Fixing the Unfixable

Earlier this week the Bush "adminstration" gathered all of the nation's largest morgage providers to try to get this mess worked out. What they have come up with is to freeze SOME of the adjustable rates for SOME of the borrowers. I've read a lot of articles on this, but there is no sincle source that is showing what "the rules" of this program will be. The mortgage guy in our office read Well's Fargo's policy on it and it had some verbiage about "case to case basis."

Here's what I can gather about the program:
- You must have an ARM loan (Our Wells Fargo statement said it would only affect 3/27 and 2/23(?) loans. Most people with ARMS have the 3/1, 5/1, 7/1, etc. So you need to not just have the ARM, you need the unusual kind of ARM. The 3/27 is fixed for 3 years and then adjusts for 27 months...? I missed the exact definition at the meeting yesterday, sorry.)

- You must be able to prove you CANNOT afford the loan if it adjusts. (Sorry to all those out there that can pretty much afford the giant adjusted price! They're only giving breaks to those that are headed for Foreclosure City!!)

- You must always make your payments on time. (Even if you can barely afford the loan, if you have missed a payment, you won't get this program. You, again, are going straight to Foreclosure City!)



So, how many people will this program provide help to?
Not so many. The loan type that Wells Fargo is offering help on was sold to, I think, 1% or less of all of their loans. (I really need to take notes in our meetings. Then I would have these stats down cold!)
On top of that, of this 1% of homeowners, they must NOT have missed a payment. And, they must basically re-apply for the mortgage to prove they cannot afford the new payment. If the mortgage banker/broker was doing a good job, all of the holders of these loans should be able to afford the new adjusted payment because the mortgage broker should have checked for that. And the only people that would actually qualify are those that have much lower incomes now than they did when they applied for the loans.


So, tell me again, who does this program help?
Uh, the bank.
And, indirectly, the average consumer.

Keep in mind that the bank is only offering this re-adjustment to homeowners that are on the fast train to foreclosure. The bank is trying to avoid going through the foreclosure process with consumers that do pay their bills but are likely to default if the payment goes up.

You may think --well, jeez, wouldn't the bank rather take the property than lose all that interest money?
I would argue that they aren't losing any interest money. If the person gets foreclosed on, the bank sure as shit isn't getting a dime from the homeowner.

And-- the costs of foreclosure are high for the banks, very high. I've been showing lots of foreclosures lately and I estimate the bank loses $50k-$70k on every foreclosure....
They loaned out $200k, they spent $10k in legal fees, and sold the property for $150.

So I think this fixing the rate stuff is CYA BS.

I do sincerely hope that someone in one of these loans is helped. But it's not going to be many.