Rustic23
Thinks s/he gets paid by the post
I was watching the news today, and a commentator related that one of the problems with refinancing is that people were underwater on their homes, and that the 4% mortgage rates that were out there were not available to many.
Seems to me if the banking regulations were changed to allow the banks to refinance these loans for the appraised value of the home at the current rate, and keep the difference between the existing loan and the new loan at the original rate, many would be able to refinance and lower their payments. While this leaves the bank with a secured and unsecured loan, they are really no worse off than they are now. If it prevents a foreclosure than they are better off. The banks would roll the closing cost into the new lower loan, and the borrower would have more money to put back into the economy due to a lower over all house payment.
This seems like a fairly simple solution to part of the mortgage problem, and one that could be put into place by a change to banking regulation rather than legislation. When the market recovers the banks and borrowers would be required to roll the loans back to conventional loans when the market recovers.
Seems to me if the banking regulations were changed to allow the banks to refinance these loans for the appraised value of the home at the current rate, and keep the difference between the existing loan and the new loan at the original rate, many would be able to refinance and lower their payments. While this leaves the bank with a secured and unsecured loan, they are really no worse off than they are now. If it prevents a foreclosure than they are better off. The banks would roll the closing cost into the new lower loan, and the borrower would have more money to put back into the economy due to a lower over all house payment.
This seems like a fairly simple solution to part of the mortgage problem, and one that could be put into place by a change to banking regulation rather than legislation. When the market recovers the banks and borrowers would be required to roll the loans back to conventional loans when the market recovers.