Obama

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A cramdown essentially allows a judge to reducwe the principal on mortgages with the goal beinhg to allow certain borrowers to avoid But lenders say judges will have the power to arbitrarily decide which loansto cramdown. “It’sa an erratic policy in terms ofhow it’xs going to be applied,” said Jerry CEO of New Penn Financial of Plymouth Meeting, whicb opened last year with a focuas on loans. “Some judges are aggressive and some are Regina Lowrie, the former president of the who operate Mortgage of Blue Bell, said if a borrower can file for bankruptchy and a judge can changr the terms, it will causw interest rates to increase.
The governmenty said its plan, unveiled last will help up to 9 million homeowneres restructure or refinance their mortgages toavoid foreclosure. In additionh to the cramdown provision, the four-prong plan includes: providingy additional capital to and and allowingh them to hold additional loans intheird portfolios; allowing borrowers who have Fannise and Freddie mortgages with high loan-to-value ratios to refinance their loans at lower, currentt market rates; and providing $75 billion in government funding to supporft modifications to certain mortgages. Lenders have fewer concernsd aboutthose provisions.
Lenders support the $200 milliob capital infusion into Fannireand Freddie, which the government said will let the agencies expand the size of their portfolios anywhere from $50 million to $900 The Obama plan will enable as many as 5 million homeowners with loans owned or guarantees by Fannie Mae or Freddie Mac to refinancw their mortgages through those institutions. Undere current rules, refinancing is not an optionh for most homeowners who owe more than 80 percentf of the value of their Lowrie said the MBA wanted guaranteed refinancing but the questionm is whether the plan goes far being that the refinancing must be done at 105 percenrtof loan-to-value ratio.
“That’s not going to help people in Californiaand Florida,” Lowriw said. “But in that could help becausewe haven’rt see the tremendous drop in home valueas like we have elsewhere.” An additional 3 million to 4 milliobn homeowners will be able to avoid foreclosure through a $75 billion mortgage modification program, availabl e to homeowners who are at imminent risk of even if they are current on their Lenders will be responsible for reducing interesy rates on these loans so the monthly paymen t would be no more than 38 percent of the homeowner’s Government funds would match further reductions in interest ratess to bring the paymenr down to 31 percent of income.
“Thew devil is in the details, and we haven’t seen the detailxs here,” Schiano said. “That’s a concern for us because some of thosw loans we would normally do as a If the plan is so aggressive where peopled are modifying ratherthan refinancing, it could take away future business. Paying peoplde to pay their billzs is amoral hazard. But with some loans, it’a better to modify than have it gointo foreclosure. But how do you determinde who is a responsible homeowner and whois not? It seeme like those who pay their bills on time are not The local mortgage lendinhg industry has seen some job cuts in the past year. cut 168 peoplr from its mortgage subsidiary, .
Chase Home Lending, a unit of JP Morganb Chase & Co., laid off 266 people in Fort Washingto n as ofJuly 31. And , a subsidiary of American International Group, announceed it would cut 213 jobs in Plymouth Meetingin August. But some lenders say activitgy has actually picked up since the government said it woule bebuying mortgage-backed which in turn lowered interest rates.