Wednesday, August 3, 2011

What about us? Responsible homeowners left out in the cold

I this might the leading edge of more strategic defaults.  If the bank won't refi the upside borrower, then the borrower just might walk away from their house.
Consider it yet another cruel irony of the housing bust: While hundreds of thousands of mortgage borrowers have been able to squat in their homes without making a single mortgage payment in months or even years, many responsible homeowners who have good credit and consistently meet their monthly obligations haven't been able to refinance in order to avoid losing their homes.

Many of today's homeowners purchased their homes during a time of easy credit, when mortgage products, like interest-only loans and option adjustable-rate mortgages were issued to the marginally qualified. And many were told that -- if they made their payments faithfully -- they could easily refinance out of these products into affordable fixed-rate loans once the payments started to balloon.

But that day has never come for some borrowers -- no matter how good their payment record or credit score.

Many lenders are refusing to refinance underwater mortgages -- loans that are higher than the value of the home -- because it would mean big losses for them if the borrower defaults, said Mark Zandi, chief economist for Moody's Analytics
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