Tag Archives: finance

What should a loan modification look like?

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I just wrote this long comment on Jillayne’s post, and decided it needed to be a post of its own.  This loan mod returns the risk premium that was not effective at controlling risk.  It didn’t work…give it back. It also makes the lender partly responsible for approving short term income on a long term basis.  It does not involve ANY loss to the lender below the face amount of the notes, and gives them some interest, and saves the homestead.  I think it includes all aspects of consideration for a loan mod, but finding staff competent to come up with loan mods in a short period of time, is not realistic.

What we do know is that the higher risk premium rates, did not cover the risk.

Let’s take an example and see how it plays out, and propose a loan mod.

Family qualified for their current home based on $80,000 a year. $60,000 was salary and $20,000 was two years of consistent bonus or overtime. That was considered conservative lending guidelines “two years of proven history on bonus or overtime

IndyMac Leaves the Mortgage Arena

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This announcement from IndyMac came via a press release today:

“…effective July 7, 2008, that we will no longer accept any new loan submissions or rate locks in our retail and wholesale forward mortgage lending channels, except for our servicing retention channel. We plan to honor all of our existing rate-locked loans and will continue to fund these loans in the coming weeks. While the managers and employees in these units have worked incredibly hard, these units are not currently profitable due to the continuing erosion of the housing and mortgage markets.”

IndyMac is planning on retaining the FHA portion of their reverse mortgage division, Financial Freedom.

This also means more people will be displaced from the mortgage industry.

“Unfortunately, the above actions will necessitate the reduction in our present workforce from approximately 7,200 to roughly 3,400 or so over the next couple of months…”

The press release mentions a couple locations where employees will be retained…no word or mention of the Bellevue office.

IndyMac had a lot of unique products and were no stranger to the subprime and alt-a markets.   They had their own automated underwriting system, eMits, that provided “risk based” decisions and pricing.    They are reported as being the seventh largest savings and loan in the nation with both retail and wholesale operations.