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: The Law of Second Chances

The Organization for Economic Cooperation and Development says the bleeding has nearly stopped!

By R. Grace Rodriguez, Esq.

According to the Organization for Economic Cooperation and Development we are in the deepest global recession in over sixty years. However, Secretary General Angel Gurria stated at a news conference this morning that the global economy is showing a slight improvement despite predictions that the US Economy will continue to shrink another 2.8 percent this year.

Jorgen Elmeskov acting economics department head stated "A really disastrous outcome has become more of a remote risk." Gurria further stated that the recovery "is likely to be both weak and fragile for some time." Recovery will remain dependent upon banks removing uncertainty of its balance sheets.

Let's translate what this means for my average client. It means that banks want to get the risky loans off their books. There are only so many ways a bank can do this.

1. Sell off the mortgage to another bank. Problem is not a lot of banks are buying risky mortgages. There are a few agressive investors who are purchasing some of these mortgages with no other intention but to foreclose on the borrowers if they cannot make good on their payments and arrearages. I expect to see more and more investors come to the table to take every advantage they can over borrowers who are in trouble.

2. Banks can modify the loans. However, as I have previously explained many of the banks are resistant to loan modification efforts because they risk investor lawsuits if the modifications are given without investor permission. Unfortunately many of the investors involved with these mortgages are large securitized loan packages involving many parties. Trying to get these big investors to agree on a modification is like trying to herd feral cats! Good luck.

3. FORECLOSURE FORECLOSURE FORECLOSURE: You have already read my thoughts on why the banks favor foreclosures. This cleans the books of the bad loans. Gives a new bank to give a loan that makes sense for the lower value of the property.

This is exciting news if you are trying to clean up your credit to get ready to buy an affordable home in this market.

The GOOD NEWS is that lenders are now offering trial period forebearances to sort out who is seriously able to make their mortgage payments. However this does not come without substantial risk given the language contained in these forebearance agreements in which the lenders are having borrowers admit that they are fully liable for their own loans, and that they have no bankruptcy options ever and they waive any notice of any foreclosure sale in the future. PLEASE DO NOT SIGN THESE AGREEMENTS. Have a competent attorney review them before you sign.

Thats all for now
Have a great week!

R. Grace Rodriguez, Esq.
(818) 734-7223

Full post as published by The Law of Second Chances on June 24, 2009 (boomark / email).