| Lenders cold to the idea of forgiving mortgage debt
A mortgage broker has an idea for reducing foreclosures: Encourage lenders to forgive debt. So far, the notion hasn't gained traction. Jeff Lazerson, founder and president of the online brokerage Mortgage Grader, believes that some foreclosures could be prevented if delinquent borrowers could refinance their loans, but with some of the debt forgiven. This type of transaction, called a short refinance or short refi, is rare. Lazerson wants to set up a streamlined system to make short refis more common. Greatly simplified, this is how a short refinance works: You owe $200,000 on a house that you bought at the top of the market. Since then, house values in your neighborhood have fallen by 20 percent, and your house is now worth $160,000. The rate on your subprime adjustable-rate mortgage has gone up, and you can't afford the higher payments.
Jackson blasts Bush mortgage plan
Bush's recent bailout plan doesn't go far enough to solve the problem of foreclosures, Jackson said, pointing to the voluntary nature of Bush's program to freeze adjustable mortgage rates for five years. "By and large they will not do it because it's voluntary," Jackson said. "There is no structure in place to in fact begin to exact from them exploitative amounts of resources. There must be some government plan in place because it's about sparing the nation a recession." Glenn Mueller, a professor at the Burns School of Real Estate and Construction Management at the University of Denver, went even further. He told The Denver Post "the liars have won," saying that the mortgage plan rewards the lenders, whom he called cheaters. However, Robert Steel, the undersecretary of the treasury for domestic finance, told National Public Radio that the Bush plan will buy affected homeowners time to refinance their mortgages.
Short sales increase as housing slump deepens
Investor Harold Stark paid $365,000 for a three-bedroom Boynton Beach townhouse last year. But the monthly mortgage payments soon started to feel like a noose around his neck.
His property's value dropped below what he still owed, $329,000. But rather than letting the townhouse fall into foreclosure, Stark worked out a deal in which he sold it for $285,000, and his lender, Chase Home Finance, forgave the difference.
"I got out of the quicksand, where I was sinking and sinking and sinking," the 74-year-old Delray Beach resident said last week. "It's such a burden off my chest."
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