Renegotiate mortgages

[formerlurker]

Hoyer is advising that Congress will renegotiate mortgages to prevent 2 million people from going into foreclosure.

Well heck why not me too?   Maybe I should skip 3 payments so my mortgage can get "renegotiated" too.   

Are they kidding me right now? 

 

[Chris_]

Hoyer is advising that Congress renegotiate mortgages to prevent 2 million people from going into foreclosure.

Well heck why not me too?   Maye I should skip 3 payments so my mortgage can get "renegotiated" too.   

Are they kidding me right now? 

 

Nope.  They seriously believe the average American couldn't tie his shoes without help - and substantial subsidies - from the Federal gubmint.

I need another case of ammo.  Stupid ****ers like these may not survive to be "sworn in" again.

[NHSparky]

And with Biden renegotiating the pricipal on our mortgages, we're all gonna live for free in our houses, and the Obama will feed us milk and honey all day....

God I'm ready to puke.

[Flame]

And again, those of us who have been doing the RIGHT thing will be the ones who get screwed. 

[BEG]

And again, those of us who have been doing the RIGHT thing will be the ones who get screwed. 

Exactly

[apeanut99]

And again, those of us who have been doing the RIGHT thing will be the ones who get screwed. 

Exactly

But look at it this way...  you wont have to deal with all that pesky money in your wallet anymore.  See, theres some sunshine.

[SSG Snuggle Bunny]

Welcome to a world where you will be required to pay 25% down on a property whose resale value will be whatever some bureaucrat says it should be.

[Willow]

and they will be back in 6 months for some more,

[Wineslob]

It'll put a whole new spin on "filpping".



 The jackasses have opened up a can of worms they can't/won't begin to understand. 

[debk]

This isn't as good as it looks.

I saw the explanation on Fox this morning.

These are FHA loans ( I think only FHA) that are being renegotiated.

For example: (have to make the math easy for me or I can't explain it properly)

Buy a house for $300,000 in 2000.

House is now only worth $200,000.

FHA will renegotiate the new loan to be 90% of the $200,000. And the payments will be on $180,000 rather than 97% of $300,000 (291,000).

The interest rate will be fixed.

But here's the zinger......when the homeowner sells the house, for say....$375,000 when the market recovers....the homeowner MUST SPLIT the capital gains with the FHA. It's possible that amount will be prior to commission paid to a real estate agent, depending on the circumstances of the sale.

Therefore the government may make money on these particular loans.

The important thing to remember, is this is not all loans. I believe it is just FHA loans. I don't know how many people who are in trouble have FHA loans. Up until the last few months, I haven't sold properties with the buyer getting an FHA loan in years.

The other thing to remember, is that FHA ( and VA) loans have a "cap" on them. This amount is based on the average price of a house in a specific area. It changes yearly. Right now, in my area....as of Jan 2008, FHA cap (maximum amount that can be borrowed on an FHA loan) is $271,050. 10 years ago, it was about $103,000.

It is different in every state.

FHA loans also have more lenient debt to income ratios than conventional, have for the most part - required 3% down by the buyer - unless they were seller paid downpayments, and are more strict on the condition of the dwelling. Buyer must be an owner occupant.

Seller paid downpayment loans are called Genesis or Nehemiah loans.  They are for first time buyers, the house must appraise for an amount that will cover the downpayment that is paid for the buyer by the seller:

If a house is listed for $90,000...Buyer offers $85,000 but wants the seller to pay the 3% down (2550)...the buyer will actually offer $87,550....but the house must appraise for the $87,550. It cannot appraise for $85,000.

I honestly don't know how many of the FHA loans are ARM loans (adjustable rate mortgage).

However, there are a huge number of 100-107% loan to value conventional loans out there that are ARM's and that are in trouble.

How many of these loans are going to be renegotiated? Rather, how many of the conventional loans will be picked up by the government?

The way I am understanding it....those aren't the ones being renegotiated by the government. It's up to the individual homeowner to negotiate with their own lender. I can guarantee there will be "pitfalls" in the fine print. It may save some homeowners in the short term, but if they can't meet the new requirements over a period of time....they will still lose the house because they can't afford the new terms.

Ultimately the mortgage companies are out to save their own collective asses first, if at all possible.

I can't help but wonder if people had just been handed x number of dollars per household, they might have been better off....though there is no guarantee that they would have used the money to get themselves out of trouble or stimulate the economy by spending on clothes, cars, etc.

[Chris_]

This isn't as good as it looks.

I saw the explanation on Fox this morning.

These are FHA loans ( I think only FHA) that are being renegotiated.

For example: (have to make the math easy for me or I can't explain it properly)

Buy a house for $300,000 in 2000.

House is now only worth $200,000.

FHA will renegotiate the new loan to be 90% of the $200,000. And the payments will be on $180,000 rather than 97% of $300,000 (291,000).

The interest rate will be fixed.

But here's the zinger......when the homeowner sells the house, for say....$375,000 when the market recovers....the homeowner MUST SPLIT the capital gains with the FHA. It's possible that amount will be prior to commission paid to a real estate agent, depending on the circumstances of the sale.

Therefore the government may make money on these particular loans.

The important thing to remember, is this is not all loans. I believe it is just FHA loans. I don't know how many people who are in trouble have FHA loans. Up until the last few months, I haven't sold properties with the buyer getting an FHA loan in years.

The other thing to remember, is that FHA ( and VA) loans have a "cap" on them. This amount is based on the average price of a house in a specific area. It changes yearly. Right now, in my area....as of Jan 2008, FHA cap (maximum amount that can be borrowed on an FHA loan) is $271,050. 10 years ago, it was about $103,000.

It is different in every state.

FHA loans also have more lenient debt to income ratios than conventional, have for the most part - required 3% down by the buyer - unless they were seller paid downpayments, and are more strict on the condition of the dwelling. Buyer must be an owner occupant.

Seller paid downpayment loans are called Genesis or Nehemiah loans.  They are for first time buyers, the house must appraise for an amount that will cover the downpayment that is paid for the buyer by the seller:

If a house is listed for $90,000...Buyer offers $85,000 but wants the seller to pay the 3% down (2550)...the buyer will actually offer $87,550....but the house must appraise for the $87,550. It cannot appraise for $85,000.

I honestly don't know how many of the FHA loans are ARM loans (adjustable rate mortgage).

However, there are a huge number of 100-107% loan to value conventional loans out there that are ARM's and that are in trouble.

How many of these loans are going to be renegotiated? Rather, how many of the conventional loans will be picked up by the government?

The way I am understanding it....those aren't the ones being renegotiated by the government. It's up to the individual homeowner to negotiate with their own lender. I can guarantee there will be "pitfalls" in the fine print. It may save some homeowners in the short term, but if they can't meet the new requirements over a period of time....they will still lose the house because they can't afford the new terms.

Ultimately the mortgage companies are out to save their own collective asses first, if at all possible.

I can't help but wonder if people had just been handed x number of dollars per household, they might have been better off....though there is no guarantee that they would have used the money to get themselves out of trouble or stimulate the economy by spending on clothes, cars, etc.

I'm not sure, but it sounds to me like they are trying to move all of the bad paper that was written outside of the FHA system.....into the FHA system in order for it to be renegotiated.....but I haven't read the bill summary yet......

doc

[debk]

I haven't been able to figure that out either.

But if FHA stays traditional to it's standards....the loan is going to have to be under the maximum amount for FHA loans in each area.

As I said...$271,050 is the max amount for FHA loan in this area. Therefore someone who owes $275,000 cannot get an FHA loan, unless the homeowner pays enough cash out to reduce the amount owed to 271,050.....which would be $3950.

Someone who owes $300,000 in this area won't be able to do it, unless they can make up the difference. If you have 20K+ laying around, you wouldn't be renegotiating in the first place.

There are however....a lot of loans that are conventional that are Under the cap, that may be able to be renegotiated from a conventional loan to an FHA loan.

I don't think we are going to see loans being renegotiated in every single community. Where they are going to be done the most is places like Las Vegas, California, Florida....where the value of houses has drastically decreased. We've had some drop here.....as most areas have seen...but not as exteme has some specific areas of the country.....primarily that had over-inflated prices to begin with.

[Zeus]

Don't be confusing the Mortgage mkt with the secondary mortgage mkt. One is the origination mkt the other is the securitization of the grouped mortgages. One was screwed up by basically being forced to underwrite loans people couldn't afford and that compounded the other which was by regulation forced to apply bad accounting principles.

This all happened not solely because of but in major part due to CRS(Mortgage Mkt) and Sarbanes-Oxley(secondary mkt)

[apeanut99]

I think that the program that debk is describing is this...

http://www.hud.gov/fha/home080730.cfm

Is this the same thing that the OP is about?

[BEG]

I heard that Countrywide is already doing this.  IF you are in "trouble" on your mortgage, they are offering something like a 5 year ARM, but, it starts at like 1% and turns to a 5.75% FIXED after 5 years.

If I had a mortgage with Countrywide, I'd quit paying it to get a deal like that.

We have a loan with Countrywide, had it for YEARS.  They have been calling us several times a day, every day of the week for months.  I never answer it.  I wonder what kind of "deal" they are trying to offer us. 

[BEG]

I heard that Countrywide is already doing this.  IF you are in "trouble" on your mortgage, they are offering something like a 5 year ARM, but, it starts at like 1% and turns to a 5.75% FIXED after 5 years.

If I had a mortgage with Countrywide, I'd quit paying it to get a deal like that.

We have a loan with Countrywide, had it for YEARS.  They have been calling us several times a day, every day of the week for months.  I never answer it.  I wonder what kind of "deal" they are trying to offer us. 

Since you've been paying yours on time, they are probably wanting to offer you a bill consolidation low.
You have to be a scumbucket or very unfortunate, to get the good deal from them.

We don't have any bills and if they checked our credit report they would know that. 

[USA4ME]

For example: (have to make the math easy for me or I can't explain it properly)

Buy a house for $300,000 in 2000.

House is now only worth $200,000.

FHA will renegotiate the new loan to be 90% of the $200,000. And the payments will be on $180,000 rather than 97% of $300,000 (291,000).

The interest rate will be fixed.

But here's the zinger......when the homeowner sells the house, for say....$375,000 when the market recovers....the homeowner MUST SPLIT the capital gains with the FHA. It's possible that amount will be prior to commission paid to a real estate agent, depending on the circumstances of the sale.

Therefore the government may make money on these particular loans.

I'm not up to date on this at all, so I'm just going on your numbers.

What would seem more practical is that if FHA were to lower the payments as though they were paying on a beginning principal of $200K rather than the original $300K, they would take the amount they reduced to get down to the $200K payment (let's say $80K) and essentially place a lien on the property for that amount in order to recover it when it comes time to sell.  IOW you basically say that there's $80K of which you'll be glad if one day you get it back, and even if you didn't earn any interest on it at least you didn't completely lose it.

.

[debk]

That's it, apeanut99.

Anyone can call up their mortgage company at any time and try to renegotiate their mortgage. Payments don't have to be missed to do it. Most mortgage companies are not going to call their mortgagee, who has missed 2 or 3 payments, and just offer to renegotiate their loan. Homeowners have to be proactive. If one is in trouble and they wait for something to happen and straighten out their payments....what's going to happen is someone like me is going to be knocking on their door and saying "I will give you $500 to move, clean out your house completely and give me your house keys within 15 days."

What has happened to a lot of these big companies is that they have bought a "bundled" group of mortgages from  XYZ Mortgage Company, in Smalltown, America.

Theoretically...that should be a sound investment for the big company (AIG, Chase, Citigroup, etc).

However, Big Company has bought these bundled mortgages on good faith from XYZ .....and more importantly....XYZ did due diligence in loaning the money to the homeowner.....ie: the homeowner was a good risk....AND the property was really worth the amount of money loaned on the property.

These bundled mortgages are a good deal for XYZ. Cause when Billy Bob walked in to XYZ and saw his high school runnin' buddy Jimmy Joe....he said "hey, bud, can you loan me $100k on my house? I need to fix it up, and the wife wants me to take her on a cruise."

Jimmy Joe says...."Sure, but instead of giving you the money for 5% for 30 years, I can only do it for 6% for 2 years, then after 2 yrs, ya gotta pay 8%.  We'll roll your existing mortgage of $80k into it. Can ya pay that and is your house gonna be worth it?"

"Oh, hell yeah, if not I'll just move....no problem. Do I need to give you any info, cause I don't want to...I didn't exactly turn in all my income last year, but I made $60k"...wink wink.

"Ok...just sign here, and I'll get ya the money. You goin' deer huntin' this year?"

Week or two later, Billy Bob has his $100k. He starts his kitchen remodel, takes his wife on a cruise, decides to buy a new truck....and he'll finish the kitchen with his income tax return.

In the meantime, Citigroup has bought Jimmy Joe's mortgage in a bundled packet from XYZ mortgage.

Year or two goes by, XYZ goes out of business.

The loan has switched over to 8%, property taxes and homeowners insurance has increased $100 a month.

Billy Bob and the wife get a divorce (he should have finished the kitchen) and they have to sell the house in the divorce.

Neither one wants to pay the house payment .....so they don't. "I'll show him/her...I just won't pay my share!"

House gets foreclosed on 6 months later.

Now, Citigroup is stuck with a house that's been vacant for 3 months, it's dirty, moldy, the kitchen isn't finished, the whole place needs to be painted - inside and out, the yard's a mess. And the cat's pooped all over the house and the squirrels have found a way to get in down the chimney.

There's a $180k mortgage on a house that's not worth $120k in a neighborhood where there isn't a house worth over $85,000 and Citigroup is going "what the hell....we need $175k out of this property!!!"

And they can't get it.

No way, no how, no nothing.

This is one of the reasons for the mess in the mortgage business....and it just ripples outward.

[apeanut99]

That's it, apeanut99.

Anyone can call up their mortgage company at any time and try to renegotiate their mortgage. Payments don't have to be missed to do it. Most mortgage companies are not going to call their mortgagee, who has missed 2 or 3 payments, and just offer to renegotiate their loan. Homeowners have to be proactive. If one is in trouble and they wait for something to happen and straighten out their payments....what's going to happen is someone like me is going to be knocking on their door and saying "I will give you $500 to move, clean out your house completely and give me your house keys within 15 days."

What has happened to a lot of these big companies is that they have bought a "bundled" group of mortgages from  XYZ Mortgage Company, in Smalltown, America.

Theoretically...that should be a sound investment for the big company (AIG, Chase, Citigroup, etc).

However, Big Company has bought these bundled mortgages on good faith from XYZ .....and more importantly....XYZ did due diligence in loaning the money to the homeowner.....ie: the homeowner was a good risk....AND the property was really worth the amount of money loaned on the property.

These bundled mortgages are a good deal for XYZ. Cause when Billy Bob walked in to XYZ and saw his high school runnin' buddy Jimmy Joe....he said "hey, bud, can you loan me $100k on my house? I need to fix it up, and the wife wants me to take her on a cruise."

Jimmy Joe says...."Sure, but instead of giving you the money for 5% for 30 years, I can only do it for 6% for 2 years, then after 2 yrs, ya gotta pay 8%.  We'll roll your existing mortgage of $80k into it. Can ya pay that and is your house gonna be worth it?"

"Oh, hell yeah, if not I'll just move....no problem. Do I need to give you any info, cause I don't want to...I didn't exactly turn in all my income last year, but I made $60k"...wink wink.

"Ok...just sign here, and I'll get ya the money. You goin' deer huntin' this year?"

Week or two later, Billy Bob has his $100k. He starts his kitchen remodel, takes his wife on a cruise, decides to buy a new truck....and he'll finish the kitchen with his income tax return.

In the meantime, Citigroup has bought Jimmy Joe's mortgage in a bundled packet from XYZ mortgage.

Year or two goes by, XYZ goes out of business.

The loan has switched over to 8%, property taxes and homeowners insurance has increased $100 a month.

Billy Bob and the wife get a divorce (he should have finished the kitchen) and they have to sell the house in the divorce.

Neither one wants to pay the house payment .....so they don't. "I'll show him/her...I just won't pay my share!"

House gets foreclosed on 6 months later.

Now, Citigroup is stuck with a house that's been vacant for 3 months, it's dirty, moldy, the kitchen isn't finished, the whole place needs to be painted - inside and out, the yard's a mess. And the cat's pooped all over the house and the squirrels have found a way to get in down the chimney.

There's a $180k mortgage on a house that's not worth $120k in a neighborhood where there isn't a house worth over $85,000 and Citigroup is going "what the hell....we need $175k out of this property!!!"

And they can't get it.

No way, no how, no nothing.

This is one of the reasons for the mess in the mortgage business....and it just ripples outward.

I absolutely love this explaination.  I need to find a way to use it with my local moonbats.

[DumbAss Tanker]

The people in default actually have leverage in the deal, because there is some chance that a lot of them might eventually pay most of what they owe if arrearages are moved to the end and the payment schedule lightened up, as opposed to the bank eating the house and auctioning it for ten cents on the dollar after it sits vacant for awhile (or a penny on the dollar, tops, if it's in one of those 'low income' areas where all the piping, wiring, and fixtures will get stripped for scrap by thieves before they can get rid of it).  You, on the other hand, formerlurker, are probably up to date in your payments and intend to keep living where you are with some regard for your credit rating, and you thus have no particular leverage in a renegotiation. 

[debk]

BEG....Countrywide is most likely calling you to try to get you to refinance and take some of your equity out of your house.

You could use the equity for whatever you want....car, trip, remodel, kids' college...whatever.

It gives you access to your equity...that Countrywide (actually someone like me comes in, takes pictures, does a 5-8 page broker price opinion which is an evaluation of what the house is worth on the current market ) will determine your house is worth based on the BPO, and how much they are willing to refinance your house for based on the new value, and Countrywide makes money on the additional monies you have borrowed from them.

On the one hand, it's a sensible way to borrow money...as all mortgage interest is tax deductible.

On the other hand.....it's very risky, if Countrywide has determined that your house is worth more than you could ever hope to sell it for in a good market.....and you borrowed the max that Countrywide is offering.

It's a risk/risk to both you and Countrywide.

If it works out for you, you get the item/trip/etc....get to deduct a larger amount of interest on your taxes thus getting more back on your tax return and Countrywide makes more money off of you.

If you can't make the payments.....it's a lose/lose for both you and Countrywide.

It's a test of your fiscal responsibility and Countrywide's risk of doing business.

This is yet another cause of foreclosure.

[USA4ME]

The scenerio debk just painted has always been a risk, even before all this other stuff got started.  What's going on now had more to do with Fannie/Freddie lowering standards in order to accomidate more risky loan programs.  Sub-prime lenders used to handle the "B" and "C" paper market, but Fannie/Freddie liked the margins and wanted in on the action.  There's no other reason to account for them putting out 100% Stated Income and No-Income Verification loans except they wanted that market.  When you're being pressed by Congress to place minorities and/or low-income families into houses, then one sure-fire way to do it is to have it where they don't have to have any money down and can essentially lie about their income.  Welcome to where we are today.

Just to clarify for those not in the industry, if someone had spotless credit and had a job in the same field for 20 years, it wouldn't matter in that respect that are extremely good borrowers, a 100% Stated or Non-Income loan would still be considered high risk (B/C paper), and therefore sub-prime.  Even the truly sub-prime lenders weren't making that many 100% loans, it's just too risky.

.

[BEG]

BEG....Countrywide is most likely calling you to try to get you to refinance and take some of your equity out of your house.

You could use the equity for whatever you want....car, trip, remodel, kids' college...whatever.

It gives you access to your equity...that Countrywide (actually someone like me comes in, takes pictures, does a 5-8 page broker price opinion which is an evaluation of what the house is worth on the current market ) will determine your house is worth based on the BPO, and how much they are willing to refinance your house for based on the new value, and Countrywide makes money on the additional monies you have borrowed from them.

On the one hand, it's a sensible way to borrow money...as all mortgage interest is tax deductible.

On the other hand.....it's very risky, if Countrywide has determined that your house is worth more than you could ever hope to sell it for in a good market.....and you borrowed the max that Countrywide is offering.

It's a risk/risk to both you and Countrywide.

If it works out for you, you get the item/trip/etc....get to deduct a larger amount of interest on your taxes thus getting more back on your tax return and Countrywide makes more money off of you.

If you can't make the payments.....it's a lose/lose for both you and Countrywide.

It's a test of your fiscal responsibility and Countrywide's risk of doing business.

This is yet another cause of foreclosure.

Why are they calling me several times a day, day in and day out?  It is driving me nuts.   If I were interested in doing something like that I would call them. 

[debk]

BEG....Countrywide is most likely calling you to try to get you to refinance and take some of your equity out of your house.

You could use the equity for whatever you want....car, trip, remodel, kids' college...whatever.

It gives you access to your equity...that Countrywide (actually someone like me comes in, takes pictures, does a 5-8 page broker price opinion which is an evaluation of what the house is worth on the current market ) will determine your house is worth based on the BPO, and how much they are willing to refinance your house for based on the new value, and Countrywide makes money on the additional monies you have borrowed from them.

On the one hand, it's a sensible way to borrow money...as all mortgage interest is tax deductible.

On the other hand.....it's very risky, if Countrywide has determined that your house is worth more than you could ever hope to sell it for in a good market.....and you borrowed the max that Countrywide is offering.

It's a risk/risk to both you and Countrywide.

If it works out for you, you get the item/trip/etc....get to deduct a larger amount of interest on your taxes thus getting more back on your tax return and Countrywide makes more money off of you.

If you can't make the payments.....it's a lose/lose for both you and Countrywide.

It's a test of your fiscal responsibility and Countrywide's risk of doing business.

This is yet another cause of foreclosure.

Why are they calling me several times a day, day in and day out?  It is driving me nuts.   If I were interested in doing something like that I would call them. 

You are most likely on a list of "good risks".

Countrywide has satellite offices all over the country. You are having a variety of lenders in their offices calling you. I'm sure it's not just one. Hard telling how many are calling.

I had 2 ARM's on my old house with Countrywide. I was a good risk because I paid my mortgage on time and had a lot of equity in my house. I sold the house in Dec 2006 and still get letters in this house (my name's not even on the mortgage or title) asking me to borrow from them.

There is a computer program called AVM .....mortgage companies purchase it. I think it stands for Automated Valuation Mortgage.

What it does is, an address is plugged in.

 HYPOTHETICALLY.....your address is put in,

1111 Anyroad Dr, Anytown, Anystate

Up pops up, the tax records on your house.

It shows the GLA (gross living area), the property identification #, # of rooms, bedrooms, baths, value of your lot....and comparable sales to your house within a half mile for urban, 1 mile for suburban, etc. for the last year.

It will also show how much you paid for your house and the original loan amount.

Based on all that info....and market conditions (the sales will show the increase/decrease in value)....lenders determine whether or not there is additional equity in your home.

You pop up on Countrywide's "good risk" sheet, there's a proactive lender at your local Countrywide office who is making cold calls to Countrywide borrowers  who appear to have significant equity in their property and they want to "help" you access it and spend it.

Yes....this is a form of telemarketing. However....the "do not call" laws do not apply to YOUR own mortgage company calling you.....for any reason. Now if it was Wells Fargo calling you and bugging you....you could complain.

Answer the phone, or call the local Countrywide office, ask to speak to the manager and ask to be taken off of their call list. It may not stop the calls entirely, but should slow them down.

[BEG]

Answer the phone, or call the local Countrywide office, ask to speak to the manager and ask to be taken off of their call list. It may not stop the calls entirely, but should slow them down.

Thanks for the info Deb.  I will answer it the next time they call.  I had been waiting for the 30 day period after you sign up for "do not call".  I had resigned up about a week ago or so and I thought it would take care of it.  Thanks for letting me know that I have to tell them to stop calling.