Will Mortgage Companies Take Advantage of the Foreclosure Bill?
Congress is on the brink of passing the anti-foreclosure bill, the Foreclosure Prevention Act of 2008 (HR 3221), but how will lenders respond? While the sole focus of everyone involved has been “how to get this bill passed,” nobody has taken the time to explain how this bill would work in the “real world.”
There are a number of issues that either haven’t been considered, or ignored.
First, this bill is totally untested and unproven. Legislation hardly ever works out in the real world as planned. Example: the FHA Secure program has fallen far short of its predicted impact.
Second, there are plenty of options already available that would not require a principal write-down. For most investors (particularly those in the high-risk tranches), the response to this option will likely be, “Pass!”
If you know how to play the game, you can get great results WITHOUT this bill.
Third, many servicers are not even competent in handling the current menu of available options for lenders. Many are almost incapable of receiving and documenting a fax. Now, they’ll have a new task to incorporate a host of additional processes.
Fourth, what’s the order of operations going to be? Will the borrower take the initiative to go get “pre-approved” for this program before they check with to their servicer? Or, will they have to get a green light from their current lender and THEN apply? Either way, one party- or both- will have a significant investment of time, money and resources with no real indication of their odds of success.
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