Underwater Loan

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Underwater Loan

A loan in which one owes more than the value of the asset the loan was intended to buy. For example, if one borrows $15,000 to buy a car, but the car depreciates rapidly to a value of only $12,000, the borrower has an underwater loan. See also: Underwater.
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The additional requirements, which apply to this Fannie Mae non-performing loan sale, encourage sustainable modifications that have the potential to give more borrowers the opportunity for home retention by requiring evaluation of borrowers with underwater loans for modifications that may include principal and/or arrearage forgiveness; forbidding walking away from vacant homes; and establishing more specific proprietary loan modification standards.
The goal of the Community Restoration Program is to preserve affordable homeownership and rental opportunities in neighborhoods that continue to have high rates of foreclosure and underwater loans.
He sees Watt as being open to providing relief in certain targeted housing markets where there are still a lot of underwater loans.
A number of localities have publicly considered adopting this plan to condemn underwater loans ("the Plan"), or some variation of it, since the firm first pitched it to counties and municipalities in California's Inland Empire.
Finally, government should confront the real-estate debt crisis head on and take steps to resolve the underwater loans that are burdening the balance sheets of small banks and businesses alike.
Unlike most modifications, those actions erase excess debt and reset home values, solving the problem of underwater loans that are a top cause of defaults.
Deutsche Bank predicts that the number of underwater loans in the New York metro area will jump from its current 11 percent to 77 percent by 2011.
The preliminary ratings reflect the credit enhancement provided by unrated subordinate certificates, a reserve fund, and excess spread; the expected good performance from a high-quality prime pool of loans, of which 88% are for new vehicles; a yield supplement account available to increase the yield on underwater loans with interest rates lower than the combined costs of debt and servicing; and a sound legal structure.
These refinancing programs have lowered the monthly costs on legacy underwater loans and provided borrowers with more sustainable mortgages, which should reduce the risk of future defaults.
Of all the underwater loans of various asset classes in a lender's portfolio, the loan-type which most likely presents the greatest value recovery challenge to a lender is the class "B" regional mall, located in both primary and secondary markets.
It would allow other local governments to join the city to expand the numbers of underwater loans that could be acquired, share strategies and attorneys in litigation, and prepare resolutions of necessity for any eminent-domain action.
The Federal Reserve's strategy allowing banks to restructure underwater loans has slowed the rate of foreclosures to a pace that is not overwhelming the market and, in fact, is frustrating some investors who had hoped for a greater selection of bargain-priced properties.
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