Responsible Homeowner Reward Program
Howard Hubler made the financial crisis worse: at Morgan Stanley, he lost $9 billion on bad mortgage bets. Now he may speed the recovery. His company, the Loan Value Group (LVG), has launched a program that could dramatically reduce foreclosures. According to studies, strategic defaults — in which the borrower has the money to pay but doesn't — account for as many as 30% of all home-loan defaults. Why? In an estimated 13 million cases, borrowers owe more than their home is worth. Under LVG's patented Responsible Homeowner Reward (RHR) program, banks promise to pay borrowers who continue to pay on time a lump sum — typically 10% of their original loan amount — when they sell or refinance their home. Miss more than one payment and the reward disappears. It's still early (fewer than 5,000 people have been enrolled), but LVG says fewer than 10% of the borrowers in RHR have ended up defaulting, compared with a redefault rate of more than 20% for other loan-modification programs. Hubler says he is confident his current mortgage bet is one that will help, not hurt, the housing market.