Odds Go Up for Mortgage Mods Post Election

Bruce Krasting's picture



This man is Ed DeMarco. He’s the acting head of the Federal Housing Finance Authority (FHFA). He’s going to lose his job in the next six weeks.



Democrats want to go back to the good old days when Fannie and Freddie were tools of both the Congress and the Administration. The Dems want the D.C. mortgage agencies to write off all underwater loans. The goal is to socialize the losses that borrowers are faced with.


DeMarco has been under attack by the liberal wing of the Democratic Party for the better part of a year. Democrats have wanted debt relief for underwater homeowners. DeMarco’s job as the head of the FHFA is to “minimize taxpayer losses at Fannie and Freddie”. As a result, he has a conflict with broad based principal reductions. "Very Important People", like Paul Krugman, have been attacking De Marco for months.



The reason that DeMarco is still standing is that he has clout behind him in the form of the Senior Senator from Alabama, Republican, Richard Shelby.




With the election over, Obama doesn’t have to play Washington politics any more. He can afford to piss off powerful guys like Senator Shelby. And that’s exactly what he is going to do.


Sometime between Christmas and New Year’s, Obama will fire DeMarco, and he will make an executive appointment to replace him. Whoever is the new boss at FHFA on January 1, will have clear orders on what to do. A hallmark of Obama’s second term will be wide scale mortgage debt relief.


The driving forces to kick DeMarco out (and get a pro-principal modification guy/gal in) has been these two Congresspersons:




This outcome is reminiscent of 2006, when another (very) liberal Democrat was calling the shots at Fannie and Freddie. Back then it was Barney Frank. We know how that worked out. It won’t end up any different with Waters and Cummings pulling the strings.


What will a principal mod plan look like? I think it will be targeted to the bottom end. Mortgages with a principal balance of less than $150,000 will get the greatest relief. Little, or no relief will be granted to those with mortgage debt over $500K. The individual mortgage restructurings will happen over the next two years. The timing will be driven around the next election. The payoff for the liberal democrats will be a shot at taking back the House in 2014.


Obama will announce who will be the next Treasury Secretary by the end of the month. Look for a confirmation of a coming debt relief plan from this appointment. If the appointee has a history of supporting debt relief, then DeMarco’s days are numbered. That’s too bad for America. He has done a good job.


The cost of a mortgage-mod-plan starts at $100Bn. It could go as high as $300Bn. That doesn’t matter at all. Bernanke will just print the money.



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lynnybee's picture

what about the people (like me) who doubled up on mortgage payments, worked like fools for 10 years straight & paid off a mortgage & is now debt free !?   can i get a rebate with my own money ?    will Obama make a deposit in my savings account ?   or, because i'm so damn responsible i'll just get squat like i always do ..... no one ever gave me nothing, i had to work for it & allocate my income responsibly.

so, Obama phone people will also get Obama home ? 

Dr. Sandi's picture


what about the people (like me) who doubled up on mortgage payments, worked like fools for 10 years straight & paid off a mortgage & is now debt free !? 

Savers are not part of the solution, they are part of the plunder.

mjcOH1's picture

"so, Obama phone people will also get Obama home ? "

Well shit, you think they were voting for him for the good of the country?

Dr. Sandi's picture

Isn't that why he wanted to be president?


No don't answer that.

optionswriter's picture

Sorry.  In the new normal, you are part of the problem, not the solution.  In this new reality you were only able to pay off your debt, b/c you somehow treated someone else unfairly.  Not only will you get squat, you'll be lucky if someone doesn't decide that you don't need the house you have.  Perhaps it's too much house and someone more deserving should have it.  So yes, the Obama phone people will also get an Obama home.  Perhaps yours and mine.


Btw.  Nice sun conyer.  But they are noisy little bastards.

CTG_Sweden's picture



Giving money to home owners will probably solve more problems for the US economy than it will create (primarily inflation that results in negative real interest rates for bank deposits and bonds). At least if they do it while the USD still is the reserve currency of the world to the same extent as today.


But I guess that those who have paid off their mortgages find this unfair. Especially if they have struggled to pay off their mortgages. I wonder whether there are more voters who find this unfair than there are voters who will benefit from these subsidies?


My impression is that is that Obama and the Democratic party have benefited from the housing bubble, excessive supply of labour and the economic crisis, the unemployment problem and reduced wages which this has caused. If the small core voter group of the Republican party for this reason will get higher capital gains taxes and also will not get rid of the death tax (unlike more “socialist” European countries like Sweden, for instance) I think that they partially deserve what they get. They partially brought it on themselves since they they thought that it was a great idea to increase the supply of labour so that they could get cheaper maids. But now they will pay the price since most of these maids and their grown-up anchor babies now have voted for Obama since he can give them health care which they otherwise would not have been able to afford.


I wonder whether Romney could have won this election by acting smarter when his comment on the 47 % was revealed. Bruce Krasting said that there was no chance that Romney would win after these remarks had been revealed.


Perhaps Romney could have turned the 47 % remark to his advantage by saying that candidates and parties which the 47 % don´t vote for have a vested interest in reducing the 47 % by creating more good paying jobs instead of the opposite, while politicians like Obama rather benefit from increasing the 47 % to 51 %.


I think that the American lower upper classes generally would have benefited financially from reducing the 47 %. But they have so far not generally not realized that. Instead, they don´t seem to have reflected over this problem at all or thought that “the more working poor people in America, the better for me” (the poorer other people get, the richer I feel). Furthermore, nobody seems to have put this issue on their agenda. Therefore, they have not considered the increased number of working poor and unemployed people as a problem. They also seem too narrow-minded to realize that an increased number of poor people results in more voters who think that higher capital gains taxes and death tax is a great idea. That doesn´t mean that they are dumber or more narrow-minded than other people. The true nature of mankind is to be narrow-minded and dumb as regards politics. That is how cultural and political values shared by the majority of the population have evolved over thousands of years ever since the dawn of mankind. The evolution has favoured individuals who don´t think too much for themselves on cultural, religious and political matters. That is how cultural values have evolved in different parts of the world and in different historical eras. It has been less likely to get you skull broken if you don´t have had to pretend that you have any other ideas than the leaders and the masses. The principal of survival of the fittest has benefited individuals who don´t think for themselves on cultural, religious and political matters. (Perhaps this is not true for all cultural and ethnic groups. But so far I have only been able to identify one exception from this rule. If your survival depends on having a realistic perspective on reality for business reasons rather than not standing out from others you may have a more realistic perspective on reality than the masses if you are successful and the same is perhaps also true as regards your future descendants.)

Zenseless's picture

Net, net we re-nigged.  Let the fun begin.

woolybear1's picture

you are a racist, shut the fuck up asswipe

cranky-old-geezer's picture



Banks will be made whole as usual. Write-down will be charged to taxpayers ...as usual.

dolly madison's picture

We got all these exponentially rising charts, and we've got the petrodollar set to fall apart.  I suspect the collapse is gonna come with or without a little help for the under water mortgages.  The world is gonna change, and we are just spinning our wheels until then.

Flocking swans's picture

demarco looks like the bad guy in every S.Segal-type flic. I hope he gets the same treatment they do in the end.

In other news. I drive a ford, and I don't want any fuckin' chevy drivers gittin this mort. break!*

*my rendition of the jist of this thread.

My take. Fuck the banks. All of em.... Also, ur neighbors getting better terms on their loans is not a bad thing. Would you like them to save, invest, spend their money in your neighborhood, or would you rather have them give it to the banks? If you answered the banks, fuck. you.

ghostfaceinvestah's picture

ur an idiot, it isn't the banks who will take the hit when the FHA and the GSEs write down principal, it is the taxpayers.

Dr. Sandi's picture

Yeah, but if the taxpayers go down, who will bail out the banks?

rustymason's picture

Jane! Stop this crazy thing!

Bear's picture

Fuck 'enm .... you mean fuck US

spjk2k's picture

meanwhile in the real world, "free", "money", and "free money" remain figments of the m draghi nation.

thedrickster's picture

I have said it on more than a dozen occasions but if they forgive principal, I am going to lose my freaking mind (and it will truly be the beginning of the final descent).

rhinoblitzing's picture

Mtg debt forgiveness - The Double Standard....

Lets think about this for a moment, the banks can reneg on the loans on their commercial and REO property and skyscrapers and homes - Now that's a smart business decison! and applauded by shareholders and the industry.

Butt.... Mention mortgage forgiveness for your neighbors - which puts a floor on the value of the home, and stabilizes the neighborhood, and keeps a individual owner with a vested interest in keeping the place nice. Also this allows the person to possibly sell and move to a place where better opportunity is with less collatoral damage.

What part of that is freaking you out?

For those who paid off their mortgage or kept current like myself, at first it might not seem fair. But this really is a way to see a stabilization in prices and a help to the middle class - not the banks. Note: Mortgage reduction should only apply to actual residence - not investment property or second homes. That would not be fair.

Mortgage Debt Forgveness - Bring It On! I might like Obama after All!

Piranhanoia's picture

Shilling for the 1% again Bruce?  Acting like the mortgages were legit and they weren't all paid off by the bailouts?   How soon you forget.

I have only two things to say,  one,  a line rendered to a famous Bruce;

"you make me feel tired all over"

and an analogy;    What do you do with a rabid bat?

Nothing, because it eats the bugs that would eat you.

Ignorance is bliss's picture

The whole mortgage market is fraudulent. Might as well pass the teat and lower the fraudulent payment so that I can pay for the ever increasing essentials Gold, Guns, Food, Fuel, and Lead.



maggiemayok's picture

We paid off our mortgage almost ten years ago and started putting the payment into an account to fund our retirement dreams, foregoing new cars and gadgets we didn't need.  Our goal was to set up our retirement home and a small substinence farm. 

Now?  We've taken that cash and purchased PM, which were lost in an unfortunate boating accident.

We may still need to farm for substinence, but I have a feeling someone is going to insist we pay a few extra taxes and fees on this home when we sell it, since we don't owe a bank a cent for it.

We can always hope for another round of firestorms...

James's picture

Maggie - In Obama care regulations ALL residential R.E. sales are charged 3.6 % upon sale.

Plus any other.

SokPOTUS's picture

Wait...what?!!?  You cashed out your retirement plan and bought PM's with it; which were lost in a boating accident?  As in sunk to the bottom of the sea?

Dr. Sandi's picture

It's a common ailment here, alas. You'd think we'd wise up after so many warnings from our fellow ZH'ers.

But no, we keep throwing our shiny into holes in the ocean.

rustymason's picture

My theory is that if you pay off your loans, then you have eliminated a reason for the gang of government/banksters to protect you and your property. In other words, only when you remain in debt will the gang protect you; they want you working for them.

Big Ben's picture

Humpty Dumpty sat on a wall,
Humpty Dumpty had a great fall.
All the king's horses and all the king's men
Couldn't put Humpty together again.

Humpty Dumpty in this case being the US economy.

Good luck reigniting the housing bubble! And I think Obama is largely a spent force now. He just squeaked by in a fairly close election against a former Wall Street insider (great choice repubs!) only 4 years after a huge housing crash that most people blame on Wall Street. He'll probably be able to do some limited mortgage mods, but the housing bubble is gone and you are not going to be able to blow another one anytime soon.

Of course, the best way to reduce the debt burden would be to inflate. But I don't think Wall Street is ready for that (just yet).

Dr. Sandi's picture

Humpty Dumpty had a great fall. But winter is coming, and he'll freeze hard to the sidewalk if he doesn't change his ways.

As for BO, 4 more years of the same spent force, dreaming of just one more night with Viagara.

Pike Bishop's picture

I have had it. I own my house, have no debt, and have non-encumbered young-adult-grad kids because we all did without for 20 yrs. We had enough money saved for retirement, until -1% became the bond net yield.

Fuck this.

I'm going to buy a big fucking house with two swimming pools and make sure there is at least one HDTV in every room and closet in the house. Then I'm buying BMWs for everybody in the family. For a finale, I'm going to take out 25 credit cards and buy so much shit, that we'll never be able to use at least half of the stuff.

I'll get breaks for the mortgage, the shitass carloans (because they'll be next), and eventually the credit cards.

There is noreason to play this game the straight way. 

walküre's picture

Let's all do that and see the economy get on fire! That's one helluva plan and in the end, nobody gets hurt! It's just freakin' paper.

mind_imminst's picture

I don't know if I have had "it". I am just sad because the America I grew up in has changed. I grew up in farm country where people worked long hard days, saved money, and were ashamed to take hand-outs. People were honest and self-reliant. Now it seems that way of life is all bullshit. It is hard to deal with. Like Pike Bishop, I bought a house I could afford, I paid off my school loan, I work a full-time job and donate a ton of time and money to non-profits and charities. I expected that if I was honest and worked hard, I might have a comfortable retirement and enjoy a few of the finer (material) things in life - a lot of the things am giving up now (in order to invest and save). It is all bullshit. In America today, you can live beyond your means and get bailed out, over and over again.

Maybe the best word is "disillusioned". I have a hard time letting go of the old sacrifice/work/save model. I don't know how to adapt to the growing welfare society.

azzhatter's picture

Couldn't have said it better. I feel the same way, disillusioned. I think the hardest part to accept is our best days are behind us. The people today are clearly different and not for the better. It's been a long grind to get to this point but it's here. The non productive freeloaders have taken the majority now. How any real american could vote for Obama and feel good about themselves is something foreign to me.

the grateful unemployed's picture

obamas reelection is a great moment for Clinton-era politics, which were being largely discredited. check your history book, the W regime was a failure of POLICY. housing iraq immmigration (he couldnt get his own party to fall in line on immigration)

no need to get too worked up about the expansion of powers under the new imperial presidency, its really policy we're selling here. the assumption that GSEs were primarily a low income liberal problem is half true. Bush sold us on the ownership society, fueled by low interest rates. (when if fact what we got was the rentier society, and the 1%, Goldman, et all charging us the rent, a new record number of Americans not owning a home, and really not wanting too. Obama will ignore this like the plague, because it is structural, and he can't do anything about it really).

on matters of moving toward the center and creating policy where there was none, housing is yesterdays news. the new policy agenda is energy, the pipeline from Canada and NG infrastructure. this was all Romney policy, now it's Obama's. move to the center, get it?

what Obama has to give up remains to be seen, Clinton gave up the no fly zone in Iraq. (how did that work out?)

and when the GSEs became a universal septic tank for bad loans originated during the ownership society, we had the housing bubble. the NEXT BUBBLE is healthcare, where Obamas naive ideas on health insurance (healthcare ready made for a policy mess) will spark massive inflation and collapse, including people who paid into the thing who are getting not even an aspiriin as these companies go bankrupt, which is what happens when policy decisions like housing are fully implemented in ways the policy maker never imagined and the foot goes down on the pedal.

Healthcare crisis, new Energy policy, (Obama was always on Drill Baby Drill), and Housing to the rear, as BB has put all that MBS in the lockbox (much as Gore wanted to do with SSN) to keep its value from dropping.



the grateful unemployed's picture

cancel your health insurance bitchez, and use the money to buy NG.

Omen IV's picture

The Banks committed systemic FRAUD which caused the bubble - i assume when you speak to Bush Policy- aiding and abetting that tool - (fraud) that is what you mean

the grateful unemployed's picture

of course housing was a fraud fueled by government policy, and the housing bubble (lower interest rates, deregulate mortgage lenders and wall street; promoted under the broad auspice of an 'ownership society' - was a policy decision too) healthcare policy is heading down the same path, with obama playing both roles, liberal democrat who starts out with limited goals of helping the poor, and those most abused by the system, and opening the doors to all sorts of fraud and abuse; mandating coverage, not regulating the industry, and allowing costs to soar well above what the economy allows. in the past every president had the right (and obligation some might say) to start a war somewhere to prove his status as CIC. now each president has the right to blow his own economic bubble, and allow it to collapse later, when the expansion and scope of the policy hecreated are out of hand, sort of like the Vietnam war which grew larger under three Presidents, until it collapsed. right now wall street smells it, the helicopters circling the roof.

Omen IV's picture

blah blah blah! all crap - one reason - only Fraud end to end :

The FBI began warning of an “epidemic” of mortgage fraud in its congressional testimony in September 2004. It also reports that 80% of mortgage fraud losses come when lender personnel are involved in the fraud. (The other 20% of the fraud would have been impossible had these fraudulent lenders not suborned their underwriting systems and their internal and external controls in order to maximize their growth of bad loans.)



RWR's picture

What I want to know is why does anyone pay for anything anymore? Are there no consequences for spending more than you can afford?

Is the American taxpayer responsible for every slcaker out there. God Save Us All!!

Bear's picture

I hope all you gary johnson and ron paul non voters in Colorado, Ohio, and Florida are happy because the SHTF

malikai's picture

TSHTF? Really? Did a statist crony get elected?

Bear's picture

You aint seen nutin yet. There are statist cronies and then there are punk ass, lying, narcissistic, arrogant statists, we got the later.


malikai's picture

I think it's just clear that the US isn't ready to elect one of the owners yet. We're still stuck on puppets and so it shall be.

Bear's picture

Obama, Bush, Clinton are/were Bilderbergers ... Romney is not. I can see you belived all the MSM BS about Romney 'plundered' through Bain.

Colonial Intent's picture

In other news, tweedledum is allegedly less corrupt than tweedledee.


malikai's picture

Sorry, I don't watch TV.

Thisson's picture

It does make a difference.  There is only so much printing that can occur before a currency crisis hits.  Adding anything to the pile, in this case, another $300b, means we experience the crisis sooner. 

LMAOLORI's picture



Very timely comment

And Now The Warning From Fitch


The sell-off is largely due to this -- Fitch is now warning that unless the US Government stops running deficits it will be downgraded.


And there is no credible plan to do that, because doing so means that you must admit that the so-called "growth" and "recovery" of the last four years has been an intentional lie.

Removing the 10% deficit spending means that GDP instantly contracts by that same 10%.  This is arithmetic and cannot be avoided, evaded, or bargained away.  GDP = C + I + G + (x - i)

Reduce "G" by 10% of GDP (which is roughly what has to happen) and GDP contracts 10%.  Period.

Increase taxes by 10% of GDP and either "C" or "I" contracts by the same amount.  Period.

There is no path out of this box without recognizing what we have done and accepting the accumulated damage and pain that we have taken on over the last four years, and continue to accumulate each and every day.

If we do not address this the market will.  

Fitch Warns On 2013 U.S. Downgrade If Fiscal Cliff Not Avoided


Zap Powerz's picture

Based on your excellent post I will make a prediction:

No proactive plan/solution will occur because its too painful.

Therefore, we will be at the mercy of the laws of nature, finance and economics to fix this for us and it will not be pleasant.  Mother Nature help us.