About Government Refinance and Home Purchase Programs

Information and Updates on Government Mortgage Programs
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Several executive from some of the big banks were on Capitol Hill today and among the things they revealed is that banks are not at all anxious to start giving money away and forgiving mortgage debts for consumers. We get this from the AP article on the topic:

Top banking industry executives are skeptical about helping troubled borrowers by forgiving a portion of their debt.

The executives told lawmakers on Tuesday they are reducing the amount that troubled borrowers owe on their home loans only in limited cases. That’s because consumers who are paying their mortgages on time are likely to see such reductions as unfair, the executives said.

Such programs “could raise issues of fairness,” agreed Sanjiv Das, Citigroup’s top mortgage executive, who appeared in front of the House Financial Services committee with top executives from Bank of America, Wells Fargo & Co. and JPMorgan Chase.

David Lowman, chief executive of Chase’s mortgage business, told lawmakers that large-scale mortgage principal reduction “could be harmful to consumers, investors and future mortgage market conditions.”

Basically it is going to be business as usual. Banks are going to do what their shareholders require them to do — make as much money as possible. That means that borrowers who want to sell short or get a loan modification or a principal reduction need to demonstrate to the banks why that is a win-win proposal. In other words, if there is nothing in it financially for the bank they probably won’t be interested. In cases where borrowers are underwater there sometimes is something in it for banks though. Foreclosing on homes is expensive for banks to begin with so when the borrower is upside down it gets even more expensive. In those cases borrowers who show they aren’t bluffing about walking away tend to have a lot more leverage at the negotiating table.

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