What loans is the gov buying?

lendaddy · 09-21-2008, 06:43 AM

If I understand correctly the gov will be buying all of the junk mortgages. So what defines a junk mortgage?

widgeon13 · 09-21-2008, 06:59 AM

Most likely how it is packaged and sold by the original lending institution to other financial institution.

Porsche-O-Phile · Porsche-O-Phile's Garage

I'd classify it as any mortgage originated between 2002 and today that's anything other than a 20% down, 30-year fixed with conventional, documented qualifying guidelines.

boba · 09-21-2008, 09:14 AM

Quote:

Originally Posted by Porsche-O-Phile

I'd classify it as any mortgage originated between 2002 and today that's anything other than a 20% down, 30-year fixed with conventional, documented qualifying guidelines.

My guess is that the folks putting the packages of loans together to sell into the secondary market mixed solid loans with the no-doc, no-down, interest only. This is why noone knows what is in these packages and why they are no longer liquid.
Once these packages get inventoried the govt willbe able to do a mark to market and see what they have gotten. Many, most will be performing loans as about 5% is what constitutes the loans in forclosure or deliquent.

IOW 5% junk mixed in with all the performing loans has made these packages questionable, and thus unsaleable.

The homes that have fallen in value below the mortage amount are another issue that will only be rectified when housing values stabalize which will take some time. If the homeowners bought the home to live in and plan to be there for a few years they will most likly be OK. If they bought to flip, well they got stuck.

Rick Lee · Rick Lee's Garage

I'm dying to hear about the restrictions on mortgages with late payments. Seems to me that the gov't. absolutely must draw the line at refusing to do anything for mortgages in default or near foreclosure. That won't help a single person facing foreclosure. But it will give some small incentive to those who are wondering if it makes sense to keep up with their payments or just let it all go to hell.

A good buddy of mine took out a personal loan for $60k to prevent a short sale of his house. He had to bring that $60k to the table. Now he's facing bankruptcy and his lawyer told him it was foolish to take out that loan. His credit would have been and will be screwed either way. No point in adding to the pain. Once the bank hears their debt will be wiped away by his BK, they sure won't appreciate the fact that he tried to do the right thing in the beginning.