If you have a residential mortgage packaged into securities by Bear Stearns or AIG, the Federal Reserve announced some good news for you on Jan. 27. The Fed's new Homeownership Preservation Policy allows homeowners to renegotiate the terms of loans once held by Bear Stearns and AIG and now owned by the Fed itself. Homeowners who are 60 days or more behind in their payments may negotiate to reduce their interest rates, extend their mortgages or even reduce their principal. The goal, the Fed said, is to avoid preventable foreclosures whenever homeowners and banks can find a sustainable agreement.
This is especially important because securitized mortgages (mortgages that have been packaged into securities) are very difficult to renegotiate. When lenders sell their mortgages to investors, they usually agree to terms that limit their ability to change the value of the mortgage. This can tie lenders' hands when homeowners want to refinance, try a short sale or otherwise change the terms of the mortgage. Banks are afraid of getting sued if they deviate too much from their agreements, and getting investors to agree to a new deal is very difficult. With their hands legally tied, lenders are forced to pass up even loan modifications that are in their own best interests.
Banks don't want to foreclose on real estate; it means they're losing money on their investment and now must spend even more on maintaining and re-selling the property. However, the Federal Reserve now owns the securitized mortgages once owned by AIG and Bear Stearns -- and the Fed serves taxpayers rather than individual investors. This move could free lenders to help many thousands of homeowners who have a financially viable plan to avoid foreclosure. Unfortunately, millions of securitized mortgages are still owned by companies not bailed out by the Federal Reserve, and those homeowners may find they need help convincing a bank to do the right thing.
At Howard Law, we negotiate aggressively with lenders on behalf of homeowners whose existing mortgages are no longer viable. Our Fullerton loan modification lawyers have been successful at converting adjustable-rate or negative-amortization mortgages and other non-traditional loans to conventional mortgages. We can also represent homeowners who need help getting a lower interest rate, extending their loans or even lowering the principal owed. If you'd like to talk with us about your own legal options at a free consultation, please contact us today or call 1-800-872-5925.