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Dick Bove Explains Why A Mass Refi "Stimulus" Would Be A Dud
Yesterday Bruce Krasting proposed a thesis, which despite some notable complications and substantial political challenges, does have its merits: namely that in pursuing a mass "beneficial" refi of agency mortgages to some threshold interest rate level, say 4%, accompanied by a surge in Fed MBS prepayments (recall that this component of QE Lite has stalled massively and now accounts for about $15 billion in POMO each month - a sad reminder of the $100 billion + beast it was in its QE2 heyday), the administration and the Fed would effectively enact a GSE-funded version of Operation MBS Twist, in which the Fed reduces its agency holdings while extending Treasury duration. Alas, Bruce may not have made it clear that this version of Twist with a Twist has an annual cost of about $85 billion invoiced to US taxpayers each year. And while we believe that plain vanilla QE (either LSAP or Chubby Checker) has a chance of passing, especially if stocks do plunge by another 20%+, QE that has to be indirectly funded by taxpayers (in the form of quarterly capital make wholes for the GSEs from the Treasury), has virtually no chance of passing. But we have been wrong before. Regardless, here is Dick Bove, whose opinion for some inexplicable reason is still relevant (and yes, we are guilty in spreading it), who takes the refi stimulus thesis and presents his views on its feasibility. And while we are the first to mock Bove, his conclusion does have some merit: "Until [the administration] figures out that more production is what is required we will continue to take money out of one pocket to put it into another and assume that we have accomplished something."
Circular Reasoning
Wednesday, August 31, 2011
Richard X. Bove
Apparently the Administration is close to suggesting a new program that could result in the mass refinancing of home mortgages. The theory behind the program is that if $85 billion in interest payments are taken away from the holders of mortgages and given to the borrowers, under these mortgages, it will stimulate more spending and an economic recovery.
Press Reports
One week ago, the New York Times published an article that indicated that the Administration was testing a number of concepts that would allow Americans with relatively high cost mortgages to refinance this debt at current rates which are much lower. The article indicated that in July, Fannie Mae and Freddie Mac held $2.4 trillion in mortgages that had interest rates that were 4.5% or higher. It was suggested that if all of these loans were refinanced at 4.0%, the current mortgage rate, homeowners would save $85 billion.
The objections to putting a program in place immediately was that it was realized that if the homeowners saved $85 billion, the GSEs would lose $85 billion. This would increase their losses and the taxpayers need to replace that money.
However, the idea seems to be resurfacing. The Wall Street Journal wrote a lengthy article on it in today’s edition. Moreover, declines in GSE bond prices suggest that at least some observers think that some type of refinance program may be mandated by the Administration.
Fed’s View
Apparently, Ben Bernanke, the Chairman of the Federal Reserve has been frustrated by the fact that interest rates are low but mortgages are not being refinanced. It had been his assumption that by lowering interest rates, homeowners would take advantage of the situation by refinancing their homes. It was also believed that the banks would not be hurt by the process because short-term rates were also being lowered so banks could maintain their margins. Plus, bank mortgage fees tend to rise rapidly during refinance booms.
The hoped for boom never developed. Home prices had dropped. “Un” and under employment was soaring. Bank lending standards had been meaningfully tightened. The net result was mortgages were not being refinanced. Not only was this frustrating but home buying did not pick up either even though housing affordability was at relatively high levels.
Incompetence
The point that neither the Administration, the Treasury nor the Fed can seem to understand is that they have strangled bank lending with their capital and liquidity rules and their price fixing requirements. This was a core reason why bank lending did not open up to facilitate a refinancing boom. Suing and fining banks is not the way to increase lending activity particularly if the suits and fines are related to mortgages the very product desired to be increased.
The policymakers also failed to understand that the infrastructure needed to support a refinancing boom had been disassembled. It no longer existed. All these people were working on foreclosures and stiffer government regulations concerning foreclosures. The government had shut down the refinance apparatus and expected interest rate cuts to take its place.
It is a classic example of how badly the people who are supposed to understand banking do not have a clue as to how it works. They love to pass laws and new regulations but they do not care nor do they understand what these regulations will do. Then they get frustrated when the simplistic monetary theories they put in place do not work. Classic!!! Pathetic!!!
Banking Policy
Now these little gremlins are at work again trying to figure out how to solve the problem of getting a refinance boom underway. The program cannot result in big losses to the taxpayer and they must get the banks on board. This would not be hard to accomplish. All they need to do is change the capital and liquidity rules and allow mortgage rates to shift slightly higher to increase bank profits. Will they do this? Who knows?
If the program they come up with has in it big losses for the GSEs and big mark downs for the banks it will be another failure. The biggest failure is that these people are still working on consumption rather than production programs. Until they figure out that more production is what is required we will continue to take money out of one pocket to put it into another and assume that we have accomplished something.
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Bove is missing the point and he is wrong.
Exactly, reverse repos are a perfectly valid form of monetary stimulus. The ignorant public has been convinced by right-wing propaganda that quantitative easing is a failed policy, so our officials at the Federal Reserve are left with little option but to persue more secretive forms of accomodation. The public are like children in their understanding of macro-economics, especially compared to the likes of Dr Paul Krugman and other economic titans. It is for their own good that further easing is pursued, and they'll thank the experts for it later.
You are either a real dickhead or that loveable fake dickhead Hamy.
I cant decide.
Some people view principles as more important than short term expediencies that may or may not help resolve a STRUCTURAL problem of which risk aversion and velocity of money are only symptoms.
We encourage moral hazard by the entrenched oligopoly if we follow your idea, even if it were to succeed. I dont see how it instantly succeeds anyway without diluting my money and stealing my past labor from me and others in the form of a ten year low grade inflation.
Hit the reset button. Solvency is not a liquidity issue. Lets take the pain now and recognize losses. Maybe people will learn and become more careful and cautious with their investments in the future.
Will no one rid is of this pestilence, this ignorant public? -- What, they with their God forsaken animal spirits stench...
We could sure use a good, old-fashioned war-culling of the herd. Too bad trenches are out of the question. Manual digging trenches good for economy, puts many to work -- Great Stimulus.
They want to put money in people's pockets?
Then how about they provide cash to people who are up to date on their mortgage, or who paid off their mortgage but have suffered the ravages of net worth loss as house prices have fallen?
Maybe the only round left in the magazine is time.
Since interest rates are just about irreducible, and the “walk away and leave the bank with the bag” option is on the table, all they are interested in now is extending the term for as many people possible to keep them in the system. They are going to live and die on housing and anything they can do to write paper is good for them.
I am 8 years into a small 15 year mortgage at 4.7%. Chase has been Fed-Ex’ing me repeatedly trying to get me to sign a 4%, zero point new loan. I figure that a new 15 or 30 year contract is all they are interested in.
For my part, one of two things will happen. Either Chase gets paid off way early and I’m out, or it all goes to hell in a bucket and I will be out as well.
Just thought of something else… maybe the quest for new paper everywhere is one way of covering the fubar that the banksters end-run around legal recording and documentation requirements became.
Hmmm..
Sadly ironic that TPTB have to have their backs against the wall before they will even consider a "stimulus", plan that might actually help some of the few remaining productive people in this country. Disgusting really.
It WILL fail utterly. Think about it. To be interested in this at all you would have to have a loan somewhere above the 5% range and at least par equity in your home. Even then, no matter what they say about "zero points", and other lies you would have to fork over many thousands in fees to reduce your mortgage by what, a couple hundred dollars a month? Where are you going to come up with that cash? A credit card? Burn it off of what little equity you have left before it goes bye-bye? Why?
When the housing bubble was expanding this would have been a no brainer. Now that home values are sinking fast only a fool would throw that kind of cash after an investment that's loosing value every day. It makes no sense.
Fed morons and other Harvard and Yale types need to get a clue.
He is still a dick.
a-bove and beyond.
i'm surprised you haven't noted this money-printing academic-industrial complex lunatic's statements today
adam posen: the dove's dove's dove, making krugman look like hayek.
http://azizonomics.com/2011/09/01/adam-posen-calls-for-printing-money-2/
It's a TRAP! The banksters know they have 'broken' home loans/MBS and NEED you to re-sign a new agreement.
DO NOT DO IT!
Instead, challenge your existing loan in court as the banksters must PROVE they have ownership, prove that the banksters have properly filed within the legal time parameter every ownership change, etc.
DO NOT SIGN A NEW LOAN! Legally force the banksters PROVE in court they own your home, because odds are the banksters BROKE the law and thus, your home loan is null/void and you own your home.
Right! This is ONLY an attempt to get the banks free and clear by trying to get people to sign a NEW mortgage...dont do it! Make the bank produce the mortgage, they cant!
Besides, I wouldnt worry too much about this because it costs thousands out of pocket to refinance, another attempted Obama gift to banksters, people wont do this theyll just keep squatting.
When people have figured out they can stay in their home for nothing, they get pretty savvy about making sure it stays that way.
Another Obama 'cash fer clunkers' bunch of BS, *fail*.
I don't doubt that this would make the title to the deed issue go away. But no one seems to be talking about the fact that with house prices declining, in order for "Mom & Pop" to refinance, they would have to bring money to the table to pay the difference between the apraised value of the house and the outstanding mortgage balance. So, not only would this clarify titles, it would also mark the houses to market on the books of the banks. We have already lost an $80K initial downpayment due to the value of our house decreasing, so now they want us to bring an additional $40K to a re-fi deal so that the banks have good collateral. Fat fucking chance. My extra money buys gold, not collateral for the banks. They think we are dumb.
that's 100% correct. you cannot refinance a home if you are jobless and/or your home is 30% under water.
that people are failing to refinance are symptoms of (1) the Fed & Treasury doing everything they could to serve the heavy contributing financial industry & public sector union backed state pension funds and (2) the Fed's abject failure to use interest rate sculpting to provide an asset boost to the deflating housing bubble.
Exactly !
MarketTruth - SOOOO True!
I'm a compliance "geek" by trade and have a freaky sort of late evening hobby of studying mortgage and securities fraud. I know, I know....I need to get a life and perhaps spend a few more late evenings reading smutty novels (mortgage stuff will give a person nightmares and physical side effects). All of this reading is what prompted me to start pulling our mortgage documents, research assignments (none), send out a QWR and dig depper to our own mortgage. Startling stuff...
When I made it known to our bankster what I knew about our mortgage origination and securitization + the trustee's failures to comply with the PSA (after much research) in addition to the issues relating to the trust itself -- our banksters couldn't have worked harder to try to get us to sign documents for a modification. I found this pretty interesting since so many people have to fight so hard to get these banksters to offer modification and actually follow through with the delivery of a modification. They were obviously very imodivated in getting our file swept under the rug quickly.
So - in connection with our bankster: Our mortgage is a big chunk of change. They seemed to freak when I let them know what I knew. Feel free to do the same. In our care, the bankstery immediately sent out an offer to modify the mortgage. I did not respond. You simply cannot sign the paperwork, folks - you'll be signing a new contract which will help absolve the bankster of what was committed previously. Visit with your personal legal counsel who is knowledgable in these matters (good luck finding one) and he/she will surely advise you of the same if your mortgage situation is similar.
Since that initial modification package sent by the bankster - they keep sending additional modification packages with urgent requests to sign and return them. They send "visitors" to the house to leave notes to call them -- but the calls are just to try to manipulate us with mortgage modification offers. Well, I was born at night - but it wasn't last night. I refuse to sign anything - it would constitute a waiver of rights and burying of the prior fraud.
EPIC FAIL, BANKSTERS.
It just fries me when various politicians with pockets lined by the banksters express concern over the banks. You know what? I'm sorry, but fraud is fraud and it voids the contract - they should eat it. HOW ABOUT A LITTLE CONCERN OVER THE PEOPLE?!!!
Make no mistake = If you are I engaged in similar conduct, we would eat it...while we were sitting in our striped jumpsuits in the Gray Bar Hotel. Banksters should be held to the same standard where they have engaged in fraud.
Sorry, but my position on bankster fraud is this: Where the evidence is there - banksters should pay - void the mortgage and leave these families/homeowners alone. Those who engaged in this activity - criminal punishment.
I don't not care that doing the right thing is will cause bankster hardship - to not punish them for the magnitude of fraud they've layered across the United States is abhorrent. It must be done.
How did you research your own mortgage's securitization? Get a copy of the PSA? Very curious....
Hi Wellingtondowd -
I first have to note something very interesting I've found and other folks have taken notice of: We're seeing that a ton of trusts that were formed in '07 - and '08...maybe '09 were set up, filings were made with the SEC and then at about the 1 year anniversary - they file a 15-whatever form with the SEC to report that the trust now only has 50 or 300 investors now and thus are now exempt from further SEC reporting. Uh...whazz up with that? What an odd concidence with all of these trusts. Also, the reporting to the IRS is there for '07, '08 - but when we link on '09, a prior year shows up. Either an honest mistake or the feds know something they don't want us to see....
Anyway, I found the trust where our mortgage was placed. FYI: You can dig into the SEC documents - you can even see your mortgage info (city, state, amount of mortgage, type of loan - even the type of income verification done, etc. in many cases).
Our trust itself has been the subject of a few lawsuits - including the latest big one by the Fed Credit Union Assoc. I looked up its SEC filings - you have a dig a little - if you click on the full blown version of the initial prospectus - you should be able to get to the PSA. There's your baby that usually states what the required duties of the trustee are...like custody of the very special paperwork that shows they now own you, uh, I mean your mortgage, their duty to file assignements, etc. The trustee in our case failed miserably.
I also noted that the SEC doc shows the entity is a DE entity - but 3 people in the State of DE were perplexed because they could find no record of the entity formation. So, I contacted the DE AG's office because about a week after finding this - I read that the AGs of NY and DE were looking into how the trusts themselves were formed, because there were inconsistencies - that indicated they may not have been "formed properly". Wow - so if the Trust doesn't exist...then I'd be hardpressed to guess how they could sue a homeowner whose mortgage was sold to that entity...and on the receiving end of a foreclosure notice.
Sorry to ramble on. I hope this helps. Happy hunting - its better than paying someone a thousand or two to do the research for you. Best wishes!
I think there is even more to this conspiracy theory on the reps and warranty problem faced by the banks. The news articles mention refis for loans held by Fannie, Freddie and the Fed only. I think the reps and warranty problem is going to blow up and the administration knows it, and wants to get F/F in the clear before it happens. Imagine, after this refi, the government will be one of the rare entities that legally own trillions of homes. The administration can then use the reps and warranty issue to force the RMBS and PLS holders to reduce principal or face annihilation. Whether F/F lose money or not is another matter. Right now, they don't even own the homes on the papers they hold. Notice BofA is trying very hard to sell their correspondent mortgage line?
Egad.
Oh, those poor banks and bankers! How they suffer so when they all have our best interests at heart! We just don't understand their pain! NOT.
The problem cannot be fixed until the banks are reorganized a la Sweden circa early 90s. These are bad debts that need to be written off along with the banks' shareholders and bondholders in large measure. Otherwise we're just Japan with a trade deficit.
"Otherwise we're just Japan with a trade deficit." and a sh!tload of cool military hardware!!
Words cannot express how bad Bove is. Despite that, I'll have a go: Tool, Plank, Retard, Shill, Moron.
The GSE's won't lose $85bn if the refis occur. This is so basic it is actually embarrassing to have to point it out. The losers, to the extent there are any, are the holders of MBS who will suffer a prepayment of principal and then if they choose, have to reinvest into lower yielding MBS.
But this is not really a zero-sum solution for a number of reasons:
1. Prepayment is partially priced into MBS already - as it always is when spot mortgage rates are well below the historic. Any MBS investor who does expect refis in that environment deserves to lose money/.
2. The barrier to refis is some arbitary LTV threshold which is crazy when you consider that the GSE's have already guaranteed the principal. Allowing a refi at a lower rate is more likely to reduce defaults and save the GSE's money, not the other way around.
3. This policy would directly put money into the pockets of stretched households where it might actually do some good, instead of collecing in a bonus pool on Wall Street.
The only reason to object to this policy is if you want to protect bank profitability and MBS holders (mainly Banks as well) ahead of households and consumers. This is what Bove is doing. That is why he is a cunt.
Sorry Bob...we have been putting money DIRECTLY into the pockets of home owners (I mean squatters) pockets through the "don't pay your mortgage" program for almost 3 years.
The only problem I really have with this plan is the banks don't eat shit on this scenario...
Yeah.. I have a hard time letting really anyone off the hook on this one. Bankers should suffer, go under. The bubble enabling, economy destroying Fed should be abolished. The public who thought rising home prices at 15% a year on a depreciating asset should not get rewarded for relying on his stupid gland.
But why stop there? There is so much other parasitic rot in the U.S. economy strangling the real wealth producers / generators of stuff / innovators. Strangled by tax attorneys, regulators, technocrats, overpriced big labor public and private, etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc. etc.
BTW-I loved your role in The Shining.
impressive.
Horsey, I believe Tyler in his opening paragraph (before the Bove piece) suggests $85b as the cost. In Krasting's piece he was a little more circumspect on the cost.
From the pleasant tone of your comment I imagine that American tax payers would be subsidizing your misfortune.
The $85bn is a numebr quoted by Bove.
And no, I am not American, nor do I live there. My views are unbiased.
yes Bove and Tyler both - strange bedfellows
a refi program ain't free and $85b/yr might be high but in the end savers and taxpayers get screwed.
Dud or D.O.A.?
Due to contract language in the MBS a refinancing is the only possible way to solve this.
A bank cannot change the terms on a specific home loan within a MBS unless the bank buys it back. However a homeowner refinancing can do it.
Who is going to refinance a house at full loan value if the house is underwater? The fed. What a stimulus! This is the new QE.
Reinflate the bubble!!!
LOL, so someone who has been squatting and paying nothing for 2 years will now pay to refinance for a slightly lower payment and start paying the bank? What a stupid idea only an idiot would do it.
Make the bank produce the original mortgage, hardly any of them can.
Look TCT, there is no money and the FED cant refinance its bubble, insanity is not an answer.
My offer is this: Nothing.
Dont discount insanity and stupidity as valid policy options.
What is the composition of the ownership of RMBS - is it primarily the Fed and banks?
Discounting the CMBS's and collaterallizing the LSAP's will, in fact, create a Little Richard.
OK america...ready set REFINANCE! LMAO this is so stupid no matter which way you look at it.
This is all NOTHING BUT another repackaged 'cash fer klunkers' fiasco and total failure.
You can lead a deadbeat to a refi but you can't make him sign it. Or pay it. Or pay anything at all like taxes, insurance. Great plan.
Wow this is just blatant, 'Hmmm lets see how can us banks get out of this giant problem we're in where we have no idea who owns what since we lost the paperwork long ago....oh I know YOU come in and pay us a few thousand$ to refinance and sign a new mortgage then we GOTCHA!'
I agree with MARKETTRUTH above. This is a move to let the bernak do more easing and twist and get the banks out of alot of their fraudulent loans. People should make the banks prove they own the mortgages and when the banks can't, get thier homes for free. Since our wonderful gov. will not punish the bastard banksters home owners need to.
Two points:
a) The Bove note reads very close to the words that I used yesterday.....
b) I do not agree with Tyler D. that this (if done) will result in an $85b cost to the government. There will be a cost. But it won't be born by Uncle Sam.
It will be born by savers. Individuals, pension funds, bond funds, MM funds are the owners of Agency paper. They are the ones who will pay for this.
At Tyler points out, prepays are nothing new in MBS land. The rate has been very high (20%) for the past few years. What the mega refi would do is accelerate the process significantly, but it is just a bigger result than what has been going on for sometime.
Bove has it right (sort of). This is a transfer of income from savers to borrowers (not government loss). This exact thing has been going on for 3 years.
The continual punishment of savers is a very bad thing to do to money. We are in a fiat system. ZIRP and the related consequences to savers is the biggest debasement of money there is. It's worse than inflation.
bk
65% of americans cant lay their hands on $1,000 for an emergency expense, no one is going to pay to have a new slightly lower mortgage payment when theyve already been paying nothing. America is in Gypsy mode right now and discovered they dont need to pay the bank at all. Gypsy's are quite savvy.
65% of americans...
link pls
Financial repression has been a theme promoted by many including El Erian, Gross etc. but I have not seen it actually quantified. Because it has not been quantified it is difficult for most to connect the dots other than a vague (or not so vague) sense that granny has been getting screwed by Wall Street and Washington.
The refi program is different because now it's not granny getting screwed by the politicians and banksters but by her neighbor, and it's not just granny but a wider demographic of home owners and even renters who will be excluded from the program in contrast to those who get a huge windfall. I'm not sure if class warfare is the correct term but whatever it is called such a program will have a very polarizing effect on an already polarized society.
Their Silly-Putty brained idea is to 'transfer' $85 billion thru lower mortgage payments to homeowners thru a lower interest rate, thereby 'increasing spending'...well this falls flat on its face before the ink dries considering most already arent paying any interest at all, or even the payment itself, and the cost of refinancing would take years to get above the slight drop in interest rate. When youve been paying nothing for 2 years, youre not going to jump at the chance to pay up front to start paying a little less. Simply retarded.
Just stunning how incompetent those running the show are. I mean, these people are idiots from Obama on down.
I do not have a PhD. in economics, but I know they can reshuffle this deck of financial cards as much as they like and there still would only be 4 Aces in the deck. With each reshuffle however, the quality of all cards will deteriorate due to the friction generated.
It's just another accounting gimmick in which an illusion of progress is created by expanding (growth=good) the black hole of ponzinomics.
The mass refi doesn't make any sense at all and that's why it probably has a good chance of being implemented.
The problem is not the interest rate ON the mortgage, but the principal OF the mortgage.
"Since the dollar is going down and stocks are priced in dollars why shouldn't they go higher," he says when asked if the notion of QE3 would help move stocks.
Pento's main thesis is the U.S. economy is in the midst of "stagflation" because the Fed continues to debase the dollar while failing to achieve any kind of real economic growth. "Everything you consume as far as eating or driving or anything you buy is going up," he says, citing the recent rise 3.6% rise in CPI and a 14% increase in import costs over the last year and sluggish GDP growth.
http://finance.yahoo.com/blogs/daily-ticker/michael-pento-fed-continue-p...
It would be cleaner to just give the middle class a 0% income tax one year and tell them to apply their "savings" to mortgages. Wink, wink.
This "plan":
- Doesn't change the overhang
- Doesn't change the depressed valuations
- Doesn't do anything for morts that aren't current
- Doesn't do anything for schmucks who ate the jumbo
In short, it doesn't do anything to fix what ails the RE market. It will free up a miniscule amount per month for the few who qualify and ratchet up the risks.
http://www.youtube.com/watch?v=NMzun_Qyrvs
"Now how much would you pay?" - Ron Popeil
snowball, here's a novel concept. Allow for refi's and give discounts to those who have continued to pay on their notes. Leave the trash on the banks/agency books FOREVER and force them to mark-to-market that crap at HUGE discounts!!!
Here's a better concept: Force them to mark to market and those who have continued to pay their notes continue paying their notes; I'm a first-time buyer with very little sympathy for idiots who dug their own graves (debtors or creditors).
after giving bankster nut hugging trillion dollar bailouts at zirp then they get 2% TIPS loaned back to guvmint on the backs of the tax donkey mainstreeters only to golden parachute their chicken wing shoulder, 30 handicap playin narrow asses out and on to the next level of bassackwardaretardation theivery ....i say its time to get some of OUR "money" back .
1. all GSE/MBS loans to 4% that are not delinquent or 30 days overdue.
2. sqatters to the curb with document proof ...otherwise reset.
3.prior to #1 rewrite all refis mark to market / ie haircut thats long over due. im talkin' the kojack
4. 10% ltv $$check after mark to market to all means tested homeowners without a loan
5. this money in circ will get redeposited at your local branch or buy those new sticks youve been eyeballin'.
6. easy choice for banksters...do this or ass pounding jail time by big jim in the slammer.
please add to list as deemed nec. thy blogblasters. putting some currency back in hand of mainstreet [that already has the liability of this bull hockey] and markdown THEN refi.... could cause the bottom to felt. cost of 85 bill is less than one half of one percent of QE-x.
hit em' straight and go for birdie,
chipshot
the banking gnome has had some good calls lately
he must have learned from his lehman is cheep call in 2008
Not sure if I followed BK in his original post, but I think he had the Fed protecting the GSEs from losses if interest rates rose via swaps. It seems like that would put the Fed in a severe bind if it later wanted to raise interest rates to control inflation. Raise rates and it goes further under on it's swaps and requires either a massive infusion of money from Treasury (likely struggling from higher rates itself) or would be forced to print which would increase inflation and drive rates higher in a positive feedback loop. I have been on the deflation side for some time, but something like this if implemented almost guarantees a Fed that cannot effectively respond to inflation.
A reporter once asked the elder Rockefeller about his required return on investment? His response was, "I am less concerned about the return ON my investment as I am the return OF my investment."
Bove's dead-on in that our problems are growth, the expansion of dollars through growth. But all Gov solutions seem to focus on the redistribution or shuffling of existing dollars. Plus, the only thing QE and refi programs accomplish is the generation of fee income for the TBTF and further cover-up their mistakes by prolonging the inevitable (read: taking the hit to principal for bad lending decisions).
America! Start worrying about the return OF your principal. Stop injecting more dead money into the failed banking/financial system!!! Start electing pro-growth/smaller Gov leaders.
This could have been the program 3 years ago, but we are past that.
If the banks have ZIRP, then the people get ZIRP too (2).
Actually, considering that the banks are bankrupt, by failing THEY have broken their mortgage contract in failing to hold title properly, failing to service properly and entered into nationwide crimes to cover it all up. As an experiment, let Wells Fargo fail - closed - fire all their employees. There will simply be nobody around to file the paperwork to foreclose on anyone. That's how this should end - millions of home owners with no one to receive payment.
If you are losing your home with no prospect of saving it, get creative and file a re-conveyance at the courthouse stating that the bank has been paid off. Sell your house to a buddy and watch what happens. I bet 5% of everything gets through because the mortgage service section of all these banks are in free fall. From the BS artist reading the script on the phone, to the servicers, to the legal department, to the sheriff's office, to the REO department, to the local agents, nobody knows what is happening.
Bove is a shill for the banking industry...
"All they need to do is change the capital and liquidity rules and allow mortgage rates to shift slightly higher to increase bank profits."
Need I say more?
S&P500 big picture remains bearish and this will ALWAYS exert the most influence. The only thing GUARANTEED is that the bearish medium/long term cycle will have the upper hand.
FX medium to long term outlook continues: Euro bearish and USD bullish.
As mentioned many times - bring on the OVERDUE USD rally.
IMPORTANT CHART HERE.
http://stockmarket618.wordpress.com
Ahhh yes, the key triple megaphone wedge pattern.
Keen Keen observation. Very clever. And timeless.
Let me understand. We’re talking about the same banking industry that figured out how to orchestrate a $700 billion TARP bailout for itself in 2 months; the same banks that have circumvented regulators for years with mega trillion dollar derivatives and shadow banking activities; the same banks that aren’t even banks but manage to classify themselves as such to obtain government guaranteed financing. I’m now supposed to believe these same banks can’t figure out how to handle all the regulations and paperwork (you know like verifying incomes and documenting title chains and stuff) to refinance strapped mortgagors when they really, really want to? What bull crap. Like Coolbeans above, I was born at night, but not last night. This commentary by Dick Bove reminds me of the comments utility companies used to make about independent electricity supply programs. Essentially they all boiled down to, “These programs are great as long as they are structured to fail and we can make a profit at it.”
I’m not surprised to see the banking industry protest any stimulus plan that shuts them out of the loop (that’s what they really don’t like about it) any more than I am surprised to see Republicans protest anything the Democrats propose, and visa versa. But, we have relied long enough on banks to do the right thing with little results. And though my preference would be for the Fed to do nothing, I say, if we must stimulate again let’s at least try something without the banks help and see what happens. I was also born curious.
Mortgage REITs (potential big losers) taking a shellacking today. (NLY,AGNC, MFA etc.)
Its purpose would be to BUY VOTES
So you have to evaluate it on that level
"has virtually no chance of passing"
Didn't think Krasting's solution required passing either house.
http://www.ustream.tv/federalreserve
Federal Reserve
189,079 Live Views 686 In Crowd
The Housing Market Going Forward: Lessons Learned from the Recent Crisis is a policy forum to be held September 1, 2011. Participants of the forum will examine the contributing factors to the severe downturn of the housing and mortgage markets, reexamine the role of homeownership and rental options, and discuss policy recommendations going forward. The event will be held at the Federal Reserve Board's Martin Building in Washington, D.C., and is organized by the Board's Division of Consumer and Community Affairs.
http://www.federalreserve.gov/newsevents/housingconf2011.htm
Live Captioning of the event is available here: http://www.streamtext.net/player?event=FRB
Don't know what is going on in your neck of the woods, but my area is experiencing an absolute boom in the building of multi-unit rental housing. You can't keep banks and real estate developers down for long. They're plucky. Wonder what kinds of government subsidies were given to the developers to get this new boom going?
Who'll rent these new apartments? Maybe the people who won't buy all the empty condos in my area. To paraphrase Speaker Pelosi "You'll just have to build them to see who'll rent them."
"All they need to do is change the capital and liquidity rules and allow mortgage rates to shift slightly higher to increase bank profits."
Then the debt service payments on the national debt will increase and eat up even more of the federal government's budget. I suspect interest rates will remain low for a long, long time.
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