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article imageOp-Ed: Big US lenders giving help to tens of thousands of mortgagees

By Paul Wallis     Jul 3, 2011 in Business
New York - Sanity at last? After millions of Americans have gone to the wall with their mortgages, two of the biggest lenders in the US are stepping in with loan relief. This a long overdue step in dealing with a real crisis for Main Street.
The New York Times reports an example of this approach:
A Ms. Giosmas owed $300,000 on her home. She wasn’t in default. Chase cut the loan in half. The property was worth “a lot less” than what she owed.
It seems that Chase and Bank of America acquired a lot of loans during the crash called Option ARM loans, which allow for some management options for borrowers.
The New York Times explains:
“…Chase, which declined to comment on its program, got $50 billion in option ARM loans when it bought Washington Mutual in 2008. The lender, which said last fall that it had dealt with 22,000 option ARM loans with an unpaid principal balance of $8 billion, still has $33 billion of them in its portfolio.
Bank of America acquired a portfolio of 550,000 option ARMs from its purchase of Countrywide Financial in 2008. The lender said more than 200,000 had been converted to more stable mortgages.”
Is sanity contagious?
So someone’s learned how to use a calculator, at last, and the idea of not punishing people for paying their mortgages has, finally, sunk in. Ms Giosmas is a good example of rational lending practices. The utterly unnecessary misery inflicted on millions of Americans by arguably the least justifiable, least competent loans management culture in history now has a gravestone to call its own. People were living in their cars as a result of the 2008 atrocity.
Is it possible that some sort of realism may finally penetrate the stunningly thick heads of lenders who’ve let perfectly good customers go to the wall for spurious accountancy reasons? This was never good business. People were sold mortgages they couldn’t afford, and the people paying in good faith got the worst of the deal because these idiot lenders couldn’t even understand basic lending principles, let alone the idea that their customers might be more honest than they were.
The US economy was trashed in a way never before seen, and their homes and towns were beggared- there’s no other word for it- to the extent that even major cities became ghost towns in many areas.
Chase and Bank of America have apparently found a formula for reintroducing reality to a market which has obviously forgotten the basics. The crash also trashed the value of the lending equity very effectively. (What the hell do they teach these guys in business college? How to look good in meetings and have no idea what they’re supposed to be doing?) The new approach may not drive up housing prices, but it’s got a good chance of delivering some actual loan repayment values in a market which has been lost in the sewer for years.
A lot of people and a lot of lenders have lost a fortune thanks to this piddling effort at loan finance. The banks, in particular, should have known a lot better than to allow this massive degradation of property values. Chase and Bank of America are calling a spade a spade.
Sanity doesn’t seem to be in much demand in the financial markets. Like US politics, anything resembling relevance to the needs of the nation or practical options for dealing with domestic crises usually isn’t on the agenda. There’s no evidence that sanity is contagious or even mildly infectious. But it’s a start.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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