Author : Mark Elkins
In 2008 Private National Mortgage Acceptance Company was started by former executives of Countrywide Financial. This company has been nicknamed Penny Mac. Its focus is troubled loans.
In May of 2009 the company filed a plan to raise $750 million through a public stock offering with the Securities and Exchange Commission. the company's game plan is to buy troubled loans at a deep discount from the nation's banks. They will then contact the people facing foreclosure and offer to modify their loans to make them more affordable.
Their concept is both innovative and interesting.
First they would buy these loans at steep discounts. They would pay as little as 20 cents on the dollar for a loan. That would mean that they would buy a $200,000 loan for as little as $40,000.
They then would contact the borrower on the loan and offer to modify it for them. They could offer to reduce the monthly payment by as much as 50%. They would do this by cutting the principal balance owed or reducing the interest rate.
The borrower will be able to save their home. Penny Mac will make a nice profit on their investment. Of course they will want to minimize their risk of the person falling behind on their payments again because that would reduce the profit they make on these loans.
When the credit markets improve, this company would look at selling mortgages to other lenders.
Their approach is fascinating. By paying as little as 20 cents on the dollar they are minimizing any potential loss. By offering to reduce the monthly payment by as much as 50%, they will be viewed as a savior by most people facing foreclosure because they will be able to make that payment fairly easily.
Look at the good will they are going to create with the person facing foreclosure. Most would have tried to work with their original lender to get a modification and to save their home. Their lender was unresponsive. Now another company, the Private National Mortgage Acceptance Company, calls them and does exactly for them what their first company would not. Most likely they will be inclined to tell everyone they know how great this new company is.
This company's program is just starting. Mortgage companies and financial investors will be monitoring closely to see how successful they are. If they are successful, other companies will follow their model and start to do the same thing.
As more companies start to do similar modifications, the number of foreclosures should drop. This approach as well as the Making Home Affordable Modification Program should go a long way to eliminate the foreclosure crisis in the United States.
If they do succeed, then the question arises why couldn't the original mortgage company have modified the loan in the same way? The original companies are most likely to say that they never could have gotten the investors to accept reducing the principal amount or lowering the mortgage payment the way Penny Mac did. That will not be valid because in the end the original investor stands to lose as much as 80% of their investment when the loan is sold to this new company. That loss is much greater than the return the Private National Mortgage Acceptance Company will get.
As a real estate investor since the 1980's Mark Elkins has seen the devastating impact foreclosure has had on common ordinary people. This has led him to study and gain much knowledge and insight into how to help people in foreclosure to take the offensive, reverse the process, save their home and minimize their losses. Please visit his website, http://www.stopforeclosureanswer.com There is also much more information on the blog at http://www.stopforeclosureanswer.com/stopforeclosure
Article Source: http://EzineArticles.com/?expert=Mark_Elkins.
0 comments:
Post a Comment