One big problem with the foreclosure mess is that so many mortgages are owned by investors. Which makes coming up with solutions for homeowners behind on their mortgages difficult -- if the holder of a loan tries to modify that loan -- say, by lowering the interest rate -- they are likely to hear from upset investors. This makes solving the foreclosure problem daunting.
But Ocwen, a major loan servicer based in West Palm Beach, Fla., is taking that chance. The company has already revised 16 percent of its 340,000 mortgages, sometimes cutting homeowners' mortgage payments 20 percent to 40 percent, says Barbara Kiviat for Time magazine. She points out that the company isn't helping homeowners stay in their homes out of sense of goodwill or charity -- it turns out that keeping people in their homes (instead of foreclosing) maximizes investors' returns -- investors only get 60 cents on the dollar for a foreclosure, Kiviat says. Making a mortgage more affordable for a homeowner means that he or she is more likely to keep paying that mortgage, she adds.
In addition, the company has been hired by Freddie Mac to run a new program targeted at 5,000 borrowers to help them through the loan modification process, which could involve lowering borrowers' interest rates or extending the terms of their loans, says Renae Merle for the Washington Post.Ron Scherer writes for The Christian Science Monitor that with 5 million to 6 million homeowners either behind on their mortgages or facing foreclosure, more banks are now willing to reduce the principal on troubled loans to make those loans more affordable for homeowners. Hopefully, all this means that more people will be able to avert foreclosure and stay in their homes.