Treasury studying home refinance plan »
Posted By STONERS 1 year, 8 months ago in Business & FinanceThe U.S. Treasury Department is studying a new regulatory proposal aimed at prodding servicers to help homeowners facing foreclosure to refinance their mortgages, the department's undersecretary, Bob Steel, said on Thursday.
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nostalgia1 year, 8 months ago
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Here's another article on this with an example of how it might work:
Mortgage crisis: Don't forgive debt, just postpone repayment
A new plan from the OTS would have lenders reduce mortgage balances, but let them collect the difference later.
Instead of having lenders forgive the difference between the old mortgage and a house's current resale value, called a short sale, the OTS advises that lenders issue a warrant or "negative amortization certificate" for the difference. If a home regains its market value and is then sold, lenders have first claims to the profits.
If the house later sold for $100,000, the lender would collect the $80,000 mortgage balance plus the $20,000. If the sale realized more than $100,000, the certificate holder might even get interest on top of the $20,000. Any profit beyond that would go to the borrower. The warrants could be publicly traded.
http://money.cnn.com/2008/02/20/real_estate/OTC...
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