There are companies that are handling their mortgage crisis better than others - let's give HSBC some credit for recognizing their problems earlier than most, and being very proactive with their loan modifications. Here's an article from Business Week:
http://www.businessweek.com/magazine/content/08_27/b4091038376313.htm?chan=search
Here is an excerpt from the article:
McDonagh, since named chief of the bank's U.S. operations, got his wish. "The mother ship," as he calls headquarters back in London, O.K.'d a $2.6 billion cash injection in the first quarter of this year. (It's a pittance compared with the massive sums many big banks have been forced to raise from outside investors since the mortgage meltdown began, something HSBC hasn't had to do.) The funds have boosted reserves and fueled McDonagh's fix-it strategy: namely, a command center launched eight months ago in Tampa where roughly 640 employees work with troubled borrowers 24 hours a day, seven days a week to modify their mortgages so they don't lose their homes. These so-called loan workouts are his No. 1 priority for the bank, which handles the processing for what is one of the largest portfolios of subprime loans. One in 20 of its borrowers is two months or more behind on payments—and delinquencies are climbing.
Across much of the industry, workouts simply aren't happening. Instead, mortgage lenders, servicers, investors, and regulators are battling over who has to take the financial lumps when the loan terms change. The average servicer—the outfit charged with collecting payments from homeowners and distributing the money to the investors or banks that own the loans—has modified less than 1% of its troubled loan portfolio, according to estimates by the Office of Thrift Supervision. As a result, more homes are falling into foreclosure, exacerbating the plunge in housing prices.
HSBC, which has already suffered $21.5 billion in loan-related losses and writedowns, has an advantage. Unlike its U.S. rivals, the bank keeps the bulk of its loans on its books instead of repackaging them into pools and selling them off to Wall Street. That's a big reason HSBC reported a hit from mortgages earlier than most major banks—its February 2007 announcement about increased losses sent one of the first subprime shivers through the market. But it's also why the bank has been able to move more quickly to fix the problems: It doesn't need anybody's permission to tinker with loan terms. "We have complete flexibility," says McDonagh, who has also tightened lending standards, stopped buying loans from third-party brokers, and made cost-cutting moves since taking the helm. "We're dealing with this entirely internally, within our bank."
The initiative seems to be working. HSBC has restructured or modified $18.2 billion worth of loans, or about 20% of its entire portfolio as of Mar. 31. "They have been way ahead of the curve in terms of realizing that they need to lower rates significantly and forgive principal," says Mike Shea, executive director of nonprofit advocacy group ACORN Housing, a longtime critic of the subprime industry that won a class action against HSBC in 2003 for predatory lending. "We know from their record they won't leave people stranded."
Hopefully we've seen the end of the slicing and dicing of mortgages, just to sell the pieces to a variety of investors. If banks had to either sell the loan in one piece, or keep the loan in-house, hopefully it would prevent more problems in the future. JTR