“Mo Mod” to be unveiled Mondayby Tim Manni
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.