For Some Subprime Borrowers, Few Good Choices / NYT

not a pretty picture...... and this is only the beginning.

sieht nicht gut aus.....und das ist leider erst der anfang.




....As problems with subprime mortgages have escalated, officials on Wall Street as well as in Washington have urged lenders and the government to step in and cushion the blow to troubled borrowers and find ways to enable them to remain in their homes.

That may not be possible in many cases.....


“There is no way they can keep their homes,”....... “It’s impossible.”

And in an unusual twist, the process of packaging and reselling home loans to investors — known as securitization, which has provided much of the cash that fueled subprime lending — has also made it harder to modify debts that go bad.

At the end of last year, more than 2.6 million home loans were either past due for more than 30 days or in foreclosure. About 40 percent of them were made to people with weak, or subprime, credit. Most economists predict that the number of troubled loans will continue to rise this year as more mortgages are adjusted to higher interest rates and home prices decline further.


Last year, more than 37 percent of subprime loans were made without verification of borrowers’ incomes, up from 15 percent in 2000, according to an analysis by JPMorgan Chase. Also, a third of borrowers took out a second mortgage, up from 6.8 percent in 2003, suggesting that they did not have enough money for a down payment.


For these borrowers, the best alternatives, according to some housing specialists, may include short sales, in which a lender accepts a sale for less than what is owed on the house, or a deed in lieu of foreclosure, where a lender takes ownership of a house instead of full payment of the mortgage.


Rising default rates have thus far had a modest impact on the overall economy, but economists fear that the problems could intensify if a broader range of borrowers, including those with stronger credit, start falling behind on payments. A big increase in the number of homes for sale, because of rising foreclosures, would put more pressure on prices and limit home buying and consumer spending. .....

• and with this scare arm graph it is likely that the foreclosures will increase dramatically / und diese grafik legt nache das die zahle der zwangsversteigerungen sogar dramatisch ansteigen wird...)

größer/bigger http://www.smugmug.com/photos/136440158-O.png

Loss mitigation efforts by mortgage lenders and government subsides, to be clear, can help borrowers and limit losses. But experience thus far suggests that a more concerted and coordinated effort will be needed. It may also require a change in the policies governing what can be done with securitized loans.

To increase a borrower’s chance of making required payments, lenders can do things like lowering interest rates on the loans, waiving past-due payments and fees, and extending the periods in which low teaser rates apply to loans.

But the options vary greatly, based on who owns the mortgages. Generally speaking, loans held by the banks that made them in the first place can be modified most easily. Loans that have been securitized are typically subject to greater restrictions, according to the terms on which they were sold to investors. Payments made by borrowers whose loans have been securitized are collected and processed by mortgage servicers.

According to a Bear Stearns analysis, half of all mortgage securities that make up a widely followed index allow the servicer to modify the interest rate, principal balance or maturity of a loan; 40 percent allow some modifications but require approval from a ratings agency if more than 5 percent of a pool of mortgages is changed, and 10 percent of loan pools allow no changes. About half of all modifications are successful at preventing foreclosures, according to the investment bank. ( this looks very high to me / das sieht mir nach einer sehr hohen qoute aus)

The restrictions are intended to protect investors against tampering with the cash flow generated by the loans. But in times of greater distress, investors prefer modifications that let them continue earning a return rather than having the property foreclosed, a costly process.
“You will see a greater willingness to work with borrowers,” said Gyan Sinha, a senior analyst who follows the subprime market for Bear Stearns.

Much of the revamping will start occurring once investors sell off or write down the value of the loans to account for decreases in home prices and the delinquent status of the loans, said Stan Ross, chairman of the Lusk Center for Real Estate at the University of Southern California.

Some borrowers may find that they can stay in their homes if the value is written down enough.
“You mark the asset down to current value,” Mr. Ross said, “then you look at the borrower and say, ‘Is this the borrower that will repay me?’ ”


But housing counselors and lawyers who have worked on behalf of borrowers say their experience suggests that is not yet happening.

They say that many servicers are unwilling to discuss modifications until loans are at least three months past due, a point when many borrowers are in deep financial trouble. Also, servicers are often unwilling or unable to make big enough changes to account for inflated appraisals and income levels that were used in underwriting the loans......

Officials at some big mortgage servicers declined to discuss their practices, but an executive at Wells Fargo, ...., says it has taken an active approach.

Consider Andrew D. Sobel, a 48-year-old in San Diego, who took out two mortgages to buy a $240,000 condominium in 2004 and is now facing its sale for $175,000. He could not afford higher monthly payments that took effect in September, when his loan was converted to a variable interest rate. Countrywide, which services his loan, would not agree to modify the loan but was willing to accept the short sale. He could not refinance because the home is worth less than what he owes on the property.



thanks to http://countrywide-foreclosures.blogspot.com/

make sure you click on the link to see the mess in much more detail! bitte auf den link klicken um das ganze ausmaß zu sehen

“There was never any effort to try to keep me in my home,” he said.

More borrowers may find themselves in a similar situation in the next two years as the first interest rate adjustments take effect on loans in 2004 and 2005. Those who continue to have spotty credit and little equity in their homes will be at the greatest risk because many lenders are no longer offering no-money-down mortgages to people with weak credit.

“If someone calls and says they want do a 100 percent loan,” said Jeff Jaye, a mortgage broker in San Jose, Calif., “my antenna goes up. My first question is ‘What’s your credit score?’ ”