Wall Street firms are stepping in to help some homeowners pay off their loans.

• When Wall Street companies purchase loans, they have an advantage over banks and other lenders: because they don’t have to go through as much red tape, it’s often easier for them to reduce monthly payments and interest rates for homeowners.
• These firms buy loans at a reduced price, so even if the homeowners pay a reduced sum, the firm still profits. The loans are also generally worth more if they get paid off than they are if the houses get foreclosed.
• The only problem is that Wall Street is offering these services to a very small fraction of homeowners.

Facts & Figures

• Approximately 90% of the loan reductions offered by Selene, one of these Wall Street companies, includes a reduction in the principal amount owed; less than 2% of the reductions offered by federal banks.
• These firms have only covered an estimated 0.25% of outstanding US home loans.
• Selene reports that 50% of the customers whose loans it buys are able to keep their homes. 20% are able to sell their homes in a short sale without a foreclosure, and the remaining 30% are foreclosed on.

Best Quote

“There are obvious inconsistencies in treatment [of borrowers] depending on who owns and services the loan. It’s the luck of the draw.” –Edward Delgado, Chief Executive, Five Star Institute