President Signs the Stimulus Package-Conforming Limits Set to Increase Temporarily

Matthew Padilla of the Orange County Register put together
some facts about the new Stimulus Package and it's effect
on the FNMA/FHLMC conforming loan limits.

I have edited some of his research to apply it to how it may
affect the San Diego housing market.

Because it calls for increasing the conforming loan limit, it
now opens up the marketplace to sell loans - which were
previously classified as jumbo loans - to Fannie Mae and
Freddie Mac.

The jumbo loan market has dried up substantially since
around August last year with the available loans being
more expensive. FNMA and FHLMC have been the major
players in buying loans, this will provide needed liquidity
to an under-served portion of today's market.

The new limit is set to be 125% of an area's median home
price, but the law does not saw which median home price
will be use.

It gives the HUD Secretary up to 30 days to post a list of
median prices and conforming limits. A spokesman for HUD,
said prices will be set via counties, unless there's a
compelling reason to do it differently in certain areas.
The bill caps any increase to $729,750.

The new limits should be posted in early March on
www.hud.gov.

Theoretically, consumers can expect to have these changes
available in the next thirty days. But there are steps that
must occur before programs are available.

One of our major lenders has tried to manage everyone's
expectations by outlining the expected procedures.

First, FNMA and FHLMC will be assessing their internal
impacts to determine the delivery approach they will require
of mortgage lenders and investors.

Second, FNMA and FHLMC must communicate their
requirements to mortgage lenders and investors. This would
include maximum loan-to-value ratios, minimum credit scores,
whether refinances will allow for cash-out and any
number of other variables that will be considered in their
risk-assessment model.

Borrowers need to understand that FNMA and FHLMC are
now taking on some of the risks that the private investors
were previously taking. If a new $625,000 conforming loan
were to default, it would represent the equivalent of 1.5 loans
of $417,000 that could have defaulted.

Third, the lenders - once they have seen the loan programs
and parameters that FNMA and FHLMC have stipulated -
must modify their loan programs to meet those requirements
and make them available to consumers.

Those borrowers between $417,000 and up to the new loan
limit should find it cheaper to get a new loan, compared to
today's jumbo rates. We will have to see what rates are
being offered when the changes are implemented and
available to the public.

The changes are temporary, with a time limit imposed of
December 31, 2008. Congress could choose to extend
the time frame, but any consumer looking for whatever
relief may be available would be wise to act sooner, not
later.

This law should allow for more liquidity in the mortgage
market, and when money is more readily available, interest
rates have the opportunity to come down.

Let's hope that FNMA and FHLMC act quickly, that they
are not too restrictive in their risk assessments, and that
the lenders put the programs into place quickly as well.

Then we can offer more solutions to worthy borrowers who
are looking for relief from their current mortgage predicament.

Good News for California if the Proposed Change to the Conforming Loan Limit Passes

Fannie Mae (FNMA) and Freddie Mac (FHLMC) create a
loan limit for loans that they will purchase. It is currently
at $417,000 for a single-family home. This limit is reviewed
annually and is primarily determined by whether prices of
homes have gone up or down during the year.

In light of the disruption in the mortgage market, lawmakers
are looking for ways to stimulate activity and provide
liquidity for lenders.

The proposal is to increase the conforming loan limit to
$625,000 on a single-family home in California. Those of
us in the mortgage profession have often wondered why
Hawaii and Alaska were classified as "high-cost" with
higher conforming loan limits, and California was not.

This may finally be a recognition that California borrowers
need the kind of support that the other high-cost areas
have provided.

If this goes through, there are at least a couple of
significant benefits to homeowners and new home
purchasers.

For those who have an existing loan that is between
$417,000 and $625,000, there may be an opportunity to
refinance their loans. Because their loan originally was
created as a "jumbo" loan (above the $417,000 conforming
limit), they probably paid a higher rate in that market.

With rates dropping and their loan balance now fitting within
the favorable conforming loan limits, a lower interest rate
may be available for these borrowers. Or, it may present
an opportunity for borrowers to disengage from a loan
that had a low initial rate and that would be scheduled for
a recasting of the interest rate and, most likely, higher
payments.

Another reason that it may benefit new home purchasers
is because it would now create liquidity in the mortgage
market that had evaporated over the last seven months or so.

Investors that had purchased mortgage-backed securities (MBS)
that were comprised of jumbo loans had seen a drop off in the
timely payments and performance of those investments. As
a result, they elected to make investments in other vehicles,
since they no longer had confidence that the quality of these
MBS was as high as they were led to believe.

When investors won't purchase loans, lenders are limited as to
how much money they have to lend. This generates a slowdown
and a logjam with lenders now having to keep loans in their own
lending portfolio instead of moving them through a fluid system.

If FNMA and FHLMC increase their loan limits, there now would
be a mortgage conduit that is more broadly accepted because
there is an element of government backing to these two corpor-
ations. This would revitalize the mortgage market, and by
extension the housing market. It would create the ability for
lower-valued homes to be marketed and allow those homeowners
to move up. This would benefit the entire real estate market.

Let's hope that Congress will be able to get this proposal through,
do it quickly and have an immediate effective date. The stimulus
that this would provide can help offset the effects of the "mortgage
crisis" that has affected the economy to such a large degree.

Lenders Are Getting Innovative - A Couple Of New Programs

As a mortgage broker, we are able to get approved with many
different lenders to represent their product lines to our clients.

With few exceptions, we can place loans with all the major
lenders that have an "office on the corner". Wells Fargo,
Chase, Citimortgage, Washington Mutual and Countrywide
are among those large companies.

There are also many lenders that do not have a retail
presence with origination offices locally and create loans
via the broker network. They make their lending programs
available to us, we do the work to process the loan paper-
work and upon their approval, the fund the loan to allow
for the closing.

When you apply with one of the large lenders directly,
you will be faced with the fact that you are limited to the
loan programs that they offer. In their effort to gain your
business, you will need to adapt to their product line,
whether that is the best loan program for you or not.
They represent their LOAN PROGRAMS to you.

We, as brokers, on the other hand, have access to all of
their programs as well as the specialized programs that
other lenders and mortgage companies develop to meet
their clients needs.

I work to understand your goals, your needs, your risk
tolerance, your time horizons and find the best match of
mortgage product from all the lenders that we represent.
We represent YOU to the marketplace.

Here are a couple of new programs designed to provide
benefit to segments of the borrowing public:

A. A 40-year loan that allows for interest only payments
for the first 15 years.

This is a fixed interest rate loan for the first 15 years. At
that point it adjusts and then is amortized over the next
25 years.

This loan is perfect for the borrower that wants long-term
stability with the interest rate that they are paying, but
also wants the flexibility of paying a minimum payment
of just the interest each month.

There have been so many loan programs that only offered
interest only payments with the interest rates being fixed
for the first 3, 5, 7 or 10 years. If you have been following
some of the difficulties that borrowers have been experiencing
lately, you know that a number of those borrowers are facing
new payment terms once they are reaching the end of the
3 or 5 year introductory periods.

This new loan eliminates the possibility of that short-term
payment shock and works well for borrowers that may want
to work toward owning their home free and clear some day.

B. A first trust deed line of credit that is designed for
borrowers that are big income earners, and who spend less
than they earn.

The concept behind this loan is to allow the borrower to
use their income more effectively in reducing their mortgage
and to have compounding work in their favor.

Let me go through an example to illustrate how it works.

Let's say the borrower obtains a $500,000 loan to purchase
their home. They bring home $10,000 per month and have
routine expenses of $7,000 per month including their
mortgage payment of $3,500, let's say.

Traditionally, they would deposit their checks into their
checking account. They would pay their mortgage payment
of $3,500 and through the remainder of the month pay the
other bills of an additional $3,500. They would have $3,000
remaining to put into savings, investments, or to pay down
on their mortgage loan.

With this new mortgage plan, the $500,000 loan would be a
line of credit. At the beginning of the month, they would
deposit the entire $10,000 against the line of credit, paying
the interest due and all of the remainder would be applied
to the principal. Through the course of the month, they
would use the ATM privilege, the online banking feature, or
the checks supplied for the line of credit to pay their bills.

By paying everything against the line of credit at the
beginning of the month, they are reducing the principal
balance so that the interest accrues on the smaller amount.
Where they would normally be leaving $6,500 in their
checking account, earning zero or little interest, to pay
their bills, now they are drawing the amounts that they need
just when they need it.

That $6,500 is "earning" interest by the fact that it is not
accruing an interest debt during that time. The combination
of reducing the principal balance significantly and only having
their interest debt accrue for a limited amount of time works
heavily in the borrower's favor over the term of the loan.

This plan allows for savings of tens of thousands of dollars in
interest charges over the life of the loan.

It requires the borrower to think in terms of actual savings and
sound financial planning principles. Too many borrowers are
so focused on the interest rate that they fail to consider alter-
natives that could provide them substantial benefits with these
kind of creative solutions.


Please remember that I have access to many distinctive loan
programs that are not available to the large lenders, but are
valuable resources to meet your needs.

As always, please get in touch with me to discuss the unique
qualities of your situation so we can arrive at a suitable solution
for you.

Recent Changes in the Mortgage Industry-Some Things You Should Know

As the shake-out continued through the end of 2007,
more changes are rippling through the mortgage business
that will affect costs of getting a mortgage, availability
of programs, and qualifying standards.

**Recently, Fannie Mae (FNMA) and Freddie Mac
(FHLMC) announced that they were imposing a new fee
that would add .25% in costs to each loan that they
purchased from lenders. This was a one-time fee at
closing, not an increase to the interest rate.

FNMA and FHLMC purchase loans up to $417,000,
commonly called the conforming limit because those
loans are designed to conform to the lending guidelines
of those two agencies.

As you might expect, the .25% fee increase will be
passed through from the lenders to the quotes that
borrowers receive for the creation of their new loans,
and the cost will ultimately be borne by the consumer.

The fee increase was imposed as a way for FNMA and
FHLMC to recover some losses that they have incurred
through the bad performance of loans in their portfolios.

**A major player in the creation of stated income loans,
Washington Mutual, recently sent out an underwriting
update stating that they were imposing new guidelines
for the creation of those loans.

Specifically, they are requiring a credit score of at least
720, and they are limiting the maximum loan to be no
higher than 50% of the value of the property.

Not all lenders have adopted this same policy, but it
gives us an indication as to how far these loans have
fallen from favor.

When the pendulum had swung so far to the side of
liberal underwriting, stated income loans were available
all the way up to 100% of the property value. There is
a higher risk to the lender when they trust the borrower
to fairly represent their income instead of asking for
proof. But the interest rates and fees were supposed
to reflect their being compensated for the higher risk.

Beyond the fact that the lenders were creating these
loans is the reality that there was a huge appetite in
the capital markets to purchase these loans. There
was a lot of excess liquidity in the marketplace, those
funds were seeking what was thought to be safe
investments with good rates of return, and that is
what fueled what came to be the mortgage crisis.

The standards that served the mortgage business and
the borrowers well for many years was allowed to
erode and the investors and lenders did not choose
to adhere to the old standards because the money
needed to get out to go to work.

But with the new announcement we can see that the
investor appetite has dried up and the lenders are
all pulling back to various degrees to minimize the
risk.

**Second loans and lines of credit became very popular
over the last few years. Instead of borrowers getting
one loan which may have required private mortgage
insurance (PMI), it was less expensive for the borrower
to couple a first and second loan to meet their goals.

Home equity lines of credit (HELOCs) were heavily
promoted by many lenders to induce borrowers to
tap into the equity of their homes and free it up to
spend.

It was not uncommon for any lender offering second
loans and HELOCs to place their loan behind almost
any other lender's first loan. They based their
decision on the value of the property, they type of
loan that there loan would go behind, and the credit-
worthiness of the borrower.

As we discussed above, where these loans were
originally offered with prudent lending standards, over
time the standards were liberalized and the lenders
were accepting bigger risks.

The second loans were the most vulnerable in the
whole scheme of things, because that loan was the
one that was extending credit closest to the value
of the property. If property values declined (which
they did), or if borrowers could not make the payments
(which some could not), the second loan was getting
squeezed in the transaction and would suffer losses
before the first loan would.

The recent changes that many lenders have announced
is that many have pulled out of the second loan market,
and the ones that remain only want to create their
second loan behind their own first loan. To a large degree,
no more of getting a second loan from lender A when the
first loan is with lender B.

There are exceptions, but they are becoming fewer.

Just another sign that the lenders and investors have
pulled back from their more extreme positions and have
probably over-reacted while they try to determine what
defines acceptable risk in this new market.

As always, get in touch with me to talk over your situation.
If you need a stated income loan or a new second loan,
we still have choices - they are just not as plentiful or as
liberal as they once were.

The Option ARM Loan - Situations When it is Recommended

Last issue, I went through the mechanics of how the
Option ARM loan worked. The fact that it allows for low
introductory interest rates and payments creates the
possibility that the borrower may defer interest and owe
more later than they originally borrowed.

When these loans were originally offered, the lenders
would limit them to no higher than 75%-80% of the
value of the property. The idea, of course, was that if
the borrower made payments in a manner that let the
deferred interest accrue, that the loan would never
"grow" to be higher than the value of the property.

Over the past several years, and prior to the pullbacks
created by the mortgage turmoil about five months ago,
the lenders got more aggressive and expanded their
underwriting guidelines to accept more risk.

It was not uncommon for the lenders to offer these loans
up to 90% of value, or to couple the first loan up to 80%
with a second loan of 20%, allowing the borrower to
finance 100% of the value of the property.

Any prudent person could see that if property values
did not continue to climb, that this type of financing
package would create problems. It would not take
much for the loan balances to be higher than the value
of the property, and when that happens the willingness
of the borrower to continue making payments wanes.

So, when property values stopped increasing, and in fact
started to decline, the riskiness inherent in these financing
packages was finally exposed.

The headlines focused on the sub-prime loans, those that
were made to borrowers with low credit scores, but still
allowed for high loan balances in relation to the value of
the property.

But the more extreme Option ARM packages were also
destined to create problems for the lenders.

And now Option ARM loans are painted with the brush
that they are "predatory" or put borrowers in a position
that the lenders knew they couldn't sustain. As the
lenders revert back to more prudent lending standards,
there is a place for borrowers to consider this financing
tool as part of their options.

There is a place for this loan for both short-term and
long-term strategies, depending on the goal of the
borrower.

It is an effective tool for investors, who are primarily
concerned about cash flow from the property, especially
amid the uncertainty of tenant turnover, unexpected
expenses and prolonged vacancies. The ability for
an owner to begin with low payments and know
exactly how much they will increase each year is
very valuable in these situations. Of course, the
owner must have sufficient equity in their property so
that as they make the decision to make the minimum
payment and have their loan balance increase, it all
fits into their plan for the property.

It is also a loan that may work for seniors, who are
equity rich, but cash-strapped. They can take out
the loan, have very low payments and by making
the minimum payments, they can borrow from the
equity in their home on a monthly basis. This
plan also gives them some security of a nest-egg
which can be used as a sinking fund to supplement
their income to make the payments.

For those that have a short-term strategy, they
can use the loan to keep monthly expenses low,
knowing that they will never be "hurt" by loan balance
increases for the time that they will own the property.

And, there are times that a borrower wants to buy
their new home before having their existing loan
completely sold. They need a substantial amount
of the equity from their home in order to provide the
down payment for the new home. The Option ARM
can be a way to take cash out of the home, keep
their payments as low as possible, and close
escrow on the new home.

As you can see, the suitable use of this mortgage
is not a "one size fits all" approach. Those mortgage
lenders that pushed this to every borrower regardless
of individual circumstances were irresponsible and
not keeping their clients best interests in mind.

The media reporting on the mortgage difficulties that
we are sorting out right now do not understand the
nuances of the mortgage business. It is important
that when you want to survey your mortgage options
that you meet with a professional who can help you
find the right mortgage product to meet your needs.

The Option ARM Loan - A Useful Tool That Has Been Abused

Included in all the news about the mortgage crisis are stories
of borrowers who have been taken advantage of by being
placed in inappropriate loan products. Perhaps the program
that is most misunderstood, and prone to abuse is the one
known as the Option ARM (for adjustable rate mortgage).

This loan is also known as a 4-pay ARM, or a negative
amortization ARM, or a deferred interest option ARM,
and it is distinct in the marketplace for using non-traditional
features to help clients in certain circumstances.

When the use of this mortgage became more widespread,
when the underwriting guidelines of the lenders became
less strict, and when the sale of this product was offered
to borrowers who were either led astray, or did not
understand what they were getting, the seeds of future
problems were planted.

When the real estate values began to take a downturn,
and borrowers had used the Option ARM to finance their
homes with very little down payment, these problems
began to bloom as part of the garden of the mortgage
crisis that we are working our way through now.

Let's go over the major features of this loan and how it
is different so that you have a thorough understanding
of how it works.

The traditional thirty year mortgage creates payments
that are split between the interest owing on the loan
and some contribution to the principal balance, decreasing
the loan balance over time. This calculation of equal
payments to retire the loan over the term of the loan is
known as amortization.

The Option ARM allows the minimum payment to be created
using a low, introductory interest rate. After the first month,
this minimum payment no longer has any direct association
with the interest rate calculation on the loan for the next five
years.

So, the first thing you need to understand is that the minimum
payments and the interest rate are operating under two entirely
different calculations, and that they are no longer tied directly
together.

The minimum payments will continue with a specified increase
on an annual basis, usually 7.5% of the original payment. For
example, if the first year payment was $1,000 per month, the
minimum payment in the second year will be $1,075, the third
year $1,156 per month, the fourth year $1,242 and the fifth
year $1,335 per month. At the end of each five years, there
is a provision for a reset of the payments, which I will discuss
later.

The interest rate begins with the below-market, introductory rate
and after the first month the interest rate will be determined
by a combination of an independent index value derived from
the financial markets and a margin determined by the lender
(you can think of that as the lender's profit margin). So,
every month the loan will probably have at least a slightly
different interest rate that will determine how much interest
is owed for that month.

As an example, when these loans were most aggressively
marketed, the introductory rate was 1.0%. Many lenders
used an index known as the Monthly Treasury Average index.
This was derived from data from the Federal Government that
the lender had no control over, but was accepted as a reasonable
measure to determine whether rates were higher or lower.
It averaged the last 12 months treasury figures to determine
the index value. Next month it would include the newest figure
and drop the oldest one, so it would still average the most recent
12 months of data. Today's 12 Month Treasury Average figure is
4.69%.

The lender offered their loans using this index an adding a margin.
A common margin was say, 2.5%.

So, the borrower received a 1.0% interest rate for the first month.
In month two, the rate is no longer 1.0%, but is now calculated
based on index plus margin: 4.69% + 2.5% = 7.19%.

Let's bring all of this together. A loan amount of approximately
$311,000 at 1.0% gives us an amortized payment of $1,000
approximately. This means in the first month, the borrower is
actually paying $259 in interest, and $741 in principal. (So
we don't get bogged down in precise numbers, let's act as
if the loan remains at $311,000 as we work through the example).

In month two, the introductory rate is gone, and the new interest
rate is now 7.19%. The borrower is still allowed to make his
minimum payment of $1,000, but now the interest that is owing
on this loan is $1,863. If the borrower makes the minimum
payment, the unpaid interest of $863 will be added to the
principal balance owing meaning that he would now owe more
than he originally borrowed.

If interest rates continue to rise, the difference between the
minimum payment and the interest accruing on the loan will
increase. If interest rates go down, the interest owing will
get closer to the minimum payment.

This is why this loan is called the Option ARM. The borrower
has the option to pay the minimum payment of $1,000, or an
interest only payment of $1,863. In addition, the lender will
offer the borrower two additional choices of a 30-year amortized
payment ($2,104) or a 15-year amortized payment ($2,822).
That is how it gets the name of the 4-pay ARM. And because
the borrower may allow his principal balance to increase due
to the deferred interest, the terms "negative amortization" and
"deferred interest option ARM" are also used to describe this
loan.

The lenders have built in some mechanisms so that the loan
doesn't spiral out of control without an attempt to rein it in.
Every five years, there will be a reset or recasting of the
payment to bring it back to reality. At that time, the unpaid
balance, at the interest rate calculated at that point, and
using the 25 years remaining on the loan will determine the
new minimum monthly payment irrespective of the 7.5%
limitation allowed in the first five years.

Using our example, if the borrower chose to pay the interest
payment and if interest rates remained constant at the 7.19%
(impossible, but useful for this illustration), the new minimum
payment at the end of five years would be $2,236 ($311,000
at 7.19% over 25 years).

If the borrower elected to defer the $863 per month over those
five years, he would owe something over $362,000, creating
a new minimum payment of at least $2,455. (I am ignoring
the effect of compounding on the deferred interest in order
to make this easy and simplify the concept).

You can see that if a borrower was only able to budget $1,000
per month, there will be a tremendous payment shock at the
end of five years if their new payment is now $2,455.

In the next issue, I will go into more discussion of this loan.
It has a suitable purpose for specific situations, and its
overuse helped unknowledgeable borrowers get into deep
financial trouble.

House Passes Bill To Correct Problems That Created Mortgage Melt Down

Because of the problems that contributed to the "sub-prime" crisis
and have a large number of borrowers facing default and foreclosure,
the House passed bill 3915 in an effort to limit abuses and bad
business practices in the mortgage industry.

The proposed legislation would include:

- Require a nationwide licensing system for mortgage
brokers and bank loan officers called the Nationwide
Mortgage Licensing System and Registry.
- Ban lenders from making loans that borrowers don't have
the ability to repay.
- Prohibit lenders from steering homeowners into refinanced
mortgages that don't provide benefit to the borrower, or
into mortgages that are at a higher rate than what the
borrower truly qualifies for.
- Prohibit the financing of points and fees and practices
like balloon payments that increase the risk of foreclosure.

(See MY COMMENTS below regarding these items).

The proposal is designed to prevent a recurrence of granting
loans to prospective borrowers with poor credit at low initial
interest rates that would reset to higher, unaffordable rates and
payments in the near future.

Opponents to the bill are concerned that congressional intrusion
could make things worse. They reasoned that the bill could make
it harder for borrowers to reset at higher interest rates, and make
the default problem deeper and more severe than it needs to be.

"Congress does two things very well: one is nothing and two is
overreact," said Rep. Tom Price, R-Ga. "While we have had a
period here where some credit, some loans, were unwisely given,
but allowing individuals, allowing Americans to purchase homes
and realize their American dream is a good thing."

Republicans voiced displeasure with the concept of lenders being
responsible for knowing whether borrowers can actually pay back
the loan. "This kind of murky language would invite litigation from
every borrower who misses a payment," said Rep. Ed Royce, R-CA.

The bill will go to the Senate, where a similar bill has been stalled
for weeks.

White House comment indicated that they were concerned that
the bill as drafted would unduly restrict access to credit for potential
homebuyers and reduce refinancing opportunities.

MY COMMENTS:

Requiring a nationwide licensing system for mortgage brokers
and bank loan officers may not be the best solution. In California,
we are licensed through the California Department of Real Estate,
and there are many safeguards for consumers to check for
complaints filed against their mortgage broker. It would seem
that each state could do a more effective job of legislating their
mortgage process and protecting their constituents.

Banning lenders from making loans that borrowers don't have the
ability to repay, although well-meaning, is probably impossible
to determine. Whenever I encounter a borrower that does not
meet the published lending guidelines, one of the first questions
that I ask is how they plan to make things work for themselves.
I may find that they have support of family members, roommates,
funds coming from an unseasoned, but still reliable source, or
plans to take on a second job to make it all work. Do they have
the ability to repay? On paper, I probably couldn't prove it to the
lender's satisfaction, but the borrower is confident it will all work
out. They are probably as well qualified as most borrowers who
are one layoff away from a catastrophic financial circumstance.

Prohibiting lenders from steering homeowners into refinanced
mortgages that don't provide benefit to the borrower, or into
mortgages that are at a higher rate than what the borrower
truly qualifies for may be difficult to determine in some cases.
There are many situations where a borrower will accept a higher
interest rate if they can benefit from lower payments. Or will
opt for higher payments to shorten the time they will have the
loan. Are higher interest rates or higher payments working
against the best interests of the borrower? The key would be
that the borrower is making an informed decision and under-
stands the tradeoffs they are making. And I think that is what
the legislation is trying to arrive at: give the borrowers enough
information to understand their benefits, their costs, and their
alternatives. With education, borrowers will make a decision
that serves their interests, and not allow a mortgage person to
make a sale of a loan product that earns themselves a fee, but
hurts the borrower.

Prohibiting the financing of points and fees and practices like
balloon payments that increase the risk of foreclosure is a mixed
bag. I can tell you from experience that if borrowers were not
allowed to finance points and fees, that it would severely limit
their opportunity to refinance. As an example, most borrowers
would prefer to pay an extra $35 per month by financing their
fees than they would to come up with $5000 in closing costs.
Most borrowers do not have $5000 set aside for this purpose
and it would stop them from moving forward. Balloon payments
are not a good thing for a borrower. It is too risky for the borrower
to be put in a position that as of a certain date they will be forced
to pay the loan in full and that there will be acceptable financing
available to help them accomplish that. It is too risky for the
borrower to be put in that position.


It is probably good that Congress is trying to find acceptable
solutions. But, in their interest to protect consumers, they may
be creating unintended problems and obstacles that will keep
the mortgage industry from meeting the needs of borrowers.