The Obama administration laid out the guidelines for it's highly anticipated mortgage modification plan today.
As I read it this plan will force banks to take a loss on performing loans:
The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac.
Later it goes on to define eligible mortgages as those in imminent danger of default, which is rather ambiguous, up to 60 days in arrears, which doesn't seem to meet the "solid payment history" outlined above.
What is immediate danger of default? Leaving a term that ambiguously defined just seems rife with danger. It's not like no one has ever crawled through a loophole before.
Not to worry though - in order to insure there is no fraud / mismanagement Freddie Mac will be monitoring compliance. Hello Kettle, this is Pot. You're black.
Seriously wasn't Freddie Mac just taken over by the government because of massive mismanagement?
Personally I think banks would be smart to modify mortgages that are going into default. As I understand it they never really recover value on a foreclosed house but why should the government be forcing this on them? Especially when the majority of people who have had loan terms modified after defaulting on a mortgage default again. This just seems to be throwing good money after bad.
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