Arizona Real Estate Notebook

Wall Street Journal.

… an investment fund managed by veteran mortgage-bond trader Lewis Ranieri, acquired the loan at a deep discount and renegotiated the terms with the Reynolds. The balance due was cut to $243,182 from $421,731, and the interest rate was lowered. That reduced the monthly payment to $1,573 from $3,464, allowing the family to stay in their home despite a drop in Mr. Reynolds’ income as a real-estate agent. “It was a miracle,” says Ms. Reynolds.

51% of Arizona Mortgages Under Water

Hmmm. In the comments of another post, Peter Fork pointed out that about 50% of Arizona mortgage holders are underwater. My ballpark guess is that at the current rate that the percentage is falling, it would take at least 5 years to get the percentage of underwater mortgages under 10%.

This article from the Wall Street Journal may point out a quicker way for Arizona overall to reduce its mortgage debt – have Fannie and Freddie sell off a lot of their mortgages. (BTW, did the Fannie and Freddie investors ever lose any money or just the stock holders?) After paying the current market rate for these mortgages (which means paying a lot less than the face value), the new owners of the mortgages could renegotiate with homeowners, foreclose or whatever they want to the delinquent loans they bought from Fannie and Freddie, and still make a buck.

Speed Up American Deleveraging

That would certainly speed up the “deleveraging” of America and bring the next recovery closer but the debt reduction would be politically controversial and Fannie and Freddie are political animals. There would be fairness issues as well.

Kick Back More Fraudulent Mortages

An in-between measure would be for Fannie and Freddie to reinforce their already increasing efforts to force banks to buyback mortgages the banks misrepresented when they originally sold them to Fannie and Freddie.

Delay and Pray

But, of course, selling the bad loans would start to exactly quantify the losses at Fannie and Freddie. The goal of all financial institutions, including Fannie and Freddie, seems to be to “extend and pretend.”