Simple Market based plan suggested for Complicated Foreclosure Problem

The Obama government battling to ensure protection to foreclosure victims is not aware that there is a simple market based plan to combat this complicated problem. In 2009 White House was given a suggestion on modifying mortgages through the web that would erase many of the hurdles the government is facing to enforce .

The new plan that is an amalgam of LendingTree and dBay known as Mortgage Crisis Solution Program is basically set up on the lines of online marketing. The troubled mortgages are linked to the three involved parties – the borrowers, the lenders and the investors.

One of the developers of the plan is Ira Hecht, an attorney from New York. Hecth, speaking at an interview said that the plan would allow the borrowers to speedily and anonymously apply for a modification of the loan; the reply would come through within minutes.

The banks, servicers and other holders of mortgages enter their data on the distressed loans on the website.

The borrowers with the help of bonafide attorneys enter their information relating to the loan into the site and “bid” the monthly payment amount they are willing to make.

The computer then automatically links the borrowers with the holders of the mortgagees who are willing to meet their suggested terms. The relevant contact information would be sent to both parties via e-mail.

The institutional investors then enter in by bidding on those renegotiated loans they are interested in. The winners do not buy the loans but are alternatively given a security called a home-certificate that is insured by the government. The investor now transfers funds for this home-certificate via the Federal Reserve System. Payment for the value of the loan is now made to the holder of the mortgage.

When the deal is closed the homeowners continue with their monthly payments for the mortgage through the website. The system divides these payments and distributes it to the investors, servicers and government insurance fund.

This new system is a cut above HAMP as regards advantages. It provides a stronger monetary incentive for the lenders to agree to loan modification by linking them with private investors who are agreeable to taking toxic loans off their shoulders.

The biggest plus point is the use of private money and not public funds to partly clear the dues of the troubled mortgages. Generally these market drives show more results than leaning on the Feds.

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