Anyone have a link to the actual bill from Thomas LOC? I'm kind've disappointed CR didn't bother to put the bill number in the article here... none of the MSM sources I've seen have the bill number either, yet that is how you need to access it to actually read the bill.
Seriously, neither WSJ or NYT bothered to actually give us the name or number of the bill... they just call it, "the housing bill"... I'm gonna call it the "National Keep Our House Values High Act of 2008"
YLSP:
How many people do you think have actually read the full 700 pages? IIRC, the $300B farm bill had an entire section missing when it was signed by Congress and the president. Wonder if anyone's pulling a Phil Gramm w/ this...
ades, every real estate person I spoke with was negative (although probably not negative enough on housing prices). Every one was really nice to me.
I disagreed the most with John from ShadowStats - he thought we were headed towards a Depression worse than the Great Depression. I suppose anything is possible, but I think the current debt problems will be worked through over a few years.
It was interesting. I don't know if I'll be invited back - but I was less bearish than some of people.
Biggest question I have is how can a guy that's not an insider at a bank or works for the government make a buck off of this fiasco without going to jail.
It's a disaster for the taxpayer and unfair for prudent homeowners and renters. What's left of the mortgage lending industry is now simply a retail front for FHA and Fan/Fred. Who can compete with govt-backed financing? And the incentives are these for everyone to dump more toxic loans on the taxpayer. This bill is a half measure that defends the current broken system and the incentives mean the story will not end well. Fred/Fan need to be privatized completely or nationalized, and the cost will be much greater down the road.
Also, CR, the main reason the FHA provisions were improved was the efforts of the opposition. The House bill originally bailed out no-doc and investor properties at $729,000. So we saw some tightening there, and also the elimination of DAP.
I'd guess a LOT of lenders in CA will GLADLY discount mtgs 15% to get Gov't. backing for the rest! Think about it folks, in Socal Coastal areas houses are just starting to fall. We've got a LOOOONG way to go before we retrace to affordability.
It makes sense to me that lenders will line up to limit their losses on mtgs. not now backed by Uncle Sam to 15%! Who wouldn't readily accept a 15% loss when the odds are great the alternative is a 30% loss OR GREATER? I think they're going to be falling over themselves to rework all the deals they can make fit.
Yes the "credit" for first time buyers is really a loan. I love that the section about that is called "Recapture of Credit." And our government wonders why so many people don't trust them. The loan won't do anything to move this potential first time buyer off the fence.
SEC. 3091. RETURNS RELATING TO PAYMENTS MADE IN SETTLEMENT OF PAYMENT CARD AND THIRD PARTY NETWORK TRANSACTIONS.
I'm guessing this is the part that relates to the IRS collecting credit card information? Flippin' can't understand what they are talking about, except it seems like the IRS is requiring businesses to turn over this information and you are exempt if you accept less than 200 credit card transactions or less than $10k... no?
Angry Renter- I am a prudent homeowner (I think). I'm not sure how it's really unfair to me. That I didn't get a $7,500 no-interest loan? OK. But various programs always come and go. It wouldn't have impacted my decision.
House members had only 16 hours to read the bill and would have had to stay up all night.
There's also a new and outrageous ban on risk-based pricing for loans at the FHA. So defaulters with bad credit get the same fees as borrowers with good credit.
It is possible that FHA, which is newly insolvent and will need a taxpayer appropriation for the first time in 74 years next year, will both have trouble ramping up the staffing for this new program and will be unable to financially handle it....there's a natural limit built in if Congress has to appropriate the hard dollars upfront.
question for those who know more than me: will this bill affect the alt-a optionArm implosion waiting to happen?
I'm kinda counting on that to incinerate prices here in OC near the coast.
Also, from C-SPAN debate it seems like one of the pigmen-enablers was saying something like if you sell a home bought using this program you have to share some of the profit with the government.
"Market Value by all definitions includes the requirement that both buyers and sellers are typically motivated. Clearly foreclosures and short sales do not have typically motivated sellers. The comparables must be arm's lenght sales that were sold under conditions required for market value estimates. When distress sales (foreclosures and short sales) are used as comparables, then the concept of market value is violated....."
I can't give you too much info about this idiotic memo.
However my take on new bill: More than a $ trillion for F&F, and 30-35% default on FHA insured mortgages in the next 2 years with a loss of ~$500 billion.
dafox, yes, payment option Alt-A loans will be the primary candidates for the banks to rollover into the FHA since those are most likely to default.
YLSP, yes, the FHA refi has a sliding scale where if you resell it within 5 years the government (and the HELOC holder if any) share in decreasing part of the profit.
Of course, the writedown is tax free instant equity for the homeowner.
Pigmen! Meet the pigmen! They're the stupid-gov'ment wallet thieves! From the town of D-C, have a taste of Roman history!
Let's ride, with the pigmen down the street, suckling from taxpayers stolen teat, when you're with the pigmen, have a legislation screw time, white collar true crime, You'll have a gay old time!
In the very early days of this blog I mentioned that F&F were disasters in the making.
P.S. That was when Tanta would tell everyone who would listen that F&F were the best things that ever happend to this country, after of course, FHA.
CR, et al - Can someone explain to me what "85% of the appraised value" means?
If Joe bought a home in 2006 for $700,000 and comps in the neighborhood are going for $500,000 (and presumably, what Joe's house would honestly appraise for in 2008), how much of a haircut does Wells Fargo take on the loan if they volunteer to work with Joe using this bill?
The way I read it, they would eat at least $200,000 but maybe I am reading this wrong?
You guys do not understand how stupid the banks are. The banks issuing new loans are not necessarily the ones who are holding the would be REOs that we are supposedly saving. So I don't think that there will be any connection between, gosh, we'll write down this loan and then get to issue that loan.
The homedebtors are not gonna want to share the appreciation with anybody.
If the banks thought this was a good thing, they could do it all by themselves, without any 700 page bill. They do not think so. They will not think so.
Yeah, the F & F stuff is something.
Don't know what to make of the credit card stuff. Gosh, Chrysler, you sneaky little so and sos, you snuck this one in, I almost have to admire your robbery of the taxpayer.
As I've posted previously there isn't gonna be any appreciation for the next 5 years, so what motivation for heloc holders to bother to do anything.
And the handing money to local gov'ts will be something.
And when does this baby go into effect? If a year from now the doom will have already happened.
I think this wll help maybe a 100 people/banks. Maybe a thousand.
Basically, mostly a nothingburger with some small something burger appetizers on the side.
John McCain is firing away, this hasn't been noticed.
"Americans should be outraged at the latest sweetheart deal in Washington. Congress will put U.S. taxpayers on the hook for potentially hundreds of billions of dollars to bail out Fannie Mae and Freddie Mac. It's a tribute to what these two institutions which most Americans have never heard of have bought with more than $170-million worth of lobbyists in the past decade."
Broker, As someone who was around then, I recall Tanta writing repeatedly that mtgs. written to F&F guidelines were COMPARATIVELY light-years better than those mtgs. that weren't. That's pretty tough to argue with, isn't it?
Lawyerliz writes: "If the banks thought this was a good thing, they could do it all by themselves, without any 700 page bill. They do not think so. They will not think so."
"But the delay could be much more than just a few months, according to a report Friday evening in American Banker, which cited HUD officials as saying that the provisions of the new housing bill wouldnt like be effective UNTIL THE MIDDLE OF NEXT YEAR.
A HUD spokesperson told American Banker that it was absolutely totally unlikely that the new program would be ready by October 1, noting the process HUD must go through to implement new programs including determining underwriting standards for the new loan program the housing bill would create.
Without those standards, which could take through the end of this year to finalize, servicers will have nothing to go on in terms of refinancing troubled borrowers under the new program."
The gruesome part of this bailout is it will inspire another round of suburban sellers getting stubborn about real estate--thinking if their house was worth $600,000 three years ago, now suddenly it will be again, even if the same house next door just sold for $350,000.
The real effect of this bill is that the congressional democrats are volunteering to take the blame for the preceding 8 years of republican economic mismanagement and malfeasance (14 years of republican mismanagement and malfeasance if you count Clinton, Rubin and the DLC as the republican wannabes they were).
Welcome to the beginning of the Carterization of the Obama presidency. I hope Obama is smart enough to find a way deal with the fecklessness of his so-called majority in congress.
And although I think he is getting pretty close to being irrelevant at this point, I am glad to see some signs of sentience coming from John McCain for the first time in quite a while.
But to anyone who thinks this is anything new, ask Tom Paxton:
I am changing my name to Chrysler
I am going down to Washington DC
I will tell some power broker
What they did for Iacoccer
Will be perfectly acceptable to me.
I am changing my name to Chrysler,
I am heading for that great receiving line
When they hand a million grand out
I'll be standing with my hand out
Yessir, I'll get mine.
SEC. 3081. ELECTION TO ACCELERATE AMT AND R AND D CREDITS IN LIEU OF BONUS DEPRECIATION.
(A) APPLICABLE PARTNERSHIP- The term `applicable partnership' means a domestic partnership that--
(i) was formed effective on August 3, 2007, and
(ii) will produce in excess of 675,000 automobiles during the period beginning on January 1, 2008, and ending on June 30, 2008.</i>
There's a lot more in that paragraph but I have no clue what it all means. What type of agreement was made on August 3, 2007 with a domestic auto dealer?
Chrysler Group returned to U.S. ownership Friday, just as the troubled automaker and its U.S. rivals are facing make-or-break labor negotiations and American car buyers are increasingly turning away from domestic makers. The purchase by private equity firm Cerberus Capital Management closes the books on a failed nine-year-old merger. The German automaker then known as Daimler-Benz paid $37 billion for the company in 1998, and essentially ended up paying Cerberus tobuy 80 percent of the automaker, and take its long-term liability to pay for its retirees' healthcare coverage off its hands and off its balance sheet.
But I still don't get how some type of partnership was made with the US Government? Or I guess since all the other US automakers were formed prior to August 3, 2007... are you effin' kidding me! They really gave Chrysler some tax help and excluded the other domestic automakers by putting the August 3 date in the bill?!?!?!?!?!
Somebody posted earlier that the other companies are structured as corporations, not partnerships, and as such, already benefit from the tax provision.
If Joe bought a home in 2006 for $700,000 and comps in the neighborhood are going for $500,000 (and presumably, what Joe's house would honestly appraise for in 2008), how much of a haircut does Wells Fargo take on the loan if they volunteer to work with Joe using this bill?
The banks take a 13% haircut (10% plus 3% fees to FHA) off of the reappraised value of the home. (That haircut is free instant equity for the uncreditworthy homeowner).
Banks obviously have very strong incentives to game that "honest" appraisal upward. These are the same guys that committed widespread appraisal fraud during the bubble...
Also, remember that these will be mostly option ARMs that would otherwise bust at a huge loss to the bank in foreclosure, so this is a win for them. The Congressional Budget Office estimated that 35% of the FHA refi loans will eventually default anyway (except taxpayers eat the loss). These were the most uneconomic loans to begin with.
We will be going back to the old days, Higher interest rates. Lots of vendor liens. It's either the banks or the stock market. They can't save both.
.Gov will have to change the rules on 401K to allow purchase of Bank CD's so that banks will have money to lend for housing once the prices drop to accomodate higher interest and lagging salaries.We will be a nation of renters.
bailey, I am afraid you are right. From talking to some of my friends (from the old country) who were working for BS in '05 this could be a tragedy.(derivatives, CDO,CDS, etc)
I think the biggest problem with the bill is precedent. It will be very hard to stop a Democratic Congress running the magic cash machine if a Republican President cannot say "no" to buying stock with taxpayer money (er, debt).
Two comments/questions:
1.) The temporary increase to 125% of medians meant a lot of places in CA were covered (in part) by the GSE loans (up to $729k in some places). 115% of a smaller median will mean a MUCH lower number (San Diego median is $379,000 x 1.15 = $436,885, not much higher than the current conforming $417k). The higher end in CA has held out for some rescue, but this means the end, does it not? No financing = no sale, unless prices go WAY down.
2.) Doesn't Washington face a dilemma? The only loans banks will want to pass along are the real dogs that are definitely going to lose more than 15%. But the FHA knows it is going to DIE if it takes all this stuff. They want the better loans. If they only accept relatively good stuff, then there is not much here for the banks. What are the procedures for FHA to decide what they will underwrite and what is too stinky, even for them?
The longer it takes to figure out that this is doing no good, the longer the delay until the next round of robbing our pockets to pay Paul.
You know I'm consistent in also expecting a coming "Greater Depression". I still fail to see the source of your optimism, although I'd love to share it. Perhaps one day you'll let us in on your specific thinking as to how we avoid one, i.e., from whence the jobs and/or money will come. As it stands, I just don't see it.
I agree with CR; I don't think this bill will be the end of the world. The fact that it's so incredibly corrupt, and full of payoffs to lenders, speculators, corporations, and all the other insiders, and has no tangible benefit whatsoever for the average, hard-working, saving Americans, speaks volumes for the corruption which is so common and pervasive in Congress these days. The fact that nobody outside of the aforementioned speculators and insiders stands to benefit from this giant turd of a bill, and the best anyone outside of the slime pit which is our Congress can say about it is that "it's not as horrible as it appears", speaks volumes for the contempt the populace has for our corrupt "representatives", and visa-versa.
The country needs some mechanism to prevent legislative bodies with huge negative approval from dumping enormous piles of socialist crap on the people. We used to have something called voting, before elections were bought and paid for, and the "free" media followed the presumptive next socialist dictator around like obedient puppies. Boy, I wish we still had that, and the voters were educated enough to throw out all the corrupt morons passing laws like this.
Yeah, but this is in the bill, so I feel MUCH better:
"(Sec. 129) Amends federal criminal law to subject to criminal penalties knowingly false statements, as well as willful overvaluations of land, property, or security, made to the FHA in connection with an insurance agreement or application for insurance or a guarantee, as well as other specified financial transactions."
bailey, one more thing. This could have never happen if it hadn't been for F&F. Let me tell you a little story. In 2000 I had a house built (on my lot). I paid 83,749 for ~3,300 total sf(2350 s.f. under air). CBS, with all the goodies.(no granite though). It is true there was no financing involved. My point is this: F&F have been a disaster for the real estate in this country. Banks would protect the borrowers by protecting themselfs, if they couldn't dump these mortagges to F&F or insure them through FHA.
The bill also eliminates OFHEO, thank god. However, the regulator of FNM/FRE is now the Fed.. and we all know how competent those blowhards have been over the past 5 years.
The harm the bill causes may not be in its actual provisions, rather it may be in the long term implications of Fannie and Freddie remaining private yet with substantially more control by the government. The potential for mischief seems to be enhanced. Here are the thoughts I had earlier today. METROPOLITAN | Property Management & Real Estate Investments
To be fair Tanta was not saying the GSEs were perfect, only that they had brought a lot of great things to the mortgage business. We're totally in agreement, though, that they're the weapons of our own destruction.
I know, I know, it's the "beginning of the end of the world"... but not the "end of the end of the world"... or perhaps just the "beginning of the end for America"...
In the example of Joe having a $700,000 loan and his house currently appraising for $500,000, you said:
"The banks take a 13% haircut (10% plus 3% fees to FHA) off of the reappraised value of the home. (That haircut is free instant equity for the uncreditworthy homeowner)."
So what happened to the $200,000 in equity that vanished due to the 'unexpected' downturn?
"...I support taking the unfortunate but necessary steps needed to keep the financial troubles at these two companies from further squeezing American families."
So the limit on Fanny/Freddie draws from the treasury is the total national debt - which is controlled by the Congress but has never been denied an increase when the limit has been approached.
Anyone else bothered that the CEOs of Fanny/Freddie ('private corporations' that no part of the US government controls as to leadership or day/day business) now can make decisions that result in potentially unlimited increases in the total national debt?
May 16, 2007, Greencastle, Ind. - "Dan Quayle has a lot to do with the deal that's set to make Chrysler an American company again," writes the Indianapolis Star's John Ketzenberger. "Quayle is chairman of global investments for Cerberus Capital Management, which agreed Monday to pay German automaker Daimler $7.4 billion for an 80.1 percent stake of Chrysler. Four years ago, Quayle founded an office in Frankfurt, Germany, for Cerberus, a $24 billion private equity firm that's 15 years old. Quayle now lives in Phoenix, but remains a fixture in Indiana, which elected him to Congress and the Senate," notes the business columnist.
"Dan moved from politics to the business world without missing a beat," says William Neale, a partner at Krieg DeVault who keeps in touch with the former vice president. "He's a very savvy businessman."
A 1969 graduate of DePauw University, Dan Quayle "is only underestimated by a few," adds Dan Evans, the chairman of Clarian Health who ran campaigns for Quayle. "Most have learned he is a force to be reckoned with, especially on international deals."
I don't particularly like apocalyptic "end of the world" stuff. It's certainly "the end of the world as we know it", though.
Although they may continue to operate in some diminished capacity under the same name, it's essentially the end of the line for the GSEs, FHA, FDIC & PBGC, not to mention the big 3 automakers and most major airlines. The continued attempts to "save" them all signal the end of the line for the dollar, too.
Monstrously tough times ahead for many. We'll come out better for it, but that's perhaps a decade or more off.
tj, the GSEs were not perfect because they needed "more regulations". Other than that they were just fine. Very much like the Kolkhozes in my old country. That's all I heard in my 30 years of living in worker's paradise.
I have pointed out for a long time that the lower participation rate is the reason for the "low" unemployment rate.
This little tidbit is also quite interesting in this context since one always hears about the HIGH European unemployment rate. Note that the current U.S. participation rate is approx. 66%:
"... At 69 percent, the country's [Germany] employment rate is slightly higher than the OECD average of 67 percent, but still well below its best performers -- countries like Iceland, Switzerland, Denmark and Norway, all of which have employment rates of 75 percent or greater. ..."
Broker, I've agreed & argued your thoughts on F&F on this site & others since the days when Tanta remonstrated: Yes, BUT they're so much better than the other guys!
Bottom line, I think it's fair to suggest, this Bill is anything but harmless & it's easy for me to suggest more than several large Banks as well as F&F bondholders, i.e. PIMCO, may do well, but I see NO evidence nor have I heard ANY coherent argument this Bill is in the best interest of taxpayers or our kids & grand-kids. Shame on everyone who worked to frame the argument for it, shame on everyone who worked to write it, shame on everyone who voted for it.
My single question for all of them is, why do they hate their kids & grand-kids so much?
So what happened to the $200,000 in equity that vanished due to the 'unexpected' downturn?
Sorry, I wasn't totally clear. The bank eats that $200,000 writedown (assuming the original loan was 100% financing). It's debt forgiveness to the borrower (and I believe that's a tax free windfall for the next 2 years). The bank then takes 13% haircut off the new valuation. That's the free instant equity to the borrower.
The banks have a strong incentive to pump the appraisals but CR is right that a lot of loans won't fit into the program, especially for banks that have to deal with a testy 2nd mortgage-holding bank. But it will make sense for the option ARMS headed for default and it benefits some of the least worthy borrowers who get equity on property where they never had any skin in the game.
YLSP:
"And there is a provision tailored narrowly for Chrysler to ensure that it can benefit from a corporate tax incentive even though the company is now structured as a partnership, not a corporation."
Cramdown legislation would have been so much simpler and easier. You could have just limited it to the next year or so. F & F could have been dealt with in another bill.
The vilification heaped on the legiscum, (by me too), is, sadly another indication of the end of the republic. The legislators are not capable of ruling and representing us. It is very very sad.
The system demands that they be the way they are. Fresh meat would merely be chewed over by the lobbiests in hardly any time. A huge bill allows the legiscum to hide all sorts of favors and expenses, and not one of them will ever acknowledge that they are thereby harming the republic.
But I repeat, since the banks are not forced to do this, they will not do so, and the 2nd mtges will not respond, and the doom that awaits will almost certainly happen before a year is up, so this bill, except for the bribery part of it, and maybe the F & F part of it, is really irrelevant. Until it is clear exactly what form the crisis that the housing debacle causes will take, it will not be clear what, if anything should be done about it.
Now, if hardly any homeowners are saved, and the foreclosures continue apace and the lenders refuse to finance the REOs, pressure will build for the banks to be forced to accept their fate. . .except by that time I think that it will be quite clear that this cannot happen since so many of them will be kaput.
Actually, the fact that bill was passed at all suggests that the rich and powerful are beginning to really hurt. No such bill which would really help the little foolish fish would pass.
In my mind (as mentioned by others as well) is the precedent set by HR 3221.
Is not only the content (e.g. Treasury buy equities, credit transaction reporting, help for Chrysler...any one of which is a big deal) but the way in which it was crafted (the core was drafted by BAC) and passed (railroaded through with very minimal debate). In addition to the initial ~700 pages numerous amendments were tossed in while debate was underway. The Bill was released in final form on Friday and the Senate vote taken on Saturday morning. It's a sure bet that most - if not all - senators even had a general understanding what lurked within the Bill. Last time I rooted around Thomas there were (2) versions of Bill Number H.R.5720 (Housing Assistance Tax Act of 2008)and (7) versions of Bill Number H.R.3221 (1-5 pertain to renewable energy) while #6 was "American Housing Rescue" and #7 was "Foreclosure Prevention" - and the URLs were very much in flux.
The estimated potential number of those distressed homeowners being helped by the bill was like 400K. History indicates that some of those (~120K) will eventually default. Therefore the actual number of those helped could be less than 300K. The FHA claims that it requires additional time to put the infrastructure in place to administer the programs (although Senator Dodd now claims that they will be ready to roll it out on Oct 1st or else...). It's beginning to sound a lot like the Help Now Alliance rerun to me.
Lawyerliz makes an excellent point with "If the banks thought this was a good thing, they could do it all by themselves, without any 700 page bill. They do not think so. They will not think so."
It reeks of crony capitalism, treads in areas where it has no business going, is poorly thought out and will help relatively few (other than the financial folks who drove it). It also concerns me that the plan seems to be to twist the FHAs arm to become the new mortgage source of last resort now that F&F are showing signs of stress. This bill wasn't about helping American home owners retain their homes. Rather it is about providing yet another conduit for the banks to offload devalued assets.
If I had been a Congressman I would have held my nose and voted for this bad piece of emergency legislation.
I'm one of those pessimists who thinks this economic correction will become a disaster on a scale similar to the Depression, especially if the secondary mortgage market vaporizes. It's probably too late to prevent a huge Economic Reckoning, but this bill is a desperate attempt to stave it off.
From what I have read which is not 700 pages this is what I think.
The banks will want to redo as many loans as possible. So they will not do fewer huge option arm loans. but more smaller loss loans
A)Because they are more likely to get another round of bailouts later if this is somewhat successful.
B) The banks will also benefit from less forclosures as there would be a slightly higher bottom to the market.
What this will not do is restart the housing ATM. It will also not bring back stunt man mortgages and rampent fraud. I would sincerely hope that people who were steered torward these toxic mortgages may get to keep homes they really wanted only as shelter. I feel most flippers are already long gone.
I am short banks and I am a taxpayer as well so I am rightously pi$$ed but I can't do anything except vote against my local congressman and senator at the first opportunity. I suggest everyone who isn't happy about this bill do the same.
bailey writes:
Broker, I've agreed & argued your thoughts on F&F on this site & others since the days when Tanta remonstrated: Yes, BUT they're so much better than the other guys!
Bailey you won't change broker's views - he grew up in the old country and the only devil he knows is 'state owned'... he can't imagine any other.
We on the other hand grew up with mega corporate multi-national devils... and can't imagine how a mere 'state sponsored' entity can be as bad as those bastard offshoring self-serving multi-nationals.
He has his East Block decay & corruption to prove he's right & we have Flint Michigan'... that's a philosophical argument neither side can 'win'.
FWIW I also believe Countrywide was worse than Freddy & Fanny when it came to bad & risky underwriting... Key term in the sentence is 'was'... with this bill Fanny & Freddy might become Countrywide Sleazy with Federal Reserve mandate & backing. If so then Broker will be shown to have been premature in his analysis... but not wrong.
How do you go about determining who the "Current Lender" is? I thought a big part of the problem was that the loans had been pureed into a bajillion RMBSes. Do Fannie and Freddie work out the write down?
With all due respect, you have no idea how stupid and short sighted and uncreative bankers and the banking industry are. the ones at the top making the decisions, not the ones at the bottom who know how to count money or even to underwrite if allowed to do so properly.
They are not smart enought so think and scheme to themselves, ahah, I will lose a little here to gain bail-outs & kickbacks over there. In fact, I wish they were. It would indicate some intelligence existed.
Some poor mid level sucker will get severely punished for cutting the loan amount and that sucker knows it and knows he will lose his job if he does so, and so he/she is not going to agree to do it.
At some point someone in charge of REOs will be able to cover his/her tushy by pointing at evil bank examiners/regulators, and saying we have to get rid of some of these posthaste or else you meine supervisor and your supervisor will be in deep trouble. And then some REOs will be sold at deep discounts to the general rejoicing of the first timers.
Now if the government were going to actually give the banks money in exchange for some haircuts, that my friends would really be a bailout. I
hesitate to even bring it up for fear someone will do it! But apparently nobody had the nerve to propose that.
I repeat, as to the 90% part, a nothingburger.
I repeat my admiration for the sheer nerve and evilness of the Chrysler people. The lobbiests who arranged that were deep down in the decending hierarchy of hell. (Cite Turtledove)
It will allow the USG to support the right for each and every American to to be free. To move about. To drive from here to there.
All auto loans, leases, or repos are now part of this program to free americans to be free.
Americans will be able, if they qualify, to borrow money against thier mode of transport, to pay for gas or anything else they would like.
Under this program all domestic automobile manufactures will be able to offer negative value leases to encourage automobile ownership and therefore keep Americans free.
"The bill has many other provisions too, including permanently increasing the conforming loan limit to 115% of the local area median home price"
I'm probably not very smart, but notwithstanding the current downturn, wouldn't a system like this typically guarantee that house prices would rise rapidly and continually until they hit the ceiling everywhere?
CR,
John Williams from Shadow Stats is a genius. He called all the housing problems, employment problems monetary inflation problems a COUPLE of years ago. And he always backed it up with financial analysis.
dryfly, you are an engineer. So let's talk numbers. A builder can build a decent house for $20-25 a s.f.(Total s.f.)Let's say $30 including the dirt.
Do you think the banks would lend you >$100 per s.f. if they couldn't sell these mortgages to F&F or some other idiots who are trying to compete with F&F?
This is fluff. This will not solve the real estate, building or the banking problems.
Folk this is election year politics-we feel your pain and we are doing something about it. With the US debt, how much of that raised debt ceiling will actually be used to bail out Freddie and Manie?
If we have learned nothing from GWB and the Rep Congress, you can pass all the laws you want, but if there is no funding, nothing gets done!!!
Do you think the banks would lend you >$100 per s.f. if they couldn't sell these mortgages to F&F or some other idiots who are trying to compete with F&F?
Broker | 07.26.08 - 11:54 pm | #
I'd say the opposite. The Fs tried to compete with the 'other idiots' - the other idiots (especially Wall Street multinationals like Bear) set the pace.
The last couple years 2/3s of those mortgages were bought by the 'other idiots' who weren't GSEs... now who was wagging the dog? Many of those were the WORST mortgages and the FIRST to blow up. Yet some here only focus on the GSE's problems.
Again it is a bias of perspective - folks talking their book & taking a stand where they sit (on their own wallet).
Regardless - it is increasingly an only GSE game now since all the other idiots have gone to money heaven...
dryfly, F&F were under investigations starting in 2003 for Freddie and 2004 for Fannie. Anyway, when you combine gov. stupidity with private biz. greed you get the worst of both worlds. It is called GSE.
If I had been a Congressman I would have held my nose and voted for this bad piece of emergency legislation.
...but this bill is a desperate attempt to stave it off.
If I were a Congressman (and God forbid, because I'm way to honest, forthcoming, and opinionated to ever hold political office), I would have held my nose and still voted against this piece of crap legislation. It does virtually nothing to help the housing market in general, and yet is chalk full of payoffs, bailouts, handouts, rights subversion, power grabs, and all the other stuff our Congress is famous for. It effectively backs our national currency with sure-fail ridiculously fiscally irresponsible housing loans, and that's the part that everyone felt was necessary enough to push all the other "not so bad" stuff through!
Just about the only positive part of the bill is eliminating DAP's, but anyone with a high school education can see those were a terrible idea, and it shouldn't take hundreds of billions in payoffs and corrupt back-room deal rewards to fix that. Moreover, none of the root causes of the housing bubble problem (F&F rules, FHA "sure-fail" loans, Fed incompetence, etc.) actually got fixed; if anything, most got worse!
There's no excuse for holding your nose and voting for this garbage; buy a shredder, grow a spine, and stand up against the spill-off of the cesspool which is our Congress.
My major concern is the appraisal fraud. I am hoping to buy a place in Miami for 200K or less. This unit fell from a high of 945K to now a little over 500K. There are so few people that actually live in these condo units (most buyers were flippers) and so much supply coming online in fall of 2008(thus not eligible to be bailed out) that I am hopeful that this will not slow down the rapid descent of prices. These units (500K currently) can't even be rented for 2K/month and have a $700/month HOA. The insanity in Miami is astounding. These units should quickly fall to the 300K range and continue their slow descent from there. Miami and South Florida Condo Bubble and Real Estate Crash Blog
I disagreed the most with John from ShadowStats - he thought we were headed towards a Depression worse than the Great Depression. I suppose anything is possible, but I think the current debt problems will be worked through over a few years.
I wasn't invited, but I guess you'd be disgreeing the most with me, also.
And the statement is telling. I used to imagine that you deliberately held back on expressing the full depth of your pessimism. Judging by this quote, I was wrong.
CR, the debt problems you so casually dismiss are the oozing of pus from festering infections in the heart, brain, and guts of what used to be a productive country.
Even if the ooze could be wiped away as quickly as it is exuded, the infection has already destroyed the functions of the body.
The question is not whether we have a Greater Depression or not. The question is, will civilization survive?
RE is only 'worth' 50% or LESS of peak values in bubble/easy finance areas. So working a 'deal' for a homeowner with the lender(bank) that cuts the 'price' 13% or so and with full doc income statements for the 'refinancing' ain't gonna cut it. The falling values have dropped half OR MORE already in bubble areas!
Having to prove income now is also a big problemo.
If the mortgage interest deduction and Fannie and Freddie got us into this mess, with a strong push from Alan Greenspan, then this housing bill is like throwing gasoline on a lighted fire.
It is very, very much as if the US is saying to the world, "Oh, you think we're too indebted? Well, eat this!"
Tanta surely you can see this bill does represent the beginning of the end of the US taxpayer, and the dollar. The 'unspecified' amount of Fan/Fred stock purchases will dilute shareholder value and ultimately cause their demise. Socializing losses and privatizing gains has worked since the dawn of time, of collapsing empires.
Too bad you dont take this more seriously. you underserve your readers by your lethargy.
"The bill also has a tax credit for new home buyers (up to $7,500)"
What A F'n JOKE. You gotta be kidding me ...is this suppose to make rush out there a buy a home quickly!! HA f u and your f,n bill...let the f'n home rot. I will wait another 5 years before I even consider a home...this country is f'ed
Er...
Just for the record for those who still have the religious belief that its the democrats alone push pork, two of the non-housing items mentioned are republican based
1. the Cerebus bailout was pushed by one John Snow not your average Wobbly
2. The Alabama RR car subsidy was put in but one Sen Sheldon a know republican sympathizer
All in all, I would rather the bailout money go to house owners then to Haliburton
There's also a new and outrageous ban on risk-based pricing for loans at the FHA.
I think Congress didn't think the FHA's risk-based pricing plan was ready for prime time. Brian Montgomery has told me that the FHA could implement risk-based pricing in a matter of weeks. Others laugh at that notion.
So defaulters with bad credit get the same fees as borrowers with good credit.
Not so. Defaulters who refi into FHA-insured mortgages have to share their equity.
YLSP, yes, the FHA refi has a sliding scale where if you resell it within 5 years the government (and the HELOC holder if any) share in decreasing part of the profit.
Emphasis mine. The emphasized portion is incorrect. Price appreciation is shared with the FHA when the loan is refinanced or the house is sold -- whenever that takes place. There is no expiration date to the shared appreciation. If the home is sold 40 years from now, the FHA gets half of the price appreciation, based on the appraised value when the FHA insurance was bought.
This could help keep the FHA's mortgage insurance fund solvent. Also, the shared appreciation is structured to encourage people to hold their FHA-insured mortgages for five years but not much longer. As soon as values start rising, it would be smart to refi out of the FHA-insured loan.
We know that Dubya used to delight in blowing up frogs with firecrackers.
So how did Hank get Dubya to bend over and accept a cherry bomb in his fundiment?
Do you think our Foreign Friends (to use a PRC phrase) would have been happy to see their F&F assets belly up?
Why did these Central Banks buy F&F debt in the first place? Would they have if there was a real question in their mind that F&F were not govt backed?
Did someone let it be known that could buy F&F debt without fear because it really was govt backed?
Yes Dear Reader the Greatest Looser in our history committed the ultimate treason. He delivered our nation into the hands of foreign creditors. Our internal affairs now must be conducted so as to satisfy foreign governments
So working a 'deal' for a homeowner with the lender(bank) that cuts the 'price' 13% or so and with full doc income statements for the 'refinancing' ain't gonna cut it. The falling values have dropped half OR MORE already in bubble areas!
The lender has to forgive all but 90 percent of the debt on the current appraised value, not on the original amount.
Don't you think banks are going to require borrowers to at least pony up the 3 percent upfrong FHA premium?
CR, you assume that Shadowstats is too bearish, and that we will work through this bad debt in a few years.
I would agree with you on this if I thought the government would stop trying to keep asset prices inflated and lobbyists happy with bills such as this one. I'm all for some targeted policies to help weather the storm, but this is just throwing good money after bad.
I believe a lot of good money will be thrown after bad - enough to create a much bugger problem in the next 5 years or so, one we will not be able to deal with.
Mistah Bonzai: Last time I rooted around Thomas there were (2) versions of Bill Number H.R.5720 (Housing Assistance Tax Act of 2008)and (7) versions of Bill Number H.R.3221 (1-5 pertain to renewable energy) while #6 was "American Housing Rescue" and #7 was "Foreclosure Prevention" - and the URLs were very much in flux.
My understanding is that this is a correct recap of what went on. H.R. 3221 was originally passed as a Renewable Energy bill, but the entire thing was gutted after passing and amended to the Foreclosure Prevention Act. That was then passed and signed.
It's an ugly, but valid progression of the process. It lowers the bar for passage, as there are fewer steps to debate the content.
It seems to me that all the lien holders and the borrower have to agree to make this work. That makes each loan a custom deal. Reasons a deal could fall apart:
a) Borrower: The borrower hopes to sell the house when the market rebounds so he keeps a payment he cannot easily afford.
b) Lender: The lender will only do the deal with an inflated appraisal so they don't have to write down so much of the loan. They don't have to do the deal at any appraisal, so they only agree to do it if they are certain the borrower won't pay and the write-down is modest.
c) Second mortgage: They think they're not getting anything, but they have nothing to do lose by being difficult and not going along with this voluntary program unless they get a nice chunk of money for agreeing.
Working through all of this will be time consuming. Except in very down markets and loans held by small local banks, it might be more trouble than it's worth. The foreclosure system seems automated, and this sounds like it requires a carefully crafted deal.
Hasn't the gummint now agreed that the Fed will oversee the stabilization of U.S. markets? This will entail much more oversight of financial institutions not previously supervised by the Fed--i.e., investment banks, whose roster of employees is just about 100% rascals.
So now I read that under the housing bill as passed the regulation/supervision of F&F are being handed to the Fed as well. Is that true?
Someone in the Congress must believe the Fed continues to walk on water to allow these injudicious delegations to occur. Of course, what the Fed's admirers will realize in a few years is that taking on these whopping and effectively impossible assignments will sully the agency's record and it will stand to lose its sterling reputation.
Whether The Fed deserves its current walks-on-water status is another question whose answer is best left to others . . . Like the talking heads on CNBC.
Great article and I just recently wrote about my views on the bill as well. Your points just conifrm why the housing relief bill will fail. The government again is trying to spend us out of an economic crisis, which is unlikely to work and only add to our national debt and the continued devaluation of the US dollar. Only time and a cleansing of the economic system will resolve the current mess.
We talk about consumers getting out of debt, what about the government who seems to love debt more than anyone else.
Thank God Congress pissed the housing bill.It took them almost 6 months. Actually it was 23 years and six months if you count from the last crisis in 1985.
Now let me see.
We know that Congress passed this bill to protect those that were financially harmed which were Fannie and Freddie, Banks, Shadow Banks, anyone connected to Congress.This bill did not protect those scum bag homeowners who caused this crisis.
2.I did not see in the bill where it gives a scumbag homeowner the right to redress ( object or fight)his foreclosure in the federal regulatory system.Thats good because those scumbag homeowners
don't have the money to hire an
attorney with a law degree, big house, new office and a bank account that would knock your socks off.
God is this the American Dream when we save the Lenders and Congress
and the Regulators in one piece of legislation.
Massive plague or famine in the next 20-30 years will help me out, I hope."
Yep, that was the goal.
Punish the wise and rewarded the stupid/wicked. Take everything from the savers and give it to the useless parasites. Keep housing unaffordable so that debt-serfs are the replacement for the middle class.
I wrote my Senators, urging them to not vote for this horrid bill, and it's the first time I was ever angry enough to write them. They, being tax-and-spend liberals, voted for it. They won't be getting my vote ever again (not that I voted for them in the first place, and not that it matters in tax-and-spend Maryland, of course!)
Congratulations to the members of Congress who passed this bill.
Thank God for the wealthy Congress people who had the foresight to pass this bill and take the National Debt to 10.6 Trillion Dollars.
We should remember that these are the same people that will have spent over 1 Trillion Dollars on an oil war and we only lost less than 5000 people and wounded were under 90,000.
Let me see if I have this straight:
Freddie and Fannie will have money to save them. These are the people who buy all the mortgages from the banks. If the wealthy and powerful banks could not sell their mortgages then they would go out of business or be accountable for their actions.
I read the other day that Fannie and Freddie have 800 billion in mortgages and 60 billion in assets. Thank God, we the taxpayers will only have to pay 740 billion to save these people .It was either the Fannie or Freddie boss that took home 60 million in one year.
I would suggest to save money that we combine Freddie and Fannie into the Frankenstein Mortgage Company with offices in Bad-bag Iraq.
Next we help the first time homeowner with $7500. so that they can buy foreclosed housing which is a blessing for the wealthy Banks.
Here is the one I like the best. It reminds me of my bank Am Trust Bank, Cleveland Ohio, who foreclosed on my home of 7 years. This is the bank that stated that they would file a frivolous lawsuit against me for fighting my foreclosure. This is the bank that refused to discuss the issues and the violations of law that caused the foreclosure.
Well billions have been set aside for people with certain criteria to refinance there present mortgage to SAVE them from foreclosure. THE BANK HAS TO AGREE to this to make it happen. This of course involves 400,000 mortgages.
Well now, these banks are the same ones that operate under the Lynch Mob program. The bank forecloses the home and then hangs the borrower. See, the borrower in the USA has no RIGHT to contest or to fight his foreclosure with the federal regulatory system, because the federal government wont permit this to happen. But the Bank under the federal regulatory system operates with impunityNO RULES.
And there are a few other things.
My question is, WHAT ABOUT THE 4 MILLION PEOPLE IN FORECLOSURE OR WHO HAVE BEEN THROUGH FORECLOSURE.
Why are these not the homeowner scumbags who started this foreclosure crisis? Are not these the same people who have no rights to fight their foreclosure within the same federal system that the banks are lending money? Cant these scumbags fight their foreclosure doing the LEGAL DANCE? You, know , the borrowers attorney and the banks attorney dance before the Band (Court) until your money runs out.
And you are there in comment land, you are write no more bailouts for the lowlife bad credit scumbag home owners that made this foreclosure crisis affordable for the wealthy and the powerful. You are right.
Thank God for my Ohio Senators Brown and wait till something happens Voinovich for spending every cent the taxpayer has plus 10.6 Trillion dollars that we dont have. I can sleep well in Cleveland Ohio under the 9th Street bridge knowing that my ex attorney and my bank
are the dance having a financial wrecking ball.
Michael LittleBig, proud to be a vet, proud to be a lowlife no credit sum bag foreclosure victim making it without any help from the Congress of the United Oil Companies of American
AWESOME
NOW I WILL NEVER BE ABLE TO BUY A HOUSE
Massive plague or famine in the next 20-30 years will help me out, I hope.
CR,
Did you need an armed entourage at the conference?
There are frequently very bullish RE professionals there no?
...........
The last spending programs of this size, the Iraq War and Medicare Part D, definitely performed better than CBO estimates...
Malden Mass? Yea its a hole but I dont know why it gets any special treatment?
Odd indeed....
..........
Anyone have a link to the actual bill from Thomas LOC? I'm kind've disappointed CR didn't bother to put the bill number in the article here... none of the MSM sources I've seen have the bill number either, yet that is how you need to access it to actually read the bill.
Seriously, neither WSJ or NYT bothered to actually give us the name or number of the bill... they just call it, "the housing bill"... I'm gonna call it the "National Keep Our House Values High Act of 2008"
YLSP:
How many people do you think have actually read the full 700 pages? IIRC, the $300B farm bill had an entire section missing when it was signed by Congress and the president. Wonder if anyone's pulling a Phil Gramm w/ this...
ades, every real estate person I spoke with was negative (although probably not negative enough on housing prices). Every one was really nice to me.
I disagreed the most with John from ShadowStats - he thought we were headed towards a Depression worse than the Great Depression. I suppose anything is possible, but I think the current debt problems will be worked through over a few years.
It was interesting. I don't know if I'll be invited back - but I was less bearish than some of people.
Best Wishes.
YLSP, do you have the link? I'll look for it.
I've read entire bills before - and then I wanted that part of my life back.
Best Wishes.
Biggest question I have is how can a guy that's not an insider at a bank or works for the government make a buck off of this fiasco without going to jail.
H.R. 3221 [110th] - Summary: Housing and Economic Recovery Act of 2008 (GovTrack.us)
This link has a "primary source" on the left of the page. So at least it's a starting point. Good luck.
H.R 3221 is the "housing bill"
This should be posted on every government office door: "What's the best thing to do when you've dug yourself into a hole? Stop digging."
The bill is H.R. 3221.
Search Results - THOMAS (Library of Congress)
It's a disaster for the taxpayer and unfair for prudent homeowners and renters. What's left of the mortgage lending industry is now simply a retail front for FHA and Fan/Fred. Who can compete with govt-backed financing? And the incentives are these for everyone to dump more toxic loans on the taxpayer. This bill is a half measure that defends the current broken system and the incentives mean the story will not end well. Fred/Fan need to be privatized completely or nationalized, and the cost will be much greater down the road.
Also, CR, the main reason the FHA provisions were improved was the efforts of the opposition. The House bill originally bailed out no-doc and investor properties at $729,000. So we saw some tightening there, and also the elimination of DAP.
Here's the link to the Bill text. It's H.R. 3221. I'm pretty sure it's the latest version.
Tiny URL - create a shorter link
I'd guess a LOT of lenders in CA will GLADLY discount mtgs 15% to get Gov't. backing for the rest! Think about it folks, in Socal Coastal areas houses are just starting to fall. We've got a LOOOONG way to go before we retrace to affordability.
It makes sense to me that lenders will line up to limit their losses on mtgs. not now backed by Uncle Sam to 15%! Who wouldn't readily accept a 15% loss when the odds are great the alternative is a 30% loss OR GREATER? I think they're going to be falling over themselves to rework all the deals they can make fit.
Thanks! HR 3221, " Foreclosure Prevention Act of 2008"
Yes the "credit" for first time buyers is really a loan. I love that the section about that is called "Recapture of Credit." And our government wonders why so many people don't trust them. The loan won't do anything to move this potential first time buyer off the fence.
"Anonymous writes:
YLSP:
How many people do you think have actually read the full 700 pages? "
I think it would make a great graphic novel.
SEC. 3091. RETURNS RELATING TO PAYMENTS MADE IN SETTLEMENT OF PAYMENT CARD AND THIRD PARTY NETWORK TRANSACTIONS.
I'm guessing this is the part that relates to the IRS collecting credit card information? Flippin' can't understand what they are talking about, except it seems like the IRS is requiring businesses to turn over this information and you are exempt if you accept less than 200 credit card transactions or less than $10k... no?
Angry Renter- I am a prudent homeowner (I think). I'm not sure how it's really unfair to me. That I didn't get a $7,500 no-interest loan? OK. But various programs always come and go. It wouldn't have impacted my decision.
Letting Treasury buy equities is insane. Financials can't fail because either BB or Hank will do CPR.
House members had only 16 hours to read the bill and would have had to stay up all night.
There's also a new and outrageous ban on risk-based pricing for loans at the FHA. So defaulters with bad credit get the same fees as borrowers with good credit.
It is possible that FHA, which is newly insolvent and will need a taxpayer appropriation for the first time in 74 years next year, will both have trouble ramping up the staffing for this new program and will be unable to financially handle it....there's a natural limit built in if Congress has to appropriate the hard dollars upfront.
question for those who know more than me: will this bill affect the alt-a optionArm implosion waiting to happen?
I'm kinda counting on that to incinerate prices here in OC near the coast.
Also, from C-SPAN debate it seems like one of the pigmen-enablers was saying something like if you sell a home bought using this program you have to share some of the profit with the government.
I have no idea where that is found.
"Market Value by all definitions includes the requirement that both buyers and sellers are typically motivated. Clearly foreclosures and short sales do not have typically motivated sellers. The comparables must be arm's lenght sales that were sold under conditions required for market value estimates. When distress sales (foreclosures and short sales) are used as comparables, then the concept of market value is violated....."
I can't give you too much info about this idiotic memo.
However my take on new bill: More than a $ trillion for F&F, and 30-35% default on FHA insured mortgages in the next 2 years with a loss of ~$500 billion.
dafox, yes, payment option Alt-A loans will be the primary candidates for the banks to rollover into the FHA since those are most likely to default.
YLSP, yes, the FHA refi has a sliding scale where if you resell it within 5 years the government (and the HELOC holder if any) share in decreasing part of the profit.
Of course, the writedown is tax free instant equity for the homeowner.
Here we go again, with a few modifications!
Pigmen! Meet the pigmen! They're the stupid-gov'ment wallet thieves! From the town of D-C, have a taste of Roman history!
Let's ride, with the pigmen down the street, suckling from taxpayers stolen teat, when you're with the pigmen, have a legislation screw time, white collar true crime, You'll have a gay old time!
In the very early days of this blog I mentioned that F&F were disasters in the making.
P.S. That was when Tanta would tell everyone who would listen that F&F were the best things that ever happend to this country, after of course, FHA.
CR, et al - Can someone explain to me what "85% of the appraised value" means?
If Joe bought a home in 2006 for $700,000 and comps in the neighborhood are going for $500,000 (and presumably, what Joe's house would honestly appraise for in 2008), how much of a haircut does Wells Fargo take on the loan if they volunteer to work with Joe using this bill?
The way I read it, they would eat at least $200,000 but maybe I am reading this wrong?
TIA.
You guys do not understand how stupid the banks are. The banks issuing new loans are not necessarily the ones who are holding the would be REOs that we are supposedly saving. So I don't think that there will be any connection between, gosh, we'll write down this loan and then get to issue that loan.
The homedebtors are not gonna want to share the appreciation with anybody.
If the banks thought this was a good thing, they could do it all by themselves, without any 700 page bill. They do not think so. They will not think so.
Yeah, the F & F stuff is something.
Don't know what to make of the credit card stuff. Gosh, Chrysler, you sneaky little so and sos, you snuck this one in, I almost have to admire your robbery of the taxpayer.
As I've posted previously there isn't gonna be any appreciation for the next 5 years, so what motivation for heloc holders to bother to do anything.
And the handing money to local gov'ts will be something.
And when does this baby go into effect? If a year from now the doom will have already happened.
I think this wll help maybe a 100 people/banks. Maybe a thousand.
Basically, mostly a nothingburger with some small something burger appetizers on the side.
John McCain is firing away, this hasn't been noticed.
"Americans should be outraged at the latest sweetheart deal in Washington. Congress will put U.S. taxpayers on the hook for potentially hundreds of billions of dollars to bail out Fannie Mae and Freddie Mac. It's a tribute to what these two institutions which most Americans have never heard of have bought with more than $170-million worth of lobbyists in the past decade."
Take taxpayers off hook for rot at Fannie, Freddie - St. Petersburg Times
Broker, As someone who was around then, I recall Tanta writing repeatedly that mtgs. written to F&F guidelines were COMPARATIVELY light-years better than those mtgs. that weren't. That's pretty tough to argue with, isn't it?
Lawyerliz writes: "If the banks thought this was a good thing, they could do it all by themselves, without any 700 page bill. They do not think so. They will not think so."
Good point. In conjunction (posted earlier from http://www.housingwire.com):
"But the delay could be much more than just a few months, according to a report Friday evening in American Banker, which cited HUD officials as saying that the provisions of the new housing bill wouldnt like be effective UNTIL THE MIDDLE OF NEXT YEAR.
A HUD spokesperson told American Banker that it was absolutely totally unlikely that the new program would be ready by October 1, noting the process HUD must go through to implement new programs including determining underwriting standards for the new loan program the housing bill would create.
Without those standards, which could take through the end of this year to finalize, servicers will have nothing to go on in terms of refinancing troubled borrowers under the new program."
I'm sure Tanta will post her thoughts on this, probably in similar length as Tolstoy's thoughts on the Napoleonic Wars.
Why can't H. Paulson just die, while there is still something left of the country?
USG buying FNM/FRE stock to hold up house prices? How disgustingly corrupt and absurd.
Broker, P.S. I think your assessment of the crap that's about to be dumped onto F&F&FHA is pretty conservative.
The gruesome part of this bailout is it will inspire another round of suburban sellers getting stubborn about real estate--thinking if their house was worth $600,000 three years ago, now suddenly it will be again, even if the same house next door just sold for $350,000.
"Why can't H. Paulson just die, while there is still something left of the country?"
I hope he sticks around to see the explosion myself.
The real effect of this bill is that the congressional democrats are volunteering to take the blame for the preceding 8 years of republican economic mismanagement and malfeasance (14 years of republican mismanagement and malfeasance if you count Clinton, Rubin and the DLC as the republican wannabes they were).
Welcome to the beginning of the Carterization of the Obama presidency. I hope Obama is smart enough to find a way deal with the fecklessness of his so-called majority in congress.
And although I think he is getting pretty close to being irrelevant at this point, I am glad to see some signs of sentience coming from John McCain for the first time in quite a while.
But to anyone who thinks this is anything new, ask Tom Paxton:
I am changing my name to Chrysler
I am going down to Washington DC
I will tell some power broker
What they did for Iacoccer
Will be perfectly acceptable to me.
I am changing my name to Chrysler,
I am heading for that great receiving line
When they hand a million grand out
I'll be standing with my hand out
Yessir, I'll get mine.
SEC. 3081. ELECTION TO ACCELERATE AMT AND R AND D CREDITS IN LIEU OF BONUS DEPRECIATION.
(A) APPLICABLE PARTNERSHIP- The term `applicable partnership' means a domestic partnership that--
(i) was formed effective on August 3, 2007, and
(ii) will produce in excess of 675,000 automobiles during the period beginning on January 1, 2008, and ending on June 30, 2008.</i>
There's a lot more in that paragraph but I have no clue what it all means. What type of agreement was made on August 3, 2007 with a domestic auto dealer?
Okay well I found a news link from August 3.
Chrysler Group returned to U.S. ownership Friday, just as the troubled automaker and its U.S. rivals are facing make-or-break labor negotiations and American car buyers are increasingly turning away from domestic makers. The purchase by private equity firm Cerberus Capital Management closes the books on a failed nine-year-old merger. The German automaker then known as Daimler-Benz paid $37 billion for the company in 1998, and essentially ended up paying Cerberus tobuy 80 percent of the automaker, and take its long-term liability to pay for its retirees' healthcare coverage off its hands and off its balance sheet.
But I still don't get how some type of partnership was made with the US Government? Or I guess since all the other US automakers were formed prior to August 3, 2007... are you effin' kidding me! They really gave Chrysler some tax help and excluded the other domestic automakers by putting the August 3 date in the bill?!?!?!?!?!
YLSP...
Somebody posted earlier that the other companies are structured as corporations, not partnerships, and as such, already benefit from the tax provision.
Ford and GM don't have John W. Snow as an advocate.
If Joe bought a home in 2006 for $700,000 and comps in the neighborhood are going for $500,000 (and presumably, what Joe's house would honestly appraise for in 2008), how much of a haircut does Wells Fargo take on the loan if they volunteer to work with Joe using this bill?
The banks take a 13% haircut (10% plus 3% fees to FHA) off of the reappraised value of the home. (That haircut is free instant equity for the uncreditworthy homeowner).
Banks obviously have very strong incentives to game that "honest" appraisal upward. These are the same guys that committed widespread appraisal fraud during the bubble...
Also, remember that these will be mostly option ARMs that would otherwise bust at a huge loss to the bank in foreclosure, so this is a win for them. The Congressional Budget Office estimated that 35% of the FHA refi loans will eventually default anyway (except taxpayers eat the loss). These were the most uneconomic loans to begin with.
We will be going back to the old days, Higher interest rates. Lots of vendor liens. It's either the banks or the stock market. They can't save both.
.Gov will have to change the rules on 401K to allow purchase of Bank CD's so that banks will have money to lend for housing once the prices drop to accomodate higher interest and lagging salaries.We will be a nation of renters.
Welcome back to the 50's folks.....
"Ford and GM don't have John W. Snow as an advocate."
Quite a "coincidence," no?
CR,
The 115% is something I hadn't read about prior; how do they define "local"? MSA??
Setting a $625K maximum might not mean anything given that median prices everywhere will drop below the current standard $417K limit.
bailey, I am afraid you are right. From talking to some of my friends (from the old country) who were working for BS in '05 this could be a tragedy.(derivatives, CDO,CDS, etc)
More on the crony capitalism in the bill, there's a new taxpayer subsidy to a single Canadian railcar manufacturer:
CongressDaily - Housing Bill Might Benefit Foreign Firm
OT--How do the Feds know which bank will take over the closed branches? Is this also crooked--payola? Obviously, this was a no bid deal.
I think the biggest problem with the bill is precedent. It will be very hard to stop a Democratic Congress running the magic cash machine if a Republican President cannot say "no" to buying stock with taxpayer money (er, debt).
Two comments/questions:
1.) The temporary increase to 125% of medians meant a lot of places in CA were covered (in part) by the GSE loans (up to $729k in some places). 115% of a smaller median will mean a MUCH lower number (San Diego median is $379,000 x 1.15 = $436,885, not much higher than the current conforming $417k). The higher end in CA has held out for some rescue, but this means the end, does it not? No financing = no sale, unless prices go WAY down.
2.) Doesn't Washington face a dilemma? The only loans banks will want to pass along are the real dogs that are definitely going to lose more than 15%. But the FHA knows it is going to DIE if it takes all this stuff. They want the better loans. If they only accept relatively good stuff, then there is not much here for the banks. What are the procedures for FHA to decide what they will underwrite and what is too stinky, even for them?
The longer it takes to figure out that this is doing no good, the longer the delay until the next round of robbing our pockets to pay Paul.
CR,
You know I'm consistent in also expecting a coming "Greater Depression". I still fail to see the source of your optimism, although I'd love to share it. Perhaps one day you'll let us in on your specific thinking as to how we avoid one, i.e., from whence the jobs and/or money will come. As it stands, I just don't see it.
I agree with CR; I don't think this bill will be the end of the world. The fact that it's so incredibly corrupt, and full of payoffs to lenders, speculators, corporations, and all the other insiders, and has no tangible benefit whatsoever for the average, hard-working, saving Americans, speaks volumes for the corruption which is so common and pervasive in Congress these days. The fact that nobody outside of the aforementioned speculators and insiders stands to benefit from this giant turd of a bill, and the best anyone outside of the slime pit which is our Congress can say about it is that "it's not as horrible as it appears", speaks volumes for the contempt the populace has for our corrupt "representatives", and visa-versa.
The country needs some mechanism to prevent legislative bodies with huge negative approval from dumping enormous piles of socialist crap on the people. We used to have something called voting, before elections were bought and paid for, and the "free" media followed the presumptive next socialist dictator around like obedient puppies. Boy, I wish we still had that, and the voters were educated enough to throw out all the corrupt morons passing laws like this.
Yeah, but this is in the bill, so I feel MUCH better:
"(Sec. 129) Amends federal criminal law to subject to criminal penalties knowingly false statements, as well as willful overvaluations of land, property, or security, made to the FHA in connection with an insurance agreement or application for insurance or a guarantee, as well as other specified financial transactions."
This is a big, polished terd.
I agree with CR; I don't think this bill will be the end of the world.
Define "end of the world".
tj, you may be surprised to learn that Conjure Bag agrees with you and CR.
For the moment, I'll leave it to both of you to figure out how that can be the case.
bailey, one more thing. This could have never happen if it hadn't been for F&F. Let me tell you a little story. In 2000 I had a house built (on my lot). I paid 83,749 for ~3,300 total sf(2350 s.f. under air). CBS, with all the goodies.(no granite though). It is true there was no financing involved. My point is this: F&F have been a disaster for the real estate in this country. Banks would protect the borrowers by protecting themselfs, if they couldn't dump these mortagges to F&F or insure them through FHA.
The bill also eliminates OFHEO, thank god. However, the regulator of FNM/FRE is now the Fed.. and we all know how competent those blowhards have been over the past 5 years.
The harm the bill causes may not be in its actual provisions, rather it may be in the long term implications of Fannie and Freddie remaining private yet with substantially more control by the government. The potential for mischief seems to be enhanced. Here are the thoughts I had earlier today. METROPOLITAN | Property Management & Real Estate Investments
Broker,
To be fair Tanta was not saying the GSEs were perfect, only that they had brought a lot of great things to the mortgage business. We're totally in agreement, though, that they're the weapons of our own destruction.
Did you read Noland's latest?
mp,
Is that some kind of CB riddle? I'm not sure I'm up to that on a weekend.
I know, I know, it's the "beginning of the end of the world"... but not the "end of the end of the world"... or perhaps just the "beginning of the end for America"...
Who knows... choose your intoxication...
Angry Renter -
In the example of Joe having a $700,000 loan and his house currently appraising for $500,000, you said:
"The banks take a 13% haircut (10% plus 3% fees to FHA) off of the reappraised value of the home. (That haircut is free instant equity for the uncreditworthy homeowner)."
So what happened to the $200,000 in equity that vanished due to the 'unexpected' downturn?
Are the taxpayers stuck with that?
Thanks for the assist.
From what I understand, McCain is in support:
"...I support taking the unfortunate but necessary steps needed to keep the financial troubles at these two companies from further squeezing American families."
The page cannot be found
He admits supporting the bill is bad and yet still does it. Maybe he learned that type of behavior from his junkie wife.
CONJURE HINT
Conjure says, "tj, take a look at the labor force participation rate."
Sorry, but we really have to go now. It's party time.
So the limit on Fanny/Freddie draws from the treasury is the total national debt - which is controlled by the Congress but has never been denied an increase when the limit has been approached.
Anyone else bothered that the CEOs of Fanny/Freddie ('private corporations' that no part of the US government controls as to leadership or day/day business) now can make decisions that result in potentially unlimited increases in the total national debt?
Hmm. Chrysler gets a shameless tax break in a housing bill? Cerberus now owns Chrysler? Dan Quayle is Chairman of Cerberus? WTF????
I don't know about you all, but if Dan Quayle turns out to be the mastermind behind the housing bubble it will all make a little more sense...
""Force to be Reckoned With" Dan Quayle '69 a Key to Chrysler Deal"
"Force to be Reckoned With" Dan Quayle '69 a Key to Chrysler Deal
May 16, 2007, Greencastle, Ind. - "Dan Quayle has a lot to do with the deal that's set to make Chrysler an American company again," writes the Indianapolis Star's John Ketzenberger. "Quayle is chairman of global investments for Cerberus Capital Management, which agreed Monday to pay German automaker Daimler $7.4 billion for an 80.1 percent stake of Chrysler. Four years ago, Quayle founded an office in Frankfurt, Germany, for Cerberus, a $24 billion private equity firm that's 15 years old. Quayle now lives in Phoenix, but remains a fixture in Indiana, which elected him to Congress and the Senate," notes the business columnist.
"Dan moved from politics to the business world without missing a beat," says William Neale, a partner at Krieg DeVault who keeps in touch with the former vice president. "He's a very savvy businessman."
A 1969 graduate of DePauw University, Dan Quayle "is only underestimated by a few," adds Dan Evans, the chairman of Clarian Health who ran campaigns for Quayle. "Most have learned he is a force to be reckoned with, especially on international deals."
Mr. Quayle - would you like potatos with your steak?
Oh man, we're in deep doo-doo.
Dan Quail (sp!) is a potatoe. Mashed, not fried like those frenchies do.
YLSP,
I don't particularly like apocalyptic "end of the world" stuff. It's certainly "the end of the world as we know it", though.
Although they may continue to operate in some diminished capacity under the same name, it's essentially the end of the line for the GSEs, FHA, FDIC & PBGC, not to mention the big 3 automakers and most major airlines. The continued attempts to "save" them all signal the end of the line for the dollar, too.
Monstrously tough times ahead for many. We'll come out better for it, but that's perhaps a decade or more off.
tj, the GSEs were not perfect because they needed "more regulations". Other than that they were just fine. Very much like the Kolkhozes in my old country. That's all I heard in my 30 years of living in worker's paradise.
mp,
Loved your short comment!
I have pointed out for a long time that the lower participation rate is the reason for the "low" unemployment rate.
This little tidbit is also quite interesting in this context since one always hears about the HIGH European unemployment rate. Note that the current U.S. participation rate is approx. 66%:
Clouds on Horizon: Joy over Falling German Unemployment May Soon Fade - SPIEGEL ONLINE - News - International
"... At 69 percent, the country's [Germany] employment rate is slightly higher than the OECD average of 67 percent, but still well below its best performers -- countries like Iceland, Switzerland, Denmark and Norway, all of which have employment rates of 75 percent or greater. ..."
Hmmmmmmm....
Broker, I've agreed & argued your thoughts on F&F on this site & others since the days when Tanta remonstrated: Yes, BUT they're so much better than the other guys!
Bottom line, I think it's fair to suggest, this Bill is anything but harmless & it's easy for me to suggest more than several large Banks as well as F&F bondholders, i.e. PIMCO, may do well, but I see NO evidence nor have I heard ANY coherent argument this Bill is in the best interest of taxpayers or our kids & grand-kids. Shame on everyone who worked to frame the argument for it, shame on everyone who worked to write it, shame on everyone who voted for it.
My single question for all of them is, why do they hate their kids & grand-kids so much?
So what happened to the $200,000 in equity that vanished due to the 'unexpected' downturn?
Sorry, I wasn't totally clear. The bank eats that $200,000 writedown (assuming the original loan was 100% financing). It's debt forgiveness to the borrower (and I believe that's a tax free windfall for the next 2 years). The bank then takes 13% haircut off the new valuation. That's the free instant equity to the borrower.
The banks have a strong incentive to pump the appraisals but CR is right that a lot of loans won't fit into the program, especially for banks that have to deal with a testy 2nd mortgage-holding bank. But it will make sense for the option ARMS headed for default and it benefits some of the least worthy borrowers who get equity on property where they never had any skin in the game.
YLSP:
"And there is a provision tailored narrowly for Chrysler to ensure that it can benefit from a corporate tax incentive even though the company is now structured as a partnership, not a corporation."
Congress Sends Housing Relief Bill to President - NY Times
Cramdown legislation would have been so much simpler and easier. You could have just limited it to the next year or so. F & F could have been dealt with in another bill.
The vilification heaped on the legiscum, (by me too), is, sadly another indication of the end of the republic. The legislators are not capable of ruling and representing us. It is very very sad.
The system demands that they be the way they are. Fresh meat would merely be chewed over by the lobbiests in hardly any time. A huge bill allows the legiscum to hide all sorts of favors and expenses, and not one of them will ever acknowledge that they are thereby harming the republic.
But I repeat, since the banks are not forced to do this, they will not do so, and the 2nd mtges will not respond, and the doom that awaits will almost certainly happen before a year is up, so this bill, except for the bribery part of it, and maybe the F & F part of it, is really irrelevant. Until it is clear exactly what form the crisis that the housing debacle causes will take, it will not be clear what, if anything should be done about it.
Now, if hardly any homeowners are saved, and the foreclosures continue apace and the lenders refuse to finance the REOs, pressure will build for the banks to be forced to accept their fate. . .except by that time I think that it will be quite clear that this cannot happen since so many of them will be kaput.
Actually, the fact that bill was passed at all suggests that the rich and powerful are beginning to really hurt. No such bill which would really help the little foolish fish would pass.
In my mind (as mentioned by others as well) is the precedent set by HR 3221.
Is not only the content (e.g. Treasury buy equities, credit transaction reporting, help for Chrysler...any one of which is a big deal) but the way in which it was crafted (the core was drafted by BAC) and passed (railroaded through with very minimal debate). In addition to the initial ~700 pages numerous amendments were tossed in while debate was underway. The Bill was released in final form on Friday and the Senate vote taken on Saturday morning. It's a sure bet that most - if not all - senators even had a general understanding what lurked within the Bill. Last time I rooted around Thomas there were (2) versions of Bill Number H.R.5720 (Housing Assistance Tax Act of 2008)and (7) versions of Bill Number H.R.3221 (1-5 pertain to renewable energy) while #6 was "American Housing Rescue" and #7 was "Foreclosure Prevention" - and the URLs were very much in flux.
The estimated potential number of those distressed homeowners being helped by the bill was like 400K. History indicates that some of those (~120K) will eventually default. Therefore the actual number of those helped could be less than 300K. The FHA claims that it requires additional time to put the infrastructure in place to administer the programs (although Senator Dodd now claims that they will be ready to roll it out on Oct 1st or else...). It's beginning to sound a lot like the Help Now Alliance rerun to me.
Lawyerliz makes an excellent point with "If the banks thought this was a good thing, they could do it all by themselves, without any 700 page bill. They do not think so. They will not think so."
It reeks of crony capitalism, treads in areas where it has no business going, is poorly thought out and will help relatively few (other than the financial folks who drove it). It also concerns me that the plan seems to be to twist the FHAs arm to become the new mortgage source of last resort now that F&F are showing signs of stress. This bill wasn't about helping American home owners retain their homes. Rather it is about providing yet another conduit for the banks to offload devalued assets.
If I had been a Congressman I would have held my nose and voted for this bad piece of emergency legislation.
I'm one of those pessimists who thinks this economic correction will become a disaster on a scale similar to the Depression, especially if the secondary mortgage market vaporizes. It's probably too late to prevent a huge Economic Reckoning, but this bill is a desperate attempt to stave it off.
From what I have read which is not 700 pages this is what I think.
The banks will want to redo as many loans as possible. So they will not do fewer huge option arm loans. but more smaller loss loans
A)Because they are more likely to get another round of bailouts later if this is somewhat successful.
B) The banks will also benefit from less forclosures as there would be a slightly higher bottom to the market.
What this will not do is restart the housing ATM. It will also not bring back stunt man mortgages and rampent fraud. I would sincerely hope that people who were steered torward these toxic mortgages may get to keep homes they really wanted only as shelter. I feel most flippers are already long gone.
I am short banks and I am a taxpayer as well so I am rightously pi$$ed but I can't do anything except vote against my local congressman and senator at the first opportunity. I suggest everyone who isn't happy about this bill do the same.
bailey writes:
Broker, I've agreed & argued your thoughts on F&F on this site & others since the days when Tanta remonstrated: Yes, BUT they're so much better than the other guys!
Bailey you won't change broker's views - he grew up in the old country and the only devil he knows is 'state owned'... he can't imagine any other.
We on the other hand grew up with mega corporate multi-national devils... and can't imagine how a mere 'state sponsored' entity can be as bad as those bastard offshoring self-serving multi-nationals.
He has his East Block decay & corruption to prove he's right & we have Flint Michigan'... that's a philosophical argument neither side can 'win'.
FWIW I also believe Countrywide was worse than Freddy & Fanny when it came to bad & risky underwriting... Key term in the sentence is 'was'... with this bill Fanny & Freddy might become Countrywide Sleazy with Federal Reserve mandate & backing. If so then Broker will be shown to have been premature in his analysis... but not wrong.
How do you go about determining who the "Current Lender" is? I thought a big part of the problem was that the loans had been pureed into a bajillion RMBSes. Do Fannie and Freddie work out the write down?
Wishing. . .cannabis.
With all due respect, you have no idea how stupid and short sighted and uncreative bankers and the banking industry are. the ones at the top making the decisions, not the ones at the bottom who know how to count money or even to underwrite if allowed to do so properly.
They are not smart enought so think and scheme to themselves, ahah, I will lose a little here to gain bail-outs & kickbacks over there. In fact, I wish they were. It would indicate some intelligence existed.
Some poor mid level sucker will get severely punished for cutting the loan amount and that sucker knows it and knows he will lose his job if he does so, and so he/she is not going to agree to do it.
At some point someone in charge of REOs will be able to cover his/her tushy by pointing at evil bank examiners/regulators, and saying we have to get rid of some of these posthaste or else you meine supervisor and your supervisor will be in deep trouble. And then some REOs will be sold at deep discounts to the general rejoicing of the first timers.
Now if the government were going to actually give the banks money in exchange for some haircuts, that my friends would really be a bailout. I
hesitate to even bring it up for fear someone will do it! But apparently nobody had the nerve to propose that.
I repeat, as to the 90% part, a nothingburger.
I repeat my admiration for the sheer nerve and evilness of the Chrysler people. The lobbiests who arranged that were deep down in the decending hierarchy of hell. (Cite Turtledove)
Currently under discussion
"The Transportation Freedom Act 2008"
It will allow the USG to support the right for each and every American to to be free. To move about. To drive from here to there.
All auto loans, leases, or repos are now part of this program to free americans to be free.
Americans will be able, if they qualify, to borrow money against thier mode of transport, to pay for gas or anything else they would like.
Under this program all domestic automobile manufactures will be able to offer negative value leases to encourage automobile ownership and therefore keep Americans free.
"The bill has many other provisions too, including permanently increasing the conforming loan limit to 115% of the local area median home price"
I'm probably not very smart, but notwithstanding the current downturn, wouldn't a system like this typically guarantee that house prices would rise rapidly and continually until they hit the ceiling everywhere?
CR,
John Williams from Shadow Stats is a genius. He called all the housing problems, employment problems monetary inflation problems a COUPLE of years ago. And he always backed it up with financial analysis.
dryfly, you are an engineer. So let's talk numbers. A builder can build a decent house for $20-25 a s.f.(Total s.f.)Let's say $30 including the dirt.
Do you think the banks would lend you >$100 per s.f. if they couldn't sell these mortgages to F&F or some other idiots who are trying to compete with F&F?
"The (8K) loan won't do anything to move the first time buyer off the fence..."
Ah, but...just wait til the NAR comes up with their spin/outright lie on that one.
That is one juicy little hook for realtors.
They'll misrepresent it for sure and , as usual, no one will stop them.
This is fluff. This will not solve the real estate, building or the banking problems.
Folk this is election year politics-we feel your pain and we are doing something about it. With the US debt, how much of that raised debt ceiling will actually be used to bail out Freddie and Manie?
If we have learned nothing from GWB and the Rep Congress, you can pass all the laws you want, but if there is no funding, nothing gets done!!!
Do you think the banks would lend you >$100 per s.f. if they couldn't sell these mortgages to F&F or some other idiots who are trying to compete with F&F?
Broker | 07.26.08 - 11:54 pm | #
I'd say the opposite. The Fs tried to compete with the 'other idiots' - the other idiots (especially Wall Street multinationals like Bear) set the pace.
The last couple years 2/3s of those mortgages were bought by the 'other idiots' who weren't GSEs... now who was wagging the dog? Many of those were the WORST mortgages and the FIRST to blow up. Yet some here only focus on the GSE's problems.
Again it is a bias of perspective - folks talking their book & taking a stand where they sit (on their own wallet).
Regardless - it is increasingly an only GSE game now since all the other idiots have gone to money heaven...
Survivor bias at its best.
dryfly, F&F were under investigations starting in 2003 for Freddie and 2004 for Fannie. Anyway, when you combine gov. stupidity with private biz. greed you get the worst of both worlds. It is called GSE.
If I had been a Congressman I would have held my nose and voted for this bad piece of emergency legislation.
...but this bill is a desperate attempt to stave it off.
If I were a Congressman (and God forbid, because I'm way to honest, forthcoming, and opinionated to ever hold political office), I would have held my nose and still voted against this piece of crap legislation. It does virtually nothing to help the housing market in general, and yet is chalk full of payoffs, bailouts, handouts, rights subversion, power grabs, and all the other stuff our Congress is famous for. It effectively backs our national currency with sure-fail ridiculously fiscally irresponsible housing loans, and that's the part that everyone felt was necessary enough to push all the other "not so bad" stuff through!
Just about the only positive part of the bill is eliminating DAP's, but anyone with a high school education can see those were a terrible idea, and it shouldn't take hundreds of billions in payoffs and corrupt back-room deal rewards to fix that. Moreover, none of the root causes of the housing bubble problem (F&F rules, FHA "sure-fail" loans, Fed incompetence, etc.) actually got fixed; if anything, most got worse!
There's no excuse for holding your nose and voting for this garbage; buy a shredder, grow a spine, and stand up against the spill-off of the cesspool which is our Congress.
Sorry to tell you guys but Maxine Waters has promised to revive the DAPs in a standalone bill...
My major concern is the appraisal fraud. I am hoping to buy a place in Miami for 200K or less. This unit fell from a high of 945K to now a little over 500K. There are so few people that actually live in these condo units (most buyers were flippers) and so much supply coming online in fall of 2008(thus not eligible to be bailed out) that I am hopeful that this will not slow down the rapid descent of prices. These units (500K currently) can't even be rented for 2K/month and have a $700/month HOA. The insanity in Miami is astounding. These units should quickly fall to the 300K range and continue their slow descent from there. Miami and South Florida Condo Bubble and Real Estate Crash Blog
I disagreed the most with John from ShadowStats - he thought we were headed towards a Depression worse than the Great Depression. I suppose anything is possible, but I think the current debt problems will be worked through over a few years.
I wasn't invited, but I guess you'd be disgreeing the most with me, also.
And the statement is telling. I used to imagine that you deliberately held back on expressing the full depth of your pessimism. Judging by this quote, I was wrong.
CR, the debt problems you so casually dismiss are the oozing of pus from festering infections in the heart, brain, and guts of what used to be a productive country.
Even if the ooze could be wiped away as quickly as it is exuded, the infection has already destroyed the functions of the body.
The question is not whether we have a Greater Depression or not. The question is, will civilization survive?
Nick,
You've made some very good points. Unfortunately, you've made me even more pessimistic that this correction will be The Big One.
RE is only 'worth' 50% or LESS of peak values in bubble/easy finance areas. So working a 'deal' for a homeowner with the lender(bank) that cuts the 'price' 13% or so and with full doc income statements for the 'refinancing' ain't gonna cut it. The falling values have dropped half OR MORE already in bubble areas!
Having to prove income now is also a big problemo.
Test.
If the mortgage interest deduction and Fannie and Freddie got us into this mess, with a strong push from Alan Greenspan, then this housing bill is like throwing gasoline on a lighted fire.
It is very, very much as if the US is saying to the world, "Oh, you think we're too indebted? Well, eat this!"
Tanta surely you can see this bill does represent the beginning of the end of the US taxpayer, and the dollar. The 'unspecified' amount of Fan/Fred stock purchases will dilute shareholder value and ultimately cause their demise. Socializing losses and privatizing gains has worked since the dawn of time, of collapsing empires.
Too bad you dont take this more seriously. you underserve your readers by your lethargy.
Maybe bush can find a flaw and veto, that's our last hope. This is such crap...
"The bill also has a tax credit for new home buyers (up to $7,500)"
What A F'n JOKE. You gotta be kidding me ...is this suppose to make rush out there a buy a home quickly!! HA f u and your f,n bill...let the f'n home rot. I will wait another 5 years before I even consider a home...this country is f'ed
"Maybe bush can find a flaw..."
Bush couldn't find his ass with two hands and a map so I wouldn't hold my breath.
More on the crony capitalism in the bill, there's a new taxpayer subsidy to a single Canadian railcar manufacturer:
National Journal Online c...080724_7454.php
Er...
Just for the record for those who still have the religious belief that its the democrats alone push pork, two of the non-housing items mentioned are republican based
1. the Cerebus bailout was pushed by one John Snow not your average Wobbly
2. The Alabama RR car subsidy was put in but one Sen Sheldon a know republican sympathizer
All in all, I would rather the bailout money go to house owners then to Haliburton
There's also a new and outrageous ban on risk-based pricing for loans at the FHA.
I think Congress didn't think the FHA's risk-based pricing plan was ready for prime time. Brian Montgomery has told me that the FHA could implement risk-based pricing in a matter of weeks. Others laugh at that notion.
So defaulters with bad credit get the same fees as borrowers with good credit.
Not so. Defaulters who refi into FHA-insured mortgages have to share their equity.
YLSP, yes, the FHA refi has a sliding scale where if you resell it within 5 years the government (and the HELOC holder if any) share in decreasing part of the profit.
Emphasis mine. The emphasized portion is incorrect. Price appreciation is shared with the FHA when the loan is refinanced or the house is sold -- whenever that takes place. There is no expiration date to the shared appreciation. If the home is sold 40 years from now, the FHA gets half of the price appreciation, based on the appraised value when the FHA insurance was bought.
This could help keep the FHA's mortgage insurance fund solvent. Also, the shared appreciation is structured to encourage people to hold their FHA-insured mortgages for five years but not much longer. As soon as values start rising, it would be smart to refi out of the FHA-insured loan.
We know that Dubya used to delight in blowing up frogs with firecrackers.
So how did Hank get Dubya to bend over and accept a cherry bomb in his fundiment?
Do you think our Foreign Friends (to use a PRC phrase) would have been happy to see their F&F assets belly up?
Why did these Central Banks buy F&F debt in the first place? Would they have if there was a real question in their mind that F&F were not govt backed?
Did someone let it be known that could buy F&F debt without fear because it really was govt backed?
Yes Dear Reader the Greatest Looser in our history committed the ultimate treason. He delivered our nation into the hands of foreign creditors. Our internal affairs now must be conducted so as to satisfy foreign governments
So working a 'deal' for a homeowner with the lender(bank) that cuts the 'price' 13% or so and with full doc income statements for the 'refinancing' ain't gonna cut it. The falling values have dropped half OR MORE already in bubble areas!
The lender has to forgive all but 90 percent of the debt on the current appraised value, not on the original amount.
Don't you think banks are going to require borrowers to at least pony up the 3 percent upfrong FHA premium?
"The bill also has a tax credit for new home buyers (up to $7,500)"
What A F'n JOKE. You gotta be kidding me ...is this suppose to make rush out there a buy a home quickly!
No, it's $7,500-a-house subsidy to homebuilders.
@MistahBonzai: BRA-VO!
And Tanta, your thoughts on this would be appreciated, at your leisure and at any length. Hell, make it as long as HR 3221, I'll read the whole thing.
CR, you assume that Shadowstats is too bearish, and that we will work through this bad debt in a few years.
I would agree with you on this if I thought the government would stop trying to keep asset prices inflated and lobbyists happy with bills such as this one. I'm all for some targeted policies to help weather the storm, but this is just throwing good money after bad.
I believe a lot of good money will be thrown after bad - enough to create a much bugger problem in the next 5 years or so, one we will not be able to deal with.
We will be crushed.
Mistah Bonzai:
Last time I rooted around Thomas there were (2) versions of Bill Number H.R.5720 (Housing Assistance Tax Act of 2008)and (7) versions of Bill Number H.R.3221 (1-5 pertain to renewable energy) while #6 was "American Housing Rescue" and #7 was "Foreclosure Prevention" - and the URLs were very much in flux.
My understanding is that this is a correct recap of what went on. H.R. 3221 was originally passed as a Renewable Energy bill, but the entire thing was gutted after passing and amended to the Foreclosure Prevention Act. That was then passed and signed.
It's an ugly, but valid progression of the process. It lowers the bar for passage, as there are fewer steps to debate the content.
It seems to me that all the lien holders and the borrower have to agree to make this work. That makes each loan a custom deal. Reasons a deal could fall apart:
a) Borrower: The borrower hopes to sell the house when the market rebounds so he keeps a payment he cannot easily afford.
b) Lender: The lender will only do the deal with an inflated appraisal so they don't have to write down so much of the loan. They don't have to do the deal at any appraisal, so they only agree to do it if they are certain the borrower won't pay and the write-down is modest.
c) Second mortgage: They think they're not getting anything, but they have nothing to do lose by being difficult and not going along with this voluntary program unless they get a nice chunk of money for agreeing.
Working through all of this will be time consuming. Except in very down markets and loans held by small local banks, it might be more trouble than it's worth. The foreclosure system seems automated, and this sounds like it requires a carefully crafted deal.
A couple of observations:
Hasn't the gummint now agreed that the Fed will oversee the stabilization of U.S. markets? This will entail much more oversight of financial institutions not previously supervised by the Fed--i.e., investment banks, whose roster of employees is just about 100% rascals.
So now I read that under the housing bill as passed the regulation/supervision of F&F are being handed to the Fed as well. Is that true?
Someone in the Congress must believe the Fed continues to walk on water to allow these injudicious delegations to occur. Of course, what the Fed's admirers will realize in a few years is that taking on these whopping and effectively impossible assignments will sully the agency's record and it will stand to lose its sterling reputation.
Whether The Fed deserves its current walks-on-water status is another question whose answer is best left to others . . . Like the talking heads on CNBC.
Great article and I just recently wrote about my views on the bill as well. Your points just conifrm why the housing relief bill will fail. The government again is trying to spend us out of an economic crisis, which is unlikely to work and only add to our national debt and the continued devaluation of the US dollar. Only time and a cleansing of the economic system will resolve the current mess.
We talk about consumers getting out of debt, what about the government who seems to love debt more than anyone else.
Thank God Congress pissed the housing bill.It took them almost 6 months. Actually it was 23 years and six months if you count from the last crisis in 1985.
Now let me see.
2.I did not see in the bill where it gives a scumbag homeowner the right to redress ( object or fight)his foreclosure in the federal regulatory system.Thats good because those scumbag homeowners
don't have the money to hire an
attorney with a law degree, big house, new office and a bank account that would knock your socks off.
God is this the American Dream when we save the Lenders and Congress
and the Regulators in one piece of legislation.
Michael LittleBig
Former Scumbag Homeowner
"AWESOME
NOW I WILL NEVER BE ABLE TO BUY A HOUSE
Massive plague or famine in the next 20-30 years will help me out, I hope."
Yep, that was the goal.
Punish the wise and rewarded the stupid/wicked. Take everything from the savers and give it to the useless parasites. Keep housing unaffordable so that debt-serfs are the replacement for the middle class.
I wrote my Senators, urging them to not vote for this horrid bill, and it's the first time I was ever angry enough to write them. They, being tax-and-spend liberals, voted for it. They won't be getting my vote ever again (not that I voted for them in the first place, and not that it matters in tax-and-spend Maryland, of course!)
Example Riverside County same tract, same model home:
Homeowner "A" 500K 30 year fixed mortgage current on payments.
Homeowner "B" 500K Option ARM mortgage behind on payments.
Appraised value of homes $250K (50% loss common today) Riverside and San Bernardino real estate blog: The Biggest Loser
Homeowner "B" lender agrees to program. New loan of $225 (90% of appraised value)
Debt goes to A and B's great grandchildren
Seems fair
I think the actual required write-down is to 87% of current value, after considering the 3% guarantee premium that has to be paid upfront.
Congratulations to the members of Congress who passed this bill.
Thank God for the wealthy Congress people who had the foresight to pass this bill and take the National Debt to 10.6 Trillion Dollars.
We should remember that these are the same people that will have spent over 1 Trillion Dollars on an oil war and we only lost less than 5000 people and wounded were under 90,000.
Let me see if I have this straight:
Freddie and Fannie will have money to save them. These are the people who buy all the mortgages from the banks. If the wealthy and powerful banks could not sell their mortgages then they would go out of business or be accountable for their actions.
I read the other day that Fannie and Freddie have 800 billion in mortgages and 60 billion in assets. Thank God, we the taxpayers will only have to pay 740 billion to save these people .It was either the Fannie or Freddie boss that took home 60 million in one year.
I would suggest to save money that we combine Freddie and Fannie into the Frankenstein Mortgage Company with offices in Bad-bag Iraq.
Next we help the first time homeowner with $7500. so that they can buy foreclosed housing which is a blessing for the wealthy Banks.
Here is the one I like the best. It reminds me of my bank Am Trust Bank, Cleveland Ohio, who foreclosed on my home of 7 years. This is the bank that stated that they would file a frivolous lawsuit against me for fighting my foreclosure. This is the bank that refused to discuss the issues and the violations of law that caused the foreclosure.
Well billions have been set aside for people with certain criteria to refinance there present mortgage to SAVE them from foreclosure. THE BANK HAS TO AGREE to this to make it happen. This of course involves 400,000 mortgages.
Well now, these banks are the same ones that operate under the Lynch Mob program. The bank forecloses the home and then hangs the borrower. See, the borrower in the USA has no RIGHT to contest or to fight his foreclosure with the federal regulatory system, because the federal government wont permit this to happen. But the Bank under the federal regulatory system operates with impunityNO RULES.
And there are a few other things.
My question is, WHAT ABOUT THE 4 MILLION PEOPLE IN FORECLOSURE OR WHO HAVE BEEN THROUGH FORECLOSURE.
Why are these not the homeowner scumbags who started this foreclosure crisis? Are not these the same people who have no rights to fight their foreclosure within the same federal system that the banks are lending money? Cant these scumbags fight their foreclosure doing the LEGAL DANCE? You, know , the borrowers attorney and the banks attorney dance before the Band (Court) until your money runs out.
And you are there in comment land, you are write no more bailouts for the lowlife bad credit scumbag home owners that made this foreclosure crisis affordable for the wealthy and the powerful. You are right.
Thank God for my Ohio Senators Brown and wait till something happens Voinovich for spending every cent the taxpayer has plus 10.6 Trillion dollars that we dont have. I can sleep well in Cleveland Ohio under the 9th Street bridge knowing that my ex attorney and my bank
are the dance having a financial wrecking ball.
Michael LittleBig, proud to be a vet, proud to be a lowlife no credit sum bag foreclosure victim making it without any help from the Congress of the United Oil Companies of American
7-30-2008