WE’RE HEARING that an Oregon pilot program might be the model the Treasury Department has been looking for to refinance borrowers who are trapped in underwater private-label loans that Bear Stearns and other issuers securitized before the subprime meltdown.
Treasury recently approved an Oregon pilot program that will use HAMP funds and funds from the
The idea is based on a proposal by Sen. Jeff Merkley, D-Ore., who has been urging the Senate to pass legislation to provide relief for struggling homeowners—but without success.
Treasury Department officials have also been frustrated in their attempts to fashion refinancing programs for loans that are pooled into private-label securities.
It is very difficult to intervene in PLS when it comes to modifying the loans and the trustees of these securities have to be sure that any changes don’t jeopardize the tax status of the REMIC securities.
Working around those obstacles is very complex. But the Oregon pilot program might be the key for opening the door for refinancing those borrowers at a lower rate.
If it works, Treasury has the funds to back a larger program. The department has obligated $29.9 billion to the
Treasury is also backing a Nevada program with $100 million that will allow a newly formed nonprofit agency to buy delinquent and severely underwater mortgages. The borrower will not only benefit from a lower rate, but also from a principal reduction.
The first loans to be refinanced under the Nevada program may be FHA-insured loans.
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Mark Fogarty is editorial director of the SourceMedia Mortgage Group and has been commenting on the mortgage market since 1984. Brian Collins is the group’s senior editor and D.C. bureau chief. He has worked the mortgage beat since 1988.