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Mortgage ‘Modifications’ – 2% Interest

From CNN’s Money.Com:

Rosie Brooks had her $48,000 mortgage forgiven in exchange for a one-time $3,000 payment.

Extreme modifications: 2% mortgages

By Les Christie, staff writer, December 16, 2009

NEW YORK (CNNMoney.com) — At 8 a.m., homeowner Rodney Wynn was drowning under his $1,800-per-month, 13.4% interest rate mortgage. But by 5 p.m., he had found some relief: a 4.7% loan with a $970 monthly payment.

Wynn, a program director for a youth home in North Carolina, is just one of a growing number of homeowners getting dream workouts on their mortgages. Some are even getting sweet 2% deals. 

Nearly 80% of all loan modifications resulted in lower payments in the second quarter (the latest figures available), according to the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision. That’s up from just over 50% three months earlier. Still, just a paltry 4% of all homeowners in need of workouts are receiving them.

When loans are made affordable, borrowers are less likely to default. A year after modifications, according to the OCC report, just 34% of borrowers whose loan payments had been reduced 20% or more had redefaulted compared with 63% of borrowers whose payments had been left unchanged…

Wynn was able to get his modification at a "Save the Dream" event offered by the Neighborhood Assistance Corporation of America (NACA) in New York City last Friday.

Lenders from nearly all the major banks and servicers were in attendance and promising to restructure loans based on what borrowers could afford. As a result, many homeowners walked in with their mortgage problems and walked out with solutions.

In fact, according to Bruce Marks, NACA’s founder, 40% of attendees left with decisions the same day. About 80% are expected to receive workouts within weeks. His organization has already hosted about 400,000 borrowers at more than a dozen of these events.

The most common restructuring seemed to be one that reduced interest rates to the minimum of 2% for the entire life of the loan. That’s partially because NACA has agreements with all the top lenders to reduce interest rates to as low as 2% if that’s what it takes to make loans affordable…

More severely stressed borrowers in many hard-hit areas have gotten even more radical deals. There are even some who are having their debts forgiven entirely.

"The interest rates they’re offering [delinquent borrowers] are a lot lower than they used to be," said Tanya Davis, a foreclosure prevention counselor for Empowering and Strengthening Ohio’s People (ESOP) in Cleveland. "They cut them to 0% for three years, then 2% for a year, then 4%, capping out at 5%. I have a case where they lowered the interest rate to zero for the entire life of the loan."

Rosie Brooks, a retired hairdresser, has been paying off her house for more than 20 years, but it hasn’t been easy since one of her daughters came down with leukemia 10 years ago…

She had paid $38,000 for the house and had refinanced the loan a couple of times. By last year, her mortgage balance was more than $42,000. She no longer works and is dependant on Social Security. The payments became impossible to afford.

She contacted ESOP, and her counselor, Scott Rose, knew her lender was unusually sympathetic. Three weeks later, Rose was able to tell Brooks that he had gotten her a workout — and it was a real dream.

The bank forgave her entire debt in exchange for a one-time payment of just $3,000, which Rose was able to obtain through a loan from the county’s foreclosure-prevention program.

Why was the bank so generous?

"To some extent, there an altruistic component to it," said Rose. "Mostly though, it’s because it’s in the bank’s financial interest."

There is only one word for the poor slobs who are still paying their mortgages at their full rate: suckers.

Of course this is only fair. So many of these poor people were tricked into living in fancy houses they could never afford.

Mr. Obama told us so (starting at 2:45 minutes into this clip):

Still, we want a deal like Ms. Brooks got. After ‘paying for’ a $38,000 for a house for twenty years, she ran up what she owed to $42,000. But has it all forgiven for $3,000 – which she borrowed.

That is sweet.

And we’re told this is “in the bank’s financial interest.”

So we expect every bank across the nation will soon be adopting this creative new approach to mortgage lending.

By the way, from casually nosing around the internet, the wonderfully helpful and generous folks at ESOP sure sound suspiciously like the wonderfully generous helpful and generous folks at ACORN.

This article was posted by Steve on Wednesday, December 16th, 2009. Comments are currently closed.

12 Responses to “Mortgage ‘Modifications’ – 2% Interest”

  1. GetBackJack says:

    We still owe (large number) on the ranch.

    If we do the black face, hobble in with a walker and sob for Wells Fargo, d’you suppose they’d knock our mortgage down to 0%?

    Bwa-hahahaha.

  2. Helena says:

    Boy oh boy, the rest of us are “Suckers” is exactly right.

    “Still, just a paltry 4% of all homeowners in need of workouts are receiving them.”

    Gee, that’s terrible. So people who have made financial deals are having to live up to them?

    The borrowers are getting “workouts” and the lenders are getting a working-over, with a lead pipe.

  3. Rusty Shackleford says:

    Social Justice on parade. So listen up whitey.

    But, in one small sense, I’ll look at it this way: Fine, take your free house. It’ll still look like crap in a few months, if it doesn’t already and it will continue to plummet in value, because the market will decide that, and it will be worth far less than whatever it is you’re paying for now. Because, if it’s a $100,000 house with a 2% mortgage, it will soon be a $50,000 house with that kind of financing. Can’t have just winners here. Everyone will be a loser. Neighborhood property taxes will go waaaaay down, therefore community services will be cut.

    There are fixed costs here. The cost of utilities, services and so on. Still have to pay to have the trash picked up, the fire department paid for, the water mains to work.

    Watch as those things still remain expensive and yet, somehow less funded.

    So whoopie….everyone gets an el-cheapo mortgage. All it will do is exacerbate the problem further, all in the name of “lettin’ me stay in my house”. But, your frustration will merely be transposed to that of a broke homeowner living in soon-to-be ghettos. If you cannot afford the mortgage, you will also not be able to afford home maintenance.

    My prediction is once, formerly nice neighborhoods that had modestly well-cared-for homes will look like crap in a very short time. It’s already happening in the Charlotte area. I’m not the least bit surprised.

    So what will they do?

    When a window breaks-garbage bag plastic.
    When the lawnmower breaks down or is stolen-let the grass grow…that is if you can afford to water it..
    When the car breaks down-leave it in the yard. Can’t afford to have it hauled away
    When the roof shingles get blown off-leave it no insurance to fix it
    When the paint peels-well…you get the idea.

    So we’ll have all these “obama-villes” that he can take pride in being able to “keep people in their houses” which will all look like crap and will be the new havens for crime in America. I look forward to it so I can know exactly where not to live.

    Thanks NACA/ACORN, you insolent, arrogant morons…you’ve actually done us a huge favor.

  4. proreason says:

    Redistribution

  5. BillK says:

    It’s in the bank’s “financial interest” because they’re trying to avoid being targeted with even more oppressive Federal legislation.

  6. mr_bill says:

    Liberal social justice in plain sight. It used to be that one got a low mortgage interest rate by paying bills in full and on time, saving a good-sized down payment, living within one’s means, and proving that you are a responsible person. Now it seems the easy way to get a great interest rate is to lie about your income, buy a house you can’t afford, don’t pay the mortgage, and cry foul when the lender has a problem with that, then force others to subsidize your poor choices because you think you ‘got cheated’ by some ‘evil rich person’ somewhere who twisted your arm to sign the mortgage.

    Rusty, you are exactly right. Even the ‘best’ attempts at social justice through equality of outcome will still produce unequal results because people who can’t afford a mortgage are not going to be able to afford to maintain the property. In the end, all that is accomplished is the destruction of another neighborhood and the creation of a new ghetto. Responsible people will move elsewhere.

    • Rusty Shackleford says:

      Yup, been thinking about this off and on for a large part of the day. In short, it’s “The projects come to suburbia”.

    • Petronius says:

      At last — a Liberal program that actually works!

      Isn’t this precisely what the Sub-Prime Program was supposed to achieve?

      Affordable housing for retired hair-dressers living off their disability checks from Social Security?

      Wow. Is America a great country or what?!

      “Responsible people will move elsewhere.” Yes, that’s where I want to go, Mr. Bill. Elsewhere. But where is Elsewhere? Galt’s Gulch?

      I’ve been looking for Elsewhere, but can’t seem to find it.

  7. GetBackJack says:

    Some day Americans are going to suddenly, startlingly, shockingly figure out that the “justice” scam … no matter which part of is examined …

    Is Roman Catholic.

    Jesuit Roman Catholic at that.

    Liberation Theology, If You Want Peace Work For Justice, social justice, and all the rest of it flows from Marxist infected Roman Catholic priests.

    Every bit of it.

    • proreason says:

      nah.

      Liberation theology is one of many Marxist plays. And all of the plays are basically scams for power-hungry oligarchs to “appeal” to populations to support their power grabs. Some catholics fall into that camp. And some priests are susceptable to the scams themselves.

      But catholics don’t drive this crap.

  8. U NO HOO says:

    Whatever happened to selling a car to make a mortgage payment?


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