Black Entertainment Television founder and owner of RLJ holdings, Robert Johnson announced to a group of bankers, housing activists and regulators Monday that he holds the solution to the lingering crisis of home foreclosures.
Johnson believes that the federal government should shell out $1 billion to be used for funding a plan that would allow lenders to have money to pay investors in an event the borrower starts missing payment that would relieve the pressure on investors, and give the lender time to reshape the terms of the falling subprime mortgages.
Johnson believes that in order to prevent crisis brought by foreclosures, the best course to take is fortifying the loan services industry.
Many of the home mortgages did not stick with original lenders, but were bought out by global investors and made into tiny fractions of mortgage backed securities. Then the monthly payments were collected by loan servicers that were contracted by investors.
With $1 billion coming from the federal government, Johnson believes he could collect another $7 billion from the private sector. As part of the plan to end foreclosure properties, he would establish a new Homeowners First Bank to take care of forwarding the money to lenders.
Homeowners First would give 5 percent on government preferred shares, and 75 of the total net earnings would go to retiring those preferred shares.
In his calculation, his plan could modify 200,000 mortgages a year if it were approved. But as of now, he does not see anyone making a way to prevent foreclosures.
A group of large banks and Hope Now Alliance have worked with 1.7 million in the first three quarters of 2008 and are making an effort to abate foreclosures by helping 225,000 borrowers in October.
According to head of the Treasury Department’s Office of the Comptroller of Currency nearly half of the borrowers missed their payments again six months after they modified their loan term, an event that only proves Johnson’s statement that no one is acting to deter foreclosures.
Author Resource:-
Leticia Carvalho has been educated in the finer points of the foreclosures market over 5 years. Read about the following article $1B Budget - Answer to Foreclosure Dilemma by Leticia Carvalho.
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