OT: mortgage discounts?
adam russell
consider offering customers an incentive to payback early. Say for every
$1k paid early they take $1250 off the principal instead. Would be
expensive but better than going bankrupt.
Carthell
If a borrower is defaulting on a subprime or creatively-issued loan,
it is not likely
that a borrower would have **any** additional cash to pay in.
(Otherwise, the
borrower would have qualified for a better loan.) If possible, and
the volume of
renegotiated loans was enough to keep the loaning company afloat,
would the subprime/
creatively-financed borrower be happy with increase in federal, state,
and local
personal income tax that would result?
-d
adam russell
"Carthell" <cart...@charm.net> wrote in message
news:1187463308.3...@r29g2000hsg.googlegroups.com...
> On Aug 18, 12:23 pm, "adam russell"
> <adamruss...@sbcglobal.net.invalid> wrote:
>> Maybe mortgage companies that are in danger of going out of business
>> should
>> consider offering customers an incentive to payback early. Say for every
>> $1k paid early they take $1250 off the principal instead. Would be
>> expensive but better than going bankrupt.
>
> If a borrower is defaulting on a subprime or creatively-issued loan,
> it is not likely
> that a borrower would have **any** additional cash to pay in.
Sure, but I think that not all of its customers are sub-prime. The company
likely has (waves hands in air) 10% of its loans in default which leaves 90%
of its customers in good shape. If it can get some of that majority to kick
in early payments it may be able to overcome its short term cash flow
problems. They have a wealth of a hidden money pool in their customer base
if they havent got their entire investment in sub-prime.
Even some of the sub-prime might be convinced to begin normal payments again
if the rate could be re-negotiated. Id guess not a few of them are
defaulting not because they cant afford it, but because it is the correct
strategy based on how rates turned out. Consider that they started with no
money and bad credit. So what do they care if defaulting hurts their
credit? They didnt have credit to begin with. I think some default because
the loan is no longer worth what they are paying for it. And if it is going
to kill the company to have them default it makes sense to re-negotiate.
catalpa
"adam russell" <adamr...@sbcglobal.net.invalid> wrote in message
news:1187454...@sp12lax.superfeed.net...
The mortgage companies don't own the mortgages.
adam russell
"catalpa" <cat...@entertab.org> wrote in message
news:8_Nxi.316$wW6.175@trnddc08...
So who owns the mortgage? Are they not in any danger of bankruptcy from
this mess?
Carthell
<adamruss...@sbcglobal.net.invalid> wrote:
> "catalpa" <cata...@entertab.org> wrote in message
>
> news:8_Nxi.316$wW6.175@trnddc08...
>
> > The mortgage companies don't own the mortgages.
>
> So who owns the mortgage?
Bear Stearns did, via a hedge fund it managed. The
fund, whatever it was, imploded.
Merrill Lynch and Lehman Brothers have has some
difficulties with the packaged mortgage loans.
Braddock Financial Corp. of Denver has a fund teetering on
the brink.
In Australia, Sydney-based Absolute Capital, half-owned
by Dutch bank ABN AMRO is taking the rocket ship to the
netherverse because of the subprime thing.
I've listed just three examples. Yahoo! search has many, many more
examples that I did not list.
> Are they not in any danger of bankruptcy from
> this mess?
You're assuming that the comanies are not already past the
danger point. Negotiation of new terms is questionable,
because many of the packaged mortgages that are failing
essentially have companies that act as a maildrops for
the payments. The maildrops can't communicate to the owners of the
packaged mortgages, nor are the owners of
the packaged mortgages (companies, individuals) willing
to talk to the mortgagees because the packages were
bought for the cash return, not for management of real
estate.
Traditional banks could do something, because they have the asset
base, organization, and people to survive the
situation. Brokers, companies that borrow money to
lend to homeowners and are responsible for a significant
percentage of the creative and subprime loans, collect
the closing commissions and fees, then resell the
mortgages can't do jack because most of the cash flow
comes from the origination and sale, not the holding,
of mortgages.
There's a guy who wrote a .pdf, and connected to the bank
rating system on thestreet.com, who wrote a good article
about the current liquidity problem, and did comparisons
of the ratios of certain banks asset base to the amount
of loans either late or "inactive" (money due, but the
borrower isn't paying and the bank has done all it can
to collect). I wish I saved the link, it was a nice read.