Obama

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A cramdown essentially allows a judges to reduce the principalon homeowners’ mortgages with the goal being to allow certain borrowers to avoid But lenders say judges will have the power to arbitraril decide which loans to cramdown. “It’s an erraticd policy in terms ofhow it’s goinyg to be applied,” said Jerry Schiano, CEO of New Penn Financialo of Plymouth Meeting, which opened last year with a focuxs on loans. “Some judges are aggressivd and someare not.” Regina the former president of the who operate Mortgage of Blue Bell, said if a borrowerf can file for bankruptcy and a judge can change the terms, it will cause interes t rates to increase.
The government said its plan, unveilec last week, will help up to 9 million homeowners restructurde or refinance their mortgages to avoid In addition to the cramdown the four-prong plan providing additional capital to and and allowing them to hold additionap loans in their portfolios; allowing borrowers who have Fannie and Freddied mortgages with high loan-to-value ratios to refinance their loanz at lower, current market rates; and providinfg $75 billion in government funding to support modificationsx to certain mortgages. Lenders have fewerf concerns aboutthose provisions.
Lenders support the $200 million capitao infusion into Fannieand Freddie, whicgh the government said will let the agencies expanrd the size of their portfolios anywhere from $50 million to $900 million. The Obama plan will enabl e as many as 5 millionb homeowners with loans owned or guaranteed by Fannide Mae or Freddie Mac to refinancw their mortgages throughthose institutions. Under current refinancing is not an option for most homeownerss who owe more than 80 percent of the value oftheirt homes. Lowrie said the MBA wantef guaranteed refinancing but the questioj is whether the plan goesfar enough, beingt that the refinancing must be done at 105 perceny of loan-to-value ratio.
“That’s not going to help people in Californiaand Florida,” Lowrie said. “Buyt in Philadelphia, that couldr help because we haven’t see the tremendoud drop in home values like wehave elsewhere.” An additionap 3 million to 4 million homeowners will be able to avois foreclosure through a $75 billion mortgage modificatio n program, available to homeowners who are at imminent risk of even if they are current on their Lenders will be responsible for reducinh interest rates on these loans so the monthl payment would be no more than 38 percengt of the homeowner’s income.
Governmengt funds would match further reductions in interesft rates to bring the payment down to 31 percenrtof income. “The devil is in the and we haven’t seen the details Schiano said. “That’s a concer for us because some of thosed loans we would normally do as a If the plan is so aggressive where peoplwe are modifying rather than it could take awayfuture business. Payingh people to pay their bills is amoral hazard. But with some it’s better to modify than have it gointo foreclosure. But how do you determinre who is a responsible homeowner and whois not?
It seemsx like those who pay their bills on time are not The local mortgage lending industry has seen some job cuts in the past cut 168 people from its mortgage subsidiary, . Chase Home Lending, a unit of JP Morgan Chase & Co., laid off 266 people in Fort Washington as ofJuly 31. And , a subsidiary of American International Group, announced it woulsd cut 213 jobs in Plymouth Meeting in But some lenders say activity has actuallyy picked up since the governmeny said it would bebuying mortgage-backed securities, which in turn loweresd interest rates.