Wachovia Setting a Positive Precedent?
 Wachovia is doing what has hitherto been the unthinkable-they are lowering principal balances on mortgages. Why are they doing it?
1. Wachovia was for a long time only granting three-month deferments which as I explained in a prior article is simply the bank's way of saying they are not sure what they want to do yet. So while the other banks were rushing to offer up hastily structured modifications plans, maybe Wachovia was taking the time to devise something that made more sense.
2. It could be because Wachovia bought World Savings Bank which specialized in Option ARM loans for many years and therefore they will be particularly vulnerable if they don't do something more drastic. This might also explain another enigma - the constant refrain on the part of the banking industry that if they lower principal balances they will incur the wrath of the investors that bought their mortgage pools and that wrath will take the form of litigation. World Savings Bank, however, was a portfolio lender meaning they didn't sell their loans on the secondary market, giving them the freedom to re-write their loans as they choose.
Hopefully this is not an isolated occurrence but rather the harbinger of a promising new trend. This approach needs to be seriously evaluated by other banks because many homeowners are questioning whether they should continue to pay on a mortgage that is twice as high the current market value of the property. Even the slightest economic hardship will make them throw in the towel. In fact, I believe that the only thing keeping many people current is years of indoctrination that our credit score is a measure of our social responsibility.
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LOL - Laughs OnLine
"Next stop, the giant vat of cheese"
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What's The Big Idea?
by Kwame J. Granderson
I firmly believe the Ancient Greek aphorism "Know yourself" was a foresighted reference to your personality behind a wheel. Maybe for the Greeks it was how you handled yourself with the reigns of a chariot in your hands, but I think they could have just as easily been referring to how you merge onto a freeway. You see, you must accept who you are as a driver; be comfortable in your automotive skin; know thy peddle as it were. I say this because there are two ways to merge onto a crowded freeway: (1) the aggressive approach: you use a short burst of acceleration to zip in front of the person trying not to let you in or (2) the passive approach: you wait until someone is willing to let you in. I am not making a value judgment here. Either approach is acceptable. Here is what is not acceptable-to use the passive approach and not thank the person who let you in, thereby deceiving yourself into believing the successful merge was your own doing. It is not the approach that is the issue; it is the pernicious self-deception that will lead you down a dangerous path. Next, you will be convincing yourself that it is ok to wear those jeans with a permanent crease down the middle from when you used to iron them. Who knows what horrors will follow...
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Share If You Care
Our goal with this newsletter is simple: Cover every important topic that might help homeowners and investors make more informed decisions concerning real estate. You can help in two ways:
1) Send us any articles or information you come across that might be of interest to other readers
2) Forward this newsletter to anyone and everyone you know that owns or plans to own real estate!
Sincerely,
Kwame J. Granderson
Equinaire
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