In an article on Realty Times, Freddie Mac states that it will buy $20 million of subprime mortgages. The intention is to help to keep the nation's foreclosure rates from escalating, and to keep the subprime crisis from becoming a full-fledged housing recession.
Freddie Mac is not the only borrower that is trying to keep foreclosure rates down. EMC Mortgage Corp is trying to keep their at-risk borrowers from foreclosure as well. Washington Mutual, the largest savings and loan in the US, plans to refinance as much as $2 billion in subprime mortgages.
Obviously, not all is well in the subprime lending sector.
The good news is that the lenders realize that the problem is brewing and they are taking the right kind of action. There is no benefit to either lender or borrower if a borrower goes into foreclosure. The idea of keeping people in their homes works for not only the lenders and the borrowers, but also for the economy. People who go bankrupt don't contribute as much to the economy. It's much better to refinance your mortgage than lose your home.
This shows the right approach. Lenders don't want to own homes; they want to lend money. Borrowers don't want to lose their homes and their credit rating; they want to keep them. And the economy doesn't benefit from a sea of houses coming onto the market and then being sold for less than their value. Hopefully, with some enlightened self-interest at work, we can avoid a deepening of any housing market downturn.
One piece of advice for you, if you are seeing trouble on the horizon with your mortgage: talk to your lender early! The move by lenders to help borrowers bodes well for you, especially if you start the conversation.
Michael Chantrel
