Monday, November 5, 2007

Mortgage Restructuring Encouraging the Wrong Behavior?

From The Wall Street Journal:

“Consider Sharon Cooper of Lynn, Mass., who wants to sell her home. The problem: She now owes more than the house is worth, so she asked her lender to allow a ‘short sale’ -- selling it for less than the amount due, and forgiving the rest -- to avoid foreclosure.

She says the lender, Countrywide Financial Corp., in August told her she would first need to fall two months behind on payments. So last month, she stopped paying. ‘I don't have any option but to stop paying,’ she says.”

From CNN Money:

“… one subprime borrower had a riskier hybrid adjustable rate mortgage (ARM) with a rate of just under 7 percent that was going to reset in December to 10.5 percent. But last month, as part of a new bailout plan from Countrywide Financial, the lender gave him a rate reduction to 5 percent on his loan, saving him hundreds of dollars a month.

Nelson feels cheated and has little sympathy for people who she believes weren't as careful as she was. ‘Everybody was seeing dollar signs,’ she said, ‘and let their greed get the better of them. So, no. No bail-out, no assistance with my tax dollars. Not one red cent.’"

From Forbes:

“Committee Chairman Barney Frank of Massachusetts agreed with this, saying that Congress would not appropriate money to bail out all lenders, and instead is focused on finding ways for qualified homeowners to restructure their mortgages and make them more affordable.”

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