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February 7th, 2009

“Mo Mod” to be unveiled Monday

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Full details aren’t available, but if this NY Post article has it right, it looks like a cramdown program of massive proportions:

In a nod to Main Street over Wall Street, sources familiar with the plan say Treasury Secretary Tim Geithner plans to allocate almost half of the remaining $350 billion in funds from the Trouble Asset Relief Program to the so-called “Mo Mod,” or mortgage modification, platform.

“Mo Mod” is an algorithmic mortgage processing program that can rewrite up to 500,000 loans a month, and will be a major part of Treasury’s plan to help repair tattered bank balance sheets.

The 21-day “Mo Mod” program works by structuring a new mortgage that more accurately reflects a home’s worth so that a troubled borrower no longer owes more on their home than the property is worth.

The process then enables a lender to pool these new mortgages together into securities that reflect more accurately a home’s value, which makes them less risky for investors.

The key phrase — “more accurately reflects a home’s worth” — is an indicator that the loan’s principal balance will be reduced. This will have the effect of lowering the monthly payment, so that — theoretically — the borrower won’t default, will continue to make payments, and stay in his home.

We look forward to hearing the details. It’s bound to be an interesting plan.

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2 Responses to ““Mo Mod” to be unveiled Monday”

  1. Kevin Says: February 8th, 2009 at 3:53 pm

    I checked out the Mo Mod platform, it provides a certified appraisal to determine value, this is not going to be a writedown, but allow the banks to modify rate and term correctly with knowing the real value..not a computer value that has no clue what your home is worth! It appears that it also has post valuation of the asset and that makes perfect sense. I would love to hear more about the program, this is a good start to correct housing prices.

  2. Tim Manni Says: February 17th, 2009 at 10:46 am

    This also speaks to issue that officials have known, or at least know now that home prices were previously inflated.

    We can enact strategies till we’re blue in the face, we need to find the core issues. Loan mods aren’t working.

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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