bobbyw24
04-13-2010, 04:52 AM
By JAMES R. HAGERTY
Some big U.S. banks are pushing back against the idea that they should slash mortgage balances for millions of troubled borrowers.
Barney Frank, a Massachusetts Democrat, argued that "to save homes on a large scale, we must move past temporary modifications in interest rates or terms and focus on permanent principal reductions that result in truly sustainable mortgages."
To write down loans enough to bring those debts down to no more than the home values would cost $700 billion to $900 billion, J.P. Morgan Chase estimated in its testimony. That would include costs of $150 billion to the Federal Housing Administration and government-controlled mortgage investors Fannie Mae and Freddie Mac, the bank said.
J.P. Morgan also said broad-based principal reductions could raise costs for borrowers if mortgage investors demand more interest to compensate for that risk. Borrowers probably would have to increase down payments, and credit standards would tighten further, the bank said.
Wells Fargo said principal forgiveness "is not an across-the-board solution" and "needs to be used in a very careful manner." Bank of America said that it supports principal reductions for some customers whose debts are high in relation to their home values and who face financial hardships but that "solutions must balance the interests of the customer and the (mortgage) investor."
http://online.wsj.com/article/SB10001424052702304506904575180320655553224.html?m od=rss_com_mostcommentart
Some big U.S. banks are pushing back against the idea that they should slash mortgage balances for millions of troubled borrowers.
Barney Frank, a Massachusetts Democrat, argued that "to save homes on a large scale, we must move past temporary modifications in interest rates or terms and focus on permanent principal reductions that result in truly sustainable mortgages."
To write down loans enough to bring those debts down to no more than the home values would cost $700 billion to $900 billion, J.P. Morgan Chase estimated in its testimony. That would include costs of $150 billion to the Federal Housing Administration and government-controlled mortgage investors Fannie Mae and Freddie Mac, the bank said.
J.P. Morgan also said broad-based principal reductions could raise costs for borrowers if mortgage investors demand more interest to compensate for that risk. Borrowers probably would have to increase down payments, and credit standards would tighten further, the bank said.
Wells Fargo said principal forgiveness "is not an across-the-board solution" and "needs to be used in a very careful manner." Bank of America said that it supports principal reductions for some customers whose debts are high in relation to their home values and who face financial hardships but that "solutions must balance the interests of the customer and the (mortgage) investor."
http://online.wsj.com/article/SB10001424052702304506904575180320655553224.html?m od=rss_com_mostcommentart