However, in a U.S. Congressional committee hearing, Secretary Henry Paulson of the Treasury Department has announced that the fund would be more beneficial to the nation by investing it in banks and financial institutions than purchasing mortgage loans in danger of foreclosures.

With the approval of President Bush, the Treasury Department would pull out TARP funds off the troubled mortgage loans market.

With this development, John Paulson, a hedge-fund manager who owns Paulson & Co. in New York, plans to start buying loans from mortgages in danger of foreclosures. With $36 billion in assets, Paulson is seeing a big opportunity in this market, where ABX indexes have fallen 35 percent. Other investors are saying that this is perfect timing for Paulson, with the TARP program already pulled out from the market. With Paulson buying in, many investors might join in this bandwagon of purchasing foreclosure properties.

John Paulson have profited last year by purchasing credit instruments against subprime mortgages. These credit default swaps on mortgage assets rise in value when the risk of foreclosures increases, which is more evident with subprime lending. Subprime lending has been a significant factor in the case of several foreclosures in California and other states.

While other fund managers are suffering a bad year in 2008, Paulson’s firm has gained 29 percent, after profiting six-fold from last year. He is expected to gain more with this new venture.

While Democrats have criticized Henry Paulson for delaying efforts in stopping the flow of foreclosures with the way the TARP money is being handled, John Paulson has defended his namesake. Paulson has lauded the efforts put forth by the Treasury Secretary and his willingness to change his views depending on the situation.

Tags: Foreclosure, properties, foreclosures, in, California, mortgage, loans, for, sale, foreclosed, homes, real, estate, property, investment, investing, buy

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Loan modifications require a lot of effort. Though it has few requirements, its guidelines are kind of vague. Also, training bank agents on how to deal with modifications is hard since every case is different from the other. The entire process of loan modifications is time consuming, giving headaches to the mortgage industry.

The up side of the loan modifications for the lenders is that, their records will not show bad debts but show active and paying loans. Since investors prefer banks with less to no pending foreclosures and bad debts, banks make an effort to show profits instead of loan failures on their records to get customers.

Sometimes, the process of loan modifications is prolonged by consumers trying to negotiate on their own since they are not knowledgeable enough about it. Without financial counseling, a loan modification might be useless after a few months, making the homeowner ineligible to loan modification. This makes it better for lenders to negotiate with a professional negotiator because it streamlines business, it gives most of the consumers the best possible loans, plus it makes the entire process easier. Also, what makes it good to deal with professional negotiators is that they are open about the feasibility of the modification of the borrower.

What upsets the entire loan modification process and the industry as well is actually those negotiators who do it themselves and does not understand RESPA, TILA, and banking regulations governing the modifications of home loans.

Consumers facing foreclosures must be careful and diligent as they attempt to negotiate for possible loan modification.

Tags: Foreclosure, properties, homes, home, foreclosures, for, sale, foreclosed, property, investment, real, estate, investing, houses

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