Comment on Downey

Don't know who this is or how they know this information (or whether it is accurate), but this comment was posted on the previous DSL post:

Just the tip of the iceberg. The real trouble comes from the MTA loans that don't have modification options because they have been sold.

Downey finally started offering modifications on the COFI loans in their portfolio, but they can't touch the MTA paper. The borrowers that are unable to refinance due to the increase in their loan balances and decrease to their values are facing payment increases of 130-150%. The sad part is some of their prepayment penalties aren't even up yet.

While Downey can begin to mitigate losses on the loans within their portfolio, they do not have the either the power or inclination to mitigate the losses on the loans they have sold. These borrowers are sitting ducks unless something happens to open up mitigation options to displaced borrowers. They know the loan product is defective, and that the underwriting guidelines at best were irresponsible.

What I can't understand is why they are still offering a 1% start rate and why they increased compensation to 3.75%?. Throw in doing away with their approved appraiser list while relaxing appraisal review procedures and I'd almost say they are doing it on purpose. I mean, you gotta think that these guys know how to do basic math and can grasp basic economic concepts.

Is Downey a rat in a trap or are they just a common rat?

The interesting thing about Downey is because of their 110% limit on Neg Am, they get to lead the industry in defaults. However, Countrywide holds the crown for putting equity lines behind their neg am stated product. Brilliant.