In the days following the federal rollout of mortgage principal reduction, housing counselor Joanie LaFemina has had one word: Oy!
About 50 homeowners had contacted her nonprofit, the Community Development Corp. of Long Island, from new clients eager to partake of the new rescue program to old ones asking for principal reductions in their loan modifications.
A little more than a week ago, federal officials said the new initiatives target struggling homeowners who are on time with their mortgage payments but "underwater," which means they owe more than their homes are worth.
They’re encouraging lenders, loan servicers and investors to reduce the principal by at least 10 percent, among other suggestions. The reduced mortgage would be refinanced into a loan insured by the Federal Housing Administration, taking the risk off the books for the financial firms and investors.
"Things are flying fast and furious around here," LaFemina, manager of homeowner services, wrote in an e-mail a few days after the announcement. "You wouldn't believe how many homeowners contacted us now trying to change the terms of their mods . . . Not only our new cases but ancient ones, too. Oy!"
Even before the subprime mortgage market imploded in 2007, the nonprofit was inundated with homeowners' requests for help. On top of that, the Wall Street collapse of 2008 drove prime borrowers and laid-off workers to ask for help.