San Jose In Houston we had an interesting meeting with Larry Litton, Jr., the CEO of Litton Loan Servicing, about the problems everywhere with the subprime market. Litton has been a loud advocate of loan modifications (“mods” in the new world). Tony McElroy, the chair of Texas ACORN and ACORN regional representative, was clear that the reputation of the company was sketchy in Houston and elsewhere, and we were listening carefully to what might really be happening here since Litton was a big servicer on these loans.
They swore that their thinking had been evolving in recent months. The implosion of the subprime market, foreclosures, and credit crunch has forced everyone’s thinking to evolve no doubt.
Nonetheless, Litton had an interesting idea.
We have been demanding a moratorium on foreclosures from subprimes. Frankly, we have not gotten too far with most companies.
Litton is arguing for “automatic mods.” His strategy it seems is sort of a grin and bear it and hope to survive the crisis. Essentially, if Lewis Jenkins, Texas ACORN Housing board member, Toni, and I understood his argument, there would be an automatic extension of the so-called, “teaser” rates on the 2/28’s (two years at low interest and then adjusted upwards!) for another two years to keep the “book” solid.
That position is darned close to a two-year moratorium on foreclosures.
We might just call that hand and see if it’s a bluff or really has cards.
In the immortal words of our ACORN’s general counsel, Steve Bachmann, we can call it a pig, but if it moos, gives milk, and has horns, it might still be a cow.