I read with interest of a California based company that is investing funds in to 200 Massachusetts homeowners’ subprime mortgages.   The company, WMD Capital Markets LLC, deserves kudos for taking on these 200 loans, and for slashing interest rates and forgiving thousands of dollars in late charges, legal fees and past-due interest.  The loans, purchased from  Fremont Investment & Loan, are a sign of what can be done if the banking industry shows a little concern beyond business as usual.  Fremont has a reputation of pushing aggressively the subprime loan mortgage.  Another 290 mortgages were sold to Carrington Mortgage Services. Attorney General Martha Coakley had sued Fremont last year, denying its right to foreclose on the 2,200 Massachusetts mortgages it held.

There is a long list of what WMD has promised to do.  They agree to permanently switch borrowers’ interest levels back to the 5 percent to 8 percent that was the original teaser rate for these subprimes.  They will also forgive roughly $7,000 to $10,000 per mortgage of loan-origination charges, late fees, past-due interest and foreclosure-related legal expenses.  And even if the home owner cannot swing the mortgage even after this help, WMD will pay a relocation fee of $10,000 to $25,000, as long as the owner leaves without a fuss.

I have to applaud WMD and Carrington for what they are doing, even if only for a small segment of people in Massachusetts.  It shows us what can be done if the banking industry shows a little compassion for those on Main Street that deserve a bailout, too.  Even though their actions is applaudable, the downside is this - the pact does nothing to address the fact that many subprime borrowers are “under water” - owning homes worth less than their unpaid mortgage balances.  The best advice given?  Take the money and run.  If this is truly the case, then perhaps it can be viewed by some as a win-win situation.  I would have to think that at the very least, people could take the relocation fee, find affordable housing for the interim, and perhaps salvage a bit of their credit rating.  Only time will tell how effective this will be.