Help on the Horizon for Subprime Borrowers?
Today’s post comes from Matt Harris, a dynamic and engaging mortgage broker with LoanSource Funding in Portland. He has some updates on the latest in the subprime lending crisis.
The crash of the subprime market has been fueled by late payments, loan defaults, and foreclosures. Many people have lost their housing and millions of subprime borrowers fear the same.
As people look to the future, they are beginning to see what once may have been considered an easy re-finance is much more difficult and costly than expected. As this realization sinks in, so does anxiety about being able to make the new payments. Are there any solutions out there? Is there anybody that can help, and should they?
Currently, as lenders feel the pressure from borrowers and the market, there is a frantic attempt to save as many loans out there as possible. Obviously it is in the best interest of lenders to keep their loans from being defaulted upon. This has led to some abnormal measures in the lending world.
Fannie Mae and Freddie Mac, the two largest sources of mortgage dollars in the U.S., have decided to attempt to “bail out” subprime borrowers. These two government-sponsored home loan organizations are pledging to use $20 billion to aid struggling homeowners. Fannie Mae has introduced a plan entitled HomeStay with the goal of preventing foreclosure on loans already existing in their books. HomeStay will refinance people into new 40-year fixed rate mortgages and adjusting credit requirements. Ideally, this would keep payments low enough to prevent foreclosure.
The agencies also plan to purchase fixed and adjustable rate loans with the intent to have lenders offer them to subprime borrowers by mid-summer. In addition to the pledges by Freddie Mac and Fannie Mae, Washington Mutual has pledged $2 billion of its own private money.
Most people feel that something needs to be done in the subprime world, but there are mixed feelings as to what level the government and its agencies should be involved. There is also plenty of debate as to whether or not these plans will actually be effective. Congress has not officially announced any plans for aid, but there has been talk of a legislative fix. (Additional news from Congress at MSNBC.)
Opponents of these “bailout” programs point to the effectiveness of a similar plan in Ohio in which 508 borrowers applied for assistance and only 42 of them qualified to be “rescued”. Others are concerned that we may get into public assistance territory and cannot justify using taxpayers’ money to assist those that maybe should not have qualified for a home loan in the first place. A consensus among most people is expressed by Richard Syron, the CEO of Freddie Mac:
The ability to enforce a mortgage contract, including the use of foreclosure, is critical to continued investor confidence in the U.S. housing market.
This does in fact seem to be a concern of many of the parties involved. If we come to the rescue of people unable to make their mortgage payment, where has the integrity of the system gone?
Thanks Matt. Many pointing fingers to go around. Many complicit participants in the meltdown….aggressive lending policies, borrowers stretching beyond their means, and overly risk-tolerant institutional investors alike. It’s time for a compassionate, but rational, response.
I encourage you to contact Matt, whether it’s for first-time buyer, challenged-credit loan options, or conventional mortgage assistance:
Matt Harris
LoanSource Funding, LLC
2613 NE Martin Luther King Jr. Blvd., Suite D
Portland, OR 97212
(503) 998-6885
email
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9 comments May 3rd, 2007
