WKZO AM 590
3/31/2008
Treasury Secretary Henry Paulson proposed a set of sweeping changes on Monday aimed at modernizing the nation’s financial system in what could herald the biggest regulatory overhaul of Wall Street since the Great Depression.
The plan, which would broadly expand the Federal Reserve’s powers, comes as concerns about the housing crisis and its fallout in the financial system continues to fuel calls for change in Washington. The Paulson changes, if enacted, would be largely invisible to consumers but would drastically alter how the financial services industry is regulated.
On the housing front, the plan would allow for the creation of a federal regulator for the mortgage industry, dubbed the Mortgage Origination Commission. The commission would aim to rein in the questionable practices of both lenders and brokers, who are now required to abide by a patchwork of state regulations.
Jay Morris:
They’re going to change the way things happen. They’re coming up with this Mortgage Origination Commission. Now if you’re thinking what does it all mean? I had that question too. Put some context on this speech if you could.
Scott:
The biggest problem we have right now, and I think everybody knows this, is that adjustable rate mortgages are becoming a huge issue with a lot of the consumers that got wrapped into this in 2002, 2003, 2004. They’re trying to find a way to streamline these people that have this type of program. The biggest problem is that a lot of these programs have gone away since they’ve done this. They’re trying to find a way to help these people with this ARMs stay with their current lenders and kind of come up with a streamlined way to get back into a fixed rate mortgage and stay in their homes, which is a number one priority.
Jay Morris
From a federal level is it the best way to do it?
Scott:
It’s not a government-backed thing. There are so many people who still have the ARMs who are going to adjust and they’re getting killed…I’ve talked to people in the 10-11-12 percent range on $150,000, $200,000 mortgages. Obviously, you and I both know that when you go from these really low rates that they had in 2003, and then you add double or triple, it’s a huge increase that you’re not used to and can’t even handle for that matter.
Jay Morris:
So it’s not the federal government getting more involved in the process, it’s really them trying to find ways to get people out of these ARMs and into fixed-rate mortgages.
Scott:
FHA has done their part. They’ve come up with the FHA Secure. If you are behind on your mortgage and it’s strictly due to the ARMs, they’re allowing you to actually refinance under that program. A website you should mention is www.hopenow.com. If you go there, it has all of the lenders who are trying to help with this. One other thing I want to mention is I’ve talked to a couple of clients that they’re actually giving forebearances to, kind of like student loan, only it’s with mortgages. They don’t sell houses..they sell money. They’re trying to keep everybody in their house. Not only that, they’re trying not to lose thousands and thousands of dollars. They’re taking what’s called a forebearance, moving all the money to the end and recalculating it and giving them a fresh start, if you will.
Jay Morris:
So what you’re saying is that if you’re in trouble, or you’re having this difficulty, is this maybe the first time these mortgage folks, the banks, are willing to work around and negotiate?
Scott:
More and more we’re seeing banks willing to work with their clients. I guess the biggest thing to say is don’t bury your head. Don’t ignore the statements. Don’t think this is going to fix itself. You have to take the first step and make these calls to your current lenders. Everybody is trying to help out with this kind of situation. Don’t ignore it. One other thing I want to say is that in Kalamazoo home sales are up. Interest rates are good. It’s a great time to make that phone call.
Jay Morris
So are we on the other side of this? It sounds like we hit this early and we’re coming out the other end whereas nationwide, they’re hitting it now.
Scott:
Ever since late last year they’ve been trying to come up with a solution to the ARMs. The biggest problem that I see what we’re having is they keep taking away the programs. A lot of people got into it because they were self-employed or it was a great rate at the time. So many loans that were done back then, you didn’t need anything. Now the only ones that are available, I have to verify your income, I have to verify that you’re working. Not only that, we’re having value issues.
Jay Morris:
Is it a good time to talk about refinancing?
Scott:
It’s a great time. The prime rate has come down to 5.25. Rates are good.
Jay Morris:
What’s the best way to get a hold of you?
Scott:
The best number is 269-488-9530. They can always visit my blog at www.kalamazoomortgage.com.
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