“Jurassic Park ”

7:39 am December 11, 2009

Bill Garrison , Sarasota Fl wrote:

Why Loan Modifications Are Like “TITANIC” and we need a Life Boat !

So many Americans bought a ticket on the USS TO BIG TO FAIL… MR Greenspan advised us to use adjustable rate mortgages. The White House said every American should buy a home. FNMA allowed borrowers to buy up to 10 investment properties. Moodys and S&P rated all of those junk CDOs as AAA…. and the ship sank….. Now Americans need a life boat…. Were are the life boats? You don’t want to help out American familys because it might impact government agencys? Really sad to see what’s happening to our country … That’s my $000,0000.02 bg
Pete Marriott and Bill Garrison Professional Sarasota Realtors ® Prudential Palms Realty .

1:06 am December 10, 2009

Grrrrrrrrrr........... wrote:

Oh….Jeepers maybe B of A will have to sell one of it’s 17 corp jets….. What’s gonna happen to the P&L’s of those lenders and pension funds when a potential 1,000,000 mortgages go into default and the monthly payments turn into $0.00. Hmmm…Wonder if all of the appliances will vanish and maybe in a few years “home sweet home” will finally get sold at 50% of the could have been save mortgage. Oh and how many people do you know that have kept their home for fourty years? 20 years? 10 ? Death, divorce, job relocation, retirement and a hundred other reasons would keep most modifications lasting only a fraction of that term. Most just want a to keep roof over their heads until this economy shakes out. A discounted mortgage has got to be better than monthly payments tunring to $0,00 and an eventual 50% off sale on what’s left of the property …… It’s almost Christmas and I need my $1,000,000 bonus, Is it in the mail ?

December 9, 2009, 5:24 PM ET Why Loan Modifications Are Like ‘Jurassic Park’

By James R. Hagerty

Everett Collection

Controlling the dinosaurs in “Jurassic Park” proved difficult. As he appeared before the House Financial Services Committee Tuesday to discuss the slow progress of government efforts to force lenders to ease payment terms on home mortgages, Anthony B. Sanders was reminded of the movie “Jurassic Park.”

It might be possible to bring dinosaurs back to life, but does that make it a good idea? Similarly, says Dr. Sanders, a professor of real estate finance at George Mason University, it might be possible to slash interest rates on millions of loans, but that doesn’t mean we should.

What if the government’s Home Affordable Modification Program somehow finally gains traction and manages to reduce interest rates to 2% on millions of loans and extend their terms to 40 years? That would just create fresh problems, Dr. Sanders says.

“Our banking industry, Fannie Mae, Freddie Mac and our Federal Reserve would now be sitting on trillions of dollars of mortgages, many at super-low interest rates and stretched maturities to 40 years,” he writes. Any rise in inflation and interest rates would then slash the value of those mortgages. “When one considers the precarious balance sheets of our lending institutions and our government agencies, we should think very, very carefully about loading up their balance sheets with these mortgages,” he warns, adding:

“Congress and the Administration should bear in mind that it is not just the banks that will suffer, but our pension funds, our own government agencies and the viability of the economy going forward.” Banks would be “stuck with low-interest, long-maturity loans on their books that will prevent them from lending to other borrowers or small businesses for a long, long time.”

The solution, he says, is to encourage financial institutions to sell distressed loans and mortgage securities at big discounts from face value to private investors, who could then restructure the loans on realistic terms related to today’s house prices. Such sales would force banks and other financial institutions to book big losses, but perhaps regulators could allow those losses to be absorbed in stages over five years.

If U.S. financial institutions don’t clean up their balance sheets by shedding dud assets soon, “we will make the Japanese zombie banks look the role model for a healthy financial system,” Dr. Sanders says.

But what about all those borrowers struggling to avoid foreclosure? “The (loan) servicers and financial institutions should be able to modify distressed loans as they see as economically appropriate,” Dr. Sanders says. “After all, these are private market contracts between borrowers and lenders.”

Please follow me for housing news on Twitter at: http://twitter.com/jamesrhagerty

They Just Don't Get It !

Here's a real estate up date that's part of my Wall Street Journal  RSS feed you'll find at the bottom of http://www.valuesarasotahomes.com/  and my reply

By Nick Timiraos

As the Federal Housing Administration begins considering how to pull back from its expanded share of the U.S. mortgage market, the agency could face pressure from some lawmakers and those in the real-estate industry who don’t want the FHA to do anything too dramatic.

Lawmakers from high-cost housing districts, for example, want to ensure that the FHA doesn’t disappear from their neighborhoods. They’ve introduced a bill that would make permanent the higher loan limits that Congress temporarily expanded last year. That allowed the agency to insure loans as large as $729,750 in the nation’s most expensive housing markets, up from a $362,000 national cap. California now accounts for around 13% of FHA-backed loans, up from less than 2% during the housing boom, partly because of the higher limits.

Without the higher county-by-county adjustments, “many areas of the country will not get the benefit of the FHA,” said Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee. “We didn’t think it was fair for California to be frozen out of the program.” Mr. Frank said he thinks limits should be increased to around $800,000.

Shaun Donovan, the secretary of the U.S. Department of Housing and Urban Development, said the agency believes the expanded loan limits should be temporary. The larger loans account for less than 2% of all FHA-backed loans. While default rates are slightly lower than on all FHA-backed loans, the loans have little seasoning, because the FHA only began insuring larger loans last year.

Other lawmakers, meanwhile, want to bring back programs that allowed borrowers to receive FHA-backed loans without making down payments. Congress last year ended widely-used programs that had allowed sellers to fund down payments to borrowers through non-profit charities, and the FHA says that those programs have eroded the net worth of the agency’s reserves by $10.5 billion. At Wednesday’s hearing, Reps. Al Green (D., Texas) and Gary Miller (R., Calif.) pressed for the FHA to find new ways that would let buyers qualify for FHA backed loans without making down payments.

“Let’s develop a program for persons who can pay for a home but who are without the necessary down payment,” said Mr. Green, who said he nonetheless understood why there was “a great deal of consternation” over the seller-funded down payment programs.

FHA borrowers are still able to use gifts from state housing finance agencies or relatives to make down payments. Housing officials are unlikely to support any effort to bring back the seller-funded gift program. “The biggest concern and issue is about having an interested party in the transaction providing a down payment,” said Mr. Donovan. “That has been what has led to the incentives that led the program in the wrong direction.”

1:39 pm December 7, 2009

Bill Garrison wrote:

I certainly agree with Al Green and Gary Miller. Why not lower the down payment requirement to 0% for those who would otherwise qualify for a mortgage. Does a few thousand dollars down payment really make a difference? Maybe someone has a 6 year old medical collection on their credit report due to a health insurance error and that has lowered the borrowers credit score to a 639 instead of the new 640 minimum. Does that really have a Bering on the likelihood of a future foreclosure?

How about 0% down only for those persons buying an existing foreclosure property and lowering the credit score requirement back to 580? I bet that would eat up a lot or those foreclosed homes and condos.

It;s more about cash flow thn it is about downpayment. There are many people than don’t have the DP but do have a great income stream. Let’s use up all of this excess housing inventory and put people in these homes vacant homes before they deteriorate into unusable tear down properties. The whole purpose FHA was created was to help people get into homes that did not qualify for a Fannie or Freddy mortgage. If FHA is going broke then they could recoup some of their losses and resale these properties. Maybe the FED should subsidise the monthly insurance premium giving FHA more income and helping the new home owner afford the new mortgage. A few bucks a month from Uncle Sam is better that letting FHA homes set empty only to be eaten up by termites and rotting away until they are uninhabitable.

I am a Sarasota, Florida Realtor and have seen many nice homes and condos turn into really awful shacks due to neglect. http://www.ValueSarasotaHomes.com/BANKOWNED

It seems like there is took much finger pointing and not enough common sense and an unwillingness to take action. That’s my $000,000.02 Bill Garrison Sarasota, Fl