There are a broad number of mortgage rescue plans that have been announced by multiple banks including Bank of America (who bought CountryWide Financial), J.P. Morgan and even the Federal Deposit Insurance Corp. (FDIC) who purchased the assets of Indy Mac bank back in July.
Bank of America’s Rescue Plan
Bank of America is seeking regulatory approval of its Countrywide takeover, plans to modify at least $40 billion of mortgages during the next two years to keep customers in their homes — avoiding both Bank of America and Countrywide foreclosures.
The move will help as many as 265,000 homeowners stay in their homes. Countrywide foreclosures are growing because the lender made risky loans to many sub prime borrowers. It is estimated that Bank of America controls approximately 25% of the homes that may be in or facing a foreclosure here in Las Vegas, so there rescue plan could have a measurable impact on our local market. Bank of America actually has two primary rescue plans in place now, one has been worked out with a large number of state attorneys that is being implemented.
JP Morgan Effort to Save Mortgages
J.P. Morgan and Chase & Co. announced an ambitious plan late last week to modify the terms of approximately $70 billion in mortgages for borrowers who may be either behind on their mortgage payments or may be so in the near term.
This announcement is expected to impact as many as 400,000 borrowers around the US. JP Morgan will move many of these loans into more affordable loans, carrying lower interest rates, smaller principal amounts and much more affordable terms for impacted homeowners.
FDIC Plan
The FDIC just announced a plan that could impact up to three million people who are in trouble with their mortgages, although this plan is being reviewed by the White House at present and has not been solidified.
Under the proposal, providers of home mortgages would make certain loan modifications for borrowers and in exchange, the government would guarantee those loans, according to preliminary reports, although this plan is again subject to review by the executive branch of the government, as it would have an estimated cost of at least $50 billion.
Analysis of These Events
Up till now many banks and mortgage firms have been unwilling to tackle the foreclosure problem facing millions of Americans. But, these rescue plans are a very positive sign for the US market as whole, as well as here in Las Vegas, as banks are starting to realize they can improve the value of their loan portfolio via mass modifications, as opposed to letting homeowners move into foreclosures.
Also, the announcements by JP Morgan and Bank of America helps to put pressure on other mortgage providers to come up with their own relief programs. JP Morgan and Bank of America are setting precedents and this will help to put pressure on other top and second tier banks.
We are not out of the woods yet though! Nationwide 7.3 million American homeowners are expected to default on their mortgages between 2008 and 2010, which is more than triple the number of foreclosures that would typically occur in this time period. Approximately half of these people could lose their homes, although this projection could be lowered significantly if we have more rescue plans.
As we’ve been saying for months, we believe the Las Vegas Real Estate Market has tremendous value at our current prices and investors are moving into our local market aggressively and purchasing single and blocks of homes. Give us a call or visit our web site, we’ve got some great deals, but they won’t last forever!!