Distressed mortgages in the United States can do municipalities

California Mortgage Resolution Partners encouraged local authorities to buy back bonds tied to bad loans, refinance loans under federal programs, and re-sell bonds to new investors

Initiative consultancy Mortgage Resolution Partners (MRP) are interested two cities of San Bernadino near Los Angeles, reports Los Angeles Times. San Bernadino has been hit by the mortgage crisis - prices fell by 50% or more. "Negotiations with the private sector to restructure loans do not have time for the spread of the epidemic - the member of the municipality of San Bernadino Ed Burke - even with historically low interest rates, many hard to refinance loans because of stricter requirements for borrowers and the difficult situation in the housing market."

MRP suggests that local authorities took advantage of the possibility of alienation from rights holders of mortgage bonds to loans given by the constitution. To help residents of the District, the government must buy credits which exceed the market value of the mortgaged home. Then the loans must be refinanced on federal programs and re-sold to new investors.

MRP initiative applies to non-standard mortgages without government guarantees, the risks of which are entirely private investors. This category includes instruments linked to 532,000 loans, said a senior managing director of Amherst Securities Group Laurie Goodman. Of these, 3,165 credits belongs to the Elk Grove and Sacramento.

We now have 5.4 million borrowers mortgage amount exceeds the value of the house (estimated MRP). Guarantee of Fannie Mae and Freddie Mac have approximately 90% of the mortgage loans in the U.S.. According to Amherst, on the balance of Fannie Mae and Freddie Mac $ 113 billion of non-standard loans. The total market for securitized U.S. mortgages - more than $ 8 trillion.

San Bernadino until decisions are not made, but the initiative has attracted the interest of several cities and districts in the United States, including Chicago, Elk Grove, Berkeley and Suffolk County in New York. True, Chicago Mayor Rahm Emanuel said that the problems in the housing market are too global to try to resolve their efforts of local authorities.

MRP together with local authorities willing to buy loans at 75-85% of the market value of housing. For example, a house worth $ 100,000 would be paid $ 75,000, while the amount of credit for tens of thousands of dollars more. The homeowner will have to apply for refinancing under the federal program loan for $ 97,750. The remaining $ 22,750 - a profit of investors, commissions MRP, legal expenses and reserves of the municipality. MRP promised investors 20-30% of revenue. But if the initiative MRP will be accepted on a national scale, the loss of the bondholders could reach 30% (estimate Moody's).

Association securities industry and financial markets (SIFMA) suggests taking loans originated in the districts, which has a right to dispose of municipal loans from mortgage trusts, with the market for securitized mortgage bonds. The solution must be "a positive impact on the cost of housing, and not exacerbate the fall in prices and reduce the willingness of investors to invest in housing district and its residents," said the representative of SIFMA Tim Cameron.

SIMFA and ASF have received a legal opinion stating that the exclusion of mortgage bonds is unconstitutional, because the benefits of this will be only MRP and private investors. Federal Housing Finance Agency U.S. (FHFA) also support the initiative MRP is not promising.

"We have seen this movie - says Stephen Glyukshtern response regulators, who heads the MRP, - several Wall Street firms and their lobbyists in Washington will fight like hell to destroy the solution that can help ordinary Americans." Investors buying refinanced loans, MRP promises up to 30% of income, and bankers - billions of dollars in fees. MRP itself is going to take $ 4,500 commission on each loan.