Saturday, November 01, 2008

Re-Working Mortgages Ain't Easy

Yah, hey.

FDIC is experimenting with re-working mortgages, using the IndyMac portfolio.

There are a few problems--

Nanci Puerto, a 40-year-old house cleaner in Antioch, ran into such a problem. She refinanced her house for $637,288 from IndyMac in 2006, taking out cash for a down payment on another property. She and her husband, who works in a machine shop, take home a combined $70,000 a year. Each month, she makes the minimum payment on her loan, $2,416. At the same time, she watches the outstanding principal swell since that payment doesn't fully cover the interest costs. Now she owes IndyMac $707,000, on a house that the county tax assessor says is only worth $410,000.

Earning $70K, owes $700K. Looks just dandy.

Lemmeeesee, heah. If you re-work that to a 100-year loan at 3%, and proptaxes don't increase, it's do-able.

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