President to Bailout All Homeowners?

This is a rush transcript from "Your World," September 6, 2011. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST OF, “YOUR WORLD”: All right, well, get ready for yet another mortgage reset. The president is set to unveil another program to help cash-strapped homeowners.

But my next guest has a suggestion. Why make it for just strapped homeowners?

Real estate whiz and former "Apprentice" star and victor Kendra Todd says, to be fair to everyone, why not rescue everyone?

Kendra, so you are saying, though not a fan of this approach, if you are going to try it, try it for everyone, right?


I think that they have just -- just diluted the whole measure of doing loan modifications with just -- just all sort of counterproductive measures. It is only available if you are in this situation, but not if you are in that situation. And at the end of the day, they have greater than a 50 percent failure rate for permanent loan mods.

And it hasn’t done a darn thing to help get us out of this downslide in the real estate market.

CAVUTO: What would you do then? Let’s say you were able to take advantage of the record-low interest rates. We had the 10-year low under 2 percent today. That’s going to lead to even mortgage rates.

It would be an ideal opportunity for everyone to take advantage of that if they could, if banks would loosen up their requirements for refinancings and the rest. It isn’t that easy, of course. I’m simplifying it. But could that make a big difference?

TODD: Neil, at this late in the game, probably not.

But I have been advocating for this since the beginning of the real estate downturn. If they had taken proactive measures a couple of years ago and actually allowed people to modify not only the principal balance of their loans, but also do an interest rate reduction, then they would have incentivized people to keep them in their homes and we probably could have at least had a reduction on the number of strategic defaults and also kept more homeowners in their permanent residences.

But the fact of the matter is most people end up defaulting on their mortgages anyway. They end up tacking on a bunch of fees. And the terms end up being worse. And really at the end of the day, while it would be in the best interests of the homeowner, it is not the best business decision for the banks, because it costs them more to do a loan modification than it does to foreclose. So that’s what they’re doing.

CAVUTO: Even if they know that they then lose that entirely? That’s the impetus for change that, look, better for you to make an adjustment now, Mr. Banker, than be stuck holding the bag for everything later.

TODD: Yes, but the most successful loan modifications include approximately 34.5 percent principal mortgage reduction.

And so you look at the loss that they are taking right there, and they might as well just foreclose. And, unfortunately, that’s what they are doing. You have got thousands of Americans who are in the middle of a loan modification, only to get that foreclosure notice...

CAVUTO: That’s right, right in the middle of it.

TODD: ... that said, I’m sorry -- right in the middle.

So, unfortunately, I think it is a little too late. But, you know, had they made proactive measures several years ago, I think it would have made a significant difference and kept more people in their homes. But if they are going to do it, they need to do it for everyone.

CAVUTO: Yes. Yes. Well, you are right on both counts. Too little, too late, and not going to happen. Well, that’s three things, isn’t it?

Kendra Todd, thank you. Good seeing you again.

TODD: Absolutely.

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