Between a foreclosure and a hard place

“While modification advocates say it is better for investors to accept a lower rate of return rather than nothing, bondholders don’t see much benefit if modifications just delay an inevitable foreclosure.

“Moreover, some securitizations prohibit modifications, as is the case with the pool containing the Goldrick mortgage. Such clauses are meant to protect bondholders — sometimes a hedge fund, sometimes a pension fund — who have been guaranteed a certain return.

“So even though the Goldricks could afford to stay in their home if the interest rate was 6.5 percent, and the bondholders would benefit by continuing to receive income on the loan rather than have it stuck in foreclosure, the servicer of the loan — Saxon — cannot budge.”

See, I have never understood why it’s legal to sell mortgages or other kinds of debt/loan. A loan is a risk, a fairly well researched one, and, in my mind, a risk should stay with the institution that placed the bet—I mean issued the loan, yeah, loan. That’s naïve, you say? Well then, okay, but I really understand moral hazard now.

“The Goldricks took out a $375,000 mortgage in 2005, when they refinanced a previous mortgage on their 1,800-square-foot (167-square-meter) house in semirural Hampton Bays, some 90 miles east of New York city.

“At first, the interest rate was 6.5 percent and the monthly payment was $2,370. After two years, it rose to 9.5 percent and suddenly the payment of $3,850 was beyond the means of a family living off Patrick Goldrick’s salary as a cable guy.”
How one family’s mortgage is linked to meltdown, Reuters, December 29, 2008

$2,370/month for a $375,000 mortgage for a one-income family? Man, how much do cable guys make?

Well, anyway, I wish the Goldricks all the best and hope they work it out. They really are between a rock and a hard place and it’s not all their mortgage’s fault, but getting some help on that would sure help in other areas. I don’t know about anyone else, but I can’t function when my home is in flux. (Unless that’s part of the plan, which is seldom.)

When did bankers get so stupid? I remember reading in the 80s that banks were in trouble and would be the next meltdown because bankers had ceased to be cautious, intelligent, responsible pillars of the community and had become financial idiots. Never mind Wall Street, they’ve always been in their own class. Previously and usually the good citizens of our country were protected from those wolves, simply because working people just didn’t have enough money to be interesting to those wolves. No more, folks!

Greed makes you stupid.

That could be one of those sampler things. If only I could sew.

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