The five biggest lenders – Bank of America, Chase, GMAC, Citi, and Wells Fargo – have $25 billion to use giving principal reductions.
If your property is worth less than what you owe on your first mortgage and if you have had a hardship, you may qualify.
We have recently gotten principal reductions for our clients from Chase, Ocwen, Chase (EMC), and Wells Fargo.
I do telephone consultations for no charge.
by J. D. Heyes
(NaturalNews) It’s probably not a concept that most U.S. banks and lawmakers want to think about, but the fact is, Iceland’s economy has grown by leaps and bounds since the government there implemented widespread debt forgiveness for many of its citizens.
The initiative came about http://www.bloomberg.com ” target=”_blank”>following protests by Icelanders in 2008-2009 who were angry at the country’s leaders and bankers for its fiscal and economic collapse. At one point, protestors gathered around the Parliament building and pelted it with rocks.
In the ensuing months, Iceland banks have forgiven loans equaling 13 percent of the country’s annual gross domestic product, which has eased the debt burden for more than 25 percent of Iceland’s population, according to a February report published by the Icelandic Financial Services Association.
“You could safely say that Iceland holds the world record in household debt relief,” Lars Christensen, chief emerging markets economist at Danske Bank A/S in Copenhagen, told Bloomberg News. “Iceland followed the textbook example of what is required in a crisis. Any economist would agree with that.”
By any definition, the initiative has been a success.
Iceland’s slow ascent out of the economic abyss began in 2008, following an $85 billion default by the country’s banks. Its economy in 2012 will surpass that of the entire euro zone, as well as the developed world on average (including the world’s largest economy, the United States, whose economy grew at an anemic 2.2 percent in the first quarter of this year), according to an estimate by the Organization for Economic Cooperation and Development (OECD).
And, while the rest of the continent continues to drown in debt, most polls now indicate that Icelanders don’t want any part of joining the European Union, which is in its third year of debt crisis.
“The island’s households were helped by an agreement between the government and the banks, which are still partly controlled by the state, to forgive debt exceeding 110 percent of home values. On top of that, a Supreme Court ruling in June 2010 found loans indexed to foreign currencies were illegal, meaning households no longer need to cover krona losses,” Bloomberg News reported.
Lessons learned, but who’s listening?
“The lesson to be learned from Iceland’s crisis is that if other countries think it’s necessary to write down debts, they should look at how successful the 110 percent agreement was here,” Thorolfur Matthiasson, an economics professor at the University of Iceland in Reykjavik, told Bloomberg. “It’s the broadest agreement that’s been undertaken.”
He went on to say that without the agreement, homeowners would have succumbed to their debt after the ratio of obligation to income skyrocketed to 240 percent in 2008.
Iceland’s $13 billion annual economy declined 6.7 percent the following year, in 2009, but has since rebounded and will expand by 2.4 percent this year and in 2013, the OECD estimated. Meanwhile, in the rest of debt-ridden Europe, the economy will collectively expand by a paltry 0.2 percent this year and only 1.6 percent the next, OECD estimates said in November.
Housing is now just about 3 percent below values in September 2008, just before the financial collapse. So improved is the nation’s economic and fiscal outlook that Fitch Ratings in February raised the country to investment grade with a stable outlook, stating the country’s
“unorthodox crisis policy response has succeeded.”
Here’s a concept: People first
Analysts say Iceland’s approach to solving its financial and economic problems put people ahead of markets at every step.
When it was judged in October 2008 that the country’s banks could not be saved, the government stepped in immediately and fenced in domestic accounts while leaving international creditors out of the loop. “The central bank imposed capital controls to halt the ensuing sell-off of the krona and new state-controlled banks were created from the remnants of the lenders that failed,” said Bloomberg.
That said, Icelanders are still reeling from the financial carnage.
“There are still a lot of people facing difficulties; at the same time there are a lot of people doing fine,” Kristjan Kristjansson, a spokesman for Landsbankinn hf, said. “It’s nearly impossible to say when enough is enough; alongside every measure that is taken, there are fresh demands for further action.”
That may come in the form of legal action. A new leadership coalition, led by Social Democrat Prime Minister Johanna Sigurdardottir that was voted into office in early 2009, has authorities looking into who was most responsible for the banking meltdown. And parliament is still weighing whether to move forward with an indictment brought against former Prime Minister Geir Haarde in 2009 for his role in the crisis.
A new coalition, led by Social Democrat Prime Minister Johanna Sigurdardottir, was voted into office in early 2009. The authorities are now investigating most of the main protagonists of the banking meltdown.
In all, a special prosecutor has announced that as many as 90 people may be indicted, while more than 200 others, including former chief executives of the country’s three largest banks, will face criminal charges.
In the U.S., meanwhile, no top bank executives or lawmakers have faced prosecution for their roles in the subprime mortgage meltdown, though the federal Securities and Exchange Commission said in 2011 it had sanctioned 39 senior banking officials for conduct tied to the housing market collapse. Big deal.
Meanwhile, the smoke still has not cleared from the bursting housing bubble; so far, home values have declined 33 percent since peaking in 2006. Yet the best Americans can get from their leaders after being suckered into purchasing homes at what turned out to be hugely (artificially) inflated prices is a proposal by President Obama earlier this year to expand loan modifications that included “some” reductions in principal loan amounts.
Gee, thanks, guys.
Sources for this article include:
May 8, 2012 • 12:12pm
Some families living in the most deeply underwater states such as Nevada and California are receiving principal reductions exceeding $100,000 from the mortgage servicing settlement, Department of Housing and Urban Development Secretary Shaun Donovan said before the Senate Banking Committee Tuesday.
The statement comes after Bank of America ($7.72 -0.24%) mailed letters to more than 200,000 mortgage borrowers for potential principal reduction under the robo-signing settlement. The bank began principal reduction in March, offering 5,000 trial modifications with more than $700 million in write-downs.
“It’s not a huge number at this point, it’s in the thousands, but hundreds of thousands are now getting these letters, not just from BofA, but from all five banks,” Donovan said before the committee.
In the fourth quarter of 2011, Nevada homeowners’ loan-to-value ratio stood at 114%, the highest in the nation, according to CoreLogic ($17.10 -0.14%). And 61% of mortgage properties in the state hold outstanding balances that exceed its value, also the highest.
California’s LTV ratio was 71% in the fourth quarter, while 30% mortgage properties in the state were underwater.
It varies by location, but in a state like North Carolina, where BofA is based, families are receiving $50,000 to $100,000 in principal reduction. North Carolina’s LTV ratio was 72% in the fourth quarter, while 7% of homeowners in the state state were underwater, drastically below Nevada and California.
Many families who were being evaluated for other types of modifications were able to receive principal reduction quickly after the settlement was finalized in March.
“We are very encouraged by the pace with which implementation is moving on those servicing standard,” Donovan said.
The settlement requires that not only principal reductions occur, but that there’s demonstrated ability for a family to pay and remain in their home for at least 90 days.
“What’s critical here is not just the amount of the principal reduction, but that it gets the family to a sustainable level and keep them in their home long term,” Donovan said.
As millions of Americans struggle in foreclosure with little hope of relief, big banks are going to borrowers who are not even in default and cutting their debt or easing the mortgage terms, sometimes with no questions asked.
New guidelines effective June 1, 2010, clarify many modification issues.
First, lenders may but are not required to reduce principal balances in a modification down to 115% of the principal balance owing.
Second, lenders may not foreclose on a borrower who is in the process of modification until after the borrower is declined and other options have been considered.
Third, a borrower in bankruptcy may proceed with a modification.
Fourth, unemployed borrowers can have up to six months of reduced payments will seeking new employment.
There are many other points these guidelines clarify. Read them here or here.
Read Supplemental Directive 10-02 here, which prohibits foreclosure during the 30-day period following a modification turn down and requires that borrowers in bankruptcy be considered for modification.
Comments