Silverbird
10-28-2008, 01:58 PM
October 28, CNBC
In another worrisome sign for the housing crisis and US economy, home foreclosures are surging to record levels and are likely to get even worse in the months ahead.
....Why is this happening—especially when the last thing most lenders want to do is repossess a house?
For one thing, banks are overwhelmed with the sheer number of troubled mortgages. That's made it more difficult for them to work out loan modifications—essentially reducing the interest rates and even the principal to help people keep their homes.
Many mortgages also have second liens attached to them, requiring negotiations with third parties.
But the main problem is that so many mortgages have been grouped together into securities and sold off to investors worldwide. These mortgage-backed securities typically carry terms that severely limit the homeowner's ability to renegotiate a mortgage.
So the banks that typically service the mortgage—collecting payments from homeowners and passing them on to the investors—risk being sued if they deviate from these terms. And those servicing the loans often make more money in foreclosures than in renegotiating a loan, giving them even less incentive to help out homeowners.....
http://www.cnbc.com/id/27406627
In another worrisome sign for the housing crisis and US economy, home foreclosures are surging to record levels and are likely to get even worse in the months ahead.
....Why is this happening—especially when the last thing most lenders want to do is repossess a house?
For one thing, banks are overwhelmed with the sheer number of troubled mortgages. That's made it more difficult for them to work out loan modifications—essentially reducing the interest rates and even the principal to help people keep their homes.
Many mortgages also have second liens attached to them, requiring negotiations with third parties.
But the main problem is that so many mortgages have been grouped together into securities and sold off to investors worldwide. These mortgage-backed securities typically carry terms that severely limit the homeowner's ability to renegotiate a mortgage.
So the banks that typically service the mortgage—collecting payments from homeowners and passing them on to the investors—risk being sued if they deviate from these terms. And those servicing the loans often make more money in foreclosures than in renegotiating a loan, giving them even less incentive to help out homeowners.....
http://www.cnbc.com/id/27406627