Saturday, January 10, 2009
They've got another month...
Mortgage giants Fannie Mae and Freddie Mac said Thursday they will extend the suspension of foreclosure sales and evictions from single-family homes through the end of January. The companies had suspended foreclosures through the holidays, but were expected to resume proceedings after Jan. 9. The government-controlled home loan giants said the extension will allow borrowers facing foreclosure to keep their homes as it works with mortgage servicers to find options for troubled mortgage holders under the Streamlined Modification Program.
What's a "Streamlined Modification Program". That's FM and FMs plan to make people debt slaves. Borrowers would get reduced interest rates or longer loan terms to make their payments more affordable. Great, give em 50 year loan at 4.5% so they keep paying on something worth 1/2 of what they paid...... That will end well!
I'm sure this will help a few people, mostly in non bubble states where the negative equity amount is lower. But in SoCal I doubt many people will qualify. In addition with the mounting job losses fewer and fewer borrowers will have enough income to qualify.
None of these ridiculous mortgage workout plans put forth so far will help. The only thing that will help is mortgage cram downs. Generally speaking I am against cram downs. But if it will stop the job losses and get the economy back on it's feet then it's hard to oppose such a plan. However, I would only support cram-downs if they screen out those that lied on the mortgage apps. I would not want investors or speculators bailed out. And I would want the cram-downs posted as sales so the comps accurately reflect the current home values. But the bigger question is, "who's going to pay for losses". A cram-down means a loss for the lender. In Freddie and Fannies case we know who's paying for the loss, you and me. But what about the other lenders? In some cases if not most cases, mass cram-downs would leave the lenders insolvent (of course they already are anyway).
But I digress....it looks like the new years foreclosure wave has been delayed a month.