“Mortgages aren’t ethical documents, they’re legal contracts. The typical residential mortgage for an owner-occupied home gives the borrower 2 options: pay on time and in full, and keep paper title to the house and full entitlements to any appreciation upon its later sale after the mortgage is satisfied; or stop making payments, and hand the keys back to the lender.
“Morality and ethics don't even enter the equation. Both options are perfectly legal for the borrower, and the only criteria should be business-based. All the ethics you need are contained within the 4 corners of the pages of the mortgage contract.
“Indeed, the ethical thing to do is for each borrower who’s underwater to look without blinders at their family's financial situation -- not just now, but over the long term."
From Mike Shedlock in Minyanville.
A Tishman Speyer-led partnership is in default on debt tied to a large office portfolio in the Washington area. Tishman itself isn't at risk. 8/19/09 Wall Street Journal
Tuesday, August 18, 2009
Tuesday, August 11, 2009
Modification falters
"U.S. Effort to Modify Mortgages Falters
By RUTH SIMON Wall St Journal 7/28/09
"The Obama administration in February laid out its foreclosure-prevention plan to much fanfare.
"One issue was that mortgage companies were waiting for final federal guidelines on key issues such as how to determine whether a loan modification is preferable to a foreclosure, said Mary Coffin, head of loan servicing for Wells Fargo Home Mortgage
"Employees at mortgage-servicing companies often tell borrowers they can't be helped if they are current on their loans, said Michael van Zalingen, director of homeownership services for the nonprofit Neighborhood Housing Services of Chicago.
"Other borrowers complained of long waits for help. Suzanne DeNick of New Jersey said J.P. Morgan Chase & Co. told her it would take four to six weeks for her modification request to be assigned to an analyst and another 90 to 120 days before she received a decision. The company also asked her to resend her application, further delaying the process.
"Mortgage companies say that to be considered at risk of imminent default, borrowers must typically have liquid reserves that amount to less than three months of mortgage-related payments and, after figuring in expenses, a few hundred dollars or less left at the end of each month."
On Cove Street, the interest rate is merely dropped. There are no costs to the borrower. No hassling evaluation by the banks--which is expensive for the banks. Banks can focus on lending. The government is not involved. Borrowers on the borderline are in better shape. Borrowers above the border have more free cash.
By RUTH SIMON Wall St Journal 7/28/09
"The Obama administration in February laid out its foreclosure-prevention plan to much fanfare.
"One issue was that mortgage companies were waiting for final federal guidelines on key issues such as how to determine whether a loan modification is preferable to a foreclosure, said Mary Coffin, head of loan servicing for Wells Fargo Home Mortgage
"Employees at mortgage-servicing companies often tell borrowers they can't be helped if they are current on their loans, said Michael van Zalingen, director of homeownership services for the nonprofit Neighborhood Housing Services of Chicago.
"Other borrowers complained of long waits for help. Suzanne DeNick of New Jersey said J.P. Morgan Chase & Co. told her it would take four to six weeks for her modification request to be assigned to an analyst and another 90 to 120 days before she received a decision. The company also asked her to resend her application, further delaying the process.
"Mortgage companies say that to be considered at risk of imminent default, borrowers must typically have liquid reserves that amount to less than three months of mortgage-related payments and, after figuring in expenses, a few hundred dollars or less left at the end of each month."
On Cove Street, the interest rate is merely dropped. There are no costs to the borrower. No hassling evaluation by the banks--which is expensive for the banks. Banks can focus on lending. The government is not involved. Borrowers on the borderline are in better shape. Borrowers above the border have more free cash.
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