According to market reports a new stimulus program for mortgages is underway that mirrors the recently closed Cash for Clunker Cars program.
The Cash for Clunker Mortgages program begins today and enables holders of nonperforming mortgages to trade them in for cash.
Holders of nonperforming first mortgages are losing money each month as holding costs accrue and property values deteriorate. In an effort to allow lenders and servicers to focus their efforts on the loans more likely to qualify for the Home Affordable Mortgage Program (HAMP), Cash for Clunker Mortgages will pay competitive prices for nonperforming First Mortgages.
Nonperforming loans, particularly those in bankruptcy or other litigation, demand a disproportionate amount of time and effort to service. Thus, loans eligible for Cash for Clunker Mortgages include charge offs, those secured by low-value homes and those owned by borrowers in bankruptcy or litigation, all of which are high maintenance for the servicing industry.
In an effort to provide prompt dispositions of these assets, preliminary indicative bids will be furnished within 48-hours. Once the preliminary indicative bid is approved by the seller, due diligence will be completed on the mortgages.
Funding typically occurs within 3 to 4 weeks of receiving summary loan data.
Cash for Clunker Mortgages is open to all holders of nonperforming mortgages secured by single family homes and 2 - 4 unit properties anywhere in the United States. Furthermore, both bulk pools and single assets are eligible.
Cash for Clunker Mortgages is administered by American Homeowner Preservation
LLC, of Cincinnati, Ohio. The company is looking to put some private equity money to work and said it was looking to but small and big packages, up to $100 million portfolios.
"So while the story is clearly not a government initiative, I find this concept to be very similar to the Treasury's Legacy Loan program, which got scrapped since none of the banks were going sell at the levels where people were bidding,” explained Jesse Litvak, mortgage traded at Jeffries & Co. “It is probably going to be hard to get size at levels that work for the sellers”