Bloomberg has a writeup on faith based groups geting involved in foreclosure prevention and loan modification.  It’s generally a news piece discussing how those groups are assisting homeowners with lender negotiation.

Here are the parts I find interesting:

Flores refinanced his mortgage through IndyMac, the Pasadena, California-based company that was seized by the FDIC in July. Two months after his loan was issued near the end of 2005, it adjusted from 1.5 percent interest to about 9 percent, Flores said. That lifted his monthly payment to $3,700 from $1,700 and covered only the interest. He said his home is worth $255,000 today and he owes about $480,000.

Flores obviously got a loan he couldn’t afford.  No discussion of sub-prime or unsophisticated borrower will change the fact the property is way over encumbered and the borrower can only afford the property if the interest rate is reduced to around 4.39 percent, or the principal balance is reduced by roughly $230,000.
So who’s supposed to make up the difference?

Arlonda Pirtle, a real-estate broker in Stockton, California, filed for bankruptcy in June after her business ground to a halt, leaving her unable to pay her mortgage. She now helps other struggling homeowners through a PICO-related group called People and Congregations Together. After burning through her life savings to try and keep her home, she says she’s relieved to see the government and private lenders finally stepping up.

There’s a lot of people who were selling over-priced property and crappy loans to borrowers who are now “assisting” homeowners with their underwater property and unaffordable loans.  No reflection on Ms. Pirtle, whom I’m sure is a nice person, but the exodus from RE and lending into loss mitigation assistance is something I find fairly alarming.  Real estate and lending have always been cyclical, some years are lean and other years can be very rewarding, the professionals are aware of it and plan accordingly.  Others just seem to drift from one industry to another, wherever it seems there might be an opportunity.