Lenders Avoid Modifying Loans, Boston Fed Says

The Boston Globe:

Mortgage lenders don't try to rework most home loans held by borrowers facing foreclosure because it would probably mean losing money, a study released yesterday by the Federal Reserve Bank of Boston concludes.

The Boston Fed's findings suggest the Obama administration's major effort to solve the foreclosure crisis by giving the lending industry $75 billion to rewrite delinquent loans to more affordable levels is not likely to work.

Read the whole story: The Boston Globe

Comments

[RJII]

Stimulus should have only bailed out main street directly.

[pastpartisan]

the whole economy is a scam bult on a house of debt waiting to topple.

any so called 'recovery' is artifical

good articles: http://www.alexandria.lib.va.us/link/redir.pxe?www.iamned.com

[ccpostman]

Obama should go after these predatory lenders. A lot of cities are doing this to recoup lost property taxes. Would not be hard to find these people, just follow the trail of foreclosures.

[nomadicexpat]

if they hadnt given these loans youd be screaming that the govt should go after them for being discriminatory and not lending enough.

individuals took out loans they knew they couldnt afford to repay AND often using fraudulent documentation, and you want the banks to underwrite it ..

go after the greedy individuals, theyre the cause of this mess

[themainpoint]

OF course they aren't lowering the mortgages. They encouraged a bubble, drove the prices up and then locked in their proifts on the overpriced assets as homeowners were locked into all the losses. (they locked in their profits by getting preemptively bailout out of any losses). Has anybody's mortgage payment gone down lately? No? Well that means banks just made trillions on overpriced assets.

The so called "help for homeowners: was just the spoonful of sugar throwaway idea so Americans would swallow when all their hard earned tax money went to "bailing out" the very people who created the bubble.

[dnpvd51]

I am so sick of the whining crybaby homeowners demanding special treatment.

It is completely unfair to give homeowners money to modify their loans giving the royal shaft to those that rent.

[japrz]

Here's a good one. I am buying a house from a realtor as a short sale. This realtor cannot pay for five $1million plus houses he owns on one street. That was no misprint. Yes this realtor owns five $1million plus house just on one street. The realtor bought them all in 2006 figuring he would flip them for $1.7millio­n. He put nothing down, got 1% teasers with second mortgages on each. So, my question is: Should we give this realtor special treatment? Have the banks give him a break so he could continue to drive the house prices up by flipping these houses? The poor realtor just wants to make a buck. It is the American way.

[denny8844]

Right on And how many times can we multiply this situation across the country with different twists The problems with liberals is that they dont comprehend that in a capitalist economy the banks are in business to make money and all too many homeowners have houses that are way too expensive for them and no amount of adjustments will ever get the monthly payments down low enough for them to afford

[RJII]

don't call homeowners crybabies, then cry about renters getting shafted.

[dnpvd51]

OK,

Which one should I do?

[sc92705]

Why should this be a surprise?

Obama believes banks will lend if he asks them nicely? Ha!

[Lorianne]

Delinquencies on home-equity loans hit record
http://www.latimes.com/business/la-fi-delinquencies8-2009jul08,0,7889773.story

[ko2ko2]

We should do what we have always done with people who can't make their payments, foreclose on them plain and simple...

[GrainOSand]

I agree, but what of lost tax revenues leading to municipal budget shortfalls, blight, and a further depressed real property market causing a further decline in paper-based wealth? I also think that AIG, Bear Sterns, Freddie and Fannie, and whatever other corporate interest that took public money were in fact -- just the right size for failure. Do not get me started on the giveaway of life and treasure that was and is Iraq. Let there be consistency in approach or let the goose know and see the world of the gander. Foreclose on the individual failures but let their be no government assistance concerning the massive failures of the corporate world. Fair is fair! Kick the corporate losers to the curb as well, lest one begin to think -- the fix is in.

[ko2ko2]

Yup, NO TO ALL BAILOUTS! To people, companies and anyone with their hand out...

[outnow]

The banks would rather risk the political fallout and restore their own balance sheets.

As with health insurance companies, a public option is needed to spur actual competition in creating credit. The government should be a direct credit provider since GSEs and banks trade off the full faith and credit of the government anyway.

Insurance companies should be in the casualty business, not funders of medical care. Getting sick or staying healthy is not an accidental loss. Why should these beancounters broker our healthcare? They own tall buildings while children go without medical care so that they can extract 30% of the top. All they do is exclude risks. Medical care is a human right too important for insurance companies to use for profits.

[darker]

Banks, Credit Card Lenders are REPUBLICAN­-DEREGULAT­ED
PROFITEERS & SCAMMERS who screw working and middle income Americans.

They are HUGELY to blame for the credit mess and economy's crash.

It's time to VOTE the rest of the crappy Republican "whores of the rich" OUT OF OFFICE.
Enough is enough.

[machivellianX]

boston fed is right...Of all institutions to agree with...hah­a. As for teh censoring nonsense..­.if this was a true progressive blog the only thing that needs to be censored is bad language, direct language, spam, and completely off topic items.....­When you start to censor ideas, and opinions you really begin to lose all credibility in my opinion...

[Usama]

Yes boys and girls you can have the American dream too by signing over your soul to Bank of Satan. For a fixed rate of one child sacrificed ever 5 years, you can have the house of your dreams. Carve a pound of flesh off of your offspring to upgrade your kitchen.

The American dream is in your grasp! Reach for the sky to fulifill your dream (while cutting your spouse's throat).

Bank of Satan has brokers standing by....... 1-800-BOW- 2SATAN.

[DiogenesOfAlaska]

This is fishy, to say the least.

It is a basic fact of loan origination that modification of troubled loans is profitable in some cases and not so in others. This is true even at the level of individual loans. Basically, modification fails to be profitable only due to the costs resulting from renegotiation - assuming that the borrower is not in the negative equity range and is in principle able to make payments on the loan. The costs due to renegotiation cannot possibly dominate in all cases.

At the systemic level, taking into account the downward spiral of real estate prices, the banks fail to solve a collective action problem on top of the flawed case-by-case decisions.

Given their failure in management in the build-up of this crisis, I do not find anything implausible in claiming that they are making errors that should be avoided by managers with a basic education in the management of loan portfolios.

How about sending these jokers back to grad-school?

[BarakCarpathia]

Banks don't want to rewrite loans and would rather the purchaser fail.
This just in, "the sky is blue."
BTW, who's making decisions for that administration?

[hulagirrrl]

I thought the government owns most banks, so why can't people get money from them? These arrogant banksters again, first they bring the mess, and then they pretend that it is not their problem, continue greed for bonuses and don't give a f....

[japrz]

People can get money from banks. Unfortunately, the people that can borrow the money have excellent credit and most of these people don't need the money. In short, if you need the money then forget it. They won't let you borrow it. The time when someone could just walk into a bank buy a house by signing papers with no proof of income is over.

[denny8844]

Remember banks are in business to make money and if they dont make a profit they are no longer in business It is not like government who panders to all to create fairness and equity and all that other liberal idealism Businesses are in the business of business Get with it