BANKS REFUSE TO HELP HOMEOWNERS!
GREED again hurting the housing market
If it doesn't cost the bank and doesn't increase their risk, then why are the banks refusing to help the housing industry?
Market conditions are beginning to offer many homeowners an opportunity to refinance their first mortgage to a lower payment or safer mortgage loan. For those that have a second mortgage or home equity line of credit, the lender in the second position must agree to subordinate (stay in second place) to the new first mortgage.
If this were to happen, the homeowner would have a lower first mortgage payment making it easier for them to afford their home and most agree that the risk to the second mortgage holder would be reduced.
This should be a WIN! WIN! But it isn't.
Agreeing to subordinate is currently optional! In most cases, the second mortgage lender refuses to subordinate. They want out! They want to force the homeowner to pay them off! If the homeowner cannot obtain a new second mortgage or pay the mortgage off with savings, the bank refuses to help and the homeowner continues to pay a higher payment on their old mortgage. The bank says no one can make us help - too bad!
My suggestion -
Force the banks that depend on the Treasury, Fed or State for their charter to subordinate second mortgage loans and equity lines of credit if the new first mortgage improves the homeowner's financial position.
The replacement loan would have to meet certain conditions.
1) If the current first is a fixed rate loan, then the new loan balance should be no higher than the current principal balance and also be a fixed rate loan resulting in a lower monthly payment.
2) If the current first mortgage is an ARM then the new loan must again have a balance that is no higher than the existing loan and either be:
A) A fixed rate loan with a lower payment than the ARM has or is expected to have within the next 6 months.
B) An ARM that results in a lower payment than the ARM has currently or is scheduled to have within the next 6 months (calculated at the current index value plus margin).
If the new loan is an interest only loan, then the term must be at least 5 years and may not have the potential for negative amortization.
NO appraisal, NO credit report, and NO ncome documentation should be required by the second mortgage lender because the objective is to maintain or reduce the risk due to the first mortgage with all other things affecting the risk of the transaction remaining the same.
Is there a politician or journalist out there that cares? Please contact me if you have questions or need some hard facts.
Have a great day!
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