Mortgage Foreclosure & Refinance Resource

The mortgage meltdown continues this week with JPMorgan buying Bear Stearns (BSC) for a 98% discount, about $236 million (next to nothing). In fact, the Bear Stearns building on Madison Avenue itself is worth more than the entire buyout, valuated at about $1 billion dollars.

What does this mean for home owners  who are facing foreclosure unable to pay their mortgages? Effectively the government has began bailing out lenders and banks who may be more willing to modify your mortgage because they are now playing with government’s money instead of their own.

Last night the wires ran the story as… WSJ FED WATCHER GREG IP: THE FEDERAL RESERVE’S DECISION TO INVOKE A DEPRESSION-ERA LAW SO THAT IT COULD LEND TO BEAR STEARNS SHOWS HOW SERIOUSLY IT BELIEVES THE FINANCIAL SYSTEM IS AT RISK
- “The Fed has two principal tools for lending money to market participants. It lends to its 20 “primary dealers,” including Bear Stearns, every day for up to 28 days in return for top-quality collateral such as Treasurys. But this doesn’t enable it to lend any single firm much money. It can lend unlimited sums through its discount window, but only to banks. It has, since 1932, had the authority to lend to nonbanks, but has been reluctant to use it. To underline the gravity of its use, at least five of the Fed’s seven governors must ordinarily vote in its favor. It was last used to make loans during the Depression. The Fed invoked the clause in 1970 to lend to companies cut off from the commercial paper market by the failure of the Penn Central railroad, but did not end up lending any money.”