Interestingly, while the fraction of loans with CLTV above 80 percent was higher than in the sand states over much of the sample period, the share of underwater loans
(and especially severely underwater loans
with CLTV of greater than 120 percent) peaked at much lower levels.
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
But Stevens thinks there's been "too much agitation over that subject." He sees Watt as being open to providing relief in certain targeted housing markets where there are still a lot of underwater loans
. He mentioned Nevada and possibly Detroit as two possible candidates.
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.
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.