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Thread: new US mortgage bailout program - it definitely 'pays' to be irresponsible

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    Banned Melonie's Avatar
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    Default new US mortgage bailout program - it definitely 'pays' to be irresponsible

    (snip)"NEW YORK (MarketWatch) -- The Obama administration on Tuesday will launch its latest efforts to rescue the failing housing market, according to a media report Saturday.

    The program, first announced in March, will focus on reducing mortgage balances for homeowners who owe more on their homes than their properties are worth, The Wall Street Journal reported in its online edition.

    The Journal, citing officials, said between 500,000 and 1.5 million underwater loans could be modified through the program. About 11 million borrowers, or 23% of households with mortgages, were underwater on June 30, said the Journal, citing data from CoreLogic Inc.

    The plan is the first effort that targets homeowners current on their mortgage payments but at risk of default because they have no equity in their homes, said the paper.

    The plan would see banks and other owners of the mortgages who write down the loans to less than the value of their property be able to, in effect, pass the written-down loan to the government. The government would then refinance borrowers into loans backed by the Federal Housing Administration, said the Journal.

    The paper said that while one in five of the loans might default, the government has set aside $14 billion from the Troubled Asset Relief Program to cover potential losses.

    The paper reported that some analysts believe the program could let investors get rid of loans that have been modified and are current again. "(snip)


    Obviously this will be a big 'winner' for those irresponsibly over-mortgaged homeowners who qualify for having US Taxpayers 'buy down' their negative equity. This will also be a big winner for the big banks who will 'get paid' by US Taxpayers to write down their toilet paper mortgages and packaged mortgage bonds. Hedge funds and Pension funds will also be 'winners' since this action will improve the 'quality' of remaining mortgage bonds that do not get written off and/or transferred to the US Treasury. Thus, arguably, this is yet another form of gov't bailout of Wall St, as well as a new 'stealth' bailout of gov't and union employee pension funds.

    There will be losers as well though ... with the largest losers obviously being US Taxpayers. But high risk high yield speculators in mortgage bonds will also get burned badly.

    As a side note, this new program bypasses Fannie and Freddie, and designates the FHA as the guarantor / eventual new owner of these rewritten but still shaky mortgages - which removes any pretense of the gov't not being in the 'mortgage business'. The gov't is already planning to allocate $14 billion in US Taxpayer money towards absorbing future losses on these shaky mortgages - an estimate that could turn out to be woefully short of reality.

    ~
    Last edited by Melonie; 09-05-2010 at 06:54 AM.

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    Banned Eric Stoner's Avatar
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    Default Re: new US mortgage bailout program - it definitely 'pays' to be irresponsible

    ^^^ This is after about a month or so of denials and "no comments" by the Obamanitwits who tried to claim that they weren't going to do any such thing.

    Re: Bush ,Iraq and his stubborness related thereto : How many times did we hear and read: "The definition of insanity is doing the same thing over and over again and expecting a different result." Point being this was TRIED already by Obama and it failed. The default rate stayed the same. Of all sectors screaming to be left alone so the market can straighten things out, it is housing.

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    Banned Melonie's Avatar
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    Default Re: new US mortgage bailout program - it definitely 'pays' to be irresponsible

    ^^^ true in an objective sense. However, in a more opaque sense, the US gov't cannot afford to allow too many mortgages / mortgage bonds to actually be deemed as 'non-performing'. Doing so would force Fannie / Freddie / FHA to actually realize losses, to write down those losses, and to return to US Taxpayers for even more billions in bailout / guarantee money. Doing so would force private sector banks and other holders of Mortgages, mortgage bonds, derivatives etc. to also realize losses and take write downs, which in turn would trigger huge adjustments to 'loan loss reserves'.

    As a secondary effect, doing so would force private sector banks and other mortgage investors ( in particular those servicing the > $700k luxury and commercial mortgage market which cannot offload risk to Freddie / Fannie / FHA = US taxpayers) to crank up interest rates in order to recoup and/or cover future losses. These higher private sector loan interest rates would in turn 'infect' other types of private sector loan interest rates such as business loans ... which would further drag on any economic recovery.

    Of course another secondary effect would be that delinquent residential mortgage homeowners who qualify for this program would get a few more months worth of 'rent free' living in their houses before they receive a de-facto $50k-$100k 'gift' from US Taxpayers in the form of a crammed down outstanding mortgage balance. Obviously this would be interpreted as a positive effect by certain registered voters !

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    Default Re: new US mortgage bailout program - it definitely 'pays' to be irresponsible

    * waves magic wand * ... poof spam is gone !
    Last edited by Melonie; 10-20-2010 at 03:23 AM.

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    Default Re: new US mortgage bailout program - it definitely 'pays' to be irresponsible

    I smell spam.

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    Default Re: new US mortgage bailout program - it definitely 'pays' to be irresponsible

    The banks should have agreed to write down the principal so more people aren't underwater. As is, there's not much that any program can accomplish. The other alternative is to allow the Bankruptcy Courts to reduce principal in Chapter 11 plans and Chapter 7 reaffirmation agreements. Right now, for far too many people, walking away is the economically sensible thing to do.

    Z

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    Default Re: new US mortgage bailout program - it definitely 'pays' to be irresponsible

    The banks are discovering they are writing down principle in one way or another! I think in the beginning, the understanding was people would let revolving credit go in the crapper before letting their mortgage go unpaid. After all, the banksters jigged the system where one's credit rating is used to price your insurance and even to get a job! But the banksters didn't realize that there wouldn't be any jobs! So what! Who gives a fuck! Add to that, a requirement in this economic system to accelerate mobility just to keep some money in the pocket. I think part of the housing bubble was the accelerated mobility requirement in todays economic system - jobs last what - three - four years. Then you are looking for another one? I hypothesis all this turn over in houses was related to turn over in jobs. It's just the credit was there to pull it off. Its like a steamer - manic activity of people hustling all over trying to make money in a deteriorating economic system until finally the top came off and released all the steam. Cold.

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    Banned Melonie's Avatar
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    Default Re: new US mortgage bailout program - it definitely 'pays' to be irresponsible

    Right now, for far too many people, walking away is the economically sensible thing to do.
    Agreed. In fact, from a practical day to day standpoint, it is far less 'harmful' to be current on one's credit card but seriously delinquent on one's mortgage.

    I hypothesis all this turn over in houses was related to turn over in jobs. It's just the credit was there to pull it off.
    Actually, inflating future property values were there to pull it off. The availability of credit just greased the wheels. I agree that, in certain areas at least, the 'volatility' of the job market contributed to similar 'volatility' in the housing market.

    The banks are discovering they are writing down principle in one way or another
    Indeed. It would appear that Fannie and Freddie are finally coming to terms with the fact that losses on the mortgages they hold will be staggering ( thus a recent request for $232 billion in additional US taxpayer bailout money ). But more 'interesting' from the broader US economy standpoint is that Fannie and Freddie are now attempting to exercise 'put back' rights forcing originating banks to repurchase mortgages sold earlier under 'false pretenses'. If and when resulting losses actually begin to fall on banks / stockholders / bondholders instead of falling on the US taxpayer, aaa ooo gah dive dive !

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    Default Re: new US mortgage bailout program - it definitely 'pays' to be irresponsible

    i am so much happy with that and i will try for that and get best of that
    ============================

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    Banned Melonie's Avatar
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    Default Re: new US mortgage bailout program - it definitely 'pays' to be irresponsible

    ^^^ I truly don't understand where that poster was headed !!!

    At any rate, the topic of mortgage bailouts appears to be heating up again. Republicans are now on record vowing to at least slow down promised bailout money to Freddie and Fannie ... whose mortgage losses are estimated to have ballooned from an original $150 billion to something in the $400 billion ballpark. As with the Germans and the PIIG problem, opinions are starting to circulate in the USA that Fannie and Freddie stockholders / bondholders should bear some share of the losses.



    And along different lines, Democrats are now promoting a new 'loan principal write down' program for underwater mortgaged homeowners ... which arguably amounts to an indirect funds transfer from US taxpayers ( TARP money ) to 'qualifying' mortgaged homeowners ( 'paying' down a portion of their outstanding mortgage balance ).

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    Default Re: new US mortgage bailout program - it definitely 'pays' to be irresponsible

    I should have defaulted when I had the chance. Now, I get no benefits and i still don't have enough equity to re-fi. FML.

  12. #12
    Banned Melonie's Avatar
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    Default Re: new US mortgage bailout program - it definitely 'pays' to be irresponsible

    ^^^ Yup ... being 'financially responsible' and continuing with your existing mortgage terms will wind up costing you an extra few hundred dollars in mortgage payment every single month, and in the end you'll wind up owning the very same house !

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