Catastrophe - Dick Morris [44]
But what about those who are behind on their mortgage payments but not yet in foreclosure? The rules of the new program are a bit vague here. The plan provides that “only homeowners in good standing” can qualify for the loans.146 You don’t have to be behind on your payments. If you can show that you‘re “at risk of imminent default” you are eligible.”147
So an applicant for relief must walk a fine line: he must be “in good standing”—which, presumably, excludes those actually in foreclosure—yet at “imminent risk” of default. So if you happen to be in between these markers and don’t owe more than your house is worth, you’re eligible for Obama’s help.
Or maybe not.
As it turns out, only home owners whose mortgages are insured or owned by Fannie Mae or Freddie Mac are eligible for Obama’s plan. “Fannie and Freddie own or insure about half of the nation’s $12 trillion in mortgages. Pension funds, hedge funds, insurance companies and other private investors hold the other half mainly through mortgage-backed securities.”148
Oh, and another thing: the program is voluntary. Banks and other lenders don’t need to participate. Indeed, many won’t participate—because they don’t give a damn what happens to the mortgage loans they made. Most of those original mortgage deals are long gone, sold on the secondary mortgage market and then chopped up and securitized and sold on Wall Street. Why should they worry?
Obama is hoping to entice the banks to participate by offering a $1,000 cash payment to those who service the mortgages for each modified loan and “as much as $1,000 annually for three years when the borrower stays current.”149 Home owners themselves are “eligible for $1,000 annually for five years for remaining current”—although the money will go not to them directly but to pay down the principal on their mortgage.150
So…
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WHO WILL GET HELP UNDER OBAMA’S MORTGAGE RESCUE PLAN
if your lender wants to participate and
if your loan is insured, or owned by Freddie or Fannie and
if you have a job and
if your loan isn’t worth more than your home and
if you are a borrower “in good standing”
…then you can get your loan modified.
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Right?
Not so fast. There are a few other caveats: The property must be owner-occupied. In fact, it must be the homeowner’s primary residence. The mortgage must predate January 1, 2009. It can’t be investor-owned, vacant, or condemned. And the loan can’t be for more than $759,750.
If you can squeeze through these eligibility standards, you may be in luck. Then you can have your mortgage reduced, through matching government and private funding, so that the payments come to 31 percent of your monthly income.
Even so, a lot of mortgage-servicing companies feel they don’t have the power to reconfigure mortgage loans without the assent of the investors who might own a piece of the loan (who could number in the thousands if the mortgage was part of a syndication). So the loan-servicing companies are asking Congress to pass a law allowing them to restructure mortgages without explicit permission from the investors.
With all that in mind, then, how many people will really qualify for Obama’s so-called Homeowner Stability Initiative? Not a whole lot.
In practice, if those who have gotten in over their heads on their mortgages are to find any real relief, it’ll have to come through the bankruptcy courts. One bill that’s making its way through Congress would allow bankruptcy court judges to modify mortgages without securing approval from the lender or the company that services the loan. This “cramdown” legislation offers the only real relief to families holding mortgages they cannot pay.
Opponents of that bill say it’ll raise the cost of borrowing, leading banks to consider more mortgages to be in default. But housing advocates say, correctly, that “mortgage lenders and investors won’t get