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Good Plan Gone Wasted

Bruce Krasting's picture




 

A good portion of the unemployment problem that America faces is structural. Bernanke can Twist all he wants. His maturity extension plan averages $2b of short-term versus long-term paper swaps a day. That is not even a rounding number in the Treasury/Agency fixed income market. Other than adding to the bonus pool at a few of Wall Street’s wire houses, it will make no difference at all.

There are a fair number of people who are now out of work (or underemployed) who can’t seek a job outside of their current location because they are underwater on their homes. Without mortgage relief, they are trapped.

Take the example of the welder in Cleveland who can’t take a promising new job in Nebraska because he is upside down on his mortgage. Assume that this welder has a contract of employment in his hand from an employer desperately looking for workers in the oil fields. All this person has to do to start over is to settle the mortgage in Cleveland. Note: This is a realistic example.

It’s not possible to create a new blanket law that fairly grants mortgage relief for people looking to move and have secured employment elsewhere. However, there are many potential opportunities for mortgage forbearance that already exist. What is needed is a very big stick to hold over the mortgage servicing banks to complete the process.

The “stick” I refer to would have to very threatening indeed. It would have to come from the highest regulatory authorities in the country. It would have to have real teeth in it. It might read like the following (plain language):

From:

Board of Governors of the Federal Reserve System
Consumer Financial Protection Bureau
Federal Deposit Insurance Corporation
National Credit Union Administration
Office of the Comptroller of the Currency

To:

All Banks and Mortgage Servicers
.
As of today there is a new deal. 
 
If a mortgagor approaches you with a request for mortgage forbearance AND this person has proof of employment outside of his/her current location we are telling you to resolve the problem ASAP.
 
Mortgage servicers have a variety of tools at their disposal to address underwater borrowers. These options include the Making Home Affordable Program and programs offered by or through Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and the Department of Agriculture-Rural Development (USDA-RD). Use these programs to mitigate loss.
 
Banks and investors may take losses as a result of this order. We don’t care. If the borrower has a liquid net worth under $25,000 we’re telling you to eat the loss.
 
If the borrower seeking relief has a second mortgage or HELOC, write it off. Don’t you dare deny a borrower forbearance on a second lien. We will eat you alive if you try.
 
You have 15 business days to wrap this up. No delays will be permitted. If you delay the process, and the individual loses the job offer, we will hold you liable. We have lawyers itching to bust one of you.
 

If you do reject a request for mortgage relief from an individual who has a job in another location, you have to report the details to us, and you must explain why you did not play ball.

We will be looking at this with a fine-toothed comb. The first ten of you that we catch screwing this up are going to get the book thrown at you. We will make your life miserable. We will sue you. We will fine you. We will take away your license to operate.
 
If you fuck with this order, we will fuck with you. We don’t care how big you are. We will take you down. We have the power and we will use it.
 

Okay. Do you like it? I hope you do. I had fun writing it. Please don’t think that I had anything to do with coming up with this idea or the use of a regulatory threat to achieve the desired results. I just copied it, (in spirit) nearly word for word, from the same government Agencies that I mentioned above . It was released today. Here’s the cover page and the LINK:

.

.

If you’re in the military with an underwater mortgage, and you have transfer orders, those government agencies have basically said “Deal with it!” – “Pronto”.

Of course lawyers wrote up the memo from those Agencies. They did however make it pretty clear that they meant business with:

If the Agencies determine that a servicer has engaged in any acts or practices that are unfair, deceptive, or abusive, or that otherwise violate Federal consumer financial laws and regulations, the Agencies will take appropriate supervisory and enforcement actions to address violations and seek all appropriate corrective actions.

That is as close as lawyers get to saying, "If you fuck with us, we will fuck with you".

I'm 100% in favor of the proposal put out by the big agencies that protects folks who are in the military and who have to move. My complaint is that this offer of relief is not made available to a larger segment of the population.

It’s way past time for loss recognition. People have to restart their lives. Banks and government lenders have to recognize losses.

The government finally came up with a good idea. One that would address the critical issues of unemployment and underwater homeowners. Too bad D.C. only saw fit to offer it to their own employees. Go figure.

.

 
 

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Thu, 06/21/2012 - 15:49 | 2548452 malikai
malikai's picture

This would be awesome.. If the regulators actually regulated, such threats might actually work.

Thu, 06/21/2012 - 16:45 | 2548690 hedgeless_horseman
hedgeless_horseman's picture

 

 

Not so awesome if you are a doctor, farmer, carpenter, mechanic, or GM bond holder when the government comes 'round making these same types of threats should you refuse to forgive the legitimate debts of registered voters.

Be careful, boys and girls, it is a slippery slope we are standing on...and it is a long way down.

Thu, 06/21/2012 - 18:30 | 2549006 New_Meat
New_Meat's picture

h_h: yep

"...slippery slope..."

yep, break bond contracts for GM and Chrystler, (thanks Ruth).  It is a French revolution been a'startin' (or maybe not).

- Ned

{Mill and Locke, well, they're just dead white guys.  Nothing modern there...}

Thu, 06/21/2012 - 17:28 | 2548846 malikai
malikai's picture

We're already sliding down at mach speed..

Thu, 06/21/2012 - 21:01 | 2549410 FeralSerf
FeralSerf's picture

Yep -- Pandora's box has already been opened.  The horse is out of the barn.  Closing the door now is too late.  GM bondholders have already been fucked.  There is no Rule of Law anymore.  Wake up, smell the coffee (or actually the shit).

Thu, 06/21/2012 - 18:43 | 2549030 old naughty
old naughty's picture

yes, quite so (fast).

Thu, 06/21/2012 - 15:39 | 2548404 williambanzai7
williambanzai7's picture

Bulls eye!

Thu, 06/21/2012 - 16:33 | 2548636 hedgeless_horseman
hedgeless_horseman's picture

 

 

Bulls eye!

What is the target?  The Rule of Law? 

Might it be another bad precident to have government agencies threatening private business (granted...banks) in this fashion?

I am sure deadbeats would love this plan.

Be careful what you wish for.

Thu, 06/21/2012 - 20:40 | 2549342 TheFourthStooge-ing
TheFourthStooge-ing's picture

.

I am sure deadbeats would love this plan.

I have a hard time picturing the banks finding anything to like with this plan. What makes you think they'll love it?

Thu, 06/21/2012 - 16:44 | 2548728 Bruce Krasting
Bruce Krasting's picture

Deadbeats?

How can you describe the welder in Cleveland who has an employment contract in another state a deadbeat??

The fact that he has a job offer proves that he's not.

How long do you make people suffer? I say five years is already way too long.

Fri, 06/22/2012 - 08:01 | 2550264 Commander Cody
Commander Cody's picture

Bruce: Read our lips - No more bailouts, period!

Fri, 06/22/2012 - 07:03 | 2550189 Moe Howard
Moe Howard's picture

Now you are just silly. People all around me walk right past 'help wanted" signs while owing huge amounts of money.

A job offer is meaningless unless you take it and pay the debts you took on. Unless someone held a gun to your head. I doubt that was the case. Who buys overpiced real estate in a dying city like Cleveland anyway? That place has been a morgue for decades.

Thu, 06/21/2012 - 20:56 | 2549395 FeralSerf
FeralSerf's picture

How long to make them suffer because they didn't read and understand the documents that they were signing (assuming the documents are really the ones they signed)?  The 21 century Les Miserables -- for the rest of their sorry lives if the fucking banks have their way!

Thu, 06/21/2012 - 17:05 | 2548794 ghostfaceinvestah
ghostfaceinvestah's picture

It's not that much suffering to contact his servicer and request a short sale.  He doesn't even have to go delinquent, servicers are approving them for current borrowers these days.

It ain't that hard.

Thu, 06/21/2012 - 16:55 | 2548735 hedgeless_horseman
hedgeless_horseman's picture

 

 

The fact that he has a job offer proves that he's not.

No, it does not.  Employed people refuse to pay their bills and default on contracts all the time.

How long do you make people suffer?

I do not make people suffer.  Can they not file bankruptcy and be clean in 7 years?  I thought you are for clearing the system? 

Thu, 06/21/2012 - 16:55 | 2548761 WineSorbet
WineSorbet's picture

BINGO.  It's called bankruptcy and move on.  Banks eat the losses.  Borrower learns a hard lesson about what it means to take on debt. 

Seriously,  the system works if you let it.  I'm FUCKING tired of government favors for banks and debtors. 

Thu, 06/21/2012 - 20:50 | 2549371 FeralSerf
FeralSerf's picture

Thanks to the Bush/bankster "overhaul" of the bankruptcy, most people with above minimum wage jobs can't file Chapt. 7 anymore.

The banks have been engaged in grand theft for some time now.  The real bank robbers are the executives at the banks.  They deserve nothing but a jail cell.

Fri, 06/22/2012 - 07:54 | 2550251 Bob
Bob's picture

What a wonderfully meat and potatoes yankee doodle dandy title they gave that steaming piece of predatory shit:

Bankruptcy Abuse Prevention And Consumer Protection Act Of 2005
Thu, 06/21/2012 - 16:35 | 2548674 WakeUpPeeeeeople
WakeUpPeeeeeople's picture

Maybe its Bearded Ben that needs to Twist In The Wind.

Thu, 06/21/2012 - 20:22 | 2549305 Matt
Matt's picture

Here's a crazy idea. If you have to move around for work, or are in the military, etc, maybe you should be a renter instead of having a massive mortgage that makes moving difficult.

 

Fri, 06/22/2012 - 06:59 | 2550188 Moe Howard
Moe Howard's picture

Exactly. I saw plenty of idiots purchase a home in a high price real estate area, then get orders to a low priced real estate area. They got screwed blued and tattooed. Good lesson. They did not have to purchase, in fact, based on normal 3 year rotation, you are a fool to purchase. My daughter and her husband bought a home right before the crash, three years later scrambling to sell. Now they are renters. Lesson learned.

Another thing, you can do what I did in bad times - leave the family behind. During the Carter Depression I worked on a railroad steel gang, I lived in a pup tent next to the tracks as we worked across the plains of western Illinois. Showered once a week, cooked out of cans on a Coleman stove, living expenses next to nothing. Took a few months to get back on my feet, but it can be done. There is no right to a king size bed in a McMansion and a $200 a month cell phone bill. It's called cutting expenses to the bone.

Bruce doesn't want anyone to move out of their "comfort zone'; people who purchased overpriced real estate need to be bailed out by the government. No hardship should befall the idiot.

Bruce - government is the problem, not the answer, they created the bubble with cheap money, they continue to distort the entire economy with cheap money, they have destroyed the savings of millions of people with ZIRP. More intervention is not the answer. Getting the government out of the economy is the only answer. In case you haven't figured it out yet, the government is a tool of the banksters. No "tweaking" will change that, nor will it ever make it "fair".

There is no free lunch, heaven is not a place on earth, God helps those who help themselves.

Utopia is a fantasy not a real place. The sooner you learn those items the faster you will smarten up.

Thu, 06/21/2012 - 22:03 | 2549608 wang (not verified)
wang's picture

What Dr. Krasting is saying is simple

your deadbeat underwater neighbor is Greek and you are German living within your means; so bail your Geek neighbor out - and in the end it may be worth it, unlimited Tzatziki and potentially other Greek delights

 

of course your Greek neigbor may in fact have good reason to require a bailout such as a job offer in Munich, and  given the current economy he/she would gladly take that postion at an entry level wage

Thu, 06/21/2012 - 23:15 | 2549764 boogerbently
boogerbently's picture

Uncle Ben didn't QE, and EU is going to want u$ to help with their bailout.

Doesn't this "mini-crisis" take care of both ?

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