MichaelZZ

Wall Street Breakfast: Must-Know News

RESOLUTION FOR DISTRESSED "RESET" MORTGAGES:

Concepts:

1) One size does not fit all, i.e., each situation should be tailored for the borrower.

2) Responsibility should be resolved between the lender and the borrower.

3) No taxpayers’ funds should be involved.

4) A mortgagor must sign a document, subject to perjury, whereby the mortgagor states that he or she was unaware that the interest rate was to be reset.

The mortgagor has the option of the following alternatives:

The mortgagor will be allowed to wind the clock back to the time prior to the purchase with the information that the mortgage will be reset at the end of five years at a rate to be determined and explained that the rate may be significantly higher than the rate offered at the time of purchase.

1) Can agree to the purchase and will remain with the current situation.

2) Can refuse the 5/25 loan as offered and opt for a conventional fixed rate loan
at a rate of the then-current rate, e.g., 7.25% and will have all payments adjusted to reflect that loan.

3) Can terminate the potential purchase.

4) Can remain in the property, while making the same payments. The lender or agent thereof will be given a lien on the property that will be equal to the accumulation of the difference between the contractual payments and the payments being made. Further, interest will accrue on this differential at the contractual rate.

If the mortgagor opts for option 3), and there is no significant evidence reflecting that the rate reset information was given prior to entering into the mortgage, the mortgagor will vacate the premises and the mortgage will be cancelled, with no further obligation.

Any other encumbrance upon the property will be the responsibility of the mortgagor.

Further, the mortgagor will be responsible for any damages done to the property.

One of the most critical factors is the business model of a CountryWide negotiating mortgages, and then having them bundled and sold as securities. That "model" stimulated the numbers, since the negotiators were no longer involved with these mortgages.

The logistics of my idea would be to have the funds consisting of two pieces (one, the payment from the mortgagor, and the second, the augmented payment from the "negotiator", who will hold the 2nd) and the total would be paid to the "security" as a whole payment.

This would place the responsibilities where they should be, on the mortgagor and on a "CountryWide", i.e., the negotiator.

If these logistics require some tweaking, so be it.


Michael Z.
Sherman Oaks
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