1. David Stutts

    Well of course the Banker is going to say what he did — after all, he IS the Chief Fixed Income Officer.

    Seriously, back in the 80’s I had a condo here in Houston that was underwater (yes…it had been purchased in 1982 when interest rates were crazy high!). I was current on my payments and in 1988 got the lender to reduce my interest rate to something that was more in line with the market in 1988 (and I think I paid a point in fees).

    Isn’t part of the problem that its tougher (if not impossible) for lenders to adjust rates on underwater loans now as compared to 25 years ago, due to all the changes in laws and increased regulations?

    1. Ted C. Jones Post author

      I do not believe there are any restrictions on lenders to reduce rates or to reduce the amount of the loan balance as long as the lender still owns the loan.

      If anything the HAMP and HARP programs reward lenders for so doing.

      but we really need to refinance completely-not modify, which allows the original lender to be paid in full with no cram-downs. And remember-all lenders make these residential loans without prepayment penalties in place-so they are always at risk for such.


  2. David Stutts

    You are correct – I was thinking HAMP, where you have to be in a cash crunch to qualify. But under HARP that is not the case, although the 1st morgage cannot be more than 125% of value of the home and the mortgage has to be guaranteed by FANNIE or FREDDIE.

    Back to my deal 25 years ago, I simply wrote the lender a request, they sent some paperwork and it was done, with no appraisal, and no govt program. I realize that doing it that way does not provide a title company with many opportunites, but it is illustrative of a time when dealing with lenders was easier.

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