A homeowner in Nevada told me that she had been negotiating a mortgage modification with IndyMac, and when she called this morning, they said they were no longer doing loan mods. A foreclosure suspension is good news for her indeed.
I find this a bit odd. So, oh, oh Sheila is going to decide that it is now even more in the interest of taxpayers to fund the temporary ownership of these properties? In case she missed it, the homes are mostly located in implosion-ville CA, and are losing value by the day. So, instead of getting those homes sold quick, they are going to sit on them, and the value will plummet further, only to have to take them on to the books eventually anyway.
Dont I get any say in deciding that I dont want to support the bonehead who is living across the street from me that cant pay, yet is living on taxpayers dimes for a few more months, while I sit here paying as usual?
I tried to buy an Indymac property in Florida not to
long ago. The location was excellent but the building would have to be torn down. Never could get the realtor nor anyone from Indymac to return my calls. I'm guessing the listing agent wound up getting it for a song.
Geoff, you must be insensitive towards the victims. You must be a rich republican who wants to throw people out on the strret. That is not the politically correct thing to do. Tusk...tusk.
I say good for Ms. Bair. Given how little (on average 50% or less) of the loan value is being recouped by lenders on foreclosed properties, a loan modification down to anything above 50% which keeps a family in the home making payments will actually preserve FDIC money.
It will also preserve the values of other homes in the neighborhoods and communities.
Those "bums" might be your neighbor. Their vandalized, ripped apart home might become your street's eyesore. Their arson fire might spread to your house.
Ms. Bair might not be taking a popular route, but she's doing the right thing for lenders and borrowers.
Id think that person would just not pay and take the housing subsidy courtesy of FDIC. But eventually they get booted. Only difference is the value of the property once realized for the bank is a heck of a lot lower, because no payments were made while the housing market sank further. I think if I was already getting foreclosed Id have already not been making payments.
Cathy, that is true only if you assume they take the property and wont move the price enough to sell it to someone who COULD and WOULD pay. That is the kind of person who should live in the home.
My worst fear used to be a Military coup taking over the US Govt. Now it is my fondest fantasy. Who are these people making these lunatic decisions. Let's round them all up and deport them to Guantanamo.
The feds have a very different set of incentives than IndyMac did. As politicians, the Bush administration wants to delay foreclosures until past the election, and they're not afraid of accountants or regulators telling them not to. As honest regulators, they would favor workouts more because the indirect costs of foreclosures will end up falling heavily on the government. Halting foreclosures helps with moth goals.
NPR this evening has an interview with Peter Wallison and former rep Richard Baker, and analysis of F & F bonus pay and F & F political influence - over $900,000 in political donations this year from Fannie, $475,000 from Freddie.....
GSEs are private but govt backed and the govt might start trading in its stock and they are donating to campaign war chests.......not good, not good, not good.
I did not know that F & F could possibly be allowed to make campaign contributions. OMG.
I wonder why you think it is fair for taxpayers to subsidize homeownership for people who couldnt afford the home they tried to purchase? Are they somehow more worth of the person who would like to own that home at the current market price? What is so special about the person who cant pay their bills that they deserve this? I think you dont believe there should be a fair clearance of the market, and that somehow the government should be put up to the task of preserving artificially inflated home values. Isnt that how we got in this mess?
Another joke. Sheila Bair mortgage business chaos creator. Loan mods, halting foreclosures... Now all customers should stop paying. LOL. This will be worse than Japan because clowns like her refused to do her job in the first place.
Question: If IndyMac had $18 billion in insured deposits, but $32 billion in assets, why is the FDIC estimating its own cost at $4-8 billion to make whole the insured deposits? Does that mean that the $32 billion in assets is actually worth somewhere between $10 billion and $14 billion?
Someone has suggested this in an email I got today, and I wonder if it makes sense to the wise ones here.
The bail-out of Fannie Mae and Freddie Mac by the combined forces of the US Treasury and the Federal Reserve Board is the ugliest exercise of its kind I have ever observed outside early transition economies and mature banana republics.
He seems to have put aside that rapier British wit and gotten out the club.
So ... do I understand correctly that the commenters on this blog want the FDIC to proceed with IndyMac's foreclosures today, this week, the rest of this month, and beyond -- without taking a timeout?
That seems to be what people are saying. Can someone explain why it's wise to foreclose now instead of postponing foreclosures for a few weeks to make sure everything was done correctly?
And if you think the FDIC shouldn't postpone IndyMac foreclosures, do you also think the FDIC should not suspend draws against HELOCs? That would be consistent, would it not?
Grats holders of IndyMac mortgages, guess you get to live rent free courtesy of my tax dollars and Blair's incompetence (or corruption, but I'm giving her the benefit of the doubt).
Since it is the mortgages Indymac owns it is a small subset of the servicing portfolio.
Basically, Sheila gets to try her principal writedown theory with OPM. She views it as the way to mitigage overall loss. It will be interesting to see if a bunch of people stop paying to get a sweetheart deal.
Indymac is a taxpayer asset. All draws agains lines of credit of any kind should be suspended. All callable obligations should be called. Any deadbeats who aren't paying should be foreclosed. Anybody trying to pull a fast one should be prosecuted. Heck, the IRS gets after people for home office deductions, but taxpayers are paying for a bunch of deadbeats to stay in their houses?
I pine for the good old days, when the Republicans were evil. These goody-tushu big government Republicans call their states "Red" for a reason.
What a plan. Brilliant! The big boys get the feds to cover their Fannie with Freddie, then the regional banks become the fall guy with preferred junk secuirty. They were going down the tubes anyway, what with CRE, etc. Then the FDIC takes over the carcass, pays off the insured an all is happy happy joy joy.
I, personally, would like the FDIC to continue the foreclosures, because every day the FDIC continues to hold those properties I (a taxpayer) lose money. A timeout gives my money to people in properties they cannot afford; if it was Blair's personal money, I wouldn't mind too much, but since it's my money, it's offensive and angers me. If Blair wants to put up her own money to cover the difference in market price for all the properties covered by all IndyMac's loans while she "takes a break", go nuts. Otherwise, it's just another way of f-ing the taxpayers through the back door.
Has anyone looked into the main beneficiaries of the fannie and freddie foundations? They spent a ton of money. Where did it all end up?
Also, the following might be proof that Prof. Krugman is fallible (at least when defending the honor of the gse's):
"Also, they didnt do any subprime lending, because they cant: the definition of a subprime loan is precisely a loan that doesnt meet the requirement, imposed by law, that Fannie and Freddie buy only mortgages issued to borrowers who made substantial down payments and carefully documented their income"
I've spoken with my mortgage people that have assured me that the automated underwriting programs were approving subprime borrowers all day long. And if they didn't, then the originators would play with the inputs until software said: okay. They would get it to the point where it approve the loan with minimal or no papwerwork -- offline -- and then they'd submit it, knowing it would go through.
Can someone explain why it's wise to foreclose now instead of postponing foreclosures for a few weeks to make sure everything was done correctly?
In this situation where home values are declining, fast, time is money. The longer they wait to forclose, the less return they get on the asset when they finally sell it. I'm not sure what you're worried about being "done correctly". Delaying foreclosure, really, is not in anyone's best interest.
do you also think the FDIC should not suspend draws against HELOCs?
There's a night and day difference between forclosures and HELOCs. Foreclosures represent collecting on an existing contract between the borrower and the lender. The borrower has every right to foreclose. A HELOC, on the other hand, places the lender under no long term obligations and can be terminated at any time.
I don't feel qualified in the slightest to make any judgments about the relative worthiness of different people in different situations. And I kind of gave up on fair long ago.
I'm trying to look at this from a purely pragmatic viewpoint. If loan mods can reduce the cost to the FDIC and, if they ultimately run out of money, to the taxpayer, then I say full speed ahead - modify the loans. Bring them down to current values. Some of the worst hit areas of CA and FL have experienced 30% median housing price drops - a 30% haircut still seems better than leaving the FDIC stuck with houses that have been turned into copper mines.
If you believe it is a problem with Indymac policy or procedures why just stop foreclosures on just the portfolio loans and not the all the loans being serviced?
I think its pretty clear what is going on. Sheila has some loans to play with and is going to try her ideas out.
I believe you are on the same page that I am Nick.
But oh well, socializatitotalitariacapitalism here we come. Basically this goverment works by whatever definition is expedient. Principles dont exist, except when convenient and accidently aligned with outcomes. Then they are trumpeted. Capitalism and free markets when it provides what we want, same with democracy. If it doesnt produce what we want, try something else that does.
But I disagree with Buiter about not guaranteeing the F & F bonds. A modest haircut could be negotiated, if there were a US leader who could call upon good will and cooperation from China, Japan, etc. No guarantee of any kind would make the US $ implode. If you think gas is expensive now, that would make us long for the days of $4.50 regular.
Doesn't the fed own Indymac? Can't they do whatever they want? Isn't it possible that the fed will write down the mortgage to an affordable level the current owner can pay? Isn't that something the real bank wouldn't do, resulting in a chain reaction to all the other houses in the area? Everyone talks about having a floor in the market. Continuing on with the current method leaves no floor, no sink, or much of anything else. It has to stop somewhere, before even the sideline investors go down the hole after housing.
If you believe it is a problem with Indymac policy or procedures why just stop foreclosures on just the portfolio loans and not the all the loans being serviced?
Hmm. Didn't know about that wrinkle. Didn't see the interview, and it's not on CNBC's site (yet).
I was watching it. I could swear she said the FDIC would review all IMB held loans in foreclosure. I think she intends to do Bair Workouts. Taking the housing crisis in her own hands, with taxpayer money. Disgusting.
Temporarily halting foreclosures could be a sensible and even necessary step, simply on the grounds of needing a few days to set up shop, esp when so much time is devoted to paying off depositors. Depositors shut out in the cold could riot, panic, and start runs on other banks. Someone whose foreclosure is put on hold for a few days will sit still.
But, as Allen C said, some explanation would have been nice. And that points to the most fundamental of all the political problems we face in the middle of this crash: there is zero leadership.
This step or that step with F & F or with failing banks is just not enough. Real leadership would sit down and explain the situation in a way that inspires confidence (look up FDR).
When anyone in the Bush Admn opens their mouth, the world's first thought is not going reassurance, not until the Bush Admn says goodby.
I didn't see the video either, but from Bloomberg:
"We'd like to look at those loans case by case to see if the loans can be modified," Bair said today in an interview with CNBC. "As the new owner of this $15 billion in mortgages, we'd like to see if we can help borrowers."
I'm just basing what I said off the reuters article:
"The Federal Deposit Insurance Corp has temporarily halted any foreclosures on the $15 billion of bank-owned mortgage loans found in IndyMac's portfolio, FDIC Chairman Sheila Bair said on Monday."
"Bair said in an interview on CNBC television that IndyMac, which the FDIC took over after it failed on Friday, had a $200 billion mortgage servicing portfolio."
Why halt on one and not the other? IMHO, the reason is clear.
I watched Bair. Her point was that many of the homes are fetching less than 40c on the dollar right now. her thought was that if she modified these loans they would likely capture more.
it may make sense... I'm not knowledgeable enough to know which route would bring in more income for the bank.
Isn't there a possibility that Bair's workouts on some of the accounts in foreclosure could produce more return for the FDIC than biting the foreclosures in this free-falling market? It would all depend on which cases get workouts and what exact terms, right?
Just asking. Why not give it a try?
Personally, I would not worry about these workouts sustaining price levels or even slowing the price decline. In fact, in the short run such principal right offs might accelerate price decline.
A foreclosure takes many months to provide a new comparable sale price. But a principal write down can happen much more quickly. Wouldn't that speed the process of clearing the market? Just asking.
Umm... This can be disastrous. It appears Congress is going to jam the Paulson plan into the foreclosure bill, as if that beast wasn't hard enough to read already. Enron loophole, anyone?
Dodd said today that the administration's proposals are "valid" and "can make a difference." He also said that while he would have preferred considering them independently of the housing bill, he supports fusing the two to try to get a bill to Bush by the end of this week.
Thanks, Cal. It's refreshing, if unexpected, to find reporters who understand the difference between a mortgage servicing portfolio and portfolio mortgages. Didn't spot the distinction made in the Reuters story.
Joe Shmoe is probably correct that it takes time to set up shop. Seems kinda reckless to proceed with non-portfolio foreclosures without taking a look at them.
What if Bair's experiment works? What if short refis and aggressive modifications do decrease loss severity? Will the FDIC be second-guessed by investors who owned IndyMac-serviced loans that were foreclosed by the FDIC?
I hear lots of people need jobs, and lots of folks with regional bank experience will be looking for new jobs soon . . . or maybe saying hello to their defense attorney and then meeting their new cellmate
"A foreclosure takes many months to provide a new comparable sale price. But a principal write down can happen much more quickly. Wouldn't that speed the process of clearing the market? Just asking."
The issue is it wouldn't provide a comparable price. It wasn't sold the homeowner stayed in it for (presumably) a higher than market price value. It stops transactions from happening but doesn't stop the price decline.
If prices are out of whack with incomes then this slows down the process not accelerates it. Price discovery is delayed. And as we've seen from the Feds that is really what they want.
The board of the world's largest jewellery retailer, which is listed on the London Stock Exchange at present, said in an announcement today that the proposal is the "natural next step in the evolution of Signet's shareholder base, which has seen a steady growth in US ownership since 2003". Almost half of Signet's voting securities are owned by US residents now.
IMHO, this is the next natural step for banks, i.e, instead of moving all that shit off balance shetts, move the whole fuc-ing company to Bermuda where they belong and then evade taxes and stop with all this crap related to disclosure and shareholder equity!
Bair's plan certainly will work, just ask her. You think that they will come out 12 months from now and fess up that it was a failure? We will be fed the same type of fabricated bullshit imaginary statistics that comes out of Hope Now Alliance, Project Lifeline, No Child Left Behind and every other ill-advised government program.
"What if short refis and aggressive modifications do decrease loss severity"
Sure. Look down a couple of posts. 3/5 of restructurings failed a year later. If those loans had been express foreclosed and properties sold to the highest bidders immediately the lender would have misssed 15% property value declines. Great job!
Instead lenders should be determining how to do foreclosures efficiently. Efficient markets!
Several points,one is that the loans being serviced have to be handled in accordance with the contracts (service agreement).The next point is that foreclosures are labor intensive,skilled labor intensive.How many skilled bodies do they have? and how many will they have next week? IndyMac is not a small or simple operation to take over,foreclosures are both politically sensitive and HAVE TO BE DONE RIGHT.So if fdic takes the time to look at the operation before deciding what to do with their extremely limited staff,well,it seems both prudent and unavoidable.
A woman takes a complementary sandwich as they are passed out to people waiting in line to enter an IndyMac Bank branch under federal management at the company's corporate headquarters in Pasadena, California July 14, 2008.
from those photos....
i wish i was near a branch, i could have got a free lunch.....
The head of Mexico's intelligence service says drug cartels are threatening the country's democracy.
Well the Bush admin, FDIC, the Fed, Wall St. have already blown America's democracy because only the crooks and deadbeats win with responsible people in the middle paying for their fucked up policies and decisions !
If this "works" in the big picture across large number of serviced loans looks for inventory and transaction volume to fall.
It doesn't mean people can afford more of a house so new buyers are assed out. Fewer short sales and foreclosures as part of inventory. Unrealistic sellers just sit and not sell since buyers can't afford to buy. This isn't a solution it is a delaying the recognition of losses (which is better for the Fed right now).
That said, right now this is only $15 billion in loans, a very small amount. Sheila gets to play her game.
Yes, what you say is strictly true. But wouldn't the effective reality be a little different?
The write down is not a new sale, but it is also not the same thing as the existing price from the last sale as recorded at the county assessor's office.
A wave of write downs would be something like a rebate on a consumer commodity, something like an advertisement of a discount sale, though an odd sale in which the seller and buyer split the loss. If the bank eats 20%, then the buyer eats 20%, so the real value today ought to be 40% off the original price. Wouldn't that sort of advertizing further strengthen expectations of falling prices going on for a while? And force sellers to accept the new pricing reality?
Any examples of this sort of thing working or not working in the past?
It doesn't really matter to me if Blair's bold socialist experiment works or not; it pisses me off that the arrogant b*tch is betting against logic, recent president, and the market with MY money. Put your own money on the line if you want to try bold, new, unproven, and illogical financial experiments. It's like the FHA still giving out 100% LTV loans: they are gambling my money on risks no investors would take.
Somebody should tell Blair her job is not to play leveraged hedge fund speculator trying to bet big on the miraculous market recovery, even if she thinks she's God's gift to idiot underwater borrowers. And the note should preferably have a personalized pink slip attached.
Re: She said the "overwhelming majority" of U.S. banks are "safe and sound."
Capital levels are strong at U.S. banks, but she warned that the industry will see the number of troubled banks and failures grow in the coming months.
"The number is going to go up," Bair said. "Banks do fail and there's nothing unusual about that.
I have to say, that is bullshit, because although some banks may be "safe", they exists as a place to store future value, and in most cases the accounts in banks are linked to jobs and things like mortgages and these dynamic institutions are all at risk while Bush and Congress & The Senate and all the bogus conspirators of this collusion pretend that things are safe! These people that suggest safety are the whores that have caused this mess and what they fail to grasp is the speed at which this all can unfold.
Senator Schumer was bold enough to to go above and beyond what his colleagues were willing to do, in regard to helping investors and just using lip service to suggest that the bank or the economy is fundamentally sound -- he took action and warned people that IndyMac et al, are not safe, because they are crooked casinos that are out of cash -- out of time!! The clock has run out and the game is over, but the politicians still want time for another round of dances and parties while things are going to hell.
Bair is just trying to do her job, but it comes at least 8 months too late and as for the rest of The Gang, whatever they say is worthless and the cash they get paid by lobby groups is worth less and less everyday and I hope they all drown in payola!
The buyer eats 20%? That is the point, he would have a home at 20% above current market value he has to pay for. It isn't like they can sell anytime soon since they are still underwater.
Existing sellers who think they have equity still get to live in denial because no new transactions happen to show where the market is at so they get the slow bleed going on.
If the fed worked on loans in areas where prices aren't out of whack with incomes, that would be one thing and would prevent an overshoot. But they want to stop the big decreases in areas that are overvalued to delay the recognition of large losses. At least that is how I see it.
Who was calling for 200 SKF by Aug ? Sure looks promising. And Bair said IMB just made it to the troubled banks list in June. The list that IMB wasn'tr on was from April. She said their benchmark lists are quarterly and the new list was going to be LONGER!
The weird thing about Bair's workout plan is that it will apparently give homeowners w/ failed banks a better deal than those under the foreclosure bill.
If you're with Wamu or any of the trouble banks would you even consider the 15% Frank-Dodd haircut?
Fact is that there are plenty other foreclosures our there besides Indymac's. There is already all the freaking price discover you want. It makes more sense to keep some people in their homes if they can afford it and keep the cash flow going, rather than turning the property over to a listed broker to sell to themselves or a confederate in a further swindle.
Some people won't be happy until people who are foreclosed on are taken out and shot.
This is an antitrust matter once again, and WTF is FTC doing? It is the job of FTC to watch over this type of activity which distorts normal free trading of commerce, just as when Bernanke/Paulson Friends Of Angelo overstepped authority to allow JPM to merge with Bear -- without public notice, or details, or review in regard to antitrust and rules related to fair competition! One word>>> lawsuits! Dah....
In other news: "My supplier said the price is going up $6 a ton in July and another $6 in August," said Georgetown's highway surveyor, Peter Durkee, noting that the current price of asphalt is $51.90 a ton.
Right. It wouldn't be a steal for someone who stayed in the house. They'd still pay too much and they couldn't sell without a short sale.
Lots of FBs can't be worked out on any terms, and others could only be worked out on red light flashing moral hazard terms.
In between, I wonder if there is a non-trivial number who could be worked out with judicious principal write downs, and with a carefully selected pool that is a minority of the foreclosures in process (10-30%?) I wonder what the wider effects would be.
It would be worth doing if it made some money for FDIC, if it speeded price discovery (or acceptance) or at least did not impede it, and if it helped people who legitmately got screwed.
Devils in the details, as always.
If you are right about the FDIC (or anyone else) wanting to stop big descreases (and you are often right), then those folks are just going to fail.
If theres a bustle in your hedgerow
Dont be alarmed now,
Its just a spring clean for the may queen.
Yes, there are two paths you can go by
But in the long run
Theres still time to change the road youre on.
And it makes me wonder.
Who was calling for 200 SKF by Aug ? Sure looks promising. And Bair said IMB just made it to the troubled banks list in June. The list that IMB wasn'tr on was from April. She said their benchmark lists are quarterly and the new list was going to be LONGER!
The flip side is that SRS seems to be grossly lagging. IYR is setting new lows, but SRS seems to be quite a ways from new highs so far.
I don't believe in authority. Conjure, yes; authority, no.
Leadership is another story. Leadership is quite real, and the best leadership does not resort to arguments based on authority. The contrary example, of course, is well illustrated by Bush's declaration that the US does not torture, which Condi Rice explained by saying, "We're the United States, we do not torture." Such arguments, based on authority and ontology, are tipoffs that leadership is collapsing.
Brownie, you're doing a heck of a job. Must be true if Bush said so.
"Fact is that there are plenty other foreclosures our there besides Indymac's."
Yes, as I pointed out, this is only $15 billion and a drop in the bucket. The question would be what would happen if this became SOP for large servicers?
"It makes more sense to keep some people in their homes if they can afford it and keep the cash flow going"
"If they can afford it" would be the operative term. So many mortgages aren't amortizing at all (IO or neg am) if someone can actually afford to pay an amortizing loan at a reasonable interest rate the servicers will be all over that already.
I think it would be very informative for people to check out their local neighborhoods in the public records (can be accessed through the MLS if you have a friendly realtor, or the courthouse if you dont). If you are in California I think you'd be shocked at the amount of money withdrawn from homes. It really doesn't have a context until you see it in the neighborhoods around you and how prevelant it is. Between the low equity position of new buyers and reduced equity of the cashout / ATM types equity is at a premium and the Fed is trying to stop people from realizing that they will actually have to pay for it instead of handing it off to someone else.
"rather than turning the property over to a listed broker to sell to themselves or a confederate in a further swindle"
Yeah, because everyone knows listing brokers are just flush with cash right now.
I think there were a massive amount of mandates issued by The Bush Coup, which helps to explain why so many Federal agencies and even individual state agencies, were so unwilling to do anything about the corruption and lack of enforcement regarding banking, mortgage and finance regulation.
This matter of collusion to ignore any proactive management that might have slowed the cancer-like (insidious) progress and root nature of this subprime Ownership Society mess, was due to a high level government mandate to obfuscate and to willingly generate and disseminate falsified and misleading information to the public -- for the purpose of enriching people that are symbolically represented by the umbrella assortment of characters in The Friends Of Angelo conspiracy.
My brother bought at the top in 2006 for 300k. His loan payment reset to $3400 from $1400. He got IndyMac to reduce the loan a little so he's now paying $3000. In the end I'm guessing the home will be worth 150k tops. I keep begging him to walk away but he and my sister in-law don't want to take the hit to their credit.
"And Bair said IMB just made it to the troubled banks list in June."
Good grief...If Bair can't figure it out, perhaps she should order them by short interest percentage. Or perhaps she could order them by capitalized interest.
Bair hasn't mentioned anything about workouts for performing portfolio loans. Technically, Frank-Dodd wouldn't apply to IndyMac Federal Bank, but it would seem unjust to give foreclosed loans a larger haircut than performing ones.
It is interesting to me that when the federal government talks about bailing out fellow citizens, the real anger comes out on this blog.
Now I have no love for the debt addicted american consumer and I will happily making money shorting them. But they aren't the real problem.
Meanwhile, the massive corporate bailouts continue and there is only mild outrage, aside from a few who understand what is really happening.
If you are worried about these people staying in their homes they can't pay for, you are taking the bait and playing right into the hands of those who continue to steal the wealth of this country.
I believe $15 billion has completely disappeared in Iraq. Gone. They sent it there in large cash shipments. Poof.
Nothing to see there. Keep getting angry at your neighbors. Keep blaming stupid poor people. Phil Gramm will keep laughing his ass off while he takes you all for a ride.
And you will be told if we can just drill off the coast of Florida, everything will be fine.
It really is fascinating how easy it is to pull off.
Absolutely right about the effects of equity extraction. I've seen that in LA, noticing it in foreclosure listings by discerning the date of purchase (listed in county assessor records on line, along with Prop 13 limited tax assessment data that gives a sense of orignal sale price). Lots of houses purchased for a couple of hundred K or less are foreslosed for $1mill in loan debt.
I have not seen data that sorts foreclosures by defaulted purchase loans and defaulted re-fi (or other extraction) loans, but it looks like equity extraction lands lots of people in foreclosure. Some might have bought fancy cars and taken vacations, but others paid for college for their kids or paid for medical care. I've got to think more people got suckered and screwed in cash-out refi loans than in original pruchase loans, though some got screwed there, too.
I wouldn't assume this burden falls primarily on taxpayers. I'd assume it falls on those with over $100,000 in IndyMac savings.
This action will decrease the eventual sale price of IndyMac, hence decreasing whatever compensation those people might have received... they will be the biggest losers of all.
Wow. If Bill Siedman were in charge, I don't think he would have stopped these foreclosures.
Fact is Shiela Bair was asleep at the switch, and to hide the results she she wants to throw money at every FB that pops up -- sort of a perverse, bureaucratic version of whack-a-mole.
Foreclosures are what we call "game theoretic". That's a fancy way of saying if you don't get yours someone else will. "Yours", of course, is the best price for your REO, which a few weeks from now will be lower than today's, and a few weeks from then even lower. Only when Shiela cranks the numbers on the loan mods, she'll of course assume prices will be flat. Because, you know, home prices never fall.
I don't trust Sheila. She is an extremely good looking woman, but she was in charge of "govt. relations" for the new york stock exchange for five years.
I would just like to say that this is an incredible surreal chapter in the history of capitalism, maybe the most bizarre and fascinating ever written.
I'm sure there will be some excellent accounts of it written with hindsight.
But I would like to thank CR, Tanta and all the posters here for writing (collectively) the best contemporaneous account of this story, on a daily basis, of any in the world. My 2 cents and glad to be a small part of it.
U.S. taxpayers on the hook in Fannie-Freddie rescue plan.
Analysts say that up to 150 banks nationwide could close over the next 18 months.
Once again the Bush admin, FDIC, the Fed, Wall St. prove again that crooks and deadbeats win with responsible people in the middle paying for their fucked up policies and decisions !
Apparently, today you could have sold the July $190 call and the $180 put for a net of $22. So if SKF closes between $158 and $212 on Friday, you would walk away with free money.
I am not suggesting anyone make this bet. Just observing that the options market is pricing in additional big moves in the SKF this week, either up... Or down.
Did I mention previously that Sheila Bair won the 1989 American Natural Bodybuilding Conference Women's Championship? I did? Not the same Sheila Bair? Bank Lawyer's Blog: FCRA
How is this possible when the FDIC is supposed to polish this turd for sale post haste. I predict the case-by-case workout will be too complicated and Bair will give an automatic 15%-20% principal haircut (at taxpayer expense) prior to unloading this off to a biggie like WFC. What is next?? Maybe Ms. Bair will not ding your credit file for the avalanche of NODs that are sure to come from her freeze plan.
Shiela BAer is an inarticulate political hack. She is a lawyer. This is yet another blatently illegal action. She has no authority whatsoever to negotiate anything. Add this to the list of criminal actions Rogers outlined today.
There may be some truth to the accusation that IndyMac's undue reliance on Alt-A residential mortgage loans, and on brokered deposits to fund the same, will lead to a review of how and why IndyMac's financial condition deteriorated so rapidly under the fitful gaze of its primary regulator (and, to be fair to the OTS, under the gaze of its "backup" regulator, the FDIC). On the other hand
Did anyone watch the yahoo slideshow on the crowds at Indymac? There was one slide that detailed a young man from US Bank that was passing out literature on their cd's.
Yesterday I walked into a supermarket that had US Bank branch and a girl chased us inside and pushed water bottles into our hands -- bottles with cardboard around them advertising $75 in groceries if we open up a checking account.
km4 writes:
...
Once again the Bush admin, FDIC, the Fed, Wall St. prove again that crooks and deadbeats win with responsible people in the middle paying for their fucked up policies and decisions !
How ungrateful of you! They were striving to let everyone and anyone who can put his marker on a piece of paper have a brand new home with all the latest amenities, and here you go complaining about a few mistakes!
"With Congress' public approval at a subterranean 9% and falling, the speaker must be starting to realize that November may not be the Democratic cakewalk that pundits predict.
President Bush, however, isn't about to be suckered into releasing the reserves just long enough for pump prices to fall by Election Day, thereby saving Democrats' skins so they can carry on their drill-nothingism for an additional two years."
**>> Here is my take tonight: Those Fuc-ers! Ok, first thing, they talk about how low the ratings are for Congress, then sidestep The Senate and obviously Bush and then fail to bring them all under one indivisible fuc-ing umbrella -- where they all share fuc-ing blame for this retarded mess! God, what a bunch of retards!
FDIC: Failed Bank Information - Bank Closing Information for IndyMac Bank, F.S.B., Pasadena, CA
"If you had a loan with IndyMac Bank, F.S.B., you should continue to make your payments as usual. The terms of your loan will not change under the terms of the loan contract because they are contractually agreed to your promissory note with the failed institution. Checks should be made payable as usual and sent to the same address until further notice. "
IndyMac Reopens, Halts Foreclosures on Its Loans - WSJ.com
And this:
"We will very aggressively pursue loan-modification strategies for unaffordable loans to make them affordable on a long-term, sustainable basis," Ms. Bair said in an interview Monday"
Because if I read the 2nd thing I certainly wouldn't do the first.
Also Congress will try to use the Fannie/Freddie bailout as leverage to get the whole housing bill passed with the issues that Bush said he'd veto still intact.
They will give him a choice between delaying the Fannie/Freddie regulation and backstop or allowing their pet programs to go through.
PR: , President Bushs ratings were in the mid-thirties in 2007 and now are in the high twenties, almost double the congressional tally.
However, here we see a contrast from a poll last month, before the bank crashes: The president's job approval hit an all-time low last week in a national survey by the Los Angeles Times/Bloomberg News. The 23 percent approval rating was even worse than record lows for Bush in surveys released in recent days by organizations ranging from Fox News to the Gallup Poll -- where Bush is now tied for the second-lowest rating in presidential polling history with Richard Nixon.
Last week, Bush bottomed out at a new Ohio low of 22 percent in the Quinnipiac Poll. And in the Ohio Poll, which has been conducting surveys since the early 1980s, Bush established an all-time low in May -- although earlier this month, he rebounded a couple of points. Breaking News and Headline News - HispanicBusiness.com
It does look a tad messy with those contradictory messages, doesn't it.
But, hey, its not as bad as when Chertoff went on TV not knowing that the Superdome was full of people without food or water or working toilets.
My abstract thoughts about the potential wisdom of FDIC considering workouts would ultimately founder in the real world on the rocks that pass for brains in the Bush Admn.
McCain: I noticed there is a poll today that showed the approval rating for the first time ever in single digits, approval rating of Congress. I have not met the 9 percent lately that approve of Congress, so we are gridlocked, we are -- the housing bill up before the United States Senate, with the housing problem that we have today, which by the way I have some problems with that housing bill, but it's better than doing nothing, and the home ownership bill.
... two things Congress never misses, that's a pay raise and recesses, no matter what the situation is. So I'll be glad to talk to you about the economy and the economy and the economy, and home ownership and lower taxes and if you want somebody to raise taxes, I'm not your guy. I'm not your candidate. And I believe that raising taxes at this particular time in history could do very great damage.
** However, McCain and his fellow Friends of Angelo Bush Coup Supporters will sidestep the reality of the subprime bailout and the cost to taxpayers, from the bank bailouts, where America is becoming a nation of socialized second rate retards because of failed republican policy, corruption, collusion and The Great Depression 2
After the way the market acted today and the state the financials were left in.. is tomorrow a sure short sell of the financials or is it a buy in commodities ? Or am i completely lost?
A retired banker told me that foreclosures were best for a bank because losses could be written off over a period of time whereas cramdowns resulted in almost immediate charges against capital. Now I wonder what the best course of action is for a foreclosed bank operated by the FDIC. Clearly Blair and her staff must make a lot of assumptions about the future. I wonder if letting the delinquent resident continue to reside in the house might result in a smaller loss to the mortgage holder in the end (whenever and whatever that is). Do we know the best course of action here? Does the FDIC? Whats the data on this?
Re tacking on the GSE regulation changes to the bailout bill:
Yeah, I had the same thought; now Dodd and the corrupt Congress can use the need to add some regulation penalty to the GSE handouts to help ram their $300 billion speculator and lender payoff through. They might even be able to tack on some other pork-barrel spending for good measure. Today's lesson: never underestimate the government's ability to exacerbate a gigantic unmitigated disaster into something even worse.
isn't this going to increase borrowing costs for future transactions putting more downward pressure on prices?
if so, it's great for those that buy with cash (the minority for sure, but no idea how many as a % of total transactions). bad for owners that want to sell and should be irrelevant for financed transactions (assuming that i'm right about lower prices compensating for increase cost of financing).
If Congress goes to 1% approval it doesn't matter. All that matters is how you feel about your Congressperson, you don't get to vote for Nancy Pelosi unless you live in her district and even then it is totally geremandered anyway.
John Stark writes:
Question: If IndyMac had $18 billion in insured deposits, but $32 billion in assets, why is the FDIC estimating its own cost at $4-8 billion to make whole the insured deposits? Does that mean that the $32 billion in assets is actually worth somewhere between $10 billion and $14 billion?
actually the fdic has about $22b in assets to work with as IMB had borrowed about $10b from the FHLB SF. the FHLB line will stay in place until the fdic manages to sell the place.
onto other amzaing news, bailout bair has put fdic coo john bovenzi in as the ceo of the brdige bank. this guy is part of the reason for the bad morale at the fdic and actually what experince does he have running an option arm lender this size. usually the fdic hires an outside professional to run the bridge bank. but given all of the stupid loan mods she wants to do it makes sense that she would place her sychophant in the job as a competent outsider would not go along with her hair brained ideas. look for the resolution costs to rise.
bailout bair's press release on sunday raises more concerns that she attempted to allay. she says IMB only accounts for 0.2% of industry assets which is supposed to make us sleep at night. but guess what, IMB will take around 10% of the insurance fund. so it will only take about $300b or 2% of industry assets to wipe out the insurance fund. another gaffe at the end of the press release -- the fdic insures depositors not banks. also, the fund falls to about $1.01 per $100 of insured deposits after IMB, well below the minimum of $1.15. notably absence from the press release is any mention how the fdic intends to restore the health of the insurance fund. this was an ill conceived press release and will cause more problems in the long run. this shows the lack of judgement by bailout bair and all the more reason she should not be in charge of running this bridge bank.
In this situation where home values are declining, fast, time is money. The longer they wait to forclose, the less return they get on the asset when they finally sell it. I'm not sure what you're worried about being "done correctly". Delaying foreclosure, really, is not in anyone's best interest.
I'm not sure I buy this. Home prices are falling because they haven't yet found the market clearing price where they'll sell. Putting the houses on the market now is not the same thing as selling them now.
You don't like the experiment Bair is trying with taxpayer money? Can you come up with something better? The arguments here are contradictory:
1) Making loan mods for more than the houses are actually worth is going to artificially prop up house values;
2) Making loan mods is going to cost us, the taxpayers, a lot more money than if the FDIC just foreclosed and sold the houses.
Can you come up with something better? The arguments here are contradictory:
If the damage is $1T in bailouts to bondholders, then one alternative is $100B/yr for 10 years of accelerated mortgage interest deduction.
A $600,000 house has a monthly carrying cost of ~$3300, counting the $1600/mo tax credit one receives from the Fed and state governments.
Doubling that tax credit for 10 years would cost us $80B/yr in tax revenue, but reduce the monthly payment by half, the equivalent of a $280,000 purchase price.
Party time would come back and all would be well in housing. All for the present cost of the Iraq war.
I just took a look at the stockholders of Washington Mutual. It seems that some funds were buying heavily in the first quarter of this year. Utterly incredible and a good eyeopener why it is stupid to put your money into a mutual fund where it is likely as not to be squandered by fools.
Foreclosure and liquidation resets the value of the house to market.
OK, but foreclosure and liquidation aren't the same thing. You're welcome to buy the house down the street from me that was foreclosed on in February 2007, crabsofsteel. Seventeen months later, it hasn't been liquidated.
It's magical thinking to believe that foreclosure and liquidation happen faster than principal writedown.
Another nice way to prevent marking to market. Just let the shadow inventory "vanish" with the bank. The debt-people get to keep their overpriced house that they could never afford, while savers in the doomed bank are wiped out. Sounds like the perfect plan in the new USSA, where vice is rewarded and restraint is punished.
"I tried to buy an Indymac property in Florida not to
long ago. The location was excellent but the building would have to be torn down. Never could get the realtor nor anyone from Indymac to return my calls. I'm guessing the listing agent wound up getting it for a song."
That's the other side of this: how much you wanna bet all the good foreclosures end up in the hands of relatively few people and "somehow" we're all still stuck waiting and waiting for prices to come down while these future slumlords build their new empires?
I think a new post is in order. There is a lot of misinformation here, and interesting points that should be addressed as well.
Nick - It's Sheila Bair not Blair. Think "Greasy Hair" if that helps you remember.
Also, the FDIC is not using "taxpayer money", ya mo-ron. It's funded by premiums that the banks pay in order to put those nifty "FDIC-insured" plaques in their lobbies.
At this point, they are trying to maximize the former entity's asset values, and doing so not as simple as "every day a foreclosure is delayed, there is a greater loss". If that were true, every bank would just foreclosure on every home that went a single day in default.
I've been rather critical of some of Bair's notions in the past, most notably her complete disregard for junior liens in her workout ideas, but I'm not about to jump all over her for wanting to evaluate if there are ways the FDIC can help given this situation.
One little problem I see is that I don't think it will be easy to proceduralize treating portfolio loans dramatically different than those that are S.F.O. Then again, there are provisions in the PSAs that could allow a given trustee to move the servicing elsewhere if they have a big beef with certain things Sheila might do.
12th percentile: "If you are worried about these people staying in their homes they can't pay for, you are taking the bait and playing right into the hands of those who continue to steal the wealth of this country."
So tell me, IYHO what is the best way to steal the wealth back? Short? Or is there another strategy you prefer?
I was in court yesterday (for a foreclosure) and the guy previous to me had an Indymac loan that was being foreclosed. The atty hadn't got any word. Summary judgt against the debtor granted.
primo
El segundo!
Right, add another few billion to that bailout cost.
Level IV assets?
A homeowner in Nevada told me that she had been negotiating a mortgage modification with IndyMac, and when she called this morning, they said they were no longer doing loan mods. A foreclosure suspension is good news for her indeed.
is this illegal..
So Sheila gets to play the mortgage restructuring game. With what personel I know not. Well, the FC'd owner gets a few more free months rent.
Cheers,
FREE RENT!!!
I find this a bit odd. So, oh, oh Sheila is going to decide that it is now even more in the interest of taxpayers to fund the temporary ownership of these properties? In case she missed it, the homes are mostly located in implosion-ville CA, and are losing value by the day. So, instead of getting those homes sold quick, they are going to sit on them, and the value will plummet further, only to have to take them on to the books eventually anyway.
Dont I get any say in deciding that I dont want to support the bonehead who is living across the street from me that cant pay, yet is living on taxpayers dimes for a few more months, while I sit here paying as usual?
Are you kidding me? I wish I had an IndyMac loan. A couple more free months rent for these bums.
Also on the wires:
UPDATE 1-US Congress Dems want GSE proposals in housing bill
| Reuters
Republican resistance to Paulson plan is building. I'd imagine they won't think much of stopping foreclosures either.
This whole thing is rapidly going beyond ugly into some sort of fantasy land...
I tried to buy an Indymac property in Florida not to
long ago. The location was excellent but the building would have to be torn down. Never could get the realtor nor anyone from Indymac to return my calls. I'm guessing the listing agent wound up getting it for a song.
SB: We'd like to modify your loan.
FB: Uh huh...Well it's worth $200k less than the loan. You gonna bring down the amount.
SB: No...we want to help keep you in your home.
FB: Here's the keys. See ya.
Cheers,
What does this mean exactly ?
If I were a deadbeat with a loan from Indymac and I want to mail in my keys (I just can't come up with the monthly nut), what happens to me ?
Do I just continue to live in the house ? Does the house become my property regardless of whether I mail in the checks ?
If that's the case, why would any homeowner with an Indymac loan continue mailing in the checks ?
Totally confused.
Geoff, you must be insensitive towards the victims. You must be a rich republican who wants to throw people out on the strret. That is not the politically correct thing to do. Tusk...tusk.
I say good for Ms. Bair. Given how little (on average 50% or less) of the loan value is being recouped by lenders on foreclosed properties, a loan modification down to anything above 50% which keeps a family in the home making payments will actually preserve FDIC money.
It will also preserve the values of other homes in the neighborhoods and communities.
Those "bums" might be your neighbor. Their vandalized, ripped apart home might become your street's eyesore. Their arson fire might spread to your house.
Ms. Bair might not be taking a popular route, but she's doing the right thing for lenders and borrowers.
The question I keep asking over and over again (to myself mainly):
Is some wider spread foreclosure bailout even politically feasible now that so many people have already lost their homes to foreclosure?
Won't an explicit foreclosure bailout now instantly make these spiteful?
Id think that person would just not pay and take the housing subsidy courtesy of FDIC. But eventually they get booted. Only difference is the value of the property once realized for the bank is a heck of a lot lower, because no payments were made while the housing market sank further. I think if I was already getting foreclosed Id have already not been making payments.
(Bair) also said the "overwhelming majority" of U.S. banks are "safe and sound."
Doctor to cancer patient:
"The overwhelming majority of cells in your body are perfectly healthy."
(Bair) also said the "overwhelming majority" of U.S. banks are "safe and sound."
Doctor to cancer patient:
"The overwhelming majority of cells in your body are perfectly healthy."
Wasn't the housing market sound in 2006?
Cathy, that is true only if you assume they take the property and wont move the price enough to sell it to someone who COULD and WOULD pay. That is the kind of person who should live in the home.
My worst fear used to be a Military coup taking over the US Govt. Now it is my fondest fantasy. Who are these people making these lunatic decisions. Let's round them all up and deport them to Guantanamo.
The feds have a very different set of incentives than IndyMac did. As politicians, the Bush administration wants to delay foreclosures until past the election, and they're not afraid of accountants or regulators telling them not to. As honest regulators, they would favor workouts more because the indirect costs of foreclosures will end up falling heavily on the government. Halting foreclosures helps with moth goals.
A good read:
UPDATE 1-US Congress Dems want GSE proposals in housing bill
| Reuters
Bair raid?
Why are the scumbag idiots in the Whitehouse who call themselves "free marketeers" bailing out Bear, Fannie and Freddy?
I'll tell you why. These reklepticans have been feeding of the taxpayers. "Free Markets" for us. Free money for them.
It will also preserve the values of other homes in the neighborhoods and communities.
Screw THAT!
Affordability means LOWER prices.
More affordable homes means we can devote more income to other things than just the mortgage.
Sorry wrong link above.
Here's the correct one:
FT.com / Lex / Financial services & property - Fixing Fannie and Freddie
OT
NPR this evening has an interview with Peter Wallison and former rep Richard Baker, and analysis of F & F bonus pay and F & F political influence - over $900,000 in political donations this year from Fannie, $475,000 from Freddie.....
GSEs are private but govt backed and the govt might start trading in its stock and they are donating to campaign war chests.......not good, not good, not good.
I did not know that F & F could possibly be allowed to make campaign contributions. OMG.
Fannie, Freddie Critics Say Warnings Were Ignored : NPR
If Conjure doesn't lock up his scotch supply he could find it gone.
I wonder why you think it is fair for taxpayers to subsidize homeownership for people who couldnt afford the home they tried to purchase? Are they somehow more worth of the person who would like to own that home at the current market price? What is so special about the person who cant pay their bills that they deserve this? I think you dont believe there should be a fair clearance of the market, and that somehow the government should be put up to the task of preserving artificially inflated home values. Isnt that how we got in this mess?
worth of = worthy tha
Another joke. Sheila Bair mortgage business chaos creator. Loan mods, halting foreclosures... Now all customers should stop paying. LOL. This will be worse than Japan because clowns like her refused to do her job in the first place.
Socialize losses, privatize profits.
Wasn't Sheila Bair in The Exorcist?
Question: If IndyMac had $18 billion in insured deposits, but $32 billion in assets, why is the FDIC estimating its own cost at $4-8 billion to make whole the insured deposits? Does that mean that the $32 billion in assets is actually worth somewhere between $10 billion and $14 billion?
Someone has suggested this in an email I got today, and I wonder if it makes sense to the wise ones here.
is this illegal..
If I were an investor holding the note and hadn't received payment in 9 months, my opinion would be, yes.
Willem Buiter unloads with both barrels
:
The bail-out of Fannie Mae and Freddie Mac by the combined forces of the US Treasury and the Federal Reserve Board is the ugliest exercise of its kind I have ever observed outside early transition economies and mature banana republics.
He seems to have put aside that rapier British wit and gotten out the club.
So ... do I understand correctly that the commenters on this blog want the FDIC to proceed with IndyMac's foreclosures today, this week, the rest of this month, and beyond -- without taking a timeout?
That seems to be what people are saying. Can someone explain why it's wise to foreclose now instead of postponing foreclosures for a few weeks to make sure everything was done correctly?
And if you think the FDIC shouldn't postpone IndyMac foreclosures, do you also think the FDIC should not suspend draws against HELOCs? That would be consistent, would it not?
Grats holders of IndyMac mortgages, guess you get to live rent free courtesy of my tax dollars and Blair's incompetence (or corruption, but I'm giving her the benefit of the doubt).
Since it is the mortgages Indymac owns it is a small subset of the servicing portfolio.
Basically, Sheila gets to try her principal writedown theory with OPM. She views it as the way to mitigage overall loss. It will be interesting to see if a bunch of people stop paying to get a sweetheart deal.
Indymac is a taxpayer asset. All draws agains lines of credit of any kind should be suspended. All callable obligations should be called. Any deadbeats who aren't paying should be foreclosed. Anybody trying to pull a fast one should be prosecuted. Heck, the IRS gets after people for home office deductions, but taxpayers are paying for a bunch of deadbeats to stay in their houses?
I pine for the good old days, when the Republicans were evil. These goody-tushu big government Republicans call their states "Red" for a reason.
Better dead than red.
So what's the point of this?
Isn't our govt still housing Katrina refugees?
What a plan. Brilliant! The big boys get the feds to cover their Fannie with Freddie, then the regional banks become the fall guy with preferred junk secuirty. They were going down the tubes anyway, what with CRE, etc. Then the FDIC takes over the carcass, pays off the insured an all is happy happy joy joy.
To Holden Lewis:
I, personally, would like the FDIC to continue the foreclosures, because every day the FDIC continues to hold those properties I (a taxpayer) lose money. A timeout gives my money to people in properties they cannot afford; if it was Blair's personal money, I wouldn't mind too much, but since it's my money, it's offensive and angers me. If Blair wants to put up her own money to cover the difference in market price for all the properties covered by all IndyMac's loans while she "takes a break", go nuts. Otherwise, it's just another way of f-ing the taxpayers through the back door.
Does that mean that the $32 billion in assets is actually worth somewhere between $10 billion and $14 billion?
Yes. Liquidated credit cards, HELOCs, mortgages, etc. aren't worth full price.
Nemo above linked to this article:
FT.com | Willem Buiter's Maverecon | The rescue of Fannie and Freddie by Hankie and Feddie
Amen!
Has anyone looked into the main beneficiaries of the fannie and freddie foundations? They spent a ton of money. Where did it all end up?
Also, the following might be proof that Prof. Krugman is fallible (at least when defending the honor of the gse's):
"Also, they didnt do any subprime lending, because they cant: the definition of a subprime loan is precisely a loan that doesnt meet the requirement, imposed by law, that Fannie and Freddie buy only mortgages issued to borrowers who made substantial down payments and carefully documented their income"
I've spoken with my mortgage people that have assured me that the automated underwriting programs were approving subprime borrowers all day long. And if they didn't, then the originators would play with the inputs until software said: okay. They would get it to the point where it approve the loan with minimal or no papwerwork -- offline -- and then they'd submit it, knowing it would go through.
Sorry Prof. It's that Ivory Tower thing again.
Isn't our govt still housing Katrina refugees?
Brilliant! We can merge FEMA with the FDIC and move the Katrina refugees into the foreclosed homes.
Can someone explain why it's wise to foreclose now instead of postponing foreclosures for a few weeks to make sure everything was done correctly?
In this situation where home values are declining, fast, time is money. The longer they wait to forclose, the less return they get on the asset when they finally sell it. I'm not sure what you're worried about being "done correctly". Delaying foreclosure, really, is not in anyone's best interest.
do you also think the FDIC should not suspend draws against HELOCs?
There's a night and day difference between forclosures and HELOCs. Foreclosures represent collecting on an existing contract between the borrower and the lender. The borrower has every right to foreclose. A HELOC, on the other hand, places the lender under no long term obligations and can be terminated at any time.
Argento
not a bad idea, actually . . . better than the formaldahyde trailers.
I don't feel qualified in the slightest to make any judgments about the relative worthiness of different people in different situations. And I kind of gave up on fair long ago.
I'm trying to look at this from a purely pragmatic viewpoint. If loan mods can reduce the cost to the FDIC and, if they ultimately run out of money, to the taxpayer, then I say full speed ahead - modify the loans. Bring them down to current values. Some of the worst hit areas of CA and FL have experienced 30% median housing price drops - a 30% haircut still seems better than leaving the FDIC stuck with houses that have been turned into copper mines.
"Can someone explain why it's wise to foreclose now instead of postponing foreclosures for a few weeks to make sure everything was done correctly?"
Some explanation would have been nice.
Holden,
If you believe it is a problem with Indymac policy or procedures why just stop foreclosures on just the portfolio loans and not the all the loans being serviced?
I think its pretty clear what is going on. Sheila has some loans to play with and is going to try her ideas out.
Awesome. Time to disable the online automatic bill pay for my mortgage.
No more staycation. It's aloha time!
I believe you are on the same page that I am Nick.
But oh well, socializatitotalitariacapitalism here we come. Basically this goverment works by whatever definition is expedient. Principles dont exist, except when convenient and accidently aligned with outcomes. Then they are trumpeted. Capitalism and free markets when it provides what we want, same with democracy. If it doesnt produce what we want, try something else that does.
Really kind of sick of this.
Principles dont exist, except when convenient and accidently aligned with outcomes.
It's called politics.
the Buiter piece on F & F in the Financial Times is excellent:
FT.com | Willem Buiter's Maverecon | The rescue of Fannie and Freddie by Hankie and Feddie
But I disagree with Buiter about not guaranteeing the F & F bonds. A modest haircut could be negotiated, if there were a US leader who could call upon good will and cooperation from China, Japan, etc. No guarantee of any kind would make the US $ implode. If you think gas is expensive now, that would make us long for the days of $4.50 regular.
Doesn't the fed own Indymac? Can't they do whatever they want? Isn't it possible that the fed will write down the mortgage to an affordable level the current owner can pay? Isn't that something the real bank wouldn't do, resulting in a chain reaction to all the other houses in the area? Everyone talks about having a floor in the market. Continuing on with the current method leaves no floor, no sink, or much of anything else. It has to stop somewhere, before even the sideline investors go down the hole after housing.
If you believe it is a problem with Indymac policy or procedures why just stop foreclosures on just the portfolio loans and not the all the loans being serviced?
Hmm. Didn't know about that wrinkle. Didn't see the interview, and it's not on CNBC's site (yet).
I was watching it. I could swear she said the FDIC would review all IMB held loans in foreclosure. I think she intends to do Bair Workouts. Taking the housing crisis in her own hands, with taxpayer money. Disgusting.
Temporarily halting foreclosures could be a sensible and even necessary step, simply on the grounds of needing a few days to set up shop, esp when so much time is devoted to paying off depositors. Depositors shut out in the cold could riot, panic, and start runs on other banks. Someone whose foreclosure is put on hold for a few days will sit still.
But, as Allen C said, some explanation would have been nice. And that points to the most fundamental of all the political problems we face in the middle of this crash: there is zero leadership.
This step or that step with F & F or with failing banks is just not enough. Real leadership would sit down and explain the situation in a way that inspires confidence (look up FDR).
When anyone in the Bush Admn opens their mouth, the world's first thought is not going reassurance, not until the Bush Admn says goodby.
I didn't see the video either, but from Bloomberg:
"We'd like to look at those loans case by case to see if the loans can be modified," Bair said today in an interview with CNBC. "As the new owner of this $15 billion in mortgages, we'd like to see if we can help borrowers."
Bair Says FDIC Has Halted Some IndyMac Foreclosures (Update1) - Bloomberg.com
Holden,
I'm just basing what I said off the reuters article:
"The Federal Deposit Insurance Corp has temporarily halted any foreclosures on the $15 billion of bank-owned mortgage loans found in IndyMac's portfolio, FDIC Chairman Sheila Bair said on Monday."
"Bair said in an interview on CNBC television that IndyMac, which the FDIC took over after it failed on Friday, had a $200 billion mortgage servicing portfolio."
Why halt on one and not the other? IMHO, the reason is clear.
Well there you have it. Thx argento.
Joe, leadership? All the free market personal responsibility drones would be up in arms.
"The overwhelming majority of cells in your body are perfectly healthy."
TCA: LOL
I watched Bair. Her point was that many of the homes are fetching less than 40c on the dollar right now. her thought was that if she modified these loans they would likely capture more.
it may make sense... I'm not knowledgeable enough to know which route would bring in more income for the bank.
Looks like Cal called it right.
Isn't there a possibility that Bair's workouts on some of the accounts in foreclosure could produce more return for the FDIC than biting the foreclosures in this free-falling market? It would all depend on which cases get workouts and what exact terms, right?
Just asking. Why not give it a try?
Personally, I would not worry about these workouts sustaining price levels or even slowing the price decline. In fact, in the short run such principal right offs might accelerate price decline.
A foreclosure takes many months to provide a new comparable sale price. But a principal write down can happen much more quickly. Wouldn't that speed the process of clearing the market? Just asking.
of course the problem is that I'm not sure that they have the personnel to do this.
Uncle B,
More news on teeth:
Page not found - London Stock Exchange
Umm... This can be disastrous. It appears Congress is going to jam the Paulson plan into the foreclosure bill, as if that beast wasn't hard enough to read already. Enron loophole, anyone?
Dodd said today that the administration's proposals are "valid" and "can make a difference." He also said that while he would have preferred considering them independently of the housing bill, he supports fusing the two to try to get a bill to Bush by the end of this week.
Republicans Seek Delay on Fannie, Freddie Rescue Plan (Update1) - Bloomberg.com
Thanks, Cal. It's refreshing, if unexpected, to find reporters who understand the difference between a mortgage servicing portfolio and portfolio mortgages. Didn't spot the distinction made in the Reuters story.
Joe Shmoe is probably correct that it takes time to set up shop. Seems kinda reckless to proceed with non-portfolio foreclosures without taking a look at them.
What if Bair's experiment works? What if short refis and aggressive modifications do decrease loss severity? Will the FDIC be second-guessed by investors who owned IndyMac-serviced loans that were foreclosed by the FDIC?
Yearning
I hear lots of people need jobs, and lots of folks with regional bank experience will be looking for new jobs soon . . . or maybe saying hello to their defense attorney and then meeting their new cellmate
I'm thinking I don't have enough TLT puts...
Joe,
"A foreclosure takes many months to provide a new comparable sale price. But a principal write down can happen much more quickly. Wouldn't that speed the process of clearing the market? Just asking."
The issue is it wouldn't provide a comparable price. It wasn't sold the homeowner stayed in it for (presumably) a higher than market price value. It stops transactions from happening but doesn't stop the price decline.
If prices are out of whack with incomes then this slows down the process not accelerates it. Price discovery is delayed. And as we've seen from the Feds that is really what they want.
Indy mac - run on the bank slideshow:
Error Page - Yahoo! News
http://news.yahoo.com/nphotos/IndyMac-seized-federal-regulators/ss/events/bs/071308indymac/s:/nm/20080714/wl_canada_nm/canada_indymac_col;_ylt=ArND77axdEKtZHDtB.fuf9XxrGIF/im:/080714/480/bd26292a7066440984db0f5f84b277e2/#photoViewer=/080714/ids_photos_ts/
WOW!
"What if Bair's experiment works?"
We're not paying her for experiments. Reminds me of Eastern Airlines when Martin Shugrue blew even more creditors' money.
OPM...You gotta love it.
New Strategy For American banks
http://www.retail-week.com/Fashion/2008/07/signet_to_list_on_nyse_and_relocate_to_bermuda.html
The board of the world's largest jewellery retailer, which is listed on the London Stock Exchange at present, said in an announcement today that the proposal is the "natural next step in the evolution of Signet's shareholder base, which has seen a steady growth in US ownership since 2003". Almost half of Signet's voting securities are owned by US residents now.
Well there goes more of the FDIC funds out the window....good move guys.
Bair's plan certainly will work, just ask her. You think that they will come out 12 months from now and fess up that it was a failure? We will be fed the same type of fabricated bullshit imaginary statistics that comes out of Hope Now Alliance, Project Lifeline, No Child Left Behind and every other ill-advised government program.
"What if short refis and aggressive modifications do decrease loss severity"
Sure. Look down a couple of posts. 3/5 of restructurings failed a year later. If those loans had been express foreclosed and properties sold to the highest bidders immediately the lender would have misssed 15% property value declines. Great job!
Instead lenders should be determining how to do foreclosures efficiently. Efficient markets!
Several points,one is that the loans being serviced have to be handled in accordance with the contracts (service agreement).The next point is that foreclosures are labor intensive,skilled labor intensive.How many skilled bodies do they have? and how many will they have next week? IndyMac is not a small or simple operation to take over,foreclosures are both politically sensitive and HAVE TO BE DONE RIGHT.So if fdic takes the time to look at the operation before deciding what to do with their extremely limited staff,well,it seems both prudent and unavoidable.
A woman takes a complementary sandwich as they are passed out to people waiting in line to enter an IndyMac Bank branch under federal management at the company's corporate headquarters in Pasadena, California July 14, 2008.
from those photos....
i wish i was near a branch, i could have got a free lunch.....
I sure hope my tax dollars didnt pay for those sandwiches!
i could have got a free lunch
Ummm...
Tom Stone --
Couple of points:
The head of Mexico's intelligence service says drug cartels are threatening the country's democracy.
Well the Bush admin, FDIC, the Fed, Wall St. have already blown America's democracy because only the crooks and deadbeats win with responsible people in the middle paying for their fucked up policies and decisions !
If this "works" in the big picture across large number of serviced loans looks for inventory and transaction volume to fall.
It doesn't mean people can afford more of a house so new buyers are assed out. Fewer short sales and foreclosures as part of inventory. Unrealistic sellers just sit and not sell since buyers can't afford to buy. This isn't a solution it is a delaying the recognition of losses (which is better for the Fed right now).
That said, right now this is only $15 billion in loans, a very small amount. Sheila gets to play her game.
Crispy,if EVERY tax dollar collected in the last 8 years had been spent on whiskey ad women we would all be better off.
Cal
Yes, what you say is strictly true. But wouldn't the effective reality be a little different?
The write down is not a new sale, but it is also not the same thing as the existing price from the last sale as recorded at the county assessor's office.
A wave of write downs would be something like a rebate on a consumer commodity, something like an advertisement of a discount sale, though an odd sale in which the seller and buyer split the loss. If the bank eats 20%, then the buyer eats 20%, so the real value today ought to be 40% off the original price. Wouldn't that sort of advertizing further strengthen expectations of falling prices going on for a while? And force sellers to accept the new pricing reality?
Any examples of this sort of thing working or not working in the past?
Whiskey and women, or whiskey ad women? I thought only men like Bill Murray made it Santori time.
hmmm whiskey ad women . . . cute.
Cal
I should also say thanks. I've learned a lot from your posts.
To Holden Lewis:
It doesn't really matter to me if Blair's bold socialist experiment works or not; it pisses me off that the arrogant b*tch is betting against logic, recent president, and the market with MY money. Put your own money on the line if you want to try bold, new, unproven, and illogical financial experiments. It's like the FHA still giving out 100% LTV loans: they are gambling my money on risks no investors would take.
Somebody should tell Blair her job is not to play leveraged hedge fund speculator trying to bet big on the miraculous market recovery, even if she thinks she's God's gift to idiot underwater borrowers. And the note should preferably have a personalized pink slip attached.
Re: She said the "overwhelming majority" of U.S. banks are "safe and sound."
Capital levels are strong at U.S. banks, but she warned that the industry will see the number of troubled banks and failures grow in the coming months.
"The number is going to go up," Bair said. "Banks do fail and there's nothing unusual about that.
Senator Schumer was bold enough to to go above and beyond what his colleagues were willing to do, in regard to helping investors and just using lip service to suggest that the bank or the economy is fundamentally sound -- he took action and warned people that IndyMac et al, are not safe, because they are crooked casinos that are out of cash -- out of time!! The clock has run out and the game is over, but the politicians still want time for another round of dances and parties while things are going to hell.
Bair is just trying to do her job, but it comes at least 8 months too late and as for the rest of The Gang, whatever they say is worthless and the cash they get paid by lobby groups is worth less and less everyday and I hope they all drown in payola!
Joe,
The buyer eats 20%? That is the point, he would have a home at 20% above current market value he has to pay for. It isn't like they can sell anytime soon since they are still underwater.
Existing sellers who think they have equity still get to live in denial because no new transactions happen to show where the market is at so they get the slow bleed going on.
If the fed worked on loans in areas where prices aren't out of whack with incomes, that would be one thing and would prevent an overshoot. But they want to stop the big decreases in areas that are overvalued to delay the recognition of large losses. At least that is how I see it.
WSJ link to overvalued markets (ones I think the FDIC will try to halt the price declines despite being clearly overvalued):
http://s.wsj.net/public/resources/images/NA-AR326_OUTLOO_20080713191219.gif
Joe,
Thanks for the kind words, I have zero expertise in this area I just read a lot about it. Definitely don't take my word as anything authoritative.
I always cringe when people listen to me
. Unfortunately I apparently like to hear myself talk!
CR is the place to learn. You can learn something new everyday here. Some of it is even worthwhile
.
Who was calling for 200 SKF by Aug ? Sure looks promising. And Bair said IMB just made it to the troubled banks list in June. The list that IMB wasn'tr on was from April. She said their benchmark lists are quarterly and the new list was going to be LONGER!
The weird thing about Bair's workout plan is that it will apparently give homeowners w/ failed banks a better deal than those under the foreclosure bill.
If you're with Wamu or any of the trouble banks would you even consider the 15% Frank-Dodd haircut?
Price discovery...blah blah blah...price discovery...free market...price discovery...
Fact is that there are plenty other foreclosures our there besides Indymac's. There is already all the freaking price discover you want. It makes more sense to keep some people in their homes if they can afford it and keep the cash flow going, rather than turning the property over to a listed broker to sell to themselves or a confederate in a further swindle.
Some people won't be happy until people who are foreclosed on are taken out and shot.
This is an antitrust matter once again, and WTF is FTC doing? It is the job of FTC to watch over this type of activity which distorts normal free trading of commerce, just as when Bernanke/Paulson Friends Of Angelo overstepped authority to allow JPM to merge with Bear -- without public notice, or details, or review in regard to antitrust and rules related to fair competition! One word>>> lawsuits! Dah....
In other news: "My supplier said the price is going up $6 a ton in July and another $6 in August," said Georgetown's highway surveyor, Peter Durkee, noting that the current price of asphalt is $51.90 a ton.
Cal
Right. It wouldn't be a steal for someone who stayed in the house. They'd still pay too much and they couldn't sell without a short sale.
Lots of FBs can't be worked out on any terms, and others could only be worked out on red light flashing moral hazard terms.
In between, I wonder if there is a non-trivial number who could be worked out with judicious principal write downs, and with a carefully selected pool that is a minority of the foreclosures in process (10-30%?) I wonder what the wider effects would be.
It would be worth doing if it made some money for FDIC, if it speeded price discovery (or acceptance) or at least did not impede it, and if it helped people who legitmately got screwed.
Devils in the details, as always.
If you are right about the FDIC (or anyone else) wanting to stop big descreases (and you are often right), then those folks are just going to fail.
If theres a bustle in your hedgerow
Dont be alarmed now,
Its just a spring clean for the may queen.
Yes, there are two paths you can go by
But in the long run
Theres still time to change the road youre on.
And it makes me wonder.
Who was calling for 200 SKF by Aug ? Sure looks promising. And Bair said IMB just made it to the troubled banks list in June. The list that IMB wasn'tr on was from April. She said their benchmark lists are quarterly and the new list was going to be LONGER!
The flip side is that SRS seems to be grossly lagging. IYR is setting new lows, but SRS seems to be quite a ways from new highs so far.
Cal
I don't believe in authority. Conjure, yes; authority, no.
Leadership is another story. Leadership is quite real, and the best leadership does not resort to arguments based on authority. The contrary example, of course, is well illustrated by Bush's declaration that the US does not torture, which Condi Rice explained by saying, "We're the United States, we do not torture." Such arguments, based on authority and ontology, are tipoffs that leadership is collapsing.
Brownie, you're doing a heck of a job. Must be true if Bush said so.
Cheers
Gareth G,
"Fact is that there are plenty other foreclosures our there besides Indymac's."
Yes, as I pointed out, this is only $15 billion and a drop in the bucket. The question would be what would happen if this became SOP for large servicers?
"It makes more sense to keep some people in their homes if they can afford it and keep the cash flow going"
"If they can afford it" would be the operative term. So many mortgages aren't amortizing at all (IO or neg am) if someone can actually afford to pay an amortizing loan at a reasonable interest rate the servicers will be all over that already.
I think it would be very informative for people to check out their local neighborhoods in the public records (can be accessed through the MLS if you have a friendly realtor, or the courthouse if you dont). If you are in California I think you'd be shocked at the amount of money withdrawn from homes. It really doesn't have a context until you see it in the neighborhoods around you and how prevelant it is. Between the low equity position of new buyers and reduced equity of the cashout / ATM types equity is at a premium and the Fed is trying to stop people from realizing that they will actually have to pay for it instead of handing it off to someone else.
"rather than turning the property over to a listed broker to sell to themselves or a confederate in a further swindle"
Yeah, because everyone knows listing brokers are just flush with cash right now.
IMHO
1) FDIC will run out of money.
currently 53B - Indymac
WAMU can wipe out the rest by itself.
2) trust the fed to choose the worst way to handle Fannie and Freddie.
Bernie: Hey lets buy their stock and hope the problem goes away.
3) there are homes in ca that are 50% down and still can fall 50% from current value. (Santa Ana, Ca.)
I think there were a massive amount of mandates issued by The Bush Coup, which helps to explain why so many Federal agencies and even individual state agencies, were so unwilling to do anything about the corruption and lack of enforcement regarding banking, mortgage and finance regulation.
This matter of collusion to ignore any proactive management that might have slowed the cancer-like (insidious) progress and root nature of this subprime Ownership Society mess, was due to a high level government mandate to obfuscate and to willingly generate and disseminate falsified and misleading information to the public -- for the purpose of enriching people that are symbolically represented by the umbrella assortment of characters in The Friends Of Angelo conspiracy.
My brother bought at the top in 2006 for 300k. His loan payment reset to $3400 from $1400. He got IndyMac to reduce the loan a little so he's now paying $3000. In the end I'm guessing the home will be worth 150k tops. I keep begging him to walk away but he and my sister in-law don't want to take the hit to their credit.
barely --
I think she intends to do Bair Workouts.
I think I would pay for a Bair Workout Video.
Just saying.
That was over 1/4 of a billion shares trading hands. Do you feel lucky, punk?
Nice Nemo!
"And Bair said IMB just made it to the troubled banks list in June."
Good grief...If Bair can't figure it out, perhaps she should order them by short interest percentage. Or perhaps she could order them by capitalized interest.
Bair hasn't mentioned anything about workouts for performing portfolio loans. Technically, Frank-Dodd wouldn't apply to IndyMac Federal Bank, but it would seem unjust to give foreclosed loans a larger haircut than performing ones.
It is interesting to me that when the federal government talks about bailing out fellow citizens, the real anger comes out on this blog.
Now I have no love for the debt addicted american consumer and I will happily making money shorting them. But they aren't the real problem.
Meanwhile, the massive corporate bailouts continue and there is only mild outrage, aside from a few who understand what is really happening.
If you are worried about these people staying in their homes they can't pay for, you are taking the bait and playing right into the hands of those who continue to steal the wealth of this country.
I believe $15 billion has completely disappeared in Iraq. Gone. They sent it there in large cash shipments. Poof.
Nothing to see there. Keep getting angry at your neighbors. Keep blaming stupid poor people. Phil Gramm will keep laughing his ass off while he takes you all for a ride.
And you will be told if we can just drill off the coast of Florida, everything will be fine.
It really is fascinating how easy it is to pull off.
Cal
Absolutely right about the effects of equity extraction. I've seen that in LA, noticing it in foreclosure listings by discerning the date of purchase (listed in county assessor records on line, along with Prop 13 limited tax assessment data that gives a sense of orignal sale price). Lots of houses purchased for a couple of hundred K or less are foreslosed for $1mill in loan debt.
I have not seen data that sorts foreclosures by defaulted purchase loans and defaulted re-fi (or other extraction) loans, but it looks like equity extraction lands lots of people in foreclosure. Some might have bought fancy cars and taken vacations, but others paid for college for their kids or paid for medical care. I've got to think more people got suckered and screwed in cash-out refi loans than in original pruchase loans, though some got screwed there, too.
12th good points
"It really is fascinating how easy it is to pull off."
It's appalling how easy it is to pull off. The tactics haven't changed since the New World was discovered, inconveniently already filled with people.
Divide and conquer will leave the vast middle majority of Americans conquered.
I know!
The note holders can have Katrina trailers up to the amount of the note.
I wouldn't assume this burden falls primarily on taxpayers. I'd assume it falls on those with over $100,000 in IndyMac savings.
This action will decrease the eventual sale price of IndyMac, hence decreasing whatever compensation those people might have received... they will be the biggest losers of all.
The IMB Report
has not been updated in a week. Perhaps someone from the FDIC would like comment on the outlook going forward.
Wow. If Bill Siedman were in charge, I don't think he would have stopped these foreclosures.
Fact is Shiela Bair was asleep at the switch, and to hide the results she she wants to throw money at every FB that pops up -- sort of a perverse, bureaucratic version of whack-a-mole.
Foreclosures are what we call "game theoretic". That's a fancy way of saying if you don't get yours someone else will. "Yours", of course, is the best price for your REO, which a few weeks from now will be lower than today's, and a few weeks from then even lower. Only when Shiela cranks the numbers on the loan mods, she'll of course assume prices will be flat. Because, you know, home prices never fall.
I don't trust Sheila. She is an extremely good looking woman, but she was in charge of "govt. relations" for the new york stock exchange for five years.
ABORT: PROJECT SLIM PICKENS
Until further notice.
Best Regards
G.W. Bush
OT, but what would happen if I were to just set up a lawn chair outside my bank and then call the paper?
Think that they'd be upset?
Sheila Bair has no more legal authority to halt foreclosures on Indymac loans than she has to declare war on Mexico. What a crock!
"She is an extremely good looking woman"
Oooooh Yaaaaaaaaaaahhhh!
Got shampoo ?
WSJ article:
IndyMac Reopens, Halts Foreclosures on Its Loans - WSJ.com
If I had an indymac loan i'd stop paying.
12th % is 100% correct.
Ray, I guess they just couldn't stop making loans fast enough for them to make enough money to stay open..
I would just like to say that this is an incredible surreal chapter in the history of capitalism, maybe the most bizarre and fascinating ever written.
I'm sure there will be some excellent accounts of it written with hindsight.
But I would like to thank CR, Tanta and all the posters here for writing (collectively) the best contemporaneous account of this story, on a daily basis, of any in the world. My 2 cents and glad to be a small part of it.
"We will very aggressively pursue loan-modification strategies for unaffordable loans to make them affordable on a long-term, sustainable basis,"
Who will these unseasoned affordable massively modified 100000 yr loans be placed with? WFC or JPM ?
I predict FDIC and PBGC will both go broke in the same year, 2010.
Barely @ 739:
Anonymouse called for SKF @ 200 by Xmas. And I got out at 153 with a nice profit.
Oh well.
And someone said that they do believe in Conjure but not in Authority.
I'm trying to picture Conjure at the lectern, a cigar in his/her mouth and a bag of ground up dog balls hanging from her/his neck.
Sweet.
Rich,
Anytime, glad to be here.
U.S. taxpayers on the hook in Fannie-Freddie rescue plan.
Analysts say that up to 150 banks nationwide could close over the next 18 months.
Once again the Bush admin, FDIC, the Fed, Wall St. prove again that crooks and deadbeats win with responsible people in the middle paying for their fucked up policies and decisions !
UB,
Re: "I don't trust Sheila. She is an extremely good looking woman"
Re: There is no page titled "Pseudohallucination".
Pseudohallucination - Wikipedia, the free encyclopedia
Sorry UB, your on your own with that one...
Interesting options observation:
Blogger: Redirecting
Apparently, today you could have sold the July $190 call and the $180 put for a net of $22. So if SKF closes between $158 and $212 on Friday, you would walk away with free money.
I am not suggesting anyone make this bet. Just observing that the options market is pricing in additional big moves in the SKF this week, either up... Or down.
Did I mention previously that Sheila Bair won the 1989 American Natural Bodybuilding Conference Women's Championship? I did? Not the same Sheila Bair?
Bank Lawyer's Blog: FCRA
I'm sick now...
How is this possible when the FDIC is supposed to polish this turd for sale post haste. I predict the case-by-case workout will be too complicated and Bair will give an automatic 15%-20% principal haircut (at taxpayer expense) prior to unloading this off to a biggie like WFC. What is next?? Maybe Ms. Bair will not ding your credit file for the avalanche of NODs that are sure to come from her freeze plan.
Shiela BAer is an inarticulate political hack. She is a lawyer. This is yet another blatently illegal action. She has no authority whatsoever to negotiate anything. Add this to the list of criminal actions Rogers outlined today.
anyone know if shorts are temporarily suspended
Not bad stuff there, but slanted towards pro-banks and sniffing for clients:
Let The (Blame) Games Begin
Bank Lawyer's Blog:
There may be some truth to the accusation that IndyMac's undue reliance on Alt-A residential mortgage loans, and on brokered deposits to fund the same, will lead to a review of how and why IndyMac's financial condition deteriorated so rapidly under the fitful gaze of its primary regulator (and, to be fair to the OTS, under the gaze of its "backup" regulator, the FDIC). On the other hand
"sniffing for clients"
Did anyone watch the yahoo slideshow on the crowds at Indymac? There was one slide that detailed a young man from US Bank that was passing out literature on their cd's.
Yesterday I walked into a supermarket that had US Bank branch and a girl chased us inside and pushed water bottles into our hands -- bottles with cardboard around them advertising $75 in groceries if we open up a checking account.
I want to party with those cowboys!
Is it too late to short IMB on the rumor that they will be reducing principal to all loans by 20% ?
opps meant if short sales are suspended also?
km4 writes:
...
Once again the Bush admin, FDIC, the Fed, Wall St. prove again that crooks and deadbeats win with responsible people in the middle paying for their fucked up policies and decisions !
How ungrateful of you! They were striving to let everyone and anyone who can put his marker on a piece of paper have a brand new home with all the latest amenities, and here you go complaining about a few mistakes!
Welcome Back!
Here is some PR: Investors.com - Page not found
"With Congress' public approval at a subterranean 9% and falling, the speaker must be starting to realize that November may not be the Democratic cakewalk that pundits predict.
President Bush, however, isn't about to be suckered into releasing the reserves just long enough for pump prices to fall by Election Day, thereby saving Democrats' skins so they can carry on their drill-nothingism for an additional two years."
**>> Here is my take tonight: Those Fuc-ers! Ok, first thing, they talk about how low the ratings are for Congress, then sidestep The Senate and obviously Bush and then fail to bring them all under one indivisible fuc-ing umbrella -- where they all share fuc-ing blame for this retarded mess! God, what a bunch of retards!
curious-er @ 9:19 pm.. good snark
Wasn't the housing market sound in 2006?
Well, it was making a sound in 2006, those of us learning from CR knew it was not a good sound...
Anyone see the juxtaposition between this:
FDIC: Failed Bank Information - Bank Closing Information for IndyMac Bank, F.S.B., Pasadena, CA
"If you had a loan with IndyMac Bank, F.S.B., you should continue to make your payments as usual. The terms of your loan will not change under the terms of the loan contract because they are contractually agreed to your promissory note with the failed institution. Checks should be made payable as usual and sent to the same address until further notice. "
IndyMac Reopens, Halts Foreclosures on Its Loans - WSJ.com
And this:
"We will very aggressively pursue loan-modification strategies for unaffordable loans to make them affordable on a long-term, sustainable basis," Ms. Bair said in an interview Monday"
Because if I read the 2nd thing I certainly wouldn't do the first.
Re: "I want to party with those cowboys!"
I lost my train of thought, but something about chaps and peyote...
Also Congress will try to use the Fannie/Freddie bailout as leverage to get the whole housing bill passed with the issues that Bush said he'd veto still intact.
They will give him a choice between delaying the Fannie/Freddie regulation and backstop or allowing their pet programs to go through.
PR: , President Bushs ratings were in the mid-thirties in 2007 and now are in the high twenties, almost double the congressional tally.
However, here we see a contrast from a poll last month, before the bank crashes: The president's job approval hit an all-time low last week in a national survey by the Los Angeles Times/Bloomberg News. The 23 percent approval rating was even worse than record lows for Bush in surveys released in recent days by organizations ranging from Fox News to the Gallup Poll -- where Bush is now tied for the second-lowest rating in presidential polling history with Richard Nixon.
Last week, Bush bottomed out at a new Ohio low of 22 percent in the Quinnipiac Poll. And in the Ohio Poll, which has been conducting surveys since the early 1980s, Bush established an all-time low in May -- although earlier this month, he rebounded a couple of points.
Breaking News and Headline News - HispanicBusiness.com
Cal
It does look a tad messy with those contradictory messages, doesn't it.
But, hey, its not as bad as when Chertoff went on TV not knowing that the Superdome was full of people without food or water or working toilets.
My abstract thoughts about the potential wisdom of FDIC considering workouts would ultimately founder in the real world on the rocks that pass for brains in the Bush Admn.
Sorry I wasted our time.
Happy Bastille Day anybody for a redo?
McCain: I noticed there is a poll today that showed the approval rating for the first time ever in single digits, approval rating of Congress. I have not met the 9 percent lately that approve of Congress, so we are gridlocked, we are -- the housing bill up before the United States Senate, with the housing problem that we have today, which by the way I have some problems with that housing bill, but it's better than doing nothing, and the home ownership bill.
... two things Congress never misses, that's a pay raise and recesses, no matter what the situation is. So I'll be glad to talk to you about the economy and the economy and the economy, and home ownership and lower taxes and if you want somebody to raise taxes, I'm not your guy. I'm not your candidate. And I believe that raising taxes at this particular time in history could do very great damage.
good news, now i can legitimately stop paying my monthly indy mortgage payment too, calling all indy borrowers, go ahead and default!!
After the way the market acted today and the state the financials were left in.. is tomorrow a sure short sell of the financials or is it a buy in commodities ? Or am i completely lost?
A retired banker told me that foreclosures were best for a bank because losses could be written off over a period of time whereas cramdowns resulted in almost immediate charges against capital. Now I wonder what the best course of action is for a foreclosed bank operated by the FDIC. Clearly Blair and her staff must make a lot of assumptions about the future. I wonder if letting the delinquent resident continue to reside in the house might result in a smaller loss to the mortgage holder in the end (whenever and whatever that is). Do we know the best course of action here? Does the FDIC? Whats the data on this?
Re tacking on the GSE regulation changes to the bailout bill:
Yeah, I had the same thought; now Dodd and the corrupt Congress can use the need to add some regulation penalty to the GSE handouts to help ram their $300 billion speculator and lender payoff through. They might even be able to tack on some other pork-barrel spending for good measure. Today's lesson: never underestimate the government's ability to exacerbate a gigantic unmitigated disaster into something even worse.
isn't this going to increase borrowing costs for future transactions putting more downward pressure on prices?
if so, it's great for those that buy with cash (the minority for sure, but no idea how many as a % of total transactions). bad for owners that want to sell and should be irrelevant for financed transactions (assuming that i'm right about lower prices compensating for increase cost of financing).
If Congress goes to 1% approval it doesn't matter. All that matters is how you feel about your Congressperson, you don't get to vote for Nancy Pelosi unless you live in her district and even then it is totally geremandered anyway.
As for IMB, when does RTC Part 2 start?
John Stark writes:
Question: If IndyMac had $18 billion in insured deposits, but $32 billion in assets, why is the FDIC estimating its own cost at $4-8 billion to make whole the insured deposits? Does that mean that the $32 billion in assets is actually worth somewhere between $10 billion and $14 billion?
actually the fdic has about $22b in assets to work with as IMB had borrowed about $10b from the FHLB SF. the FHLB line will stay in place until the fdic manages to sell the place.
onto other amzaing news, bailout bair has put fdic coo john bovenzi in as the ceo of the brdige bank. this guy is part of the reason for the bad morale at the fdic and actually what experince does he have running an option arm lender this size. usually the fdic hires an outside professional to run the bridge bank. but given all of the stupid loan mods she wants to do it makes sense that she would place her sychophant in the job as a competent outsider would not go along with her hair brained ideas. look for the resolution costs to rise.
bailout bair's press release on sunday raises more concerns that she attempted to allay. she says IMB only accounts for 0.2% of industry assets which is supposed to make us sleep at night. but guess what, IMB will take around 10% of the insurance fund. so it will only take about $300b or 2% of industry assets to wipe out the insurance fund. another gaffe at the end of the press release -- the fdic insures depositors not banks. also, the fund falls to about $1.01 per $100 of insured deposits after IMB, well below the minimum of $1.15. notably absence from the press release is any mention how the fdic intends to restore the health of the insurance fund. this was an ill conceived press release and will cause more problems in the long run. this shows the lack of judgement by bailout bair and all the more reason she should not be in charge of running this bridge bank.
In this situation where home values are declining, fast, time is money. The longer they wait to forclose, the less return they get on the asset when they finally sell it. I'm not sure what you're worried about being "done correctly". Delaying foreclosure, really, is not in anyone's best interest.
I'm not sure I buy this. Home prices are falling because they haven't yet found the market clearing price where they'll sell. Putting the houses on the market now is not the same thing as selling them now.
You don't like the experiment Bair is trying with taxpayer money? Can you come up with something better? The arguments here are contradictory:
1) Making loan mods for more than the houses are actually worth is going to artificially prop up house values;
2) Making loan mods is going to cost us, the taxpayers, a lot more money than if the FDIC just foreclosed and sold the houses.
It can't be both of these.
Can you come up with something better? The arguments here are contradictory:
If the damage is $1T in bailouts to bondholders, then one alternative is $100B/yr for 10 years of accelerated mortgage interest deduction.
A $600,000 house has a monthly carrying cost of ~$3300, counting the $1600/mo tax credit one receives from the Fed and state governments.
Doubling that tax credit for 10 years would cost us $80B/yr in tax revenue, but reduce the monthly payment by half, the equivalent of a $280,000 purchase price.
Party time would come back and all would be well in housing. All for the present cost of the Iraq war.
Just writing down the principal amount does not work because:
Hi, we're from the government.
And we hold your mortgage now.
I just took a look at the stockholders of Washington Mutual. It seems that some funds were buying heavily in the first quarter of this year. Utterly incredible and a good eyeopener why it is stupid to put your money into a mutual fund where it is likely as not to be squandered by fools.
Foreclosure and liquidation resets the value of the house to market.
OK, but foreclosure and liquidation aren't the same thing. You're welcome to buy the house down the street from me that was foreclosed on in February 2007, crabsofsteel. Seventeen months later, it hasn't been liquidated.
It's magical thinking to believe that foreclosure and liquidation happen faster than principal writedown.
Another nice way to prevent marking to market. Just let the shadow inventory "vanish" with the bank. The debt-people get to keep their overpriced house that they could never afford, while savers in the doomed bank are wiped out. Sounds like the perfect plan in the new USSA, where vice is rewarded and restraint is punished.
"I tried to buy an Indymac property in Florida not to
long ago. The location was excellent but the building would have to be torn down. Never could get the realtor nor anyone from Indymac to return my calls. I'm guessing the listing agent wound up getting it for a song."
That's the other side of this: how much you wanna bet all the good foreclosures end up in the hands of relatively few people and "somehow" we're all still stuck waiting and waiting for prices to come down while these future slumlords build their new empires?
I think a new post is in order. There is a lot of misinformation here, and interesting points that should be addressed as well.
Nick - It's Sheila Bair not Blair. Think "Greasy Hair" if that helps you remember.
Also, the FDIC is not using "taxpayer money", ya mo-ron. It's funded by premiums that the banks pay in order to put those nifty "FDIC-insured" plaques in their lobbies.
At this point, they are trying to maximize the former entity's asset values, and doing so not as simple as "every day a foreclosure is delayed, there is a greater loss". If that were true, every bank would just foreclosure on every home that went a single day in default.
I've been rather critical of some of Bair's notions in the past, most notably her complete disregard for junior liens in her workout ideas, but I'm not about to jump all over her for wanting to evaluate if there are ways the FDIC can help given this situation.
One little problem I see is that I don't think it will be easy to proceduralize treating portfolio loans dramatically different than those that are S.F.O. Then again, there are provisions in the PSAs that could allow a given trustee to move the servicing elsewhere if they have a big beef with certain things Sheila might do.
12th percentile: "If you are worried about these people staying in their homes they can't pay for, you are taking the bait and playing right into the hands of those who continue to steal the wealth of this country."
So tell me, IYHO what is the best way to steal the wealth back? Short? Or is there another strategy you prefer?
It was only a matter of time:
OneWest Bank formerly IndyMac @ Pissed Consumer
will USB set the tone for tomorrow?
I was in court yesterday (for a foreclosure) and the guy previous to me had an Indymac loan that was being foreclosed. The atty hadn't got any word. Summary judgt against the debtor granted.
police was dispatched @ LA - Encino office; 2 nd day of lines
?