Shopping at Amazon?
Wait! If you click on the Amazon banner link at the top of the page first, HCN will get a percentage of anything you purchase for 24 hours!
Open predictions
Our local book authors
User login
Who's online
There are currently 16 members and 149 guests online.
Can't make this stuff up, can you?
totally friggin' ridiculous
But it doesn't matter to the bank stocks as they continue to get free money and buy each others stocks.
LEH is up how much today....
mexico here we come.
Ciao
MS
An average of $50K bailout per borrower is going to solve things? What planet does the FDIC go to get their crack?
HOP Now. Pain later.
Tanta, so the long and short of it is that MBS investors will hold the economy and banking system ransom until they get a better deal? Like maybe swapping for treasuries? Could there eventually be pressure from people like Barney Frank to force lenders to take these terms?
Thanks Tanta for your insight!
A new show coming to a tv near you.
"Name that bailout" every night thiers a new winner!
Disclaimer-The winner must be have 580 credit score, 30% underwater on equity, all plumbling and fixtures must be in place, have a new boat and rv, traveled to europe on previous heloc tapping, like dogs and support our cheif or chef...
Who is going to push this legislation through congress. I would love to see who puts their stamp on this one. Barney Frank? No one wants to be responsible for propping up the market when years from now when it collapses.
I'm telling you, the best bailout plan is to start up manifest destiny again. "The world is ours along with all its natural resources and slave labor." That would solve all our financial problems.
I like how they have a front end ratio cap of 35% (near the old tried and true back end ratio of 36) when someone could get a loan from fannie/freddie with a 45% combined front/back with no limit up to 45% on the front. If 35% is pushing it... what is 45%?
Unaffordable defined by front-end DTIs exceeding 40 percent at origination.
What's that? You went stated-income and wound up with a front-end ratio of 38?
Greasy sez...SUCK IT!
I think bailouts make atol of censt in the free market system.
The only advantage that I can see for the lender is there may be a reduced risk of default due to the lower payments. If the lender likes the advantage, why couldn't they just reduce the interest rate or monthly payments themselves without having to go through all this nonsense?
Elvis , I immigrated to the US so I could be part of the controlling entitiy that has access the entire worlds natural resources and slave labor. Now they are screwing it up royally and I am thinking I did this for nothing!!!
This explains the price of HOPs tripling recently.
MoT,
In my experience chasing returns is a risky proposition.
All these bailouts are preventing true capitulation and a bottom in the market. The housing and mortgage market are larger than anyone realizes. 30 trillion in home value and about half that in mortgages in the US alone. The longer the slowdown the worse it will be. To be sure the bottom and a true recovery are years away and is getting even further out with every "bailout".
Money does grow on trees. The future will always be better. No one ever fails in the United States no matter how foolhardy. We showed those red socialist bastards with our lovely free enterprise system, didn't we? Thin air money will preserve our national integrity and financial system. Dow 15000 by October.
Pull out your pockets, kiss the bunny on the nose.
Is this the current FHA loan limit?
Tanta, so the long and short of it is that MBS investors will hold the economy and banking system ransom until they get a better deal?
Has it ever been otherwise?
Could there eventually be pressure from people like Barney Frank to force lenders to take these terms?
I doubt it. That "sanctity of contracts" thing will stop any plan to change loan terms from being mandatory.
Remember that the loans in question here are overwhelmingly securitized. The feds can do a fair amount of beating up on regulated depositories, but what can they do to force MBS owners to play ball?
And while a lot of second liens are in fact securitized, huge numbers of them are not (compared to subprime and Alt-A first liens). This plan puts some pain on the MBS investors, if they participate, but it really wipes out the second lienholders, probably half of whom are regulated depositories. I guess the FDIC isn't worried about the banks taking too much of a loss on their seconds.
Tim, if none of the plans have any traction at some point it seems that there will be forced terms. Unless these plans are not taken seriously by the politicians presenting them. I do not underestimate the desire of Obama or Hillary to push something like this through if they have the platform to do so.
Hm. There are a number of conditions placed on several parties here, all of which must be met or, presumably, they fail to qualify. Nearly-solvent borrowers might be all right, provided no second lien and an inexplicably tractable mortgage investor, servicer/representative. How widespread is that?
Description offered on NPR yesterday morning had the mortgagee paying interest only in that initial five year period, though this may not be correct.
It was said before to the banks:
The PV of future cashflows on a lower negotiated principle on a mortgage is much greater that the current value of a foreclosed property.
Why won't they listen ??
They are all freaking MAD.
IT'S MY MONEY AND I WANT IT NOW!
Is this the current FHA loan limit?
Beats me. I assume so.
Description offered on NPR yesterday morning had the mortgagee paying interest only in that initial five year period, though this may not be correct.
Yes. The mortgagee (the lender/investor) pays the interest in the first five years. The mortgagor (the borrower) does not pay interest until the five years are up.
We haven't even hit hard times yet. When employment plummets, the garage sales are over, 401Ks are tapped out, and all family members tapped, what will be the next reachdown? Nationalize, socialize housing -- and when firstborn is born, you must bring it to the special HomeLand workhouse where he/she works the entirety of their life for gruel in order that your foolhardy debt might be repaid. Better yet, any breeding in captivity will further support the Ponzi borrowing of this generation.
You know, I read about this last night and thought, in my best Boston accent after reading the terms, "now this is totally re-tAH-ded".
You can be put at ease by the fact that the lender response to this was described as "lukewarm". Which probably means "no effing way".
But I'm glad to see my tax dollars at work trying to come up with drivel to divert attention away from real issues...
How many would qualify by being below the 35% DTI? In the city where I live, the average DTI is probably over 100% (the median house price is 11x the median household income).
Is this the current FHA loan limit?
I would guess that refers to the limit as of the note date, but it's not clear. Most of the problem stuff is less than $417k anyway. Anyway, it's academic - this plan is nothing more than another grandstanding opp for Sheila.
The PV of future cashflows on a lower negotiated principle on a mortgage is much greater that the current value of a foreclosed property.
True enough, except that this plan doesn't just lower the principal balance. It subordinates the modified loan to the Treasury's interest.
So you had a $200,000 first lien. You modify that to a $160,000 second lien behind the Treasury's $40,000 first lien. Plus you write off the five years' worth of interest on the Treasury loan.
That means that IF the loan does end up defaulting after you do this, you lose more than you would have otherwise.
So the issue isn't really whether the reduced cash flow is a better deal than FC today; the issue is whether this workout improves the risk profile of the loan so much that it seriously lessens the chance that it will default in a year after the mod. 'Cause if it does that, the investor always loses more than it would in FC today.
Did Bush ask all of the agencies to write an essay entitled "How Can We Pretend to be Addressing the Crisis"?
Bair's submission wins in the 'Free Lunch' category.
Clearly, the assignment to the cash flows to the various tranches is already determined by very complicated agreements. This has to end up as a fricking nightmare for the accountants and a bonanza for the lawyers.
Effe
This "plan" sure makes me feel better about my FDIC incinerated deposits.
the issue is whether this workout improves the risk profile of the loan so much that it seriously lessens the chance that it will default in a year after the mod.
Tanta | 05.01.08 - 12:38 pm | #
Thanks Tanta.
Can we then say this is like putting more lipstick on the Mortgage Pig?
The FHA loan limit was increased in the "stimulus" bill along with the GSE conforming loan limit. Things are definitely out of control....this has nothing to do with protecting the average American. Here's the FHA breakdown by MSA:
FHA Mortgage Limits
Do these people not understand that the problem IS NOT that mortgages are not affordable.
The problem is that homes were bought as a speculative investment at the peak of a bubble, and the homes are losing value. Period. Period. Period.
Keep paying on a losing investment. Even the dumbest of the dumb, arent that dumb.
So you had a $200,000 first lien. You modify that to a $160,000 second lien behind the Treasury's $40,000 first lien. Plus you write off the five years' worth of interest on the Treasury loan.
Yeah, that's about where in the article i used the word retarded the first time. ..let me get this straight as a lender. I have to re-write the loan at 160, write off the interest for 5 years, and take a subordinate position to the US Treasury when this borrower eventually defaults on the 40k loan as well as the now rewritten mortgage as he/she surely will.
I'd describe my reaction to that as a lender as "lukewarm" also. About as lukewarm as standing in a stream of urine, because that's about what this amounts too.
The FDIC usually gets what it wants from Congress eventually. Some times it takes a few years and a change of administrations but in the end its plenary powers almost always expand and rarely contract. The FDIC also constantly claims there is no cost for deposit insurance to taxpayers because insured banks pay for the coverage. Where do you think the banks get the money for this? From bank customers of course. And, more importantly, when the coming bank failures fully deplete the FDIC's $51 billion deposit insurance fund Congress will fund it with your hard earned taxpayer money.
Amerikaners! You likey build pyramid? Get used to lash, cruel taskmasters and servitude. The day of your bondage is at hand. Prepare your lily white manicured hands for callouses! Your backs for heavy burdens, your minds for crushing neglect. Your greed and foolhardiness have sown shackels upon your feet. Egypt, Babylon, Ninevah, Washington.
The penalty for hubris has always been the same.
HOP is also a crappy hedg.
w: "I do not underestimate the desire of Obama or Hillary to push something like this through if they have the platform to do so."
Be of good cheer. Neither will be able to turn their attention to it for almost a year. By then things will have developed a long way.
I have to assume that the first five years of interest to the Treasury is prepaid by the investor, meaning the actual funding would be $30,800 (4.6% interest for five years of $9,200 subtracted from the funding amount).
ahem. speaking of present value...
ahem. speaking of present value...
I lost interest in trying to figure out how to discount the discount rate.
Well, that and the close italics tag.
Stop Begging Ben for Help Cooking Banks' Books: Jonathan Weil
"Orange County, California, gave us much of the mortgage mess. Now one of its local congressmen is seeking new ways to keep us from knowing how bad it is. Meet U.S. Representative Gary Miller, a real-estate developer by trade, whose home county once included five of the nation's 10 largest subprime home lenders. Last week, Miller succeeded in getting a little-noticed amendment attached to a bill aimed at helping struggling homeowners refinance their mortgages. The insert would require the Federal Reserve to ``study'' the Financial Accounting Standards Board's rules on mark-to-market accounting and report back to Congress."
Stop Begging Ben for Help Cooking Banks' Books: Jonathan Weil - Bloomberg.com
I lost interest in trying to figure out how to discount the discount rate.
present value pun!
present value pun!
That's what I'm here for.
I lost interest in trying to figure out how to discount the discount rate.
Tanta | 05.01.08 - 12:57 pm | #
I'm using 11% in my estimates because that's what Citi is getting these days.
HOP is significantly better than 180 billion in rebate checks funded by the Chinese for the Chinese. While the plan may have holes, I would much rather see something that helps individuals get back on track to reducing debt and increasing savings. The bottom line is that the markets need to correct but the ordinary taxpayers need to be protected. How do you do that? I have no friggin clue, but this plan is much better than all the other non-inventive, historically failed plans by the gov and the fed.
I might have to give the FDIC a B for effort. Though it might just be another Paulson type political posturing plan.
When will we all just lay down and accept the Austrian Business Cycle Theory and call it a day?
I'm actually less interested in what the PV is of the prepaid interest than in what the PV of the rate reduction over the life of the loan to 5.88% might be.
That'd be kind of a nasty hit to the credit enhancement on these deals, no?
This plan stinks, but try as I might, I can't think of a better one. It seems that there really isn't a good way to slow down foreclosures and ensure that loans get repaid.
I can think of one approach that would ensure that debts are paid and that people stay in their hose, but it is pretty undesirable: introduce serfdom. That is, legally tie mortgage holder's to their property confiscate a portion of their labor and that of their descendants (say 1/2) until the loan is paid off. The main problem with this is that many people owe enough on their loans that neither they nor their offspring will ever pay off the loan, creating, well, all the problems of medieval serfdom.
Shouldn't the FDIC be spending its time figuring out what to do with all the coming bank failures? Or, are we back to the fantasy world where no banks fail, the Fed hands out free money to all, and everything only goes up (except salaries, of course.)
Don't bother replying - I know the answer is "everything only goes up!"
sigh Can we please stop with the taxpayer funded bailouts? Please?
That is, legally tie mortgage holder's to their property confiscate a portion of their labor and that of their descendants (say 1/2) until the loan is paid off.
Are you sure you're not someone really working for Goldman Sachs posting here?
Problem with medieval serfdom? NOT, sweet times for the landlords.
I hate the hairsplitting on how we can make insolvency less insolvent. All plans revolve about either debasement, time dilation, or musical bagholding.
What are we a bunch of princes (esses Tanta) with provisioned whipping boys? Spoiled rich, effete, froward.
The feds can do a fair amount of beating up on regulated depositories, but what can they do to force MBS owners to play ball?
I'd describe my reaction to that as a lender as "lukewarm" also. About as lukewarm as standing in a stream of urine, because that's about what this amounts too.
After reading this, I'm left with a gut feeling that this is as much an actual plan/proposal, as it is a CYA against future calamities. ( i.e. We offered you guys a way out, but you didn't sign up !" )
What ever happened to "Hope Now"?
A year from now I'll post again; "what ever happened to HOP"?
time dilation
I always wanted to be a Time Lord. Best job in the universe!
Maybe that's where my economic calls come from
Tanta, the question we all have is how can we game this to our own benefit?
If I have a 5.5% 30 yr fixed, how can I get a lower interest rate through this plan so I can spend more money buying TV's.
hope now falling apart, only hop now
This will reduce cost to taxpayers considerably where it prevents default but I question how often it's doable. The loan has to go from over 40% DTI to under 35% DTI just by using the Treasury's credit to cut the interest rate. Plus the lender has to go along with giving up 20% of principal - and some interest - for a reduced default expectation. If the lender loses 50% on a default, that's a 40% reduction required in the expected default rate. How many loans will have the required changes in DTI AND a 40% reduction in likelihood of default just from reducing the interest rate? Not many, I'd think - probably nothing but megatoxic loans made to people who could afford a traditional loan but were defrauded into megatoxic 2/28s.
HOP may not worsen the second lienholder's position, but it doesn't improve it any.
Well, they'll be behind 2 affordable loans rather than 1 unaffordable one, so default is much less likely. They do gain, substantially, when the HOP loan can be made.
I would think the mortgage insurance only pays off under particular circumstances, and a voluntary renegotiation of the loans won't be one because of a) moral hazard and b) who would have asked for it anyway. But IANAL.
Winston writes:
"This plan stinks, but try as I might, I can't think of a better one."
Yes, then nobody could move and when jobs in an area contract, what happens?
The only thing that will solve this problem is time and pain. Everything else is a foolish use of my money.
...I lost interest in trying to figure out how to discount the discount rate.
no longer in love with amore-tization?
Went for hope as a hedge. Lost my shirt, and an arm and a leg. Now using hop as a hedge. My wife worries about the next step....
What ever happened to "Hope Now"? A year from now I'll post again; "what ever happened to HOP"?
hope now was truncated to HOP. Next up: Ho.
I can't wait to see the Ho plan.
either that, or we'll go from HOP to SKIP and JUMP
...I lost interest in trying to figure out how to discount the discount rate.
no longer in love with amore-tization?
LOL. Stop; I can't take the PUNishment.
ho soon
seems appropriate for one about to be on the street.
--
Frikin Crooks. Who are they helping and at whose expense? The US political system is engaged in helping the bad (irresponsible part of the general population and the financial Crooks) and punishing the good (responsible segment of the population). That makes it a criminal enterprise worse than the Mafia and at much bigger scale. We are dealing with a morally bankrupt system. What is Right and what is Wrong has no place in such a system.
"Scheme," Tanta is a good word to describe but crookery is far more accurate. What we have seen for the past 8+ months is confirmation of my observation:
A system of the Crooks, by the Crooks, and for the Crooks!
Americans are BRED to be dopes so that they would not see crookery of the political system as crookery. What alternative do Americans have to the current political system?! Blind faith is a terrible affliction.
Jas
Yesterday, we stopped by a KB development where there were some homes that looked like we might be able to afford. $250k for half a duplex.
The lady informs me that they are affordable housing and asks how much we make to see if we can get into the program. I whisper 85k and she gets wide eyed and says there is no way we'd qualify. Apparently the program has lowered the income limted to 62k for a family of 3.
She then tried to convince us to look at a model 35k more which is 300 sqft smaller. I looked at her like martians were marching out of her ass. What planet do these people live on?
The best part was driving out of the development and it seemed like house had immigrant familes literally spilling out the front doors and garages. How are these people making enough to afford 350 to 450k homes? Whiskey Tango Foxtrot?
I can't wait for this one:
Stop Onerous Destruction Of Money Y'all.
or SODOMY.
This plan gives new meaning to the expression "all hopped up".
Well, they'll be behind 2 affordable loans rather than 1 unaffordable one, so default is much less likely. They do gain, substantially, when the HOP loan can be made.
It doesn't matter to the second lien lender whether the loan is still performing if the second lien lender can't collect any more payments. Just having the lien out there only helps them out if property values recover sufficiently when the loan finally does pay off that there are funds left to cover all three liens.
I would think the mortgage insurance only pays off under particular circumstances, and a voluntary renegotiation of the loans won't be one because of a) moral hazard and b) who would have asked for it anyway.
Mortgage insurers regularly pay "partial claims" in a modification, if they really do believe that the modification improves the probability of default. It's the same math to the MI as it is to the lender: a loss, but less of a loss than FC. Plus, if the policy stays in place, the MI continues to be paid premiums.
If the lender doesn't get the MI's agreement to the modification, of course, the MI can cancel the policy. That takes care of the moral hazard problem.
If the MIs refuse to pay any partial claims on these mods, and they demand that their exposure be lowered to reflect the new loan amount, then this plan really is gravy for the MIs.
I looked at her like martians were marching out of her ass.
I'm sitting in my office freezing (the HVAC system designer must have thought this floor was going to be used to store meat in) with my coat on, having a sever allergic reaction to god knows what so am one big hive with more benedryl in me that anyone should have, and avoiding work because i don't feel well but have to make a speech at a quarterly meeting in a couple of hours. Thank you for making me visualize that and laugh.
If you start from the assumption that the treasury/taxpayers shouldn't bear any of the loss, I don't see how there's room for much improvement on this.
You can't get more out of a borrower than the borrower can afford to pay. And since the consensus here seems to be that the default rate will be too high even with this plan, we seem to be pushing the envelope as far as we can in that direction, if not farther.
Which leaves the rest of the shortfall to be divvied up among the mortgage insurers and the various investors.
Maybe this plan lets the MIs off a bit easily and could be improved in that regard. But the losses have to be borne by somebody, sooner or later, and (barring some form of serfdom) this is as much as can be squeezed out of the borrower. If that's not good enough for the investors, than it's either (1) tough luck (and let the foreclosures roll in) or (2) start passing the losses to the treasury in some way. I don't see a third choice.
ipodius -- you're allergic to work and Benedryl won't help, but marching martians might.
btw when i read that the first time, i'm so drugged that i thought it said "martinis marching out of her ass" and that visual was just as funny. carry on, i'll sit and shiver, as opposed to sitting shiva which just might happen if i don't stop swelling up.
Sorry for feeding the troll, but:
Jas - You persist in using the verb "bred." The U.S. has one of the highest immigration-to-base population ratios in the OECD. I couldn't imagine an environment less conducive to "breeding."
In fact, unless you've been living under a rock for the past 18 months, you might have noticed the entire goddamn nation is going bat-shit crazy over the fact that we've got all these folks showing up who just happen to have been "bred" somewhere else.
Look for a better verb. Preferably one that has had relevance since the Eugenics movement.
Does anyone have a clue what is driving this savage short covering rally in financials and builders today?
Getting obliterated!
Getting obliterated!
barely | 05.01.08 - 1:38 pm | #
Not a clue. I'm the oil/gold guy remember? Today is pain - but I'm still way up.
I'm losing a lot of imaginary wealth today. Good thing it's all only bits and bytes!
Does anyone have a clue what is driving this savage short covering rally in financials and builders today?
I think it's conjure in the financial sector, but you'll have to wait for verification from mp. maybe he's stopped gnawing on trees.
I'm losing a lot of imaginary wealth today. Good thing it's all only bits and bytes!
TCA | 05.01.08 - 1:44 pm | #
It's only a loss when you have to sell
With all this MoMo ,I forgot today is auto sales #'s day!!!
F truck sales down 12%
yoy should look good soon... the ROD is inversly accelerating
I think, InterestingTimes, that Jas is using an archaic form of English...sort of like in the 1800's when people said "I'm a born and bred Virginian" or something to that effect.
Which either means he's around 200 years old, or he learned English from reading 150 year old books. It seems to be his stock phrase. What he really means is native-born Americans, but I'm sure he won't change.
I may not know the new black, but I am a "born and bred" Ohioan, ipodius.
That phrase is still in common usage in my family, and as far as I know none of them are over 150.
ipodius | 05.01.08 - 1:49 pm | #
I think you might be addressing FatalException (05.01.08 - 1:36 pm), not me.
Ipodius - BTW, you may not have called the rate cut quite right, but you were right about the results - dollar up and commodoties down. Didn't even need the rate to stay the same. Pretty nifty.
It's only a loss when you have to sell
Interesting Times | 05.01.08 - 1:47 pm | #
I think you mean "buy", not "sell"....
I think you mean "buy", not "sell"....
Yalt | 05.01.08 - 1:53 pm | #
Are we talking about houses again?
Okay, so back to the plan.
Why do they have to make these plans so confusing that only .00001% of the population (which means Tanta) understands it?
Just forget all the fancy concepts and apply $50,000 to every mortgage in the U.S. That oughta be simpler, probably save it all in the paperwork it's going to take to fill the public in on what the heck they're talking about in the first place.
Restructured mortgages cannot exceed a debt-to-income ratio for all housing-related expenses greater than 35 percent of the borrower's verified current gross income ('front-end DTI').
Are they actually going to verify the current income? My God, what a novel idea! Who would ever have thought that this would be useful in mortgage underwriting?
Whocoodanode?
administratively simple
Now there is some Hope!
Why do they have to make these plans so confusing that only .00001% of the population (which means Tanta) understands it?
Because simple easily-grasped plans would work even worse.
"unsustainable at origination."
Coffi thought they were!
iPodius,
Thanks. I suppose it is an archaic usage, ( apologies, Yalt) but an idiomatic one. I'm just a syntax freak. The only thing that bothers me more is folks who spell "lose" with two 'o's.
P.S. The Benadryl explains that Time Lord remark earlier!
I'm from the government and I'm here to help you. Now if you'll just bend over this won't hurt a bit.
"Does anyone have a clue what is driving this savage short covering rally in financials and builders today?"
Indymac comments.
No apologies necessary, FE--I just wanted to point out that some of us are still archaic.
oh, I beg to differ. HOP IS a plan. Just ask Hank Optimist Paulson. He hopes the credit crisis is past the midway point, and that is all the market needs to rally. Of course, nothing regarding the issue of why we have a credit crisis at all has changed. In fact, looks to me like the housing forecast keeps getting worse. Sounds like a whole lotta HOPing going on to me.
`Dumbest Idea Ever' Used as Pensions Plug Deficits (Update2) - Bloomberg.com
`Dumbest Idea Ever' Used as Pensions Plug Deficits
Pension bonds are making a comeback, as states and cities from Alaska to Philadelphia bet they can use the proceeds to help fill deficits in their retirement funds and still generate a higher return than what they pay in interest.
Officials may sell a record $35 billion of the securities this year after offerings declined since 2003, according to data compiled by Bloomberg. Connecticut issued $2.2 billion of pension debt last month, paying an average rate of 5.88 percent on money state officials project will earn 8.5 percent when invested.
Rescuing my comment re: Mock Turtle's bet to Sebastian on previous thread:
As if Sebastian had $50!
HA!
Did you notice that just before that announcement IndyMac also announced that their CFO had gone on medical leave and had been replaced?
Odd coincidence, that....
...barring some form of serfdom
Is this option off the table now? The srfx index is holding up pretty well.
"Does anyone have a clue what is driving this savage short covering rally in financials and builders today?"
Maybe anticipation of the phony BLS employment report that comes out tomorrow in which the birth/death model historically creates the most phantom jobs in April every year.
Historical Net Birth/Death Adjustments
Why do they have to make these plans so confusing that only .00001% of the population (which means Tanta) understands it?
Because simple easily-grasped plans would work even worse.
Tanta | 05.01.08 - 2:01 pm | #
Tanta, I can't believe you missed the point (gotta be a first). This plan, like most government plans, have nothing to do with trying to actually solve a problem. Or if they do, that is incidental.
The plans are intended to APPEAR to solve a problem, and thereby diffuse electoral threat.
Other than making war, I don't know of many - almost any - government programs that actually solve a problem, rather than make it worse.
That said, a useful program like, say regulating financial entities on which the health of our nation depend, that is almost certain to disappear.
P.S. The Benadryl explains that Time Lord remark earlier!
And mis-directing the post to the wrong person! My eyes are a little swollen from the reaction.
But the Time Lord statement is a Dr Who thing
But it would make me a damn good investment adviser or hedge fund manager@
OriginalFrank is right . . . this falls in the same category as that "Gas Tax Holiday" that would make things worse, while pandering to fools.
It is disgraceful.
BLS statement tomorrow...will be another glorious day at the United States of Corporate Communists. Death to the poor scum!
Haven't seen much of Jas Jain? Perhaps his white-hot outrage has been so stimulated in recent weeks that he has converted to pure energy?
Like "Powder", only made out of rage.
HOP loans...will avoid unnecessary foreclosures to help stabilize mortgage and housing prices.
I may have figured out the meaning of the phrase "unnecessary foreclosures". In this context, it seems what she really means is "foreclosures that could be averted with an infustion of cash contributed by some party other than the borrower". By this definition, there is no limit to the portion that could go into the "unncessary" bucket. It's just a matter of how wide you want to open up the value.
Apparently, $50bn buys 1 million "unncessary foreclosures" by Greasy's reckoning.
--
FatalException,
All populations are bred with a belief system to support the ruling elite, i.e., provide justification for their rule. In the case of America the ruling elite are the wealthy and their agents. They have turned into outright Crooks, much more so than at any time in the US or the world history. Throughout history power of money was always checked by other power, or powers. No more.
In today's America the Money rules supreme for the first time in history and this has spread to most of the world. Power corrupts
I sincerely hope that this clarifies my commentary.
Jas
D'oh!
Re: Just forget all the fancy concepts and apply $50,000 to every mortgage in the U.S. That oughta be simpler, probably save it all in the paperwork it's going to take to fill the public in on what the heck they're talking about in the first place.
Outsider | 05.01.08 - 1:57 pm | #
I'm in favor of that if it is also applied to mortgages (like mine) that are all paid off.
Is the video up on YouTube yet?
The Bair Switch Project
FDIC becomes the first, first becomes second, second becomes third...
If you do not have a home and cannot afford one on will be appointed for you.
All populations are bred with a belief system to support the ruling elite
Haiti's breeding program has been particularly sucky.
(OT) Gary said: "As if Sebastian had $50!"
That $50 bet must have been meant as a joke. I stand to lose thousands of times more on an inaccurate recession forecast, I can't even imagine how much money the blog-readers here have at risk, cumulatively.
S.
Sebastian writes:
(OT) Gary said: "As if Sebastian had $50!"
That $50 bet must have been meant as a joke. I stand to lose thousands of times more on an inaccurate recession forecast, I can't even imagine how much money the blog-readers here have at risk, cumulatively.
If you are including money supposedly insured by the FDIC, alot.
So if you have 50 investors (more likely more) in a mortgage security does each investor have to agree to this scheme for EACH loan?? I don't think so. The people making these plans up don't have any idea the complexity of the mortgage securitization process. And the likelihood that these borrowers would default again is so high that no literate investor would ever agree to make their position more subordinate. Heck, many of the borrowers defaulting don't even have jobs now anyway so they won't qualify based on DTI. Just the time spent thinking up these dumb ideas is a waste of taxpayer money.
Jas Jain,
You can take some comfort in the fact that the current system that so benefits the elites is virtually mathematically certain to hit a very large and solid wall at some point in the next 15 years max.....
Any system that depends on neverending growth is doomed from the very start. And any system that systematically rewards the very worst of agents at the expense of the responsible is going to die sooner rather than later.
And good riddance.
Anybody catch yesterday's article on FHA Secure?
Who Is Getting the Mortgage Aid? - NY Times
It's "failure" because so few homeowners who were behind on their mortgages were helped.
But more homeowners than anticipated were proactive in taking advantage of the plan, refinancing in anticipation of trouble.
Homeowners aren't as stupid as they're portrayed here, clearly some of them do have good sense.
Sebastia
Some much needed levity / ipecac:
Curbed NY: Ladies and Gentlemen, Jared Seligman Has Arrived
Geoff -"Of course, nothing regarding the issue of why we have a credit crisis at all has changed."
Oh, it changed in a big way the day the Fed bailed out BSC and put a floor under the IBs. The underlying issues are still present but the consequences vanished. I wish I took that side of the trade that very day. I would be megabucks ahead if I would have digested that news correctly. Too bearish for my own good...
Anyone else from the era of high school sex-ed classes where we were taught:
"Hope is not a method."
Got Popcorn?
Neil
Did Bush ask all of the agencies to write an essay entitled "How Can We Pretend to be Addressing the Crisis"?
When I read this, my first thought was: I hope that's what happened. This seems like a pretty well thought-out way to claim that the government offered an alternative to homeowners and lenders, without actually bailing out anyone (other than possibly the MI companies). It's complicated enough to seem like a rational proposal, and doesn't force anyone to do anything.
... To me, that seems like a win-win. I don't want a bailout, and the government is giving something to the drolling, helmet-wearing retards clamoring for one, which doesn't actually spend any of my money. Bravo if it was intentional.
Barely,
Did the consequences really vanish? Or were they just pushed forward in time?
Me thinks the latter but we will see.
Yal,
"Did you notice that just before that announcement IndyMac also announced that their CFO had gone on medical leave and had been replaced?"
Heh, yeah. Not sure what it means, though. Possibilities:
A) The previous incumbent was not onboard and needed to be eased out
B) The previous incumbent was not competent and needed to be eased out
C) The previous incumbent was given a heart condition by the credit crunch and really needed to be eased out
That the FDIC is willing to float a plan of this scale for homeowners in current or potential trouble is evidence that "the worst is over" is not their perception.
There are a lot more pigs for the snake to eat.
An essential tenet of effective public policy is simplicity.
If its complicated, convoluted and contrived you can bet its not by accident someones or somethings interests are being protected and/or promoted.
Its clear that HOP is NOT simple; so whose interests does it serve?
Why go through the trouble of floating it if its highly unlikely to ever be enacted?
Whats the latest on the Dodd-Frank homeowner bailout bill?
Shnaps writes:
...Apparently, $50bn buys 1 million "unncessary foreclosures"
LMAO!
Paulson has distanced himself from the plan. Anyway, the talk about MBS investors and homeowners is a smokescreen; this is a bank bailout.
An essential tenet of effective public policy is simplicity.
Good point. Howsabout Paulson just instructs everyone to get out a pen and write an extra zero on all of the bills in their wallets/purses which bear his signature.
With all those ones becoming tens, tens become hundereds, we'll certainly stimulate lots of economic activity! Subprime borrowers can get caught up on their payments with their Hankbucks®! As an added bonus, it'll save a buttload on helicopter fuel.
If a plan like this is implemented, does anyone really believe that Treasury won't later surrender its `super-senior' position and either go pari passu or take the first loss?
Steve - this isn't a bona fide plan, nor is it a bank bailout (how'd you draw that conclusion?) this is political grandstanding, plain and simple.
Why go through the trouble of floating it if its highly unlikely to ever be enacted?
Beats me. "Bair 2012"?
shnaps,
It's a bank bailout because a large chunk of that $50B would be a loss on bank-owned loans in foreclosure. The interest rate haircut in the plan would eat only a fraction of the bank capital that would be written off in foreclosures.
iPodius,
I caught the Dr. Who significance. I like the idea of a Tardis-enabled fund manager. Imagine explaining that to the SEC. "So you see, I've got this phone booth..."
Jas,
You appear to have missed the intervening discussion. I took issue not with your rhetoric, (which speaks for itself) but your inapt choice of verbs.
One cannot "breed" a highly volatile, dynamic population, but one might inculcate, deceive, brain-wash, mislead, etc., etc. - take your pick. The phenomenon you allege is not achieved through reproductive control, as connoted by the word "breed", but rather information control.
Since you appear to have assigned the "breed" language to a macro, however, I'm letting the matter go.
The government's going to be in first-lien position; I don't know how you think they're going to lose a "large chunk" of the $50B unless you think housing prices are going to drop another 80% or more.
If you mean the FDIC's going to be out quite a bit on banks that fail due to mortgage and HELOC losses, that's true regardless and I don't see how you could blame this plan for the foreclosures.
Steve writes:
If a plan like this is implemented, does anyone really believe that Treasury won't later surrender its `super-senior' position and either go pari passu or take the first loss?
Yes.
Now I understand why you think it's a bailout. Having started with the assumption that it has to be a bailout regardless of the announced details, how could you reach any other conclusion?
BG writes:
Heh, yeah. Not sure what it means, though. Possibilities:
A) The previous incumbent was not onboard and needed to be eased out
B) The previous incumbent was not competent and needed to be eased out
C) The previous incumbent was given a heart condition by the credit crunch and really needed to be eased out
I was thinking some combination of A and C: it was the demand that he adopt the Wright Model B for future projections that made him ill....
It will be interesting to see how many people qualify at the 35% rate.
Why would the FDIC float a plan like this? It seems odd to me that this plan seems to hurt those organizations that it is there to backstop. Most of the firsts are securitized (no bank involved) and result in no loss to FDIC if the loan goes bad. Seconds seem to be more likely held by a bank (possibly even an FDIC insured bank). So by turning those seconds into thirds, banks holding these are more likely to fail (errrr, need FDIC help) as these thirds go bad. So then the FDIC can take the money they got by selling Treasuries or whatever they will call them for the funding for this, and pay the depositors their money when the bank goes belly up. Robbing Peter to pay Paul. Am I missing something?
It looks to me like it would be of no use for MBS, but it would be used to recapitalize failing banks and keep them afloat.
That's my first guess.
Steve, as Uncle AR points out, virtually all of the loans we're talking about here are in MBS/ABS. The investors therefore (particularly in the high-risk tranches) are overwhemingly non-bank entities. So your FDIC-insured First National Bank of Palookaville isn't being helped by this whatsoever.
Please tell me which second lien holder is going to ok this deal. I have a friend who want a loan modification but because his second was with another bank they wouldn't even work with them. They refuse to take a new second position on the new loan agreement..
Doesn't this program just reward the worst borrowers. One of the criteria is that the mortgage was unaffordable at origination. Does that mean all of the stated income borrowers have to come clean and admit they committed mortgage fraud? Is the guy who qualified originally and then had a negative life altering event ineligible because at origination his loan was affordable?
It just gives more life to the argument that you have to let this play out in the market or bail every single homeowner out. Otherwise you're just picking winners and losers with no rhyme or reason for the choice.
Tom Lindmark writes:
Doesn't this program just reward the worst borrowers. One of the criteria is that the mortgage was unaffordable at origination. Does that mean all of the stated income borrowers have to come clean and admit they committed mortgage fraud?
Since the affordability criterion for eligibility involves a front-end DTI calculation and since "eligibility is determined by origination documentation," I don't think stated-income loans would be considered for this program. If anyone can find anything in the FDIC document indicating otherwise, please let me know.
I can't imagine that this applies to more than 10 or 20 people who have lenders willing to go along.
Latest from the mtg and foreclosure wars:
Fellow comes in. Owes 99.9% of the value of his house. Except. .
he recently refinanced. The title agency didn't pay his underlying mtg.
Well, they STARTED to pay it and because it was $500 short, Wells Fargo returned the cleck. The closer--an attorney--sent another check for the correct amount, but when the check got back to his bank, he had stopped payment on it. My client got the run around for a while and then filed a claim with the title insurance company which was turned down, because he hadn't bought title insurance for the refi (nobody ever does). But. . the title underwriter is honest, and say they are going to take care of it. Well, as honest as a title underwriter (as opposed to human underwriters who work for them, which I hugely admire--I'm talkin' about the Baron here), gets, after all, they are an insurance company.
Should my guy walk away? He can't make 2 mtg payments. They have already ruined his credit, since he rightly stopped paying on the loan that was supposed to be paid off.
I told him to keep paying for a few more months, to see if the first lien is paid off. If it isn't both he and the new mtg will be subject to foreclosure. He has no equity; his credit is ruined; he has nothing to lose. If it's paid off, everything reverts to normal. If it's not he can live there for free for quite a long time, and not even feel guilty about it. Plus in a few years, he can explain what happened to prospective lenders, and surely get a better deal than a normal walk-away.
Futher, I have another new client, hopelessly complicated situation, but bottom line, he was maybe supposed to be a second, but the first mortgage was forged!! For real.
I am just a little person in the world of real estate. This is a very small sample. But if this is an example of what is going on in the world at large, well I gasp at the size of the problems.
Pondering the Mess writes:
Shouldn't the FDIC be spending its time figuring out what to do with all the coming bank failures?
another loopy proposal by bailout bair. her time would be better spent preparing for the wave of failures about to happen among c&d lenders or fixing the morale problem at the fdic.
Yalt,
As outlined by this article, "eligibility is determined by origination documentation". Are you of the opinion that the FDIC or whoever administers this program is going to intensively review each loan package and the supporting documentation for 1 million loans? A stated income loan is no different from a full doc loan in that both are done on the same form and both have income numbers from which the front and back end ratios are calculated. The only difference is that the stated income loan contains no supporting data to prove the income while the full doc loan obviously does have this data.
Seems like appropriate medicine for the patient. Our system is more complex than all the simpletons who scream bailout. Like we aren't all in the same economic boat, simpletons??? We are. Get over it and pony up your tax dollars and shut up because you have all eaten of the cake.
Hypocrites. Do you think that the financial system can collapse without taking you with it??? It is this hypocrisy which is the most disturbing thing about this crash.
The Bair Wished Project ?
HOP for the HOPEless?
HOPped up on drugs?
HOPlessly devoted to MEW?
F'd like a bunny?
HOPin' down the money trail?
Sorry, I have had a bad day at work and came home and took it out on the rabbit.
Tanta, maybe you owe Marty Feldman an apology for calling his plan "Teh Dumbest". At least I understand how his plan was meant to work...he recapitalizes banks by offering 15-year mortgage holders free ponies. It depended only upon the willingness of 15-year mortgage holders to accept free ponies and the willingness of the public to bail out banks by throwing money at people least likely to be in trouble. One out of two ain't bad... The lender simply gets the recapitalization whether it wants it or not.
This plan at least offers to modify loan terms for people who truly need their loan terms modified, but it appears to put the "go/no go" decision in the hands of the lender. Very messy.
I like Shnaps Hankbucks idea. It isn't too far from the truth but alas... nothing can be that simple and few things as funny.
Good one Shnaps!!!!
This is nothing more than an attempt to prop up real estate asset prices at full market peak valuation using a Treasury bond issue as a buttress. The idea that underwater homeowners will be expected to pay off bad loans in full and thus take the hit 'for society' is a Ha-Ha-Funny punchline. Why?; why would a borrower take this on? If they are just in a pinch but think they can make it with a better rate, maybe. But really, they are being asked to take the full property loss 'for society.' Why do I NOT see this happening?