did not need it. I exceeded the income threshold for my filing status.I do belive my taxes should go to help those who have made less, and has a family that may be losing their home. The stimulus check of $600.00 surely helped a struggling homeowner, but likely would not get them caught up with their bills. In there current economic times it is very easy to get caught in debt. The credit gravy train has stopped.Now the goverment is stepping up and doing what americans are supposed to do. Help the poor,the tired,the hungry and those that may be facing foreclosure. When I asked one of my clients "Why would you borrow 450K against your house when you only make 45k per year?" His reply was simple " I did not think the bank would let me borrow more than I could afford." I would have thought that that too If I didn't have the benefit of being a banking insider. The whole scenario is remincient of the "Friends dont let friends drive drunk" ad campaigns. One would think your bank wouldn't let you borrow more than you could afford, Right? Just like the friend that wouldn't let a friend drive drunk Right? Wrong. The banks are not your friends, they are in the business of taking your money and making more of it. In the early stages it was lucrative to allow people to borrow more than they could afford. Banks made money hand over fist selling these loans as mortgage backed securities on the secondary market. Why? Because the investors had no Idea what exactly they were buying or the risk. They only knew they had derivative to protect them on a default and could swap loans. After all, the bond ratings on these securities were AAA stautus. Fast forward to ING's near collapse,Bear Stears,Merryl, etc... They were the underwriters of the derivatives. So If they become insolvent, there is no choice but to go back, and rework the loan portfolios.
The choice is clear for the banks, negotiate with the mortagagor and secure the debt ,or take a loss and lose more money. The bank are reluctantly stepping up and helping out. If this didn't happen the financial markets would have collapsed. 401k's depleted,equity depleted, and a new scary great depression. A loan modification has a specific guideline for approval. Not everyone will qualify for a loan modification ,and many will still lose their home. But If you had a temporary set back like an illness or job loss you may qualify. You must have some form of current income.