"Secret Seconds" On Top of "Piggyback" Mortgages May Trigger Homeowner Foreclosures of $164 Billion!

The Untold Truth: Did Government Regulators Know About Secret Second Mortgages?

NEWPORT BEACH, Calif. -- Professor Rydstrom, Esq. says: "Creative or exotic loans are not the problem per se, nor are they so "exotic". What's exotic is the infusion of what I call "RAhD" (randomly activated hidden debt) by the industry and government sponsored entities (GSEs) such as Fannie Mae and Freddie Mac. Reportedly, uninsured first liens with undisclosed second liens were sold to the GSEs. RAhD took down Enron and the dotcom boom. It can also ruin homeowners. If you're as sick as your secrets, and unknown seconds are the secret, foreclosures will render the economy sick. We must expand the American Dream of homeownership, reduce RAhD with "permanent" tax deductible mortgage insurance, and use what I call: Truly Intelligent Disclosures[TM] ("TID") and contractual Safe Harbor Intelligent Loan Options[TM] ("SHILO")."

Problem. One of five subprime mortgages originated over the last two years will end in foreclosure, nearly double the projected rate from 2002. (CRL 12/2006). With the recent rapid growth of homeownership, lenders created loans such as Piggybacks (etc.) to meet demand. Lender's earned more fees by using first and second lien piggybacks pursuant to GSE guidelines; which allowed the sale of first liens up to 80% of value within limits (without insurance). What's worrisome is the high loan to value and adjustable rate piggyback first liens burdened with super-high revolving variable rate home equity line of credit seconds ("HELOC") (Calhoun, PhD) topped off with abusive prepayment penalties, running naked without mortgage insurance. Although there is proper use for such loans, as loans reset as interest rates rise and property values fall, homeowners will become "locked-in" with no way out. When distressed prepayments are added to foreclosure rates, total "failure rate" for subprime approaches 25 percent. Of subprime loans, African-Americans took 50%, Hispanic 40%. (CRL, Nixon, New York Times, 12/2006)

Solution. We need more risk mitigation devices such as no or low cost mortgage insurance type products that benefit the borrower as well as the bank and the industry. Joseph Thomas and attorney Rydstrom are developing solutions called: Foreclosure Mortgage Insurance[TM] ("FMI"), Default Mortgage Insurance[TM] ("DMI"), and Interim Loan Measures[TM] ("ILM"). Request Report: [e-mail]

Interview, Appearance, or Consulting Contact: Professor Richard I. Rydstrom, Esq., LL.M. Taxation [e-mail] | www.oconnellandrydstrom.com | 949-798-6206