Saturday, November 01, 2008

Efforts to Save Mortgages

Yesterday it was announced that JP Morgan Chase were putting together a program to modify $70 billion in mortgages for borrowers who are behind on their payments. The plan would cover approximately 400,000 mortgages most that were aquired when Chase and WaMu mergered. It seems some of the mortgages written by WaMu had a structure that had the principal growing month after month. This program is on the back of a similar program that Bank of America is doing. Also the FDIC is working with home owners who had loans with IndyMac. These programs all make sense to me. Most of these people want to pay their mortgage, they just can't. They probably borrowed to much and the bank lent them to much and now are in a situation where they cannot afford the payment. Option 1 the bank forecloses on the owner, kicks him out and takes over the home. The bank then tries to sell the house on the open market. Option 2 the bank calls up the owner and comes up with a number the owner can afford to pay and allows them to stay in their home. A win win situation. The bank has a paying assest and the owner stays in their home and continues on the path of the "American Dream".

I know some people would say that people who can still afford to pay their current mortgage are not getting a break, that in this case it paid to borrow a little more (alot more in some cases) then you can afford as the banks are now renegotiating their loans. OK, true, but what is the alternative? More people having their homes taken away, an economy slowed to a halt for a longer period of time. Stocks getting hit again and again. That is the reality.

Michelle Cabrera was on The Big Idea last night. Donny Deutsche was questioning her on this plan saying that it doesn't hold people accountable for their actions (I paraphrasing here). You took out the loan and now you owe the money, pay up, if you can't you suffer the consequences. Ms Cabrera countered that this was a "victimless crime" similar to prostitution. If two consenting parties are will to renegotiate the terms of their agreement for the betterment of all go do it. In this case I agree. Sure I would like to renegotiate the terms of my loan too, but I can't (I tried....the bank said no thanks). But I encourage all Americans to call up their mortgage holder and sit down and discuss their situation. It cannot hurt, all the bank can do is say "no thanks".

Ms Cabrera also talked about small businesses and how they to should go to their landlords, suppliers and shippers and have similar discussions. Remember it doesn't cost anything to ask and these are mutually beneficial relationships, if you cannot afford to stay in business then your landlord, supplier and shipper all suffer too.

This is essentially what "Wall Street" did, they went to the Government and said "We need help" some got it (Bear Stearns), others didn't (Lehman) but it certainly didn't hurt to ask.

Good Luck and Good Currency Trading.



Blogger K said...

This is great news. When mortgages are in trouble, WE are in trouble! thanks for this article.

2:01 PM  

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