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Opposing Views on Principal Reduction
The various programs and proposals to reduce the principal loan balance on mortgages to deeply underwater borrowers would improve the equity position of some homeowners while leaving other seemingly similar borrowers with negative equity.
On the one hand, some argue, borrowers who haven't made their payments on time would benefit with a lower loan balance, while consumers who have struggled to maintain their mortgage payments would be left out in the cold. Such a moral hazard would incentivize homeowners to default on their loans in order to qualify for principal reduction.
On the other hand, advocates for writing down loan balances claim that it would help heal the housing market and boost the economy.
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California Borrowers Receiving Principal Reduction
A revision to the requirements for a California program that reduces principal for underwater borrowers paves the way for much-needed participation by the Federal National Mortgage Association and the Federal Home Loan Bank Corp.
HAMP Volume Slips
Mortgage Daily incorrectly reported on Monday that the number of active modifications completed through the Home Affordable Modification Program had the biggest month-over-month increase ever. In fact, the gain in active HAMPs was slower than the previous month and also worse than the same month during the previous year.
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Cases of Principal Reduction Growing
The mortgage servicing sector has an uphill battle cleaning up its image. But while some in the business acknowledge shortcomings early in the housing crisis, they also have seen improvement since. Among those improvements are more cases of borrowers who are seeing principal reduction through loan modifications.
Democrats Go On Offensive Against FHFA Chief
A pair of House Democrats has lobbed an allegation at the regulator of Fannie Mae and Freddie Mac that his congressional testimony on principal reduction is contradicted by internal documents from Fannie.
Complaints Against FL Lawyers Balloon
More than a thousand complaints against real estate attorneys have Florida Bar investigators buried.
Strategic Modifiers Pose Threat to GSE Principal Forgiveness
The regulator of Fannie Mae and Freddie Mac has found that enhancements to the government's loan modification program could make it profitable for the two housing finance agencies to offer principal forgiveness. But "strategic modifiers" could wipe out any benefit from the program. The regulator's preference is to offer principal forbearance.
Loan Modifications Hid Bank Losses
The aggressive use of loan modifications by two senior executives of a Texas thrift enabled the financial institution to hide bad loans and artificially inflate earnings. But the bank failed, and the two executives now must defend their actions in court.
Ocwen Executive Talks About Challenges
Ocwen Loan Servicing LLC claims to be the biggest subprime mortgage servicer in the country. It has entered into more than a thousand pooling-and-servicing agreements with investors. |
