BIG STEP - FED To Modify Terms on Mortgages They Acquired!
WOULD IMPACT $84 BILLION OF MORTGAGE ASSETS CENTRAL BANK ACQUIRED IN CONNECTION WITH AIG, BEAR STEARNS BAILOUTS!
In one attempt to help many borrowers stave off foreclosure, the Federal Reserve Board has created a program to modify mortgage loans tied to the debt the agency acquired in connection with the bailouts of failing investors in Mortgage Backed Securities, including American International Group and Bear Stearns.
In a story by Wall Street Journal reporter Sudeep Reddy in today's edition, the modifications could include a combination of lower interest rates, extended repayment terms, and perhaps even a deferral or reduction in due principal, in some cases.
Rising mortgage loan defaults continue to drive down the value of Mortgage Backed Securities. Experts fear a continued weakening in the mortgage market could further damage the stressed U.S. Banking System, and hamper efforts of a real economic recovery any time soon. President Obama and his administration is pushing for action to stem the rising tide of foreclosures. Congress, along with the Fed and the U.S. Treasury Department, plan to introduce their homeowner relief plan within weeks.
In mid-2008, the Federal Deposit Insurance Corporation had mixed success modifying mortgage loans they acquired when they took over failing sub-prime, no-doc lender IndyMac Bank of CA. The mortgage modifications served as short term relief for some, but many borrowers granted loan modifications fell back into arrears several months later.
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