Homeowner preservation assistance

We’re the government and we’re here to help! So says the state of Pennsylvania who created a mortgage refinance product deemed REAL, Refinance to an Affordable Loan. The program has been adopted by 67 lenders including Countrywide Financial Corp., Sovereign Bank, GMAC Financial Services and JPMorgan Chase. Borrowers generally must not make more than $120,000, among other conditions. The state will lend up to 100 percent of the mortgage.

Joining the forbearance party was none other than Angelo Mozilo and his ARM’s dealers at Countrywide. According to the Countrywide announcement over 35,000 “homeowners” have received assistance by contacting the mortgage retention center.

In addition to direct outreach, Countrywide’s efforts include working with non-profit and community groups across the country to create grassroots efforts to contact and counsel distressed borrowers, particularly in communities that are experiencing unusually high foreclosures. “There is an unprecedented effort among lenders, investors, community groups and the industry to work together to help homeowners,” said Bailey. “No one benefits from foreclosure, and counseling and intermediary support from these groups can be fundamental to the success of our borrowers.

Of course this press release by Moodys may have something to do with the press releases above:

Lenders did little to help subprime borrowers with adjustable-rate mortgages stay in their homes, even as it became clear many homeowners would struggle to keep up with their payments, a study released on Friday shows.
Moody’s Investors Service said banks eased borrowing terms on just 1 percent of subprime mortgages with interest rates that reset higher in January, April and July. It said that “only recently” have servicers begun to modify more loans to help homeowners avoid foreclosures, “despite much industry dialogue and heavy press attention” on the problem.

My comments: We’ve seen this movie before. During the 1930s numerous state and local governments intervened with forbearance programs which inevitably failed for obvious reasons. This grand experiment will also fail as wages continue to decline, adjusted for inflation while the financial obligations ratio hits an all time high.

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