Mortgage foreclosure bailout plan may help few |
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Lenders are not obligated to participate
The center also observed that the new plan is voluntary on the part
of lenders, loan servicers and investors, and that it contains neither
incentives (apart from foreclosure avoidance) for those companies
to implement it, nor reporting mechanisms for them to track the
outcomes.
The voluntary nature of the program means the companies
may not modify any more loans than they otherwise would have without
the plan.
Lenders have modified only relatively small numbers
of loans since the mortgage crisis surfaced some months ago. HSBC,
one of the largest home-loan lenders, had modified some 8,000 loans
prior to an ARM reset as of Sept. 30, 2007, according to Kate Durham,
a spokeswoman for the company. Countrywide, another of the largest
lenders, had modified 20,000 loans as of Oct. 23, 2007, and expected
to modify another 30,000 loans before the end of 2007, according
to a company statement prior to Paulson's announcement.
Representatives for investment advisers UBS, Deutsche
Bank, Barclays Capital, and Jefferies & Co., as well as the U.S.
Treasury, did not respond to requests for more information about
the discrepancies among these estimates. But UBS this week announced
a further $10 billion writedown of its U.S. subprime mortgages.
That suggests the company has a dim view of the likely return on
those investments.
Foreclosure rate on the rise
Meanwhile, delinquency and foreclosure rates on residential properties
have been on the rise. In the third quarter of 2007, payments were
delinquent on 5.59 percent of all such outstanding loans, and foreclosures
had been initiated on 1.69 percent of those loans, according to
a statement from the Mortgage Bankers Association. Both figures
were reported on a seasonally adjusted basis and had increased compared
with the second quarter and prior-year third quarter figures.
Prime fixed-rate mortgages accounted for 63 percent
of the country's outstanding loans and 17 percent of the started
foreclosures, while subprime ARMs accounted for 6.8 percent
of the outstanding loans and 43 percent of the started foreclosures.
Florida and California are "the two largest states
in terms of mortgages outstanding and are the key drivers of the
increase in the national foreclosure rates," according to the MBA
statement. That means those states may be home to the most disappointed
homeowners, as well.
Read the Bankrate story, "Nuts
and bolts of the mortgage relief plan," to find out the specifics
of the plan and find out who qualifies for the different bailout
plans.
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