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April 2, 2007
Bargaining With The Bank
The Times ran an interesting piece yesterday reminding those facing a mortgage payment crunch to be proactive with their lenders. The logic makes sense: Your bank does not want to foreclose on you; it's not in the real estate speculation business and the process of disposing of a repossessed property costs it $40,000 or so. As a result, if you can come up with a proposal that will cost your bank less than $40,000, a compromise is likely. The article recomends starting the conversation three to four months before a rate reset. Have any Brownstoner readers been through a negotiation like this or know anyone who has?
Homeowners, Call Your Bankers Before They Call You [NY Times]
Photo by Mark Lennox
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Comments
This is pretty similar to other kinds of debt. If you have a large outstanding credit card bill you can't keep up with, the lender will usually work with you.
Posted by: Anonymous at April 2, 2007 11:01 AM
i have a home mortgage workout group as a client and they are always setting up payment plans for their past due borrowers (I don't help them on that end of their business though). it's very common. especially in ny, they're not interested in foreclosure. way too big a hassle. seems more common elsewhere, in the south and in non-judicial foreclosure states.
Posted by: anon at April 2, 2007 11:33 AM
If you have an ARM that is resetting soon, you are already screwed.
You were supposed to have already re-financed. Now that all the sub-prime and Alt-A shops are shutting, its too late to refi now.
Your only hope is that the Fed starts cutting rates aggressively enough to bail you out.
Posted by: ItsAWrap at April 2, 2007 11:56 AM
if Feds 'cut rates aggressively' - would probably be seen by bond market as inflationary and mortgage rates would go up not down.
The Feds don't set mortgage rates.
Posted by: Anonymous at April 2, 2007 1:11 PM
Correct, the Fed Reserve does not set mortgage rates, but mortgage rates generally rise and fall in correlation to bond market yields.
The fed would lower rates if there was evidence the economy was cooling. This would have the likely effect of increasing bond prices, thereby reducing bond yields (bond prices and yields move in opposite directions), and correspondingly, woul dlikely result in lower mortgage rates.
I'm not saying any of this (fed rate reductions) will happen, just thought the 1.11 post was incorrect.
Posted by: Anonymous at April 2, 2007 2:19 PM
1:11 is correct in saying the fed doesn't set Mortgage rates.
However, the fed most certainly has an effect on rates.
The prime rate is primarily the rate used to set Home Equity Lines of credit and the COFI is the rate that is used to set adjustable rates. Prime is based on the Fed Funds Rate which is Set by the Fed... The COFI (more inderectly linked to fed funds) tends to lag other interest rate movements.
That said, if the Fed Did cut rates, other rates would tend to follow.
Most first mortgage rates are based on the 10 year.
Posted by: NewStoner at April 2, 2007 3:30 PM
The Fed had raised PrimeRate from 4.00 to 8.25 starting in mid 2004.
Fixed 30 mortgage rates have barely moved in comparison and are little above mid 2004.
Point I was making is if Fed cut 'rates aggressively' bond yields (and mortgage rates which follow bond yields) could increase if 'market' felt rates were unwarranted/too severe and considered them inflationary.
Posted by: Anonymous at April 2, 2007 5:58 PM
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