Read this article by Gretchen Morgenson in the New York Times before you enter into another loan. Renegotiation of mortgage loan terms has gotten harder because loans are sold through and serviced through so many layers that terms can't get modified.
And the very innovation that made mortgages so easily available — an assembly line process known on Wall Street as securitization — is creating an obstacle for troubled borrowers. As they try to restructure their loans, they are often thwarted, lawyers say, by strict protections put in place for investors who bought the mortgage pools.
This impasse could exacerbate the housing slump, pushing more homeowners into foreclosure. That would lead to a bigger glut of properties for sale, depressing home prices further.
“Securitization led to this explosion of bad loans, and now it is harder to unwind and modify them even where it is in the best interests of both the borrower and the investors,” Kurt Eggert, an associate professor at the Chapman University School of Law in Orange, Calif., said in an interview. “The thing that caused the problem is making it harder to solve the problem.”
Creating difficulties is the complex design of mortgage securities.
Some homeowners have problems simply identifying who holds their mortgages. Others find the companies that handle their loan payments, known as servicers, are unresponsive, partly because modifying loans cuts into profits.
Even if circumstances suggest fraud when a loan was made, lawyers say, the various parties protect each other by refusing to produce documents.
Beware financial institutions. They aren't fair. Though I'd make an exception if you can borrow hundreds of millions of dollars. That would change their incentives in dealing with you such that they'll take the time to think rationally about your relationship to them. Otherwise you'll just get processed according arcane rules designed simply to give them a lot more cards to play with you.
|Share |||By Randall Parker at 2007 August 05 10:51 PM Economics Housing|