As of August, nearly 3% of all home loans were in foreclosure, and a further 6% were more than 60 days late on their mortgage payments. To the back burner went Treasury’s original plan to buy up distressed mortgage bonds, and along with it the idea that such purchases could be used to pressure banks into giving better loan deals to homeowners facing foreclosure.
Saving homeowners is far from easy. The original Bush plan, FHASecure, which involved the government refinancing people into lower-interest loans, has thus far helped only about 387,632 borrowers. A subsequent plan to identify borrowers in trouble and modify their loans has been more successful. As of October, the Hope Now Alliance says it has helped 2.3 million borrowers stay in their homes. In July, Congress allocated $300 billion for a new plan, Hope for Homeowners, to help borrowers stay in their houses. The current global credit crisis originates from the moment when subprime borrowers starting having trouble making their mortgage payments, which had been funneled into interest payments to bond holders.
And the fractured ownership of those mortgages vastly complicates efforts to help homeowners. People with knowledge of the mortgage business believe that proposals to buy up individual home loans and refinance them, as proposed by Senator John McCain, seem impractical at best. The $11 trillion mortgage market may be small potatoes compared with the problems in the $60 trillion market for credit default swaps. A number of economists have recently proposed new plans to stop foreclosures, seeking mechanisms to buy up and refinance individual home loans.
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See my interview on Southern California Homes, a top site for California homes for sale, as well as New Mexico real estate, Northern California real estate and Los Angeles, CA homes for sale: 5 Tips for Deciding Whether to Refinance Your Mortgage.
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