Below is an actual example of a recent WaMu loan mod with a 5-year $1 million bullet payment. This mod takes exotic lending to level I have never witnessed in my 20-years of mortgage banking. This makes a Pay Option ARM looks safe and cozy -- and puh-lease do not tell me this is great because it frees him up to spend money into the economy. Banks offering and borrowers actively accepting this style loan mod will guaranty that the housing crisis stays will us for a long time to come. This borrower will lose his home in 5-years, I have no doubt. That is of course unless his house price goes up 100% AND great, low rate super jumbo money returns to the market so he can refi out of it - then again, many lenders won't even refi a loan that has had a previous loan mod done. Property Value: $800k Note amount: $1 million plus deferred interest New Mod amount: $1.053 million First TWO years rate/payment: 1% and $878 Third year rate/payment: 3% and $2633 Forth year rate/payment: 5% and $4389 FIFTH YEAR PAYMENT - THE BULLET: ALL OUTSTANDING BALANCE DUE AND PAYABLE [specimen img at the source]
Banks offering and borrowers actively accepting this style loan mod will guaranty that the housing crisis stays will us for a long time to come. This borrower will lose his home in 5-years, I have no doubt. That is of course unless his house price goes up 100% AND great, low rate super jumbo money returns to the market so he can refi out of it - then again, many lenders won't even refi a loan that has had a previous loan mod done.
Property Value: $800k
Note amount: $1 million plus deferred interest
New Mod amount: $1.053 million
First TWO years rate/payment: 1% and $878
Third year rate/payment: 3% and $2633
Forth year rate/payment: 5% and $4389
FIFTH YEAR PAYMENT - THE BULLET: ALL OUTSTANDING BALANCE DUE AND PAYABLE [specimen img at the source]
Now --before Barry signs the Stimulus Package-- is a good time for Mr Baker to clarify his concept of "rent-to-own" underwater remediation through owner- or bank-financing.
In Related News | Bloomberg |
Citibank agreed to support, which serviced about 7 percent of all U.S. mortgages last year, agreed to support federal legislation that will let bankruptcy courts reset mortgage rates for borrowers
Ever the loss leader. Diversity is the key to economic and political evolution.
FranknDodd | 9 Jan 2009
Under Frank's proposed makeover of the TARP, the second half of the $700 billion funds will be "conditioned on the use of a minimum of $50 billion for foreclosure mitigation." His language would require secretary Henry Paulson to develop a comprehensive plan to prevent and mitigate residential mortgage foreclosures by March 15, 2009. The required elements of the plan include a guarantee program for qualifying loan modifications under a systematic plan, bringing down the costs of Hope for Homeowner loans, "either through coverage of fees, purchasing H4H mortgages to ensure affordable rates, or both." The plan would also need to establish a program for loans to pay down second lien mortgages that are impeding a loan modification, grant servicer incentives and assistance to stimulate modifications, and include the purchase of whole loans for the purpose of modifying or refinancing them. ... "In developing such program, Treasury shall provide mechanisms to ensure availability of such reduced rate loans through financial institutions that act as either originators or as portfolio lenders," the outline reads, in part. "Treasury shall make the affordable rates available under this program available in connection with Hope for Homeowner refinancing program. ... Included in the proposed Hope for Homeowners improvements are an elimination of the 3 percent upfront premium, an increased maximum loan to value ratio from 90 percent to 93 percent for borrowers with mortgage debt-to-income ratios over 31 percent. The government's profit-sharing of appreciation over market value of the home at the time of refinance would also be eliminated. Frank's outline also would require the Treasury to develop a program outside of TARP funding -- instead using funding available through the Housing and Economic Recovery Act of 2008 [actually, this bill engrosses HOPE4Homeowners] -- to "stimulate demand for home purchases and clear inventory of properties" by promoting more affordable mortgages through purchasing mortgages and mortgage-backed securities.
Included in the proposed Hope for Homeowners improvements are an elimination of the 3 percent upfront premium, an increased maximum loan to value ratio from 90 percent to 93 percent for borrowers with mortgage debt-to-income ratios over 31 percent. The government's profit-sharing of appreciation over market value of the home at the time of refinance would also be eliminated. Frank's outline also would require the Treasury to develop a program outside of TARP funding -- instead using funding available through the Housing and Economic Recovery Act of 2008 [actually, this bill engrosses HOPE4Homeowners] -- to "stimulate demand for home purchases and clear inventory of properties" by promoting more affordable mortgages through purchasing mortgages and mortgage-backed securities.
And the Oct Bailout Bill ("EESA") engrosses HOPE4Homeowners. I love that story ... It just won't die!
Moody's downgrades BoA, Wells Fargo | 8 Jan 2009
It turns out that, for now at least, acquiring ailing financial institutions will carry some ratings risk -- Moody's Investors Service on Thursday said it had downgraded key credit ratings at both Bank of America Corp. (BAC: 13.19 -2.58%) and Wells Fargo & Co. (WFC: 25.49 -0.89%), after both banks completed sizable acquisitions in recent weeks. Ratings cuts affected debt ratings, as well as financial strength ratings at the lead banks. ... Moody's cited "asset quality concerns" in lowering the bank's financial strength rating to B from a previous rating of A, and said it believes that after the acquisition, Wells Fargo's Tier I ratio and its adjusted tangible equity to risk weighted assets ratio will be noticeably lower than their levels at the end of Q3. "The fall in Wells Fargo's tangible equity ratio results from the fact that the equity it raised was low in comparison to the amount and quality of the Wachovia assets it acquired," said Moody'ssenior vice president, Sean Jones.
Moody's cited "asset quality concerns" in lowering the bank's financial strength rating to B from a previous rating of A, and said it believes that after the acquisition, Wells Fargo's Tier I ratio and its adjusted tangible equity to risk weighted assets ratio will be noticeably lower than their levels at the end of Q3.
"The fall in Wells Fargo's tangible equity ratio results from the fact that the equity it raised was low in comparison to the amount and quality of the Wachovia assets it acquired," said Moody'ssenior vice president, Sean Jones.
duh. Diversity is the key to economic and political evolution.
