Comments on: Lehman’s indefensible mortgage modifications

By: Sechel

Sechel — Fri, 11 Feb 2011 10:42:57 +0000

It’s technically wrong that he had to default to reject the modification. He could have chosen to make the payment based on the adjustable payment and not the fixed rate Aurora was offering. That said any agreement that does not require signed consent is bad law and should be illegal.

By: TFF

TFF — Fri, 11 Feb 2011 02:28:22 +0000

I’m big on signed contracts, especially for deals running tens of thousands of dollars…

A tacit opt-in on a mortgage modification? They don’t have a leg to stand on.

By: wah718

wah718 — Fri, 11 Feb 2011 02:07:52 +0000

First, The Bank’s heart was in the right place. The … Bank’s … Heart. Yes. Of course.

Moving on, I think this article mis-uses the term “teaser rate” – it doesn’t look like WeissMalik had a “teaser” i.e. a rate that was lower than a normal 5/1 ARM rate than would then adjust up to a normal 5/1 ARM rate after a few months – he just had a 5/1 ARM, and his interest rate would start floating after 5 years.

Unlike Option ARMs, Neg-Am mortgages and ARMs with real teaser rates, 5/1 ARMs aren’t that complicated or exotic. It’s pretty obvious that the bank took advantage of the mortgage chaos to keep their income high. If their little gamble on the Fed rate hadn’t worked out, they could have simply sent out another “notification letter” saying that the rate would float again, just keep making your payments if you agree , etc. etc. and on and on.

By: junkcharts

junkcharts — Thu, 10 Feb 2011 22:48:08 +0000

Felix: you’re giving them too little credit. Your argument requires that these banks realize losses back in 2008 in the hopes of reducing future losses. If they are ok with such a strategy, then they wouldn’t have fought so hard against “mark to market”. (There is also possible opportunity cost: if they foreclose, they could potentially find a better buyer.) Also, if this is such a great thing for customers, they would have explained it clearly instead of using marketing trickery.

By: TFF

TFF — Thu, 10 Feb 2011 21:29:37 +0000

Incompetence is more common than fraud, especially since most of the top employees can’t see beyond their next bonus.