Home values went through an extended period unprecedented gains 2. Naturally, many people wanted to capitalize. Home builders couldnt build houses fast enough and mortgage companies couldnt sell mortgages fast enough. Banks who would sell the combined loans as Bonds, use the mortgage payments to pay off the bond payments and keep a spread. Bondholders get backed bonds with great interest rates for their investment. Finally, some of the high risk borrowers defaulted on their loans. And home values began to decrease a little bit. All of a sudden, some of the mortgage backed bonds started to default without the underlying cash from the mortgages to pay the interest. So the banks lose money covering some of the bonds, and bondholders lose money on the bonds the banks didnt cover. Now the banks didnt want anymore packaged loans. So then the mortgage companies got stuck with some more of their bad loans. Now they have to sell the foreclosed homes on the bad loans for far less than they did the first time and they start losing big bucks. Not exactly the credit crunch problem, as that is something else. Yes, the loan originator owns the property that is foreclosed on. This is NEVER want a Mortgage lender wants to do, as they are in the business of issuing loans, not selling houses.

Home is foreclosed, and the place needs to be fixed up before putting on the market.

Countrywide forks over the money for this, and tries to sell the property. But, like we have today, there is a massive GLUT of homes on the market, both new and old. This depresses the value of the property they are trying to unload. Now you get a widescale loss like this for a company, and you can see where the problem grows.

Countrywide is a mortgage lender, and they issued out bonds to investors, in order to generate revenue. X, and have not other source of income to increase their loan volume, therefore their revenue stream. These are bonds that are sold to investors. 1000 when the CMO matures.

Homeowner makes their Mortgage payment.

Countrywide takes a portion of the interest payment and the rest is passed on to the Investors. Homeowner to cover costs, and they are passing on Interest Payments received to the investor which increases investing demand. So when everyone starts to default, Countrywide still owes the interest payments to the Investors.

The Investors want to pull out because of missed interest payments. Credit Ratings, and then the house of cards starts to fall as Countrywide has a severly depressed income stream and a debilitating debt oblligation that they MUST pay. Institutional Investors are generally the ones involved in the CMO market. So when they have a lot of money tied into this, and that money doesnt come back to them, it kills their bottom line. This was so massive it actually caused Financial Crisises in China, Canada, Europe and Great Britian. You should have atleast a 640 beacon score but higher is always better. Countrywide is great for this.

If the default was a result of the increase in your mortgage payment and you were current prior to that, check with a local lender that does FHA Secured Loans. This is a new product that came out to help people in your situation. But even filing bankruptcy will only delay the trustee sale, but every day your loan is in default the greater the legal fees become. Also double check with your servicer to see if they now have a workout program or reverse type mortgage. Especially if its Countrywide they have many workout programs now.

Last resort would be to put the house up for sale as a short sale. Your bank will have to agree to this. Be sure to find a realtor who has been through a cycle like this and that is very familiar with short sales and pricing your home right. If a Arm and it has adjusted up, you could qualify for the FHASecure program. If they are not interested in helping you than check out the above program. The FHASecure program will operate under the same safe guidelines as FHAs existing mortgage insurance program. Eligible homeowners will be required to meet strict underwriting guidelines and pay a mortgage insurance premium, which offsets the risk to FHAs insurance fund. The borrower must be delinquent on his mortgage payments after the reset. If there is sufficient equity in the home, FHA will allow missed mortgage payments to be included in the FHA refinance mortgage, if the arrearages arose after the reset.

FHAs maximum LTV ratio and maximum loan limit. FHA refinance mortgage is not enough to pay off the existing first lien, closing costs and arrearages, the lender may execute a second lien at closing to pay the difference. If payments on the second are required, they must be included in qualifying the borrower. If payments are deferred, they must be so for no less than 36 months to not be considered in the qualifying ratios. Borrowers need not yet have missed any mortgage payments to be eligible for this type of subordinate financing. FHA has other refinance programs to help borrowers who are current on their mortgage payments but have high cost mortgages and want to refinance them. For more information on other FHA refinance programs, borrowers should contact their mortgage lender or find an FHA lender in their area by going to the above website.