Mortgage Meltdown and Foreclosure Defense: Private Lending Might be a Resource for You

Besides all of the strategies we are collecting for you here, there are some monetary resources you could consider. Things like reverse mortgages are not likely to yield you anything if you are in trouble because you needs lots of equity to get into those. But there are private lenders and peer to peer lending groups that are getting more active. 

Here are some resources you can go to to learn about and perhaps secure a private loan. These resources are equally applicable for those investors who wish to pursue higher returns by lending, peer to peer or in investment pools. Mostly these loans are NOT securitized. 

Description of Zopa and Prosper et al:

USA Today Article:

Peer to Peer Leader Featured on TV:

Peer to Peer Featured on CBS TV:


Business Opportunity:

Mostly small business lending:

Luxury Mortgages:


May 24, 2008


Mortgages Without U.S. Backing Start to Rise

THE private mortgage market in the United States — almost moribund in the wake of the subprime crisis that bankrupted some lenders last year — is showing small signs of revival.

In the first quarter of this year, there were $116 billion in private mortgage loans, loans not issued or insured by the federal government or a government-sponsored entity. That was up from $84 billion in the final quarter of 2007, according to a survey of lenders by Inside Mortgage Finance, a newsletter.

In the wake of the collapse of the private mortgage securitization market in the second half of last year, few banks were willing to make loans that they could not sell, primarily to the government-sponsored enterprises Fannie Mae and Freddie Mac. Those agencies are private companies, but they have a limited right to borrow from the Treasury, and investors generally assume that the federal government will bail them out if they get into serious trouble.

The agencies’ share of the mortgage market rose to a record 75.6 percent in the final quarter of 2007. Add in the 1.3 percent share for Department of Veterans Affairs loans, and the 4.5 percent share for the Federal Housing Administration, and the share of truly private mortgage loans fell to a record low of 18.6 percent.

In the first quarter, the private share recovered to 24.2 percent, meaning that in a country that considers itself the bastion of private enterprise, three of four new home loans had some sort of government-related guarantee.

“There are more banks and other lenders increasing their portfolio lending,” said Guy D. Cecala, the publisher of Inside Mortgage Finance. “At year-end, banks were reluctant to do any portfolio lending.” Portfolio lending refers to an institution’s making a loan and holding on to it, rather than selling it either as a mortgage or as part of a securitization package.

Much of that private lending appears to be in jumbo mortgages, which are too large to be bought by the agencies. The limit had been $417,000, but Congress has raised it temporarily, with differing limits in various areas.

There is still a great reluctance to grant mortgages to subprime borrowers. Mr. Cecala estimated that $10 billion in subprime loans were made in the first quarter, a little less than in the final three months of 2007. In 2005 and 2006, about one in five dollars lent went to subprime borrowers, with a peak volume of $625 billion in 2005.

While there is a little more private lending activity, the private mortgage securitization market continues to shrink. Investors have not yet been reassured that new securitizations will be safer than the disastrous ones from 2006 and early 2007.

A look at the total volume of mortgage loans helps to explain how the mess was created. In 2003, with interest rates at very low levels, a record $3.9 trillion in mortgage loans were made, most of them for refinancing. When interest rates edged up the next year, it seemed reasonable to expect a big falloff, but the decline was only 26 percent.

Mr. Cecala said that the mortgage industry, having greatly expanded to deal with the wave of refinancings, looked for ways to keep lending. The availability of alternative products, allowing larger loans relative to value, or giving borrowers the option to make very low payments for a limited time, grew. That easy credit helped to push home prices up, until they peaked in 2006.

Now, with mortgage defaults rising, Congress is expected to enact housing legislation to permit the F.H.A. to guarantee refinancing loans to homeowners in danger of losing their homes. A Senate committee approved a bill this week to allow such guarantees, but only if the loan amount was reduced to a figure lower than the current value of the home. Such a reduction would cause a loss for the original lender, but that loss might be smaller than it would be with the alternative: the house goes into foreclosure.

Read Floyd Norris’s blog at

4 Responses

  1. First of all, I’d like to point out that I began researching and fighting my “bait n switch” ARM immediately after signing in 2005 to no avail. I began working with NACA in 2007.

    When my 2/28 Libor resets were approaching 10%, clearly beyond my disability & SSI retirement, I looked into HAMP. It looked like I qualified although Ocwen said they would not take my application until delinquent. (although I wasn’t, later they said I would be approved if I withdrew my bk paperwork, which I did only to have them break into my house where I found the NOS nine days before the date!)

    Confirmation from fraudulent loan mod co., that foreclosure would not move forward while in the process, lead to payment to first loan modification (paid four more since then, over 7K), and first missed mortgage payment.

    The next seven months, servicer was mute, and although I get an average of four Ocwen calls / hang ups per day, during that period they remained silent. Note that I called them myself weekly and referred to the ‘loan modification’ that was being negotiated, and Ocwen customer service said nothing either way leading me to believe I was in a safe zone. Not true. After they filed for foreclosure (after seven months), and I paid an attorney to submit the papers again, Ocwen ignored me and my application for HAMP.

    Now that 17 months have elapsed, they call me daily asking why I’m behind on my payments. Had I not believed the HAMP program was real, I could have avoided the ‘default status’ being used against me now.

    The irony is that the ARM loan was a refinance done under threat of foreclosure from Citi* who offered me a 30 day extension (ONLY), provided I was late on a payment. Although I hadn’t missed any payments, I withheld the payment while they PRETENDED they were processing a request for an extention. The kicker is, I was being unlawfully hounded by a collector on an unsecured loan. I could have passed on paying them as my income is exempt but I wanted to do the right thing. (does anyones ears perk up that the agressive collection which included threats to take my home was a company owned by my mortgage company? No? How about if the offer was a result of them threatening to take my house by shouting, “I’m calling your lender?” Also, at that time the following was entered on my credit report where I would put a comment: “….has a home worth X, and a home loan worth X, effectively advertising 205K of equity.)

    They ended up telling me I was in foreclosure as a result of this process that was a complete setup. I rushed to refi away from them and went from the frying pan to the fire. I thought I was dodging a bullet. Instead, my thirty year 6% was now a 2/28 Libor ARM which grew beyond my ability to pay.

    Once more, not behind on payments, I was cajolled into the HAMP program and told, only if you’re late. Once the payment wasn’t made, they had me right where they wanted me, which isn’t a participent in HAMP. My now inflated home value has been increased far beyond where I started.

    I no longer believe anything I am told, illegal or not, and at this point question how ‘DUMB’ my gov reps REALLY are!

    P.S. What is the point of the foreclosure protection act that was recently passed if players like Ocwen receive ‘blanket’ exemtions? More cover to creep on me and take me unaware?

  2. On March 4, 2009 the $75 billion Homeowner Affordability and Stability Plan was passed into law by President Barack Obama. The White House has just released who will qualify and how to go about receiving a Loan Modification through the new plan. Here is what you must know!

    Step 1: Determine if you are Eligible for your share of the $75 billion Bailout?

    1. Do you live in the home?
    2. Is your current loan amount within ($625,500 in high cost areas and for other areas $417,000)
    3. Are your current house payments more than 31% of your gross income?(The Complete Loan modification kits will automatically calculate all financial ratios your lender may want to see)
    4. Are you must be able to prove you have current income?
    5. Do you currently have a job?
    If you answered yes to these five questions there is a good chance you will qualify for a loan modification under the terms in the Homeowner Affordability and Stability Plan.

    Step 2: Apply for a Loan Modification (Order and Instantly Download the Complete Loan Modification Kit)

    You must act quickly; millions of American’s will be trying to get a piece of the bailout! The sooner you act the better your chances are of receiving a loan modification. However, it is important to ensure that you have all your documentation in order so that when you do reach your lender they will be able to process your request quickly.
    So in step 2 first prepare all documentation required by your lender then contact them. The Complete Loan Modification Kit has all document templates, forms and checklists your lender may request. With the Homeowner Affordability and Stability Plan if your loan qualifies there is a good chance that the lender will contact you. Be certain that the person claiming to be your lender truly is! But there is no guarantee your lender will contact you, therefore it is in your best interest to be proactive and contact them.
    It is important to understand that with Obama’s Homeowner Affordability and Stability Plan lenders have a financial incentive, and they love money, to process as many loan modifications as possible. Therefore it is essential that if you want your lender to consider your case a high priority for them, you need to make it easy for them to process your application fast. Nothing will get your case dropped to the bottom of the pile faster than taking up an hr of your lenders time with questions you can learn easily if you read the included Loan Modification Manual. The Complete Loan Modification Kit Course Manual provides a clear overview of the loan modification process.
    One of the largest differences in the loan modification process that the Homeowner Affordability and Stability Plan will have is the fact that to receive a loan modification you do not need to be behind on your mortgage payment. Now if your ARM has been reset to a high rate and you answered yes to the questions in step 1 you can likely get your rate reduced to 4.5% fixed.
    Follow Up! It is especially important now, with so many loan modifications being started that you stay in contact with your lender and ensure your case is being handled effectively.

  3. somethings that have become such a public problem shoud not be kept private

    Neil I sent you an email with 2 attatchments this is the handywork of private lending please note the second set of docs aren’t signed thats because they were NEVER disclosed!

  4. Are private lenders privy to the truth and lending disclosure or any disclosures for that matter that other mortgage company are privy too

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