BAILOUTS ARE COMING Click LINK for complete Story

Make no mistake about it, massive bailouts are coming.  It is the only way out of this mess. Why do you think BofA was so eager to take on Countrywide despite having nearly $80 billion in near worthless subprime, Pay Option and HELOC’s on their books? For their servicing and friendly loan officers at a branch in your city?!?  Polease.

This $300 billion bailout being proposed is only the beginning.  The bailout limits the banks losses and puts on the rest of FHA (the tax payer).  What if in the future a law is passed making the banks exempt from all liability for the bad loans they wrote in the past?  Then, you will have no choice but to either leave your home, keep paying absurdly high payments on a depreciating asset when you can rent for half the price or accept a nationalized bailout where you split any upside appreciation in the future with the Gov’t.

Everything they have tried in order to ‘fix’ the housing market thus far has failed.  Now the ‘tools’ they are using are getting larger and more elaborate. $300 freaking billion for a subprime problem that by and large is over!?!  Are you kidding me!! Remember, subprime defaults platued a few months back and are now flatlined albeit at very elevated levels.

It is now clearer than ever that unless you reduce principal balances or bring back the exotic loan programs home prices will fall much further. Defaults are surging and values are dropping faster then ever, even going into the summer selling season when values should be stabilizing or rising.

Should the banks compensate good borrowers, especially if they are experiencing hardship due to a borrower, who never should have been there in the first place, losing their home next door?  In many cases it was the exact same bank who gave the bad borrower the defaulting subprime loan next door to the prime borrower.

Most everyone with a mortgage may need a bail-out in the future.The further home values drop, the more that will need assistance. But it will come at a great expense of all tax payers and home owners. 

Right now is a special moment in time when the banks have too much inventory, they are being very generous, you do not have to split your future upside and the tax payer does NOT subsidize mortgage modifications.  The banks and/or bond holders take the hit exclusively and more and more we are seeing the bond holders and mortgage insurers go back after the bank for losses. The liars and thieves can go to FHA or deal with the new Govt bailout and split their upside for all I care, but again this comes at the tax payers expense.

FHA SECURE IS NO SOLUTION

Oh sure, many will say ‘they should go get an FHA Secure loan’. Ok, sure. You tell a guy with a nice 10/1 interest only at 4.75% with 6-years left who is $300k underwater to go get an FHA Secure refi and have his payments double. I would love to hear that sales call. The following is from the FHA site- this sounds really good, ey?  “With FHASecure, the lender will not automatically disqualify you because you are delinquent on your loan, and the lender may offer you a second mortgage to make up the difference between the value of your property and what you owe. ”

This makes no sense when banks will reduce your principal balance, your interest rate or both right now. FHA is telling you to go get re-leveraged with a first and second mortgage. It is cheaper to walk away and rent in most cases.

‘THE DOG ATE MY NOTE’ BAIL-OUT

The ‘dog ate my note’ defence is gaining popularity but only a few cases have ever been brought to trial and wiating for that could spell trouble. Believe me, if courts across the nation start telling trustees that they cannot foreclose because they are not the real owner of the loan, there is no real owner due to securitisation and the borrower gets a free home, there will be laws put in place overnight to protect the banks. This sort of thing would take down our nations banks overnight.  

If this defence turns out in the end to be valid and accepted and you opt to do a loan modification now, you may not be eligible for your ‘dog ate my note’ bail-out down the road. But if it doesn’t pan out and you wait laws will be passed and other bail-outs put in place that surely protects the banks and you may have to split all of your upside after the bail-out you eventually opt for with the Gov’t. Essentially you are gambling with your home and net worth. A mortgage modification done right now has never been easier and carries no strings once complete.

I am under the belief, however, that in the end banks will have to take back everything that defaults for: early payment default  (first 6-12 months depending on investor); fraud  (self-explanatory); white-lie fraud  (fudging income, assets etc on limited doc loans); and lender negligence  (sloppiness, unauthorized exceptions etc).  Defaults for these reasons alone could amount to 50% of all defaults…who knows. One thing is for sure, servicers are assisting bond holders and mortgage insurers in audits of defaulted loans in order to place blame off of themselves.

NON-PROFIT HELP

Hope Now said they have ‘helped’ 1.5 million people. Perhaps, who really knows. What I do know is a close friend called them as a test a month ago. I wrote about it. Below is the ‘help’ he was given. He also said the clerk was ‘obviously munching on hard fruit or vegetables while talking to him’.

-make a budget
-cut down on spending money for things that are not essential for living
-take shorter showers
-keep the AC/heater off unless it is unsafe to do so
-take public transportation

Other than this, most of what they’re issuing are repayment plans.  In other words, temporarily forgiving the delinquency, then piling the fees and original debt into a bigger loan. In my opinion, a perminent mortgage modification is a much better solution.

So, guys there is your Gov’t help. I hope it helps and feel my advice is better.

For all these reasons, I remain a huge mortgage modification advocate. I know by the response rate of the YouTube video and post many need help but do not know where to turn. I am happy I was able to be of assistance. -Best Mr Mortgage