Do you like to watch sports on TV?
Isn’t it amazing how much money the “jocks” who play sports generate in terms of revenue and as a result get paid to just be a jock?
What if I told you that the real jocks in the world who generate the real revenue and make the real money weren’t named Kobe, Tiger, Lebron or LaDanian?
The real jocks who are responsible for generating trillions of dollars are the Quant Jocks.
Quant as in Quantitative. As in numbers. As in the smartest-guys-in-the-room-who-wear-glasses-and-part-their-hair-on-the-side who are hired to come up with the financial models that the big banks base their entire business around.
These Quant Jocks are the guys who came up with those wonderful things called CDO’s (mortgage speak for Collateralized Debt Obligation), CDS’s (Credit Default Swaps, more mortgage speak) and a handful of other three lettered acronyms that have given the country a severe case of the financial hiccups these last few years.
Attention Quant Jocks: I have an idea, but we are going to need your help flexing your spreadsheet muscles to let us know if this big idea will work or not.
Let’s see if we can attack the Foreclosure Crisis from a different angle and solve it.
Are loan modifications working?
Not really - in fact, the highest levels of government are pushing for more loan modifications to get done soon.
Are short sales working?
Kind of, but not really. I still hear it takes way, way too long to get a short sale done.
Foreclosures?
Still happening — and from the data that I can gather, more strategic defaults are happening more as more people are simply choosing to “let their home go”. The number one problem cited in the decision in strategic defaults is the amount of negative equity in a property.
In many areas of the “sand states” it isn’t uncommon to see a homeowner be 50% or more upside-down in his home — which means that house he bought 3 years ago for $200,000 is now worth $100,000.
And right or wrong, when property values plummet in the high double-digits in entire zip codes, the end result appears to be mass default.
Here Is A BIG Idea:
If a homeowner has a LTV higher than 125%, write the current loan down to 90% of the appraised value of the home and create an equity-sharing agreement with the homeowner that you will split any equity gained in the home if they refinance or sell the home.
2 Benefits To The BIG Idea:
- The smartest guys in the room will quickly figure out how to turn the resulting “IOU 50% of my equity” into some kind of security that can be traded/sold if an institution doesn’t want to hold it. You might be surprised to learn how many banks have written down the value of these mortgages to 90% (or less) of the current appraised value already.
- Homeowners will have a lower (”more affordable”) mortgage payment - and - have no reason to become another strategic default statistic. Low interest rate + equity in home = the best chance for a homeowner to make their mortgage payment or simply sell the home and try to get the most money possible rather than short sell it for the least amount the bank is willing to take.
Will it work?
Let’s put it this way: I’ll bet you a can of Diet Pepsi that if implemented, it will work better than the FHA Secure and the FHA Hope for Homeowners Program - combined.
I wonder what the Quant Jocks will have to say about it.
Last 5 posts in Loan Modification
- Bank Accidentally Sells House as Foreclosure - November 11th, 2009
- Loan modifications are lowering monthly payments - October 4th, 2009
- More Homeowners are Late on Their Mortgages - September 21st, 2009
- Successful Short Sales…I mean plural…more than one! - September 14th, 2009
- FHA Mortgages Now Qualify For Government Help - September 3rd, 2009
- Stumble it!
- Categories: Loan Modification
Comments
4 Comments so far
Joanna Jensen
Actually Loan Modifications are working. I work for an Attorney Broker and we specialize in Loan Modifications, short sales, and regular real estate transactions. Modifications do work. I have been doing them for over a year. I am very finicky about my processing so I process mine myself. My personal stats are approx 60% + and I dont cherry pick. I take any client who has income that they can show. I have stopped two foreclosures and have saved one client as much as $4000 per month on their loan mod.
I think we have a lot of mis information out their. Our law firm has well over 70 success and that is just this year its a small law firm. We have gotten principal reductions, and in fact yesterday I got my first Making Home Affordable Plan trial program. With the program comming out in the middle of several of my clients already being submitted it did cause me to have to resubmit several files. The lenders apparetly cant just read the rules and start the new guidelines the following week. Per what I was told by negotiators at Wamu it tool them untill late July to get the new program figured out.
The new Making Home Affordable Plan that I got approved really is a good program. It is saving the homeowner over $1200 per month. It has a 2% interest for the first 5 years, then it goes up 1% per year untill it maxes out at 5.25% this is saving the homeowner substantial money and it now includes taxes and insurance. Also the thing that is cool about it is if the home owner stays current they will get a credit towards their principal every month as incentive for the first 5 years.
this is the real problem. Some people lie. I have had people call and ask me to get them approved because they know what I do. If a home owner isnt facing a hardship, underwater, interest rate adjustment they may not get modified.
But I do beg to differ, lenders are modifying, sometimes it takes longer. Some times it can be done quick. You need to know what your doing. I think some where along the lines the stats are skewed.. I know well over 55% of mine go thru!! However, it does depend on the lender, the investor and the individual situation.
JoAnna Jensen
Realtor paralgeal
Pleasanton, CA
james york
I have 2 houses both in default, I hired a company to modify for us.
The first offer we just could not afford, and they are telling us this is it you have to take it.
Why would we take on offer we cant afford? and go right back into default.
Maybe you can help us.
James.
joanna jensen
Hi James York,
Sorry to hear about your homes in default… It is definately a stressfull time.
I have stopped two foreclosures within days of the sale. Who ever is negotiating for you may not be doing their job. Different people process these different ways.
Because I am the one who meets the client, signs them up and knows about their personal situations I make sure to do the very best I can for each and every client I have. I will go over a negotiatiors heads straight to their manager.
send me an email or feel free to give me a call.
Sincerely,
JoAnna Jensen
Volo Law
Paralegal Realtor
925 699 5041
Joanna Jensen
Hi James,
Is your new mortgage payment on your primary home some where around 31% of your gross income including impounds?
Also, do you have a lot of credit card debt?
I am happy to talk to you and give ideas.
free consultation.
JoAnna Jensen
Volo Law Group
925 966 5041