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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
Comments
9 Responses to “Help on the Horizon for Subprime Borrowers?”
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Hi Matt,
GREAT web site! Good for you! I’m so excited for you, branching into a new career. Go Matt, go Matt, go Matt!
Matt—Refinancing people mortgages into new 40-yr. fixed rate mortgage-that adds up to 10 more yrs. paying, plus all the extra
interest-What kind of a deal is that??? Taxes are used for wars,
give-aways to every country some that don’t need help and I could go on and on but my question. Why can’t a certain amount
be forgiven??? U.S. forgives other countries for their debts. When american citizens lose their homes, live on the streets then
we have uneducated people, hunger , crime and then prisons
that taxpayers support. Why can’t America be more tolerant
and generous to their own people?? Old Testament forgave
debts every 7 years. Our own government is more tolerant to
foreigns here illegally. What’s wrong with this picture??
Are you the divine appointee to FIX and solve this problem????
Thank you for your attentive time.
Emma,
I appreciate your feedback, and no I would never presume to be “the divine appointee to fix and solve this problem”. The aim of my article was to put forth information showing what those in power are doing in order to shed some light on the trouble subprime borrowers are facing. I agree whole-heartedly about the 40 year mortgage plan not being a real solution to the problem. It is more of a band-aid. However, it is a better alternative than the banks foreclosing on people’s homes. Moving borrowers into a 40 year fixed mortgage simply restructures the payments to a level that may be more affordable to the borrower thus allowing them to retain ownership of their homes. Ideally those borrowers will later be in a position to refinance and get back into a 30 year mortgage if they prefer.
Due to the fact that many borrowers can no longer make their mortgage payments after rate adjustments, many people are asking “what can we do?” The lender’s response to this is what I outlined in the above article. I have tried to paint the most detailed and accurate portrayal of what lenders are doing to help. So far, although Fannie Mae and Freddie Mac have spoken, congress has remained silent, and in all reality cannot do anything about mortgages they do not own. As far as your take on the Old Testament, debt forgiveness, and our nation’s help to “foreigns”, the government is not in a place to forgive debt unless they own that particular debt. Many of the loans out there that are in threat of being foreclosed upon are owned by banks and other private institutions. I am a mortgage broker, therefore I pair borrowers up with a lender, so unfortunately I am in no way proposing that I have the infrastructure or the know how to solve this complex problem. In all reality that is what is being worked out by lenders, and will most likely eventually require more involvement by the government.
Thanks again for your response,
Matt.
Matt,
It is so refreshing to deal with a mortgage broker who actually cares about his clients. As i have followed your career, it is obvious that you have integrity, and want the best possible results for your clients.
….and caring, devoted parents that clearly left an imprint on their son. It’s just a feeling I have…
I lost some money in the stock market, when do I get to apply to the government for assistance with amortizing my losses?
First thing to remember, a bail-out isn’t for the person sitting in the home, it is for the banks. The banks gambled on the housing bubble and are now starting to get worried as NODs and foreclosures rise. The banks gave out credit like the peppermint candies and suddenly they realized that 12-16% appreciation wasn’t going to happen forever.
Why should I pay for this? Here is what I am hearing….
“Buy a home you can’t afford, plead ignorance when the ARM resets, ask the government for help.”
I’m more amused by states that are trying to get a moratorium on foreclosures. Great message to people, “don’t bother paying your mortgage”.
signed,
frustrated tax payer
Ralph…
I am right there with you. What we are seeing is the classic debate between objective and subjective realities.
On an emotional/homeowner level, people being foreclosed upon are expressing their plight to show us what happens to a common American. I believe that many have been taken advantage of and that affects most people emotionally. From an investment/objective point of view the same information is viewed just as you stated. A poor investment was made, and now people want help trying to recoup their costs. The problem is trying to decipher what side of the arguement to be on and for what reasons.
Yeah, some people simply made bad investments and are looking for the sympathy vote to stay on top, however there are also many out there that were literally taken advantage of by predatory lenders. So…what is the solution? Well part of it is to make the lenders less predatory, and hold them responsible when they are. Unfortunately this does not solve most of the current issues. Hopefully it will save us from this in the future.
I do not know the solution to our current problem. I am sure I would not be writing this if I did. I do know that my emotional strings are being pulled when I hear of families becoming homeless and I also feel my business sense becoming angry when I hear of investors whining because they made a poor investment. I don’t think that our Government should relieve the debt or take it out of taxpayer money, but I also feel that they will need to step in, in some capacity.
What to do about the subprime crisis? Answer = there really isn’t much the government can do at this point, even if they wanted to. We have some enormous storms on the horizon, and they really haven’t hit yet. There is the commercial real estate loan market, which is actually having some of the same problems as the residential real estate market. The Fed will probably have to go in with some cash infusion to help out the commercial lenders.
‘Caveat Emptor’
This is Latin for ‘Buyer Beware’. It doesn’t matter how much the real estate market has zoomed to the stratosphere. How much money Uncle Joe made from selling his house. There has ALWAYS been the element of risk. And when the buyer signed on the line, there was always that risk, even if it was only 0.0000001 % risk.
I agree with you Matt I really have mixed feelings about it. I belive the government will step in and help as much as they can. But – it’s not out of benevolence. They have a vested interest in seeing people keep their homes.
BUYER BEWARE SEEMS TO BE THE AMERICAN WAY .NOT TO MENTION THE WAY OF THE WORLD. I BELEAVE I HAVE A HEART ,BUT WE HAVE TO BE HONEST WITH OURSELVES. MOST OF THE TIME A LOT OF US GET THAT FEELING WHEN WERE PURCHASING SOMETHING WE KNOW WE CANT AFORD ,SO WE DONT BUY ITOR WAIT UNTILL WE CAN AFORD IT.I FEEL BAD FOR THOSE PEOPLE WHO WERE SWINDLED OR MISSLED BY A SAVY LOAN OFFICER BUT ALLTIMATELY THEY WERE NOT FORCED TO PURCHASE A HOME.IT SEEMS A LOT OF US HAVE FORGOOTTEN WHAT A SRARTER HOME IS.WE WANT TO HAVE THE SWIMMING POOL ,BIG BACKYARD,NOT TO MENTION THE TWO & HALF CAR GARAGE.WE SIGNED ON THE DOTTED LINE MANY TIMES FOOLING OURSELVES INTO THINKING ILL CUT BACK ON THIS OR THAT TO PAY FOR IT & NEVER DO. SO NOW ITS TIME TO PAY THE FIDDLER .FOR EVERYONE INVOLVED CAUSE LETS FACE IT LENDERS DONT GET FULLY REIMBURSED WHEN THEY FORECLOSE . WHAT IM SAYING IS BEWARE OF CREDIT CAUSE YOU ARE PAYING FOR THAT SERVICE. SOMETIMES MORE THAN WE THINK.