Gary North

Feb. 14, 2009

As you know, millions of home owners are upside-down in their mortgages. They owe more than their homes are worth.

This is a major factor in the lack of economic recovery. The lenders will not re-negotiate what are clearly bad loans. If an owner is paying his mortgage on time, he gets no cooperation. Only if he is several months in arrears are lenders willing to deal, in order to keep from having to foreclose on the properties.

The situation is so bad that a member of the Board of Governors of the Federal Reserve System gave a speech on this refusal of the lenders to negotiate. You can read it here.

There may be a way out for home owners who know what to do. Hire a lawyer. If a lawyer acts as an intermediary, a lender pays attention.

Even if you have been told by a bank's representative (who makes $10 an hour) that no such negotiation is possible, this may not be true. Hire a lawyer.

The bubble was promoted by unscrupulous brokers who faked data and oversold borrowers. Your lender may have encouraged this. Lenders worry when they see a letter from a lawyer asking for re-negotiation of a loan.

In this market, those who pay on their upside-down mortgages are funding lenders who are willing to re-negotiate with borrowers who are not paying. The squeaky wheel gets the grease.

There is no better way to get squeaky than to hire a lawyer. If you can find one who specializes in such re- negotiations, so much the better.

Tell your lawyer to demand to see a copy of the note: To whom you owe the money. No note? Sliced and diced? Missing in action? You now have extreme leverage. For more information, click here:

At $100+ per hour, don't let the lawyer do this research. You do it, then print out the two articles that look good to you. Ask him to drop them a note on letterhead stationery.

Squeak.

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