FED TAKES ACTION TO STOP FORECLOSURES
HOME LOANS, INDUSTRY NEWS, TIPS FOR SELLERS
February 16th, 2009
When the Federal Reserve bailed out Bear Stearns and AIG they assumed responsibility for a large portfolio of toxic mortgages. According to a recent article in the Washington Post, Chairman Ben Bernanke is poised to renegotiate the billions in mortgages it now owns to prevent an avalanche of foreclosures.
One key element of the plan is to forgive a portion of the loan to aid the borrower if the home’s value has declined below the loan balance by 25% or more. Estimates are that nationwide 14% of homeowners are “underwater” when it comes to their home value vs. their mortgage balance. Previous efforts to modify loans have failed because mortgage holders have only adjusted interest rates and/or loan term but rarely forgave any mortgage debt.
Now that the Fed is in charge, they have indicated a willingness to consider debt relief to help homeowners keep their homes, if doing so is in the best interest of taxpayers . Bernanke hopes this strategy will be a model for other holders of mortgages to emulate.
It is unknown what portion of the assets held by AIG and Bear Stearns are mortgages, but estimates place it in the tens of billions of dollars. Homeowners are unlikely to know if their mortgage is owned by the Fed because they will deal only with their mortgage servicer.
Assuming the Federal Reserve follows through on this promise, it will be a step in the right direction to address the housing crisis.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
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