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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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Wed, 11/07/2012 - 13:35 | 2956908 Cognitive Dissonance
Cognitive Dissonance's picture

They'll make the rules up as they go.

Wed, 11/07/2012 - 13:16 | 2956793 Gene Parmesan
Gene Parmesan's picture

You're F'ed like me. I don't qualify for any largesse because I refi'ed a month late back in '09.

Wed, 11/07/2012 - 13:37 | 2956931 ParkAveFlasher
ParkAveFlasher's picture

Here I was gloating about how high my chin is above water, and how I've played the housing market in the last ten years.   

Reminds me of the Greek myth of Tantalus in the Underworld, given unquenchable thirst and set chin deep in cool fresh water, with a branch ripe with plums set over his head.  Whenever he reached for a plum, the branch lifted just out of his grasp.  Whenever he lowered his lips to the water, the level would recede just below his mouth.

Is this Hell?  I would prefer Heaven.

Wed, 11/07/2012 - 11:37 | 2956104 Joe Davola
Joe Davola's picture

Depends on the congressional district.

Wed, 11/07/2012 - 13:34 | 2956089 Cognitive Dissonance
Cognitive Dissonance's picture

Yeah...........but What's In It For Me?

<I always tune my iPod to WIIFM.>

Sorry. Forgot the /sarc tag.

Wed, 11/07/2012 - 15:11 | 2957409 Winston Churchill
Winston Churchill's picture

Nada.

Or maybe NDAA ,

Live enslaved or die.

Wed, 11/07/2012 - 11:31 | 2956069 Rainman
Rainman's picture

No mortgage and no debt......my parsimony comes back to bite me in the ass AGAIN !

Wed, 11/07/2012 - 16:46 | 2957835 dark pools of soros
dark pools of soros's picture

quick - grab some declining value properties so you can get in on the SAVINGS!!!

Wed, 11/07/2012 - 13:21 | 2956823 barliman
barliman's picture

 

Bruce is always leaving out LITTLE details ...

... like what happens to the markets between now and late December.

How do you do "mortgage relief" if the markets crash, the TBTF are failing and the 10YR rate is at 5.50% and climbing?

(Phrased as a question for the L.I.V.'s - What happens when the people you want to tax more decide not to let you?)

Wed, 11/07/2012 - 21:04 | 2958862 barliman
barliman's picture

 

Or perhaps you should try answering the EASY question:

What happens when the people you want to tax more decide not to let you?

Hint: Fiscal cliff approaching, Republican hand weakened, what do you tax more that does not affect the average Obama voter?

Thu, 11/08/2012 - 00:00 | 2959368 James
James's picture

Hint: Fiscal cliff approaching, Republican hand weakened, what do you tax more that does not affect the average Obama voter?

 

 

 

 

Work/Labor

Thu, 11/08/2012 - 03:18 | 2959618 barliman
barliman's picture

 

LOL!

I have heard some of them actually work and pay taxes.

They are also stupid enough to believe they won't have to pay more taxes for the privilege of having voted for the SCOAMF.

THEY cannot control whether they pay more taxes ... so I must be thinking of some other group of people.

Wed, 11/07/2012 - 19:28 | 2958624 BigJim
BigJim's picture

 ...How do you do "mortgage relief" if the markets crash, the TBTF are failing and the 10YR rate is at 5.50% and climbing?

Ummm... there's this guy? His name is... ummm... Ben, I think?

Welll... he can and will stop the ten year hitting 3%, let alone 5.5%.

Wed, 11/07/2012 - 20:57 | 2958842 barliman
barliman's picture

 

Pray tell what mechanism in what scope does he have remaining at his disposal to allow him to forestall the rise of the 10YR rate?

QInfinity is failing at $ 40 billion/month - will he purchase ALL the 10YR supply, sell it back to the TBTF's at a loss, and then buy them back?  Wash, rinse, repeat?

Q10YRadinfinitum?

Wed, 11/07/2012 - 11:29 | 2956055 Joe Davola
Joe Davola's picture

Would one need to show photo ID to claim a house bailout?

Wed, 11/07/2012 - 11:28 | 2956044 Everybodys All ...
Everybodys All American's picture

He'll print right through a bond market implosion.

Wed, 11/07/2012 - 11:27 | 2956027 Gene Parmesan
Gene Parmesan's picture

Sounds like I need to hurry up and get my mortgage from being just barely above water to fully submersed somehow.

Wed, 11/07/2012 - 11:52 | 2956210 NEOSERF
NEOSERF's picture

Ask the NAR for help, they have some crack analysts over there.

Wed, 11/07/2012 - 11:34 | 2956087 Mercury
Mercury's picture

You can trash your property to bring it's MV below your mortgage.

Demo for dollars.

Wed, 11/07/2012 - 11:23 | 2956022 Colonial Intent
Colonial Intent's picture

Well it worked for wall st, why not main st?

Wed, 11/07/2012 - 17:00 | 2957927 ajax
ajax's picture

 

 

damn right Colonial Intent and I'm all for it but so late... so late in the game now...

Wed, 11/07/2012 - 17:04 | 2957954 ajax
ajax's picture

 

 

See the Cockburn documentary "American Casino" and please if anyone can find it streaming online please put the link to it up here!! As 'must see' as "Inside Job" and/or "The Smartest Guys In The Room".

Wed, 11/07/2012 - 11:08 | 2955937 Almost Solvent
Almost Solvent's picture

Obamamortgages Bitchez!

Call 'em up with your Obamaphone to get 'em!!

Wed, 11/07/2012 - 12:19 | 2956374 optimator
optimator's picture

Those Obamaphones served their purpose and will shortly be cancelled.

Wed, 11/07/2012 - 13:28 | 2956862 Panafrican Funk...
Panafrican Funktron Robot's picture

Why would you cancel cheap citizen tracking and distraction devices?

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