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Prepare to Be Forgiven, Ye Mortgage Sinners
Although we waxed skeptical here the other day about Warren Buffett’s just-announced $5 billion stake in Bank of America, we allowed for the possibility that the deal will provide a handsome payoff to him no matter what happens to the bank. B of A could implode, after all, a victim of sinking collateral values for its mortgage loans, and of litigation over its securitized-lending business. There is also the wild card of homeowners challenging lenders in court to show clear title to properties that are in line for foreclosure. In fact, this issue alone has the ability to capsize the global financial system, since “clear title” is exactly what ceased to exist when the feather merchants of the banking world leveraged out real estate to-the-max earlier in the decade to create an $800 trillion derivatives edifice – the Mother Lode of Digital Money, as it were. All of that sum must be viewed at the moment as deflationary overhang, by the way – not to mention, a key stumbling point for those who argue that The Great Economic Crisis must eventually precipitate out as hyperinflation.
So, how do you produce even mild inflation, let alone hyperinflation, with the housing market in a full-blown Depression? Most surely not by expanding the capacity of banks to make mortgage loans. That’s been tried to death – first moderately, then aggressively, and finally desperately — with zero success. Despite trillions of dollars worth of mortgage stimulus and supports both implied and real, the residential market looks even grimmer than it did a few years ago. Existing-home sales fell 3.5 percent in July despite the fact that prices were 4.4 percent lower than in July 2010. Now that’s deflation. There’s also the $6.6 trillion loss of home equity that has occurred since the onset of the housing bust five years ago. Will it ever return? We can’t imagine how, although it’s possible that Buffett and our President think they see a way. The two have been pretty tight lately, raising suspicions that they had hatched a rescue plan for housing before the Sage of Omaha sank a pile of dough into B of A preferred stock, a fat six-percent dividend, and warrants exercisable for $7.14 a share. (The stock ended the week at 7.75 after trading as high as $8.80).
Buffett must have gotten something from Obama. Why else would he have announced a $40,000-a-plate fund-raiser for the President before the ink had dried on the B of A deal? Pretty unseemly, really. As ‘C.C.’ noted in the Rick’s Picks forum, the “Robin Hood of the downtrodden” has cozied up to the second wealthiest man in America. So what might they have talked about? The “housing problem” for sure. It supposedly will be one of the President’s key talking points in the jobs speech he’s slated to give when his endless summer actually ends after Labor Day. We expect the speech to mark Obama’s outward transformation from elitist to populist. As such, we can expect to hear about a plan that will purport to save homeowners rather than mortgage lenders, allowing the former to refinance loans at low rates regardless of whether their homes are underwater. The President may even demagogue the bankers by admonishing them to get with the program in a big way. We are about to enter the Era of Mortgage Forgiveness, you see, and it can work only if lenders find it in their obsidian hearts to favor wastrels just this once over well-to-do shareholders and bondholders Banks and rentiers are about to take a hit, since they will be cajoled into trading old mortgage bonds for new ones that carry a lower coupon rate. Politicians will be in the line of fire too, since they might have to make some tough calls that would effectively favor deadbeats and spendthrifts over borrowers who acted responsibly.
Lying to Ourselves?
And make no mistake, that is going to be the most delicate part of any political maneuvering that purports to deal with the mortgage crisis. The New York Times would have you believe otherwise. “Many of today’s troubled borrowers were not reckless,” the Grey Lady editorialized recently. “Rather, they are a collateral damage in a bust that has wiped out equity and hammered jobs, turning what were reasonable debts into unbearable burdens.” We are lying to ourselves if we accept the narrative that the housing boom/bust was caused by factors other than a reckless and massive collusion between borrowers and lenders. We are all to blame, really, although it would appear that, politically speaking, the time has come for the bankers to shoulder their fair share of the housing bust.
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Fuck you whore, every other avatar at this site is boobs and cunts and broads, one person has balls and you attack for that alone, rat racist you are you have no interest in what was said, only the testicles which you have none of. I am in Medford Oregon, I will give you my name and address privately, and invite you to settle this privately. Keep in mind Crater Lake is 2,000 feet deep. The water is so cold that body parts do not rot and rise to the surface, they sink and stay sank.
One day all Americans will have the same rights, cunts like you will not like that much, oh boy. Lose your own fucking photo asshole, stop directing other citizens as if you were better than they. And I am serious, I am at the end of my tether with you stinking breeders.
Plus one LBSB for the avatar alone.
This is about getting fresh signatures on fresh brand new notes and making robo fraud go away with as little legal damage as possible, with the insiders making out like bandits-- enter Buffet. Fuckers.
Bait and switch...pull the bait and club the fish. Promise "healthcare for all" and deliver mandatory purchase of worthless insurance paper priced as the insurers see fit. Promise to end war in Iraq, and start attacking 4 more countries in the same region. Call Paul Volcker into the huddle, but ignore him and listen to Summers and Geithner instead. Create a consumer financial protection agency but make it part of the Fed.
Yep. Instead of "money laundering" this is simply "title washing."
Ding! Ding! Ding!
This scheme will not work until the the banks give the homes away or they are ready to mark down homes to pennies on the dollar. Mortgages no matter how low can not be paid if there the mortgagee is being paid minimum wage or is not working. Unemployment continues to grow and whatever new jobs being created are outsourced or paid at minimum wage. The stock market is rigged with HFT. Argue whatever moral hazards you want, morality doesn't change reality.
It's all in the fine print. All these refis w/ principle reduction will convert to recourse loans and absolve the banks of robo signing & other liabilities from the old loans. The non-recourse states will have to play.
"It's all in the fine print. All these refis w/ principle reduction will convert to recourse loans and absolve the banks of robo signing & other liabilities from the old loans. The non-recourse states will have to play."
Agreed.
I've been absolutely deluged by "great offers" to reset my current, not-underwater mortgage lately. There's no particular reason for it, other than that someone must be fishing. Since my mortgage was one of those processed under MERS, I've been intentionally passing on the offers- I had a good deal to begin with, so I'm not losing a thing- and if the MERS debacle blows up one day soon, I don't feel any pressing need to absolve them of guilt for their participation in advance.
Yea, here pay a few $1,000 bucks to the bank to refinance for a new slightly lower mortgage payment, all you people who pay nothing now and squat for free...yea this makes a real lot of sense.
The banks violated numerous laws and in many cases don't have the legal right to foreclose.
They broke those laws because they were greedy, just like the homeowner who bought way too much because he was told the market will never go down by Alan Greenspan.
Banks that played fast and loose with title chains of custody lost their rights to foreclose IMHO, so all the homeowners in these cases are not sguatters. What would you do if you found out the business you send your mortgage payment to doesn't own your home or have your title? Why don't you send your mortgage payments to me then?
Morality aside, does the letter or spirit of the law even exist any more for the aristocratic class?
You've hit the nail on the head.
Any payments made by a party on a bifurcated note should be refunded or at the very least accrue in the reverse fashion as banks do on their ledgers, i.e. principle reduction first, interest/"earnings" second. The remaining principle, if any, should be allowed to be refinanced.
Personally, I favor a greater penalty on the parties that devised the bifurcation madness, including criminal sanctions and personal incarcerations in real penitentiaries.
The judiciary is the proper venue for restitution and justice but since judges are old seasoned attorneys that received their plum positions as payments for past political expediencies, I won't expect any. Brood of vipers all.
nicely done
MrBoompi
does the letter or spirit of the law even exist any more for the aristocratic class? No !
But did it ever apply to the master class whose political whores write the laws according to the drafts sent to them by the lobbyists ?
Didn't one of their uberclass let it slip that only the little people pay taxes. Same with all laws; they only apply to the little people.
And they are now openly flaunting it.
Unearned bonuses for ruining the economy.
Insider information between the President and Buffoon.
Don't like your credit rating. Send in the Gestapo.
The head of the worst outsourcer to China is the U.S. jobs czar.
What's not to like here in the Gulag ?
Well, I'm a little upset that Arena Football is over for the year, but other than that things are peachy.
This new plan for Government involvement in real estate/mortgages will probably work out as good as the last one.
Remember the suckers who got played by government into buying a home with the Government's first-time home owner credit. The Government effectively created hundreds of thousands of new under water home owners as prices went lower, eclipsing the measly first time homeowner credit.
I'm sure anything done on a grand scale as you speculate will only result in a grand scale screw up.
don't forget, by accepting new finance terms, all robo signing frauds against you must be withdrawn. why pay 1% less if you can live for free?
RIGHT! All these mortgage squatters arent paying ANYTHING right now, so why would a plan that you 'pay a little less at a smaller interest rate and OH BTW the value of your house is less too lucky you' do ANYTHING at all? It wont!
They'll happily go for it because they'll probably be allowed to take some additional cash out of "their equity" when they refi. This additional cash will be (hopefully) be used to make some more down payments at the local Chevy dealer and the merry-go-round will (hopefully) make a few more laps with the music playing. It's Hope and Change, bro! Get used to it!
massive deflation lol
to find the solution.. rip up old twentys in public, free food for all, gas for 10 cents a gallon. movie tickets cut in half. wipe all vestages of price moves off the map. a loaf of bread now 20 cents
Rick still does not get it on the deflation , inflation issue ... drum roll inflation is fiat printing.
the debt that must be continually refianced .
Got high prices and inflation rampant? Simple! Just REDUCE the prices! Voila! Problem cured.
Someone please wake me when this bus finally leaves Insaneville.
We are about to enter the Era of Mortgage Forgiveness (via Fannie via the taxpayer)
and here comes Obama to announce the appointment of the next jobs Tsar, Geithner's ex assistant
Why don't they just give Mozillo the job? I hear he's available and has some experience in this area.
There is no doubt that there was "reckless and massive collusion between borrowers and lenders" during the 03-08 period. But many were not party to this insanity.
I bought a home in early 06 and I bought within my means and with a fixed rate mortgage. Many did in fact. Don't use too wide a brush with your whitewash bro.
True CD. I bought in 2003, what I could afford, with 20% down. Took a ton of cash out of the house I sold (bought in 1988 for $64K and sold for $147K). Didn't miss a beat on the housing "downturn". Now I've got plenty of equity, a manageable fixed rate payment, and a desire to kick some banker ass if they start giving away freebies. Come on, pricks, just try it. You don't need to fear the ghetto looters anywhere near as much as you need to fear the middle class folks who have done the right thing all along. Not near as much...
I agree, I don't see the collusion. Collusion connotes a sly deception for mutual gain. What the hell is the gain if you buy a house and then cannot afford it? The mutual assent came where the buyer was assured by eleven "professionals" sitting around a super-heated closing table that just because the actual contract had an ARM, and different terms than what was agreed upon, is no reason not to go through with the signing. After all, they promised, as long as you pay on time the first year your property will appreciate and you can refinance it at better terms. We swear we will refinance you and make all the terms better if you'll just sign now...really, you can afford this, everybody's doing it...watch the shows on cable.
Exactly. And even worse than that, some buyers saw paperwork where the first few pages were salted to look like a fixed rate mortgage. They only found out later they had an ARM.
If you bought within your means and were not fraudulent, what's your problem?
The problem is that people like us played by the rules and made some degree of sacrifice, prudent budgeting, and self discipline. Now not only do we pay for our houses, but we are expected to pay for the houses of people who made poor choices, or we are expeced to be happy when we see the sendthrift neighbor get the gift of a write off.
We already have a fair mechanism to deal with this. Jingle mail in non recourse states and personal bankruptcy in recourse states.
<<The problem is that people like us played by the rules and made some degree of sacrifice, prudent budgeting, and self discipline. Now not only do we pay for our houses, but we are expected to pay for the houses of people who made poor choices, or we are expeced to be happy when we see the sendthrift neighbor get the gift of a write off.>>
I agree with you on that.
But if you were not fraudulent and lived within your means, you shouldn't be losing your home.
I am starting to believe that these giveaways to delinquent homeowners, while giving folks who played by the rules, a huge red, white and blue middle finger, is specifically intended to foment class warfare in America.
the real lie is that housing was the root of the economic crisis
Then what was the root cause in your opinion? Loss of well paying jobs to satisfy the increasing greed of top management and rentiers?
leverage of 50x against imaginary assets and leverage on that leverage all combined into a clusterfck
If the US mortgage market in total was $10t and 20% were in trouble you do the math
otherwise TARP would have more than fixed things
The big lie has always been the it's the fault of the housing market, the only thing the market implosion did was to expose the ponzi scheme
The root cause is massive theft of capital assets, a transfer of wealth from the proletariat to the top 1%. Housing was just a tool, a very lucrative one a that for the Power Elites. There are other tools as well, not the least of which is the military/war industry.
Exactly. It was tech stocks in the 90s. It was housing's turn post y2k and war's turn post 9/11. Sector rotation.
Lather. Rinse. Repeat.
The WSJ, NYT, WaPo and every PhD economist says that housing is the root of all of the present day evil. So it must be true........right? They wouldn't lie about these things. And their Phd's say they know what they're talking about.
/sarc
Sheep Dog, you missed one point earlier. Mortgage forgiveness. The homes will be written to current appraised value and that will be refied at 1%.
Saw this coming years ago. This guy in the White house really, really wants to be re-elected!
So who eats the loss attendant w/the write downs? Do we just shove them up a Unicorn's rectum? "Dr Obama to the proctology suite, paging Dr. Obama..."
Oh, 'forgiveness is the key'...yea I see....what is this, a BeeGees song?
No. I think it's called Buying Votes.
LOL, no way banks take the loss...NEVER HAPPEN!
It has to happen. Bank losses? Some. Most will be unloaded on Fannie, Freddie, or some other scheme to transfer the losses to the tax payers. Watch it happen!
The people not paying know that they will eventually have to pay rent again. Why not stay where they are when the new payment will be similar to a rent payment?
Then there is the whole unemployment thing.
The other side of the coin is that this is the greatest stimulis ever enacted. No mortgage payment means new i-pads, cars, and everything else. Maybe they don't want people to have to pay?
The taxpayers and future mortgage holders will pay the tab.
You're right that the banks won't take the loss. The loss has been and will continue to be socialized into the balance sheet of the Fed. The savers, mostly pensioners, will take the loss.
If you must play the game, the only realistic choice you have is to know the rules, even if you don't agree with them (and I don't). When TPTB are handing out freshly printed money, you should get in line to get your share. This likely means borrowing cash you might not need. You can buy gold with it ("but you can't eat gold") or take someone out to an expensive dinner with a nice bottle of Bordeaux (which you can eat).
"LOL, no way banks take the loss...NEVER HAPPEN! "
Privately, no. There will be funding redirected through the back door to shore up the loss from the inkless printer. Publicly, yes. They will take a shellacking in the public eye, be villified in the press and the sheep will cheer! Win win for everyone. The prez gets good pr points, the banks get the blame and the sheep get morgtage reduced to market and a lower interest rate! What's not to love? Oh, what...? The back door "loans"? Yeaahhhhh..... wellll.... when the sheep are done cheering they will figure out they just paid for not only a bank bail out, but also a campaign of monumental scale for Odumbo's reelection and the great "gift" they just received. Of course, by the time it comes to light (if ever), Odumbo will be term 2 and the collapse will be in full blown steamroller mode.
...and a couple of other points: This scenario doesn't even address the fact that any idiot that takes the deal wipes any past liability the banks had or the possible tax implications that could lead to GOVT possession of the RE through the IRS. You really think the "forgiveness" isn't addressed somewhere in the fine print?
http://www.thestreet.com/story/11224917/1/a-huge-housing-bargain--but-no...
"On Wednesday, the Federal Housing Finance Agency (FHFA), the Department of Housing and Urban Development (HUD) and the U.S. Treasury Department issued a Request for Information (RFI) concerning the disposition of the inventory of foreclosed homes owned by the federal government."
"These homes, which are now the property of the U.S. government, the U.S. taxpayer, U.S. citizens collectively, are going to be sold to private investor conglomerates at extraordinarily large discounts to real value.
You and I will not be allowed to participate. These investors will come from the private-equity and hedge-fund community, Goldman Sachs(GS_) and its derivatives, as well as foreign sovereign wealth funds that can bring a billion dollars or more to each transaction."
Well, there you go; hurry up and push the paper work through; you and a few friends can form a REIT and get a real good deal. Snicker, snicker. I feel sorry for the "smart money" that's going to get into this tar baby.
All we need is street addresses for these bargains -- strange the rash of mysterious fires that broke out and destroyed the value of these "assets".