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Is the US Government About to Forgive Mortgage Debt? Let’s Crowdsource Our Way Through a Scenario or Two!
Note: This is a long post, so I have bifurcated it - placing part two with the heavy graphics and the financial stuff on by blog. The intro and legal theory suggested by readers is here in part one. I would suggest one read it in its entirety before dismissing any one part of it, though.
Is it possible for the US Government to choose to forgive mortgage
debt? Sounds outrageous? Read on for the legal theory behind this claim
and let me know what you think? I thought it was little esoteric as
well, but as I looked deeper… Well, I’ll let you be the judge.
A lot of attention accrued to Representative Grayson’s calling out of
foreclosure fraud, and for good reason. The story is absolutely
amazing, and kudos to a member of congress that defends his
constituency.
It’s not as if other entities have failed to take notice. ZeroHedge has its usual witty commentary regarding the possibility of foreclosure transactions potentially being unwound due to fraudulent foreclosure activity. The NYT
ran an article stating that Fitch will look into lowering the credit
rating of companies that participated in the submission of inappropriate
foreclosure paperwork, which apparently seems to include an awful lot
of companies. It goes on to state (as excerpted by Zerohedge):
Fitch Ratings said that Wednesday
it was asking mortgage companies about their internal processes for
executing foreclosure affidavits. If it finds the processes lacking,
Fitch will consider downgrading the company’s rating.
The agency also said if the
issue is widespread, the resulting delays and extra costs to
foreclose could increase losses related to residential mortgage-backed
securities.
Here’s the twist. A lawyer who happens to have
followed my writings over the years has suggested that most are missing
the big picture in focusing on fraudulent foreclosure documents. He
contends (and I’m paraphrasing here, these are not my words, per se) “that
since the U.S. has ownership interest in many (if not most) delinquent
and distressed mortgages, this fact will be counted as policy in
litigation. As a consequence it matters A LOT if you can
say that your client has a Fifth Amendment Due Process right (or third
party beneficiary Federal common law right) to a HAMP modification
which is in FACT a minimization of the risk of default (not that flaky
31% number) BECAUSE, among other things, the U.S. has no economic
incentive to foreclose”. Now, I am no lawyer and thus the legal
issues are beyond my domain, but I must admit I found the theory
interesting. So, I’ve decided to crowdsource this one in anticipation
that some of the more astute legal minds can shed some light on the
validity of the theory. I’ll supply the financial stuff in this post,
and I’ll rely on the legal eagles to peer review the theory.
This all stemmed from a chart and “what if”
scenario I post on the 23rd of September in which showed the increasing
decline in recoveries from gross charge-offs from banks.
As a matter of fact, things are so
bad that I believe banks will have a perverse incentive to actually
walk away. Now wouldn’t that be something??? Next, we take a look into
the home builder that makes more money doing distressed investing
than it does building and selling homes.
The legal argument from the BoomBustBlogger in question is as follows:
Things are
moving pretty fast now, especially since so many states are moving to
ban home foreclosures, and since your comments on the lack of economic
incentive to foreclose is coming to the fore. It’s becoming
a question of, Hey Uncle Sam, what is your policy? This may result in
actions to quiet title, against the banks and the United States. The basis will be that in fact, the United States has forgiven home mortgage indebtedness. Your own observation of the economics of foreclosure is part of the mix. But the entire argument that the U.S., has in FACT (no matter what it CLAIMS) forgiven home mortgage indebtedness, is this:
Through its
1. ownership
stake in banks (creating Fifth Amendment Due Process rights to what is
in FACT–not the arbitrary 31%–minimization of the risk of housing loss:
see Huxtable v. Geithner Order on this (not the Order to Dismiss, sounds
like a settlement was reached since Huxtable filed no opposition); 2.
contracts with servicers (creating third party contract rights in
borrowers–see Marques v. Wells Fargo); 3. mortgage principal reduction; 4. adjustments to gross income for principal reduction; and 5. loss of economic incentive to foreclose,
the United States has in fact forgiven home mortgage indebtedness.
And here is more on the topic…
The
big divide in the United States District Courts, with regard to HAMP,
is the language of HAMP which seems to give the Government discretion as
to whether to modify or not. Here is typical language from a court
decision saying there is no right to a modification:
“Notably, the statute provides that loans may be modified “where
appropriate” – a phrase that limits the Secretary’s obligation and
evinces a Congressional intent to afford discretion in the decision
whether to modify loans in certain circumstances.”
The way
to defeat this (as was done in Huxtable v. Geithner, before the case was
settled or abandoned) is to show FACTS which demonstrate that the
Government is actually enforcing a different policy. In that case, it
doesn’t matter what the enabling language says, what decides the policy
is what the government is DOING. What OTHER facts show that the
Government is pursuing this different policy? That is where your
observation comes in.
One of
those facts is the factual conclusions the government ITSELF has come
to. What has it really concluded in the secret, back rooms?
This is
why I was interested in your analysis of the returns on taking title to
defaulting properties (the link being the Government ownership stake in
these properties). If the Government ITSELF has decided there is no
further economic incentive to foreclose, then its policy can ONLY be to
prevent foreclosures, because economics shows no facts in favor of going
forward with foreclosing and taking title. Government policy must be
based on facts–if it is not, then the policy is simply prejudice, and
the courts will not uphold factless prejudice. It’s a matter of
determining what policy the Government is pursuing, as a process of
eliminating all those policy options for which there is no factual
basis. Weeding out one prejudice after another. One such prejudice, I
submit, is the idea that there is an economic incentive for the
Government NOT to grant HAMP modification. If there is no economic
incentive to foreclose, then this supposed economic incentive is
revealed to be a prejudice, and unenforceable. A right to HAMP
modification follows as a matter of elimination of other options.
That is
where you come in. It would greatly help if, on your site, you would
give an estimate of the month/year on which the data clearly show that
the economic incentive to foreclose is ZERO. Once it became clear that
the U.S. had no further economic incentive to foreclose, it would be
very clear that the U.S. has in FACT forgiven home mortgage debt. That
is what zero incentive to foreclose, means. It means that, in FACT, the
debt has been forgiven.
I get
the feeling that, privately, the U.S. is racing ahead based on this
knowledge. I would not be at all surprised to see Obama simply ban home
foreclosures nationwide.
But we are still in limbo, because there is still this notion that
robo-affidavits are the only problem with foreclosure documents, and
once that is “cleared up” it’s full speed ahead with foreclosures.
That
is certainly not the case, and people need to realize that that is not
the case. Above all, their lawyers need more ammo, and the best ammo
would be a detailed examination of the rapidly declining economic
incentive to foreclose.
By the
way, if you assume that the Government already knows we are fast
approaching zero incentive to take title, what signs tell you that the
Government is already acting on the idea that there is zero incentive to
take title? That is, what actions of the U.S. Government tell you that
it has in FACT forgiven home mortgage debt, that it has ALREADY written
it all off as a loss, and is now acting in the AFTERMATH of that
writeoff. Because I think that’s where we are. The United States is
ahead of ALL of us on this. They know how bad. What I’m asking you is,
where is evidence that they know there is nothing to be gained from
foreclosure, and have moved ahead and have IMPLEMENTED that conclusion?
So if you
could deal with that in some big public way, that would be best… That
would attract the attention of every lawyer, judge and investor in the
country–it would immediately resolve every legal question surrounding
home foreclosures, and it would provide an opportunity to get more of
the truth into court cases. Even from the analysis you provided on
9/23, it is clear to me that it’s game over for home mortgages. They
are simply not a part of the economy any more–they’re social policy and
the U.S. is dealing with them as social policy: but what IS the
Government’s new policy? Well, what do the FACTS show it is?
Since you’re not a lawyer, you greatly underestimate the importance of this observation. When the United States has a stake in a matter, facts relating to that matter are imputed to it as United States POLICY.
Well, he’s right. I am not a lawyer. Actually
far from it, but it does appear he is on to some creative legal theory. I
invite any and all competent legal type to weigh in on this. There is
even more on this topic, which at first sounds a bit far fetched, but
actually congeals into a cogent argument as you read on…
It is a BIG mistake to read this as just a matter of cleaning up a few documents. These phony affidavits [as referenced above]
were part of an effort to hide bad debt on banks’ books. It is also
hiding something else, which is that the United States has forgiven home
mortgage indebtedness. Look:
1. ownership
stake in banks (creating Fifth Amendment Due Process rights to what is
in FACT–not the arbitrary 31%–minimization of the risk of housing
loss(on this prong, please see online the Huxtable v. Geithner Order
(not the Order to Dismiss–sounds like a settlement was reached since
Huxtable filed no opposition). The reasoning of Huxtable is sound and is
pretty generally accepted now. There IS a Fifth Amendment Due Process
right based on U.S. ownership of banks, and this Due Process right is a
right to a modification based on what is in FACT the minimization of
risk of default–this means that the 31% is simply the Government’s
assertion on this point–it is LITIGABLE;
2. contracts
with servicers (creating the same rights as above, but on a third party
beneficiary theory–see Marques v. Wells Fargo–online). The reasoning of
Judge Lorenz is also sound and is simply another basis for claiming a
factual minimization of the risk of default, rather than simply
accepting the Government’s 31%. Again, the 31% is going to be litigated.
People have to get used to that–it’s not off limits anymore;
3. mortgage principal reduction through HAMP;
4. adjustments to gross income for principal reduction through HAMP; and
5. loss of
economic incentive to foreclose (this is Reggie Middleton’s analysis on
his blog). The Middleton analysis is new (it’s at www.boombustblog.com, the September 23 story on housing prices). The return/chargeoff is rapidly hitting 0.
Litigants in
HAMP will certainly have the right to civil discovery as to what the
United States has concluded with respect to the economics of
foreclosure.
It will
probably turn out to be just what the facts show: that the policy is in
FACT to minimize the risk of default because there is no economic
incentive to foreclose.
Of course this
seems impossible, unacceptable, blah blah blah. But if the economic
facts bear it out, then the economic facts bear it out and you just have
to wrap your head around it. What will happen next/is happening now:
1. litigants
will sue to quiet title (among other causes of action such as fraud,
conspiracy, Civil Rights violations, etc., naming Tiny Tim, the IRS
commissioner and the United States, among others); and
2. the U.S. is
scrambling right now to decide what to do if people who have a gazillion
dollars and are sitting in a house which is soaring in value,
nevertheless decide to simply stop paying on their mortgages.
Of course, the
first instinct of Uncle Sam will be some sort of coercion. When that
fails in court, the next gambit will be to try to provide some incentive
to people to keep paying those damned mortgages. Who knows how this
will end?
In any event,
it’s Reggie Middleton’s analysis which broke the back of this. Indeed,
I’m sure his analysis was already made in the dark of night at the
Treasury Department.
| The following charts of charge-off recoveries was sourced from the subscription document available to all Paying Subscribers (any who are interested in this extensive data set and analysis can subscribe here): Historical Bank Charge-offs and Recoveries 2Q10. There is also a more comprehensive mortgage, loss, demographic and credit template that was used in the original US (Don’t) Stress (US) tests, otherwise known as SCAP . We have taken the liberty to update the template on a periodic basis for the government, since it appears they are not forcing the banks to do so  , and it is available here: SCAP Assumptions Updated_09082010 Web Version.This model shows a weakness in the Case Shiller method of following prices (which I will illustrate in graphic detail at 4:30 pm on Bloomberg TV and in my blog later on today) in that the CS doesn’t include investment properties (usually the first to go into foreclosure), new construction, and REOs. As a matter of fact, Case Shiller actually looked slightly rosy as of late compared to the facts on the ground (see Why the Case Shiller Index, Although Showing Another Downturn Coming, is Overly Optimistic and Quite Misleading!). |
That’s been the
entire tendency of this mortgage mess: to separate out what is in FACT
the policy of the U.S., as opposed to what the U.S. SAYS its policy is.
If you believe the latter, you don’t get your day in court. But if you
assert the facts in court, then your house is free.
As this
unrolls, it will sink the dollar. This will entirely change rights in
housing in the United States. Among other things, it means that Lindsey
v. Normet minimum scrutiny for housing is out the window, because the
United States’ policy is a higher level of scrutiny for housing.
Of course, all of this prompted me to look a bit deeper into the
economics of foreclosure from the lender’s perspective in the near to
intermediate future. For those thatdon’t know, the US is the owner or at
least underwriter of risk for the biggest lenders in the country. We
outright own Fannie and Freddie, who process the bulk of conforming
mortgages, and we underwote the risk of Bear Stearn’s rotting assets
directly as a condition of their sale to Jamie Dimon/JP Morgan as well
as partial ownership of Citi and AIG and the underwriting of untold risk
through Fannie and Freddie insurance programs. There is no telling how
much is underwritten indirectly. For a hint, see More Doom and Gloom: Homebuilders Making Better Money as Hedge Funds than Home Builders as well as Reggie Middleton’s Overview of the Public-Private Investment Program and I’m headed back to DC, with blogger’s opinions in hand! for examples of the government giving out 0%, non-recourse loans to buy failed assets.
This is the chart that originally sparked the conversation. It is a
rough chart that is annual and encompasses several loan categories.
So, I decided to dig back in and make the charts more granular in
both loan categories (concentrating on residential housing, as per the
legal theory above) and the time periods in question. As you can see,
the charge-offs on 1-4 family residential housing skyrocketed nearly
1,500% (yes, that is a lot) from the bursting of the bubble in '06.
Both recoveries have increased and the charge-offs decrease, giving
us an increase in recovery rates over the last two quarters though. Now,
before we get all giddy about the improvement in the credit situation
in residential real estate finance and blow out all of our provisions,
let’s take a more careful look at the chart. For one, although the
recoveries have increased very slightly, it is the drop in the
charge-offs that has served to boost the recovery rate. So, that leads
us to ask “What has changed so positively in the market to cause such a
drop in charge-offs?” Well, for one the Case Shiller Index has shown a
rise in prices. Of course, BoomBustBloggers don’t really go for that,
because the Case Shiller Index rise fails to capture many of the
elements that are causing aggregate housing values sold to fall on an
economic basis. See Why the Case Shiller Index, Although Showing Another Downturn Coming, is Overly Optimistic and Quite Misleading! then reference this chart below.
Those who are interested in reading the rest of this article can find it in its entirety on BoomBustBlog.com, here.
»
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I don't disagree with your thought process or argument, but I guess the question is all these toxic assets had "value" 2 years ago when we launched TARP to save the world too, but they did not have enough value to dig out of the derivatives hole. So the question is, is there really enough value now? Or will the govt step in with another hair-brained, ill thought out program in an effort to "save" the system." Again, not saying "free house for everyone" thought I've learned over the last few years not to underestimate the utter stupidity of the government. It shouldn't surprise anyone that the banks are using the same flawed processes to foreclose as they did to underwrite these crappy loans years ago -- they're still trying to take a high volume, mass produced approach to solving there problem rather than employing any actual strategy -- FASB gave them the option to make their own rules when the removed the risk 18 months ago. If failure faced them every day, I am certain banks would be taking a much different approach.
What this man said...At some point the real owner of the land will be resolved and when it does they will take the nescessary action....
MachoMan-
The MBS rush has made a sausage out of determining who the lienholder is. You can't make a pig out of sausage. While there is a defaulting homeowner as one party, there is no counterparty, only a big legal sausage. A sausage with no standing.
The government side of the banking cartel has a perverse incentive to foreclose on people: the writing off of loan interest for income tax purposes. The more people who lose their homes, the higher the taxable income base, and the more revenue the government takes in. It's a way to raise tax revenues without mussing with the electability issues around tax increase legislation.
The private side of the banking cartel, however, prefers to munch first on the low-hanging foreclosure fruit: those who pay little interest into the banks because their loans are nearing payoff. The home value to principal ratio is much more redeeming than foreclosing on a new home, when the loan is likely to be higher than the market value if they foreclose it. And, there is more temptation to forge documents on those older loans, because the payoff is much greater. What's worse is they can and do turn around and finance the asset with a new loan to a new buyer, thereby making interest on the same house twice, which is good cash flow on top of the bonus monies made from the seizing of an asset at pennies on the dollar and reselling it at even these market prices.
These two purposes are at odds, to some extent. The government needs revenue for their spending binge, and they get that from less people writing off home loan interest. The private cartel gets revenue from interest, and they can't get it unless the sheeple are in debt. If you've noticed, the private cartel usually seems to win out.
I think one thing is certain, though. The taxpayer is the big loser here, these issues aside. If the banks take a haircut via the judicial process and lawsuits, the people pay. For the banks already owned by the government, the people pay. For the non-bailed-out banks facing huge losses, they will most certainly be bailed out by, again, the taxpayer. But if they are not, they will be seized by the government and parted out, sold off, and rolled into new ponzis. The people will pay, if even via shareholders who had to take a haircut. The circle of life will continue for the private banking cartel.
I think I understand what you are saying. Basically because the Government gave Banks like JPM Money for Loans they thought were not worth anything, the loans have in essence been written off to 0 by the government as they paid JPM the value of the Loans to take the Loans from the Company they aquired like Washington Mutual to be put on their books. Includes Washington Mutual, Bear Stearns.
This is very penetrating, very shrewd, and takes us much deeper into what is going on behind the scenes in U.S. government planning.
But then tell me this: if what you are saying is true, what is the technical reason the U.S. is still trying to hide bad debt on bank books? I am VERY interested to hear your answer.
Finally, we are, instead of fulminating, actually putting the facts together to tell us WHAT U.S. policy is and HOW the U.S. is implementing it.
Again, my compliments. Very, VERY insightful. More please.
ok, but how does this get us to a homeowner who promised to pay for the home being relieved of the debt?
Allow note-holders [banks] to become property landlords and collect rent, concurrently giving existing mortgagee occupant the Right Of First Refusal to pay the required rent.
No one able to pay rent is foreclosed.
Mortgagees lose their equity.[As they would if mail-in the keys]
Banks etc revalue the property [cf. Principal Reduction] and have potential gain from future sale.
Gives all of us interlude to re-think some greedy/unworkable aspects of ideas of Private Property.
What's not to like?
this is already the way it works... you just need to change out some of the parties and instead of rent, substitute "tax" and you got it... we're already there... everyone rents. Essentially, "rent" ends up playing second fiddle to "tax"
Aren't you missing the incentive effect?
Once some people get free houses, everybody in America stops paying. Where's the government then?
one of the cycles Martin Armstrong tracks is real estate - he is showing the peak of the current cycle in 2006 and the next trough in 2032
that's right, 26 years from peak to trough!
laugh at his work if you want but buy real estate at your own peril
Man that would be the ultimate kick in the teeth for the responsible who did it the "American way" by working hard and being responsible to pay off their mortgage. To see their neighbour who used their house as an atm to buy all kinds of fancy stuff being given it by the government would be enraging. I'm Canadian but if I saw that happen here I'd go postal. We have scrimped for years to avoid debt.
Welcome to reality - only failure is rewarded this Christmas (again).
I don't see any good coming out of this.
I've long stated that principal reduction is the only solution.
I still believe it is an ONLY option that would help dig us out.
I'm 100% for it as long as it comes with caviats that make it:
1. Primary residents only.
2a. Optional for the homeowner
2b. If the homeowner chooses a principal reduction, they also carry an open receivable on the written off portion, that must be paid off if the owner sell at a profit after the writedown.
(in short, no windfall. You have a $200,000 house. You put down $40,000. Your MTG is 160,000. Let's say they do a 20% (I target 10-20% as the necessary reduction) reduction, You pay your mortgage based on $138,000. Meanwhile, an open receivable is attached to your mortgage for $32,000.
If you sell your house 5 years from now for $180,000 you do not keep all the profit above what you oowed in principal. (lets say the Pricipal owed was down to $130,000) You are not up $50,000. Instead, you then have to pay off the 32,000 before you see a profit.)
The purpose of this is simple. Low interest rates act the same way a principal reduction would, in that they both act as a rolling stimulous for the homeowners of our consumer economy. Unfortunately, Lowere interest rates don't give you ANY INCENTIVE to stay in a house that you are UNDERWATER IN!!!
At the same time, these forced lower rates, force the savings rate to be low, which in turn also give the homowners NO INCENTIVE TO SAVE, as they receive no interest in their savings.
I've done articles on this in the past for Nouriel Roubini's RGE Monitor. I'll paste the link:
http://www.roubini.com/us-monitor/254751/debt_destruction_through_principal_reduction
All the best, Miss America, Rich H
Nice to know you did it for NR........any pix to share?
Get this.. I was writing on Roubini's sight free of charge. (doing it in my spare trime. usually working between 12Am - 3am, which turned me into a zombie during work and my free time with my kids) I had #2 foot traffic on his websight. ...I was hitting EVERYTHING! Far more accurately then him. (If you played the market with his calls you would've been broke! 0 timing!)
Anyhow. With my spot on timing calls, my near and long macro calls being just as accurate, I thought I'd be a shoe in to parlee it into something. Hell, event a reach around would have done! Anyway, he expands his operation, adds finance "gurus" to his staff, and I shoot my resume over to him.
....not even a "sorry"
Nothing. Not a single reply.
I followed up. Still nothing.
That pretty much ended my blogging career.
I'm still a banker, and still kicking ass. but I've learned to not share any of the good stuff. Especial;ly not for free. (worst part is, I really started doing it for the greater good of bringing about awarness to all who would listen.) Maybe it's greed, but I think it's more bitterness (sour grapes on my part) ...but I now don't give a sh!t watching people struggle to connect the dots and figure it out.
OK.. Can't resist. 1 tidbit. I follow flow more then anything. (cash) There is a MAssisve INFLOW of liquidity. FROM EVERYWHERE!!!
Where it goes... Where it plays. Where it trends. I kinda know. ...But as a bear it's hard for me to actually acknowledge this massive inflow.
Good luck.
All the best,
MA/RH
Email me, reggie at boombustblog dot com.
My old buddy Miss America! How's it going, my old friend?
Who was that asshole that kept showing up at RGE saying that housing is a right, and had all that legal mumbo jumbo...
Ryskamp. This sounds like a John Ryskamp arguement.
Reggie - legal mumbo jumbo only works for they ones who have the power and influence. Whthout the power and influence, your legal has no mojo.
Please don't mention that name!!! Sorta like Voldemort. Yes, John Ryscamp was his name. He was 50% bright and 50% idiot. His cry was for eminany domain, and he regularly sighted a case (i believe hotel affiliated) that was non applicable.
I gave him the benifit of the doubt, and read through a lot of his crap. Had Wife (bancruptsy lawyer) and and other legal friends read through and they shared my opinion.
To me, he was pushing his book. He theorized. Then wrote a book. ...and then hoped it would come true so his book would look prophetic. ...and then he trolled every blog in the world spreading his eminant domain theory.
God to hear from you.
All the best, MA/RH
What if they took that forgiveness and made everyone pay income taxes on it? Would that reduce the deficit? Would it wipe it out?
The thesis of the article and your reply is interesting. It seems that this would be a solution to a lot of problems, no?
It would help pay off the deficit, help the banks get the bad mortgages off their balance sheets, we wouldn't default on our debt and we would pay it and our creditors off, the economy could boom.
However, you mentioned that the dollar would go to shit. So, that means we would be able to export to everyone around the world!
Maybe I am not seeing enough negatives here.
What if they took that forgiveness and made everyone pay income taxes on it?
We already do that. There is a huge tax hit for (I think) short sales because you have a huge hunk of deduction or something disappear.) Or maybe you paid (and deducted) interest on 300k and it drops to 200k, so 1/3 of your deduction (you already took) disappears?
Dollar turning to shit? I don't know what the mechanics of the dollar losing its 'currency of the world' status, but that would be massively disruptive. Much more than the EU breaking up and shit-canning the Euro. It can only happen very slowly.
I think they at least temporarily removed this tax on the forgiveness for short sales
That would be a huge chunk of taxes due all at once, 33% on the forgiven amount? I would need to take out a second mortgage to pay that....
Convert them to renters and move on.
not that I agree with it, but this is what is coming... no alternative.
indentured renters - it will be like the company store at the old mines, except you live in it and you cannot leave it...a debtors prison
...and here comes tranches of Rental Backed Securities ( RBS ). Booyah !
And I THOUGHT I was cynical -- you win!
Principal reduction may be the only solution, which is why it will never happen.
Don't you understand why prices were bubbled in the first place?
Look around you. You'll find that you are now surrounded by people who have been intentionally trapped via leveraged debt in an overpriced house. These people now have little choice but to beg for Obama to "Save Us!".
As I said above, it is all about creating mandates and closing the trap shut. To believe that principal write-downs are coming for the masses, is to believe that criminals can and will provide efficient goods and services. There will be a few write-downs for the politically connected, but for most, they are screwed. By design.
All herds are assembled for a single reason called slaughter day.
yes but....
I certainly believe the middle class are now deliberately in the slaughterhouse
however
i have one last glimmer of hope that, with significant riots, protests and a lot of incumbent politicians losing their seats, that the new & remaining politicians will fear their electorates more than they fear the angry hand of the farmer that puts grain in their trough
Because what we must remember and hopefully bank on is that the financial oligarchy consider politicians as mere pawns that are above joe sixpack but certainly below themselves. We need to wedge and prise this gap wider
These people now have little choice but to beg for Obama to "Save Us!".
That's why we should vote Republican- they really will slave save us.
Good summary.
"Save us from ourselves, let TBTF run washington!" /sarcasm
Spot on NA....
- Not in a long long time have I spent so much time reading an article twice and still end up befuddled as to where the argument is, and what evidence the author considers relevant.
- Basically, above is a hot mess of financial explanation for the premise, which itself is vague and amorphous.
- You're better than this Reggie.
+1. You are giving too much credit because generally reggie is on the ball. You must treat each article as an island unto itself and weigh its merits independently...
The fact is, it does not make sense because it is incoherent... it's not even good for spitballing... nor a stream of consciousness... more like half a dozen mba students trying to get a 300lb woman over a 10 foot wall on the "team building" ropes course.
which makes it perfect for 'crowdsourcing'
as in .. 'do my thinkin peons'
Compelling thoughts, though I think ultimately this is going to be something where the government ends up owning, modifying, and enforcing existing mortgages, with increased authority to take "affirmative action" if the borrower doesn't pay. The IRS is about to get fucking huge-er.
This would be nothing short of total takeover if they own your house, they can just bulldoze the m'fer & move you into a comp. wherever they think might be suitable. I want no part of it. Time for the gov to but the fuck out & let the chips fall were they may, highly unlikely I suppose...
Not when bulldozers are made illegal before any changes (yet only banks have bulldozers).
Think i'm joking? Remember, citizen you cannot win for your own good and civilization's.
Ding! Ding! Ding!
It will be the new and improved (and mandated) Fannie Mac Daddy!
The people who think there will be free housing do not understand the value of indebted homeowners in the first place. Criminals will never give up this much control when there is so much at stake.
Well, not unless they want to use this as the "spark that lit the prarie fire," as in riots and home burnings of the free-loaders. If that is the case, then I expect to see strategic defaulters names and addresses appear in the media first.
Where is the logical conclusion take us?
If those whose homes are in foreclosure are foregiven their debt but those who have been paying and are in good standing are not... Isn't that a recipe for revolution?
If everyone's mortgage debt is foregiven, won't that destroy the banking industry? Destroying what is left of available credit and crashing the economy, even while the homeowner's swimming in money?
Does the US Gov't step in and say that it now has ownership of all properties still under a mortgage...
The results for this don't seem pretty.
A lot of the banks have already sold their toxic mortgages to Fannie & Freddie and the Fed. It won't destroy credit or anything else. In fact, it might be a good thing to forgive those debts. Why? These distressed homeowners will have extra cash and can start buying stuff & help the economy.
China likes that idea. Spend - spend - spend.
Then we'll be right back where we started.
A 40% reduction in ALL residential debt would cost about $4 trillion...about what we've spent thus far dealing with this fiasco and probably less than it will cost us via QE2. By lowering all mortgages commensurate with the same percentage loss of equity to date (approx. 40%) there will be a couple of positive benefits: Loan payments will be reduced and homes will once again have equity - both of these factors are huge motivation for people not to walk away from their loans...it also puts a real bottom on the market. The buyers in waiting who are worrying about further erosion of price will now feel more comfortable about getting back in the market. The recovery cycle starts. It's not rocket science, it real. Whatever is done, someone is going to be angry and someone will get fucked. This is the cheapest best solution, and best of all, the gangster banksters and the crooked wall street guys who are responsible for this shit will finally have to take it in the shorts like ANYONE who owns real estate (even if you are not in default, you've lost, on average, 40% of your asset value from two years ago).
+20% (down) and the whole farm.
We can piss away our kids' money with QE this and TARP that, but none of it gets into J6P's pocket in any discernable way. If we are going to build a bonfire with dollar bills, why not build one everybody can enjoy?
Consequences be damned.
If those whose homes are in foreclosure are foregiven their debt but those who have been paying and are in good standing are not... Isn't that a recipe for revolution?-- The ones who played by the rules and are responsible are the least likely to revolt. This fact will weigh heavily on the decision making process of the government in my opinion.
not necessarily, it depends how they do it.
For instance the Fed says 'ok all you banks, we're forgiving 20% of your loans but you have to write down 20% of the loan value of all your borrowers across the board, delinquent or not.
that way there's less moral hazard for mums and dads
oh, and then i read the next guys comment below which says the same thing more eloquently....
This will be the Left's (lead by BHO) way to "redistribute wealth" to their special classes. I've had discussions about your's and little timmy's favorite agency (the IRS) taking over as a the special servicing agent to keep such trolls in their homes. While they will not own the home (the gvt. still will) they will pay a permanent tax (rent or mtg pmt) to old uncle sammy.
If they do this I will commit to go on point for the fight. I am one of the idiots who makes good but not great $$ wondered how in the Hell everyone else was buying these homes? Well, I figured out the game and saw that it had to end badly. ( I just wish I was as smart as Mr. Bass in Texas to short the hell out of all the shit) I went to cash in 2007 and with a couple of colleagues we had a fund ready for the explosion. I know of some solid mid and upper tier banks that did not play in the shit either that were waiting, too. But just as ZH showd last week with Charles Munger - Berkshire would most likely be out of business had the assets been properly valued in '08 and they had to pay up on thier bets and we did not save AIG, BoA, JPM, GS, etc.
This extend and pretend will be the death of this system. This cronycapitalism is almost done. Because if they now take my tax $ to keep others in their unearned mansions. Screw em! I'm ready for a fight, then.
McMansions in Florida don't burn too easily, them stone walls and tile roofs.....