Relevant:
- Un-Freezing Foreclosures in the Nevada Desert -- A Mandelman Matters Podcast on What Nevada's Homeowners Need to Know
- Mortgage lenders move more foreclosures back into delinquent bucket: LPS
- Illegal Mortgage Foreclosure, JP Morgan and a Federal Injunction
- Foreclosures: Recent Court Ruling to Have Dramatic Impact; Low Interest Rates To Have Limited Effect; Service 'Report Cards' May Help
- Homeowners are getting hit a second time
2008-06-02 — mortgagenewsdaily.com
"Earlier this month a reader, Pamela Norvell, wrote a suggestion for lessening the foreclosure crisis. She suggested a freeze and/or a rollback of interest rates to their original levels. In making her suggesting Ms. Norvell wondered what it was causing lenders to foreclose on properties rather than do a workout or a restructure."
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Comments:
homerebound at 19:31 2008-06-03 said:
I’m not sure why some lenders are unwilling to modify loans to prevent a foreclosure. This is a mystery to me given the economics involved in the foreclosure process. But here are a few problems that may be contributing: 1. Servicers that deal with modification requests usually cannot approve them without the ok from the investor that owns the asset. Many times these “investors†are not players in the retail or wholesale mortgage market and do not make decisions based on reputation, goodwill and make-sense lending practices…etc. Instead, they are managing an investment portfolio. Much like a fund that invests in stocks; these investors may have “stop loss†models which tell them to get rid of a certain amount of loan assets with certain characteristics or from a certain pool or security. 2. There is simply not enough resources at most major lending institution to deal with the crisis. Many times, there is a loss mitigation person working on the modification request that has very limited knowledge. 3. If a lender already wrote down the non-performing loan, they may be better off foreclosing to insure limiting future losses and doing so may allow them to collect on MI. Whereas processing a modification has an additional risk. There is a large percentage (something like 50%-60%) of modifications that still end in foreclosure. Modifying a loan that eventually goes bad anyway erodes the value of the asset even more than if the lender foreclosed in the beginning. Furthermore, depending on the MI contract, some modifications may result in a breach of MI coverage, adding additional risk to the transaction. Permalinkadd a comment | go to forum thread
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