As can be seen from the article below, we are not out of the woods yet, despite all the news talk about the market reaching bottom. For South Florida, we still ahve a long way to go. Why the high rate of foreclosures? I believe that after many failed attempts to modify loans, continued high unemployment in Florida, the fact that many homes are investment homes or condos, which carry a tax liability when short sold, many people are turning to bankruptcy (see: http://www.usatoday.com/money/economy/2010-03-03-bankruptcy03_ST_N.htm ), and as these cases get discharged, the homes end up in foreclosure or short sale anyway (yep, after bankruptcy, you still have to deal with the house)
---- Charl Van Wyk
South Florida Sun-Sentinel.com
Real estate
Foreclosure filings jump in South Florida
Mounting job losses, “underwater” mortgages lead to more foreclosure filings in South Florida
By Paul Owers, Sun Sentinel
April 15, 2010
Foreclosure filings rose last month by 38 percent in Broward County as homeowners struggled with unemployment and "underwater" mortgages, RealtyTrac Inc. said Thursday.
Broward had 6,341 homeowners in some stage of foreclosure in March, up from 4,599 a year ago, according to the Irvine, Calif.-based company that tracks mortgage defaults nationwide. Broward had the eighth-highest foreclosure rate among Florida's 67 counties, with one in every 127 housing units receiving a filing.
Palm Beach County filings in March totaled 3,983, more than double the 1,509 in March 2009. The county had the state's 17th-highest foreclosure rate.
The problem isn't likely to improve soon, as job losses mount and home price declines add to the number of homeowners who owe more than their properties are worth.
"We're going to continue to have a dark cloud hanging over our real estate market for some time," said Greg McBride, senior financial analyst with Bankrate.com in North Palm Beach.
Initial foreclosure filings in both counties were down substantially compared with February, perhaps an early indication that a government-sponsored foreclosure-alternative program started recently is working, RealtyTrac said.
The plan is designed to remove barriers to so-called short sales and promote deeds in lieu of foreclosures, in which homeowners hand back their properties to the banks. The plan took effect April 5, but some lenders were using it earlier this year.
The program is sure to be popular with people who want to get out from under onerous mortgages. But it will drag down home prices, creating more underwater borrowers who may fall into foreclosure, Fort Lauderdale real estate lawyer Shari Olefson said.
"I don't know that this is the answer," she said.
RealtyTrac spokesman Daren Blomquist said it's important to speed up short sales because that will clear the inventory of available homes and ultimately help the housing market recover.
Meanwhile, South Florida remains one of the busiest areas in the nation for loan modifications. A Treasury report on the Making Home Affordable program showed that the Miami-Fort Lauderdale-Pompano Beach metropolitan area accounted for 4.7 percent of loan modification activity under the program.
But those efforts aren't likely to ease the foreclosure crisis, according to the Congressional Oversight Panel, a watchdog agency monitoring the federal government's bailout program.
RealtyTrac compiles default notices, scheduled foreclosure auctions and bank repossessions. Not all homeowners who get notices lose their properties.
Florida had the nation's fourth-highest foreclosure rate in March, with one in every 149 housing units receiving a filing, RealtyTrac said.
In December, the Florida Supreme Court ordered the creation of a statewide mediation program for homeowners and lenders before a property can be sold through foreclosure.
Broward's 17th Judicial Circuit Court has appointed the American Arbitration Association to administer its mediation program starting July 1. Program details for the 15th Judicial Circuit Court in Palm Beach County are not yet clear.
A bill in Florida's Legislature that would allow banks to foreclose without going before a judge appears to have died.
While the state's clogged foreclosure system needs an overhaul, the proposed bill was too radical, said Rod Petrey, president of the Collins Center for Public Policy. The nonprofit group provides mediation services for four state circuit courts.
"With someone's home, where their family is, we ought to move very slowly in taking that away," Petrey said.
Staff writer Harriet Johnson Brackey contributed to this report.
Paul Owers can be reached at Powers@SunSentinel.com or 561-243-6529.
Copyright © 2010, South Florida Sun-Sentinel
http://www.sun-sentinel.com/business/fl-foreclosure-realty-trac-20100415,0,7862149.story
Thursday, April 15, 2010
Wednesday, April 14, 2010
Home repossessions jump 25% in South Florida
Lenders repossessed almost 9,200 properties in South Florida during the first quarter of 2010, a 25 percent increase from the first quarter of 2009, according to a new report from CondoVultures.com .
The first quarter surge was led by 3,707 property repossessions in Broward, Miami-Dade and Palm Beach counties in March 2010. That was a new high for a single month in the 39 months that CondoVultures.com has tracked bank repossessions.
Prior to March, the record was 3,706 repossessions set in December 2009, according to the report.
South Florida bank repossessions totaled 2,900 in the month of February and 2,475 in January, according to the report.
CondoVultures is a real estate consultancy based in Bal Harbour.
-- MIAMI HERALD STAFF
Read more: http://www.miamiherald.com
The first quarter surge was led by 3,707 property repossessions in Broward, Miami-Dade and Palm Beach counties in March 2010. That was a new high for a single month in the 39 months that CondoVultures.com has tracked bank repossessions.
Prior to March, the record was 3,706 repossessions set in December 2009, according to the report.
South Florida bank repossessions totaled 2,900 in the month of February and 2,475 in January, according to the report.
CondoVultures is a real estate consultancy based in Bal Harbour.
-- MIAMI HERALD STAFF
Read more: http://www.miamiherald.com
Wednesday, April 7, 2010
Surge in foreclosures attracts lawyers who promise to renegotiate mortgages but don’t
By PAUL ELIAS
The Associated Press
“I nearly ended up in a homeless shelter,” Warren Jacobs said of his hiring United Law Group to renegotiate the mortgage on his Mesquite, Texas, home.
SAN FRANCISCO | Warren Jacobs was desperate when he received a “robo-call” that promised to help him stave off foreclosure of his home near Dallas.
The father of six had lost his construction job, lacked health insurance and couldn’t pay the bills for his 17-year-old daughter’s cancer treatment, let alone his mortgage.
So on Jan. 21, he dialed the return number and was connected to the United Law Group. Minutes later, Jacobs agreed to scrape together $2,000 to pay the Irvine, Calif., law firm.
Jacobs unwittingly became one of the many thousands of homeowners who authorities say have been taken in by unscrupulous or incompetent loan-modification lawyers who rushed into a burgeoning niche: helping struggling homeowners renegotiate their mortgages.
Ripoffs of homeowners have become so common that state bar associations from Florida to Arizona are warning their members of the many ethical pitfalls that await those who exploit the mortgage crisis.
The California State Bar is investigating more than 400 lawyers who are suspected of ripping off thousands of homeowners nationwide.
The first to be charged was Sean Rutledge, the founder of the law firm that purported to represent Jacobs and 13 other homeowners.
Just months after securing a law license, Rutledge had been flying high. His United Law Group added several lawyers and opened offices in other states.
Today Rutledge’s license is suspended, his nascent career lies in tatters and he is under investigation in California and Ohio for taking fees of up to $3,500 from desperate homeowners then allegedly doing little — or nothing — to save their homes.
The California Bar in July formally charged Rutledge with not only failing to perform vital tasks to stop foreclosures, but also calling his clients “losers” in the rare occasions he returned their phone calls.
Rutledge has denied the allegations and said he would contest the attempt to disbar him. He is appealing the dismissal of a lawsuit he filed against the California Bar, alleging that the group violated federal laws that protect people with disabilities. Rutledge is diabetic and alleges state bar investigators, when scheduling meetings, ignored his need for treatment.
Rutledge did not return e-mail messages seeking comment, and he could not be reached through the United Law Group, which remains in business.
January was the 11th straight month in which more than 300,000 properties nationwide were subject to foreclosure filings, according to Irvine-based RealtyTrac, which predicts a record 3 million foreclosures this year.
Jacobs told investigators that Rutledge’s law firm advised him to stop making mortgage payments and cease communicating with his lender.
When the bank moved to seize the house for which Jacobs paid $175,000 in 2003, United Law Group failed to formally request “forbearance,” as it promised, to delay foreclosure. On June 1, Jacobs hired another lawyer to file bankruptcy on his behalf to stave off foreclosure the next day. In September, he agreed to a new payment plan with his bank and continues to live in the 4,000-square-foot house in suburban Dallas.
“I nearly ended up in a homeless shelter,” Jacobs said.
Earlier this month, Ohio Attorney General Richard Cordray filed a lawsuit against Rutledge and the United Law Group, alleging they defrauded homeowners in that state.
Nina Vultaggio, a spokeswoman for United Law Group, and others contend that the financial industry is behind the crackdown on lawyers. Vultaggio said that the financial industry is the biggest villain in the mortgage crisis and wants to deprive their customers of legal representation during complicated negotiations to save homes.
“When you get into trouble, you need an attorney to talk to these negotiators,” Vultaggio said.
Vultaggio said United Law Group has filed class-action lawsuits against Bank of America, JP Morgan Chase and Washington Mutual, alleging unfair business practices. The banks deny the allegations.
Legal experts still strongly recommend homeowners in peril hire lawyers to counsel them in how best to deal with their lenders, but state bar officials warn clients to research a lawyer’s background.
Jacobs said he is still waiting for United Law Group to refund the $2,000 fee he paid in January.
The Associated Press
“I nearly ended up in a homeless shelter,” Warren Jacobs said of his hiring United Law Group to renegotiate the mortgage on his Mesquite, Texas, home.
SAN FRANCISCO | Warren Jacobs was desperate when he received a “robo-call” that promised to help him stave off foreclosure of his home near Dallas.
The father of six had lost his construction job, lacked health insurance and couldn’t pay the bills for his 17-year-old daughter’s cancer treatment, let alone his mortgage.
So on Jan. 21, he dialed the return number and was connected to the United Law Group. Minutes later, Jacobs agreed to scrape together $2,000 to pay the Irvine, Calif., law firm.
Jacobs unwittingly became one of the many thousands of homeowners who authorities say have been taken in by unscrupulous or incompetent loan-modification lawyers who rushed into a burgeoning niche: helping struggling homeowners renegotiate their mortgages.
Ripoffs of homeowners have become so common that state bar associations from Florida to Arizona are warning their members of the many ethical pitfalls that await those who exploit the mortgage crisis.
The California State Bar is investigating more than 400 lawyers who are suspected of ripping off thousands of homeowners nationwide.
The first to be charged was Sean Rutledge, the founder of the law firm that purported to represent Jacobs and 13 other homeowners.
Just months after securing a law license, Rutledge had been flying high. His United Law Group added several lawyers and opened offices in other states.
Today Rutledge’s license is suspended, his nascent career lies in tatters and he is under investigation in California and Ohio for taking fees of up to $3,500 from desperate homeowners then allegedly doing little — or nothing — to save their homes.
The California Bar in July formally charged Rutledge with not only failing to perform vital tasks to stop foreclosures, but also calling his clients “losers” in the rare occasions he returned their phone calls.
Rutledge has denied the allegations and said he would contest the attempt to disbar him. He is appealing the dismissal of a lawsuit he filed against the California Bar, alleging that the group violated federal laws that protect people with disabilities. Rutledge is diabetic and alleges state bar investigators, when scheduling meetings, ignored his need for treatment.
Rutledge did not return e-mail messages seeking comment, and he could not be reached through the United Law Group, which remains in business.
January was the 11th straight month in which more than 300,000 properties nationwide were subject to foreclosure filings, according to Irvine-based RealtyTrac, which predicts a record 3 million foreclosures this year.
Jacobs told investigators that Rutledge’s law firm advised him to stop making mortgage payments and cease communicating with his lender.
When the bank moved to seize the house for which Jacobs paid $175,000 in 2003, United Law Group failed to formally request “forbearance,” as it promised, to delay foreclosure. On June 1, Jacobs hired another lawyer to file bankruptcy on his behalf to stave off foreclosure the next day. In September, he agreed to a new payment plan with his bank and continues to live in the 4,000-square-foot house in suburban Dallas.
“I nearly ended up in a homeless shelter,” Jacobs said.
Earlier this month, Ohio Attorney General Richard Cordray filed a lawsuit against Rutledge and the United Law Group, alleging they defrauded homeowners in that state.
Nina Vultaggio, a spokeswoman for United Law Group, and others contend that the financial industry is behind the crackdown on lawyers. Vultaggio said that the financial industry is the biggest villain in the mortgage crisis and wants to deprive their customers of legal representation during complicated negotiations to save homes.
“When you get into trouble, you need an attorney to talk to these negotiators,” Vultaggio said.
Vultaggio said United Law Group has filed class-action lawsuits against Bank of America, JP Morgan Chase and Washington Mutual, alleging unfair business practices. The banks deny the allegations.
Legal experts still strongly recommend homeowners in peril hire lawyers to counsel them in how best to deal with their lenders, but state bar officials warn clients to research a lawyer’s background.
Jacobs said he is still waiting for United Law Group to refund the $2,000 fee he paid in January.
Lenders starting to run after 'walkaway' homeowners
It's a variation of "you can run, but you can't hide," in the case of underwater homeowners (those whose homes are now worth less than the remaining mortgage). In increasing numbers, according to reports, people are simply walking away from their homes. Now banks and other lending institutions are starting to run after them.
According to the Detroit Free Press, more and more lenders are either hiring collection agencies or "getting deficiency judgments -- court orders that allow banks to collect on mortgage balances."
And that is bad news for the walkaway ex-homeowner. Such a court order would allow the bank to do everything from garnishing wages to grabbing any tax refund he might be expecting.
It gets worse, too.
If you walk away from your home, you are still responsible for taxes on it. At the moment, many banks are actually paying off that bill because they want to head off a tax foreclosure situation. But once they catch their breath, guess who the lenders will go after to recoup those payments made on your behalf?
Yep. You.
Florida real estate attorney Larry Tolchinsky tells CNN.com: "Banks are pulling credit reports to see if it's a strategic default. If you're behind on all your other payments, you're okay. But if you're not, they'll come after you."
As one Web site that helps provide homeowners with foreclosure news points out, the extent that a lender can go after you when you walk away from your home depends, to some degree, on the laws of the state you reside in. So it is important you check this out if you are giving serious thought to walking away from your underwater property. Complicating matters, the site also points out, is whether you have a second mortgage on the property. You need to take all that into your calculations when it comes to any future liability.
None of this, of course, deals with the larger ethical question: Whether, under any circumstances, it is okay to walk away from a property you still owe money to lenders on? That debate has been intensifying in recent months as more distressed homeowners are taking that option.
But if you have settled this ethical issue in your own mind and with your family, and have decided to go ahead and toss those keys back to the bank, you really do need to be keenly aware that the banks are apparently starting to fight back and your money concerns may not come to an end just because you closed that door and walked away.
Charles Feldman is a journalist, media consultant and co-author of the book, "No Time To Think-The Menace of Media Speed and the 24-hour News Cycle." He has written about real estate related issues for several years
According to the Detroit Free Press, more and more lenders are either hiring collection agencies or "getting deficiency judgments -- court orders that allow banks to collect on mortgage balances."
And that is bad news for the walkaway ex-homeowner. Such a court order would allow the bank to do everything from garnishing wages to grabbing any tax refund he might be expecting.
It gets worse, too.
If you walk away from your home, you are still responsible for taxes on it. At the moment, many banks are actually paying off that bill because they want to head off a tax foreclosure situation. But once they catch their breath, guess who the lenders will go after to recoup those payments made on your behalf?
Yep. You.
Florida real estate attorney Larry Tolchinsky tells CNN.com: "Banks are pulling credit reports to see if it's a strategic default. If you're behind on all your other payments, you're okay. But if you're not, they'll come after you."
As one Web site that helps provide homeowners with foreclosure news points out, the extent that a lender can go after you when you walk away from your home depends, to some degree, on the laws of the state you reside in. So it is important you check this out if you are giving serious thought to walking away from your underwater property. Complicating matters, the site also points out, is whether you have a second mortgage on the property. You need to take all that into your calculations when it comes to any future liability.
None of this, of course, deals with the larger ethical question: Whether, under any circumstances, it is okay to walk away from a property you still owe money to lenders on? That debate has been intensifying in recent months as more distressed homeowners are taking that option.
But if you have settled this ethical issue in your own mind and with your family, and have decided to go ahead and toss those keys back to the bank, you really do need to be keenly aware that the banks are apparently starting to fight back and your money concerns may not come to an end just because you closed that door and walked away.
Charles Feldman is a journalist, media consultant and co-author of the book, "No Time To Think-The Menace of Media Speed and the 24-hour News Cycle." He has written about real estate related issues for several years
New Plan to help Struggling Homeowners
A Bold U.S. Plan to Help Struggling Homeowners
By DAVID STREITFELD New York Times
Once again, the federal government is adding to its arsenal of programs for troubled homeowners, seeking to help those who urgently need it while neither angering nor creating perverse incentives for those who do not.
The new measures, announced by financial policy makers at the White House on Friday, are among the boldest to date. They are aimed not only at the seven million households that are behind on their mortgages but, in a significant expansion of aid that proved immediately controversial, the 11 million that simply owe more on their homes than they are worth.
Some of these people, if the government plan works, will emerge with a house whose payments they can afford and whose new mortgage reflects its market value. Unlike many previous modification recipients, they would presumably be less likely to re-default, helping to stabilize a housing market that remains queasy.
“We’re walking that delicate balance to make sure these solutions are sustainable and not temporary,” said David H. Stevens, commissioner of the Federal Housing Administration.
It is a balancing act in numerous ways. If the plan falls short — and some experts were skeptical on Friday — the Obama administration could find itself having to start over yet again in six months or a year.
“The housing market is the Vietnam War of the American financial system,” said Howard Glaser, a housing consultant. “The federal government is in so deep, they have to keep ramping up to find a way out.”
The latest programs, together with foreclosure assistance efforts already in place, are aimed at helping as many as four million embattled owners keep their houses. But the measures, which will take as long as six months to put into practice, might easily fall victim to some of the conflicting interests that have bedeviled efforts to date. None of these programs have the force of law, and lenders have often seen no good reason to participate.
To lubricate its efforts, the government plans to spread taxpayers’ money around liberally. For instance, it had previously planned to give homeowners that sell their homes rather than let them go into foreclosure a “relocation assistance” payment of $1,500. The plan announced on Friday increases that amount to $3,000.
All told, the new measures are expected to cost about $50 billion. The White House was careful to stress that the money will come from funds already set aside for housing programs in the Troubled Asset Relief Program. There will be “no additional commitment of taxpayer dollars,” Michael S. Barr, an assistantsecretary of the Treasury, said at the White House briefing.
Here is what the $50 billion is supposed to buy:
The simplest component of the plan involves assistance to unemployed homeowners. Mortgage companies will now be encouraged to reduce payments for at least three months and possibly six months while the homeowner pursues a new job.
To be eligible, borrowers must submit proof they are receiving unemployment insurance. The new payments will be 31 percent or less of their monthly income. The missing money will be tacked onto the loan’s principal.
A second and more complicated program is a requirement that mortgage servicers consider writing off a portion of a borrower’s loan to get it down to a more manageable level.
Borrowers in the government modification plan who owe more than 115 percent of the value of their home and are paying more than 31 percent of their monthly income toward the mortgage are eligible. The write-downs are to take three years, with the borrowers in essence being rewarded for making their payments on time.
The third major new program strays the farthest from the government’s previous approach. Borrowers who owe more on their homes than they are worth will get a chance to cut their debt — providing the investor or bank who owns the loan agrees.
Mr. Stevens of the F.H.A. said the program was “for responsible homeowners who through no fault of their own find themselves in a situation of negative equity.”
There is no official requirement that these homeowners be in distress, but it would probably make the investor more receptive to a deal. Whether homeowners will scheme to get into the program is one of the big uncertainties.
The investors will write down the loans to 97.75 percent of the appraised value of the property, at which point the F.H.A. will refinance them through new lenders. The F.H.A., which currently insures about six million homes, will insure the new loans as well.
If the homeowner has a second mortgage, as many do, the total value of the new mortgage can be as much as 115 percent of the value of the property. The F.H.A. will spend up to $14 billion to provide incentives to the banks that service the primary loan as well as the owners of the secondary loans. Some of the money will also provide additional insurance on the new loans.
Numerous parties will have to work together to make these deals fly. The primary loan might have been bundled into a pool and sold to investors during the housing boom. The investor must agree to cut the principal balance for a deal to work, and any bank holding a second mortgage on the property would have to go along, too.
The only incentive for the first lien holder is a quick exit from a loan that might ultimately default. Payments for second lien holders will be made on a sliding scale.
Early reaction to the refinance program among lending groups was less than enthusiastic.
“The magnitude of this program will likely be measured in the tens of thousands rather than the hundreds of thousands of borrowers,” said Tom Deutsch, executive director of the American Securitization Forum. Both banks and investors belong to the forum.
The Mortgage Bankers Association, which represents the banks that service the primary loans and own outright many of the secondary loans, warned that “each servicer will need to determine whether this is the best approach to help the individual borrower.”
The new proposals irked many people, who flooded online forums Friday. Some said those in trouble deserved their fate. Others asked why the government was propping up housing prices when many renters still could not afford to buy a house. And some wondered about the message these rescue plans were sending to those who resisted the housing bubble.
Dave Juliette, a software worker in Pittsburgh, is in the last group. He paid off his loan eight years ahead of schedule and now owns his house free and clear. “I’m a homeowner in a more genuine sense of the word than many of these people with mortgages,” Mr. Juliette said. “But I won’t be seeing a dime.”
By DAVID STREITFELD New York Times
Once again, the federal government is adding to its arsenal of programs for troubled homeowners, seeking to help those who urgently need it while neither angering nor creating perverse incentives for those who do not.
The new measures, announced by financial policy makers at the White House on Friday, are among the boldest to date. They are aimed not only at the seven million households that are behind on their mortgages but, in a significant expansion of aid that proved immediately controversial, the 11 million that simply owe more on their homes than they are worth.
Some of these people, if the government plan works, will emerge with a house whose payments they can afford and whose new mortgage reflects its market value. Unlike many previous modification recipients, they would presumably be less likely to re-default, helping to stabilize a housing market that remains queasy.
“We’re walking that delicate balance to make sure these solutions are sustainable and not temporary,” said David H. Stevens, commissioner of the Federal Housing Administration.
It is a balancing act in numerous ways. If the plan falls short — and some experts were skeptical on Friday — the Obama administration could find itself having to start over yet again in six months or a year.
“The housing market is the Vietnam War of the American financial system,” said Howard Glaser, a housing consultant. “The federal government is in so deep, they have to keep ramping up to find a way out.”
The latest programs, together with foreclosure assistance efforts already in place, are aimed at helping as many as four million embattled owners keep their houses. But the measures, which will take as long as six months to put into practice, might easily fall victim to some of the conflicting interests that have bedeviled efforts to date. None of these programs have the force of law, and lenders have often seen no good reason to participate.
To lubricate its efforts, the government plans to spread taxpayers’ money around liberally. For instance, it had previously planned to give homeowners that sell their homes rather than let them go into foreclosure a “relocation assistance” payment of $1,500. The plan announced on Friday increases that amount to $3,000.
All told, the new measures are expected to cost about $50 billion. The White House was careful to stress that the money will come from funds already set aside for housing programs in the Troubled Asset Relief Program. There will be “no additional commitment of taxpayer dollars,” Michael S. Barr, an assistantsecretary of the Treasury, said at the White House briefing.
Here is what the $50 billion is supposed to buy:
The simplest component of the plan involves assistance to unemployed homeowners. Mortgage companies will now be encouraged to reduce payments for at least three months and possibly six months while the homeowner pursues a new job.
To be eligible, borrowers must submit proof they are receiving unemployment insurance. The new payments will be 31 percent or less of their monthly income. The missing money will be tacked onto the loan’s principal.
A second and more complicated program is a requirement that mortgage servicers consider writing off a portion of a borrower’s loan to get it down to a more manageable level.
Borrowers in the government modification plan who owe more than 115 percent of the value of their home and are paying more than 31 percent of their monthly income toward the mortgage are eligible. The write-downs are to take three years, with the borrowers in essence being rewarded for making their payments on time.
The third major new program strays the farthest from the government’s previous approach. Borrowers who owe more on their homes than they are worth will get a chance to cut their debt — providing the investor or bank who owns the loan agrees.
Mr. Stevens of the F.H.A. said the program was “for responsible homeowners who through no fault of their own find themselves in a situation of negative equity.”
There is no official requirement that these homeowners be in distress, but it would probably make the investor more receptive to a deal. Whether homeowners will scheme to get into the program is one of the big uncertainties.
The investors will write down the loans to 97.75 percent of the appraised value of the property, at which point the F.H.A. will refinance them through new lenders. The F.H.A., which currently insures about six million homes, will insure the new loans as well.
If the homeowner has a second mortgage, as many do, the total value of the new mortgage can be as much as 115 percent of the value of the property. The F.H.A. will spend up to $14 billion to provide incentives to the banks that service the primary loan as well as the owners of the secondary loans. Some of the money will also provide additional insurance on the new loans.
Numerous parties will have to work together to make these deals fly. The primary loan might have been bundled into a pool and sold to investors during the housing boom. The investor must agree to cut the principal balance for a deal to work, and any bank holding a second mortgage on the property would have to go along, too.
The only incentive for the first lien holder is a quick exit from a loan that might ultimately default. Payments for second lien holders will be made on a sliding scale.
Early reaction to the refinance program among lending groups was less than enthusiastic.
“The magnitude of this program will likely be measured in the tens of thousands rather than the hundreds of thousands of borrowers,” said Tom Deutsch, executive director of the American Securitization Forum. Both banks and investors belong to the forum.
The Mortgage Bankers Association, which represents the banks that service the primary loans and own outright many of the secondary loans, warned that “each servicer will need to determine whether this is the best approach to help the individual borrower.”
The new proposals irked many people, who flooded online forums Friday. Some said those in trouble deserved their fate. Others asked why the government was propping up housing prices when many renters still could not afford to buy a house. And some wondered about the message these rescue plans were sending to those who resisted the housing bubble.
Dave Juliette, a software worker in Pittsburgh, is in the last group. He paid off his loan eight years ahead of schedule and now owns his house free and clear. “I’m a homeowner in a more genuine sense of the word than many of these people with mortgages,” Mr. Juliette said. “But I won’t be seeing a dime.”
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