MIC Sees Growing Demand for Proactive B&C Workouts.

NEW YORK -- Today, there is a lot of talk about using Federal Housing Administration loans to refinance troubled B&C borrowers out of risky loan products. But one company that's built its business around Veterans Affairs lending believes its retail loan origination staff can also play a role in saving troubled borrowers by modifying their current loans.

Bill Edwards, chairman of Mortgage Investors Corp., St. Petersburg, Fla., believes that a proactive approach to refinancing borrowers facing rate resets could save many from foreclosure. And MIC, a firm that is one of the nation's leading VA lenders but is approved to originate other loan types as well, has approached industry servicers about using its workforce of loan officers to aid in a massive streamline refinancing attack on the problem. But to save many borrowers from foreclosure and to minimize losses, lenders, servicers and investors may have to make some concessions themselves, Mr. Edwards believes.

Mr. Edwards says the current subprime crisis is "shameful for the industry," noting that almost all of the headlines stemming from the failure of some lenders and higher-than-expected early payment defaults have been negative.

And already, there is concern that the problems plaguing the weaker credit quality borrowers are spreading into alt-A loans as well.

Mr. Edwards acknowledges that it won't be possible to save every troubled borrower and that finding solutions to help those who can be helped will not always be easy. But he believes it is in the best interest of lenders and investors to try to negotiate ways to salvage these loans wherever possible.

"The only answer is that there is no steadfast answer to it. It is a crisis. It's obviously less of a crisis if you don't foreclose than if you do foreclose," Mr. Edwards told NMN. "I think there are a lot of good people getting some bad luck right now."

There are a number of causes for the current rise in defaults on subprime loans. In addition to a loosening of underwriting standards and the advent of some riskier loan products, borrowers have had to deal with rising gas prices and higher minimum payments on credit cards. Many couldn't manage to balance the competing demands on their finances as gas prices doubled and credit card payments doubled. Next, mortgage resets, particularly on teaser rate loans, have doubled the home loan bill for some.