The Valentine From the Federal Government
February 14, 2012
The latest program from the federal government in the attempt to shore up the housing market is the settlement that would require banks to provide billions of dollars in aid to homeowners who have either lost their homes or who are at risk. Supposedly the deal will set aside up to $17 billions specifically to pay for principal reductions and other relief for borrowers who are behind on their mortgages or who owe more than the home is currently worth. For the homeowners who have been following every plan put out by the government in attempts to recast their mortgages, this proposal, if it actually works, would be the greatest gift of this decade.
Needless to say, the homeowners who have been unable to have their lenders respond to applications for loan modifications are sceptical, but hopeful. It would be a step in the right direction if the billions allocated to banks had strings attached. For instance: banks would be reimbursed for the loss taken when the loan was written down or the interest rate reduced.
Say the present loan amount is $400,000 at a 5% interest rate for 30 years. It is modified to a $250,000 loan amount with the current interest rate of 3,75% for 30 years. I am sure a mathematical program could determine the loss to the lender. It could be complicated since the lender would be receiving a lump sum now rather than a stream of interest payments over the next 30 years. Lots of variables do complicate figuring the loss for the lender, but for the borrower/homeowner, the loss of equity has already occurred and to be able to make the payments and remain in the home is what many of these underwater owners would really see as a gift.
Happy Valentine's Day !!!!!
The latest program from the federal government in the attempt to shore up the housing market is the settlement that would require banks to provide billions of dollars in aid to homeowners who have either lost their homes or who are at risk. Supposedly the deal will set aside up to $17 billions specifically to pay for principal reductions and other relief for borrowers who are behind on their mortgages or who owe more than the home is currently worth. For the homeowners who have been following every plan put out by the government in attempts to recast their mortgages, this proposal, if it actually works, would be the greatest gift of this decade.
Needless to say, the homeowners who have been unable to have their lenders respond to applications for loan modifications are sceptical, but hopeful. It would be a step in the right direction if the billions allocated to banks had strings attached. For instance: banks would be reimbursed for the loss taken when the loan was written down or the interest rate reduced.
Say the present loan amount is $400,000 at a 5% interest rate for 30 years. It is modified to a $250,000 loan amount with the current interest rate of 3,75% for 30 years. I am sure a mathematical program could determine the loss to the lender. It could be complicated since the lender would be receiving a lump sum now rather than a stream of interest payments over the next 30 years. Lots of variables do complicate figuring the loss for the lender, but for the borrower/homeowner, the loss of equity has already occurred and to be able to make the payments and remain in the home is what many of these underwater owners would really see as a gift.
Happy Valentine's Day !!!!!
posted by shirley harry at 8:45 AM
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