Yesterday, on TV, I did a few stories about how the big government bailout (TARP) is having some unfortunate and unintended consequences on troubled borrowers (see links below).
Apparently some of the banks and lenders are slowing down on refis, short sales and loan restructuring because they want to wait and see what they get from the bailout. In the story, I quoted Bruce Marks of the Boston-based Neighborhood Assistance Corporation of America, who claims Fannie Mae, one of the nation’s largest investors in mortgages, is being extremely resistant to help borrowers.
Marks: “What Fannie and Freddie are saying to us is that they're not willing to reduce the interest rate permanently below the market rate to make it affordable. They're not willing to stop the foreclosures, and they're not willing to reduce the principal on any mortgage out there, so they are the most resistant out there than any investor in the country.”
- Realty Check Video: Homeowners Left Hanging?
- Realty Check Video: Foreclosure Relief & the Bailout
A Fannie spokesman admitted to me on the phone that they’re not writing down principal, but he did send me this defense:
We are undertaking a variety of efforts to help prevent foreclosure and keep people in their homes:
- While specific rate and term adjustments we may make to modify a loan vary depending on the circumstances, I can tell you that, in some instances , we will lower the interest rate below market for a period of time to let a borrower get back on their feet. We will also extend the term to 40 years in some cases to help lower the monthly payment.
- We continue to aggressively take steps to make sure borrowers at risk of foreclosure are contacted and workouts are attempted before loans are referred to attorneys to begin foreclosure proceedings. In some cases, we are even pulling back cases from the attorneys to have the servicers work them. We're reviewing everything very closely.
- Home Construction Falls Sharply in September
- In the five weeks prior to September 30, we reviewed 7,750 foreclosures and 17,309 loans on the cusp of foreclosure to be sure we're making every effort to prevent loans from going into foreclosure. We stopped about 40% of the foreclosures reviewed and about 80% of the loans at risk of foreclosure so that additional loss mitigation efforts could be attempted.
- As we have continued to build our loss mitigation infrastructure, we are now in position to review 100% of the foreclosure referrals, which totaled more than 27,000 in September alone.
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