This is a precise summary of the foreclosure fraud crisis facing this country and the world.
Mr Grayson did not tell you that much of the assignments to mortgage note servicing companies of rights to collect your mortgage payments, and foreclose if you don't are in essence void. This is because ownership of the notes and mortgages was not legally transferred. The transferring companies did not have the ownership rights to transfer!
This is an especially difficult problem for very many securitizations because these instruments required that ownership of the assets in them be legally and properly transferred by a finite, unchangeable date that has long since passed.This cannot be fixed by a later assignment,legal or not. The deadline has passed.
Follow closely now: The vast majority of these securitizations have been sliced and diced into an alphabet soup of derivative securities that were sold world wide. If the underlying collateral - the very mortgages and notes we are talking about - were never legally assigned then these further securitizations and alphabet soup derivatives have been created and sold fraudulently.Imagine the lawsuits waiting to be filed everywhere!
Nobody knows who actually owns what. That will have to be decided by, no doubt lengthy, court cases.
Additionally, trillions of dollars, yen, francs, zloty, euro and on of liability hangs over the heads of the financial institutions who solicited these mortgages in the first place, or who bought them and fraudulently repackaged and resold them!!!!
Yep, the major players in this cesspool are our very own US banking giants: Citi Bank; Wells Fargo; Bank of America and of course the investment banks that aided and abetted the securitizations and sold them on: Goldman, Merril Lynch, Lehmann, etc etc
Too big to fail?? They are too big to survive.
Think about this too: you, the law abiding homeowner have been making your payments on time, to a servicer who does not have the legal right to collect them from you because that right to assign did not legally belong to the institution who said it had legal ownership if your note - it clearly did not.
So you have been making payments to a servicer who has a disputed authority to collect them, and has been sending them on (less its fees, of course) to entities that did not have proper legal ownership of the notes.
What happens if someone else comes along and sues you for non-payment under the note you signed that they now allege they legally own? Mr Grayson tells you this has already happened in Florida!!
All you will be left with is crippling legal expense to prove that you are the victim of fraud.
The Florida courts and many of the other foreclosure courts have only very recently been grudgingly coming to terms with this. Remember, judges are elected, are usually lawyers or politicians, who are presiding over proceedings in which their fellow legal practitioners are presumed to be ethical. They dispense justice in these courts, or do they? They are swamped, have not got the time to read documents, dispose of cases in 90 seconds in the interest of clearing the docket. All on the say so of lawyers for document mills representations!!
Click on the Heading for a link to an absolutely scary summary of organized crime at work with our Government Blessing.
The unsaid consequence of all of this is that banks and other owners of affected mortgages have a bunch of unenforceable contracts that they show as assets. These will have to be "marked to market" - and reserved for on balance sheets or written off.
Whichever path they go down, the destination is the same - banks are bankrupt. That means that the value of their assets (including all the money we the taxpayers gave them) is arguably less than their liabilities. They should be dealt with through the bankruptcy courts: sell their assets for what can be recovered and pay off as much of the liabilities as the proceeds allow.
Then of course we the people must find a way to keep the promise of the American Dream enshrined in the tax code: homeownership - a safe and secure roof over your head - is an entitlement written in the tax code for decades. It is a legally sanctioned "entitlement".
There is a way to do this and solve the problem once and for all. I have laid it out in detail in several previous posts. They are in the archives. I will re-post them, updated,for convenience of readers.
Showing posts with label mortgages. Show all posts
Showing posts with label mortgages. Show all posts
Tuesday, October 12, 2010
Thursday, September 9, 2010
Subprime 2.0 Is Coming Soon to a Suburb Near You: Edward Pinto
Commentary by Edward Pinto
(Edward Pinto, a mortgage-finance consultant, was executive vice president and chief credit officer at Fannie Mae from 1987 to 1989. The opinions expressed are his own.)
Sept. 8 (Bloomberg) -- On the second anniversary of the bailouts of Fannie Mae and Freddie Mac, it’s now obvious that weak lending standards, serving the political interest of affordable housing for all, were the main reason for the nation’s mortgage meltdown.
But the government just can’t permit lending to anyone and everyone; it must insist on prudent judgment about who will repay and who will default. Not only will borrowers who lack a down payment, steady income, employment and a good credit history probably get into trouble -- surprise! -- but too much irresponsible lending also creates artificial demand for houses, driving prices into the stratosphere and, as we have just experienced, puts all homeowners at risk.
The same mistake occurred in 1929, when any investor could buy stocks on margin with as little as 10 percent down. Small wonder that after the crash the U.S. government instituted a margin requirement of 50 percent down.
Congress should apply the same principle to housing purchases, increasing the amount a buyer must put down and other safeguards to assure prudent lending. Congress refuses to do this. Why? Giving citizens cheap, easy housing is a great way to win votes, no matter what horrific repercussions ensue.
Who’s Following Whom?
Consider the prevailing narrative that holds a greed-driven private sector responsible for the 2008 financial crisis. A secondary narrative points to a greed-driven Fannie Mae and Freddie Mac abandoning their credit standards in an effort to follow the lead of Wall Street.
If these explanations fail to convince, a third blames a combination of deregulation and insufficient regulation, again driven by greed, as rulemakers were asleep at their posts.
What is missing is the central role played by an affordable housing policy built upon the misguided concept of loosened underwriting -- a policy created by Congress and implemented for
15 years by the Department of Housing and Urban Development and banking regulators.
From 1993 onward, regulators worked with weakened lending policies as mandated by Congress. These policies systematically dismantled a housing-finance system based on the common sense principles of adequate down payments, good credit, and an ability to handle the mortgage debt.
No Money Down
Substituted was a scam of liberalized lending standards that turned out to be no standards at all. In 1990, one in 200 home-purchase loans (all government insured) had a down payment of less than or equal to 3 percent. By 2003, one in seven home buyers had such a low down payment, and by 2006 about one in three put no money down.
These policies led millions of Americans to buy homes with little or no money down, impaired credit and insufficient income. As a result, our economy has been brought down and the taxpayers have had to foot the bill for bailout after bailout.
Congress and U.S. President Barack Obama’s administration refuse to learn the lesson that is painfully aware to American taxpayers, and they have made it clear that they have no intention of fixing broken underwriting.
Let’s start with the latest pieces of evidence. The Dodd- Frank Bill, signed in July 2010 by the president, omitted both an adequate down payment and a good credit history from the list of criteria indicating a lower risk of default as regulators sought to define a qualified residential mortgage.
‘Prudent Underwriting’
This was no oversight. Republican Senator Robert Corker and others proposed an amendment that would have added both a minimum down-payment requirement and consideration of credit history along with the establishment by regulators of a “prudent underwriting” standard. This amendment was defeated.
In early September 2010, Fannie and Freddie’s regulator, the Federal Housing Finance Agency, following requirements set out in 2008 by Congress, finalized affordable housing mandates that are likely to prove more risky than those that led to Fannie and Freddie’s taxpayer bailout. As required by Congress, these new goals almost exclusively relate to very low- and low- income borrowers. Meeting these goals will necessitate a return to dangerous minimal down-payment lending, along with other imprudent lending standards.
Of course, FHFA Director Edward DeMarco notes that Fannie and Freddie aren’t to undertake risky lending to meet these goals. As has already been noted, Congress doesn’t consider low down payments and poor credit as indicative of risky lending.
How convenient.
Return to Subprime
The Federal Housing Administration, in its actuarial study released late last year, projected that it will return to an average FICO credit score of 635 by 2013. This signals the FHA’s intention to return to subprime lending. Once again, Dodd-Frank supports this policy change.
The FHA, the Veterans Affairs Department and the Agriculture Department’s grip on the home-purchase market increases month by month. They now guarantee more than half of all home-purchase loans. However, skin in the game isn’t a requirement. For example, the FHA’s average down payment is just
4 percent. Even this meager amount disappears after adjusting for seller concessions and financed insurance premiums.
On Christmas Eve in 2009, the Treasury Department announced new terms to the bailouts of Fannie and Freddie. Starting on Jan. 1, 2013, the terms of the bailout agreement provide for a continuing obligation to provide about $274 billion in capital to Fannie and Freddie. This amount is in addition to the unlimited sums that are available between now and Dec. 31, 2012.
As a result, one or both of these entities can now continue indefinitely as zombie institutions under conservatorship.
As a society, we have to go back to at least 20 percent down, with limited exceptions. Credit histories need to be solid. Documentation has to be iron-clad. Lender capital levels need to be raised.
Here’s my proposal to bring Congress’s penchant for imprudent lending to a quick end: All congressional pension assets should be invested in funds backed solely by the high- risk loans mandated by federal housing legislation. I have a feeling that things would change fast.
(Edward Pinto, a mortgage-finance consultant, was executive vice president and chief credit officer at Fannie Mae from 1987 to 1989. The opinions expressed are his own.)
Sept. 8 (Bloomberg) -- On the second anniversary of the bailouts of Fannie Mae and Freddie Mac, it’s now obvious that weak lending standards, serving the political interest of affordable housing for all, were the main reason for the nation’s mortgage meltdown.
But the government just can’t permit lending to anyone and everyone; it must insist on prudent judgment about who will repay and who will default. Not only will borrowers who lack a down payment, steady income, employment and a good credit history probably get into trouble -- surprise! -- but too much irresponsible lending also creates artificial demand for houses, driving prices into the stratosphere and, as we have just experienced, puts all homeowners at risk.
The same mistake occurred in 1929, when any investor could buy stocks on margin with as little as 10 percent down. Small wonder that after the crash the U.S. government instituted a margin requirement of 50 percent down.
Congress should apply the same principle to housing purchases, increasing the amount a buyer must put down and other safeguards to assure prudent lending. Congress refuses to do this. Why? Giving citizens cheap, easy housing is a great way to win votes, no matter what horrific repercussions ensue.
Who’s Following Whom?
Consider the prevailing narrative that holds a greed-driven private sector responsible for the 2008 financial crisis. A secondary narrative points to a greed-driven Fannie Mae and Freddie Mac abandoning their credit standards in an effort to follow the lead of Wall Street.
If these explanations fail to convince, a third blames a combination of deregulation and insufficient regulation, again driven by greed, as rulemakers were asleep at their posts.
What is missing is the central role played by an affordable housing policy built upon the misguided concept of loosened underwriting -- a policy created by Congress and implemented for
15 years by the Department of Housing and Urban Development and banking regulators.
From 1993 onward, regulators worked with weakened lending policies as mandated by Congress. These policies systematically dismantled a housing-finance system based on the common sense principles of adequate down payments, good credit, and an ability to handle the mortgage debt.
No Money Down
Substituted was a scam of liberalized lending standards that turned out to be no standards at all. In 1990, one in 200 home-purchase loans (all government insured) had a down payment of less than or equal to 3 percent. By 2003, one in seven home buyers had such a low down payment, and by 2006 about one in three put no money down.
These policies led millions of Americans to buy homes with little or no money down, impaired credit and insufficient income. As a result, our economy has been brought down and the taxpayers have had to foot the bill for bailout after bailout.
Congress and U.S. President Barack Obama’s administration refuse to learn the lesson that is painfully aware to American taxpayers, and they have made it clear that they have no intention of fixing broken underwriting.
Let’s start with the latest pieces of evidence. The Dodd- Frank Bill, signed in July 2010 by the president, omitted both an adequate down payment and a good credit history from the list of criteria indicating a lower risk of default as regulators sought to define a qualified residential mortgage.
‘Prudent Underwriting’
This was no oversight. Republican Senator Robert Corker and others proposed an amendment that would have added both a minimum down-payment requirement and consideration of credit history along with the establishment by regulators of a “prudent underwriting” standard. This amendment was defeated.
In early September 2010, Fannie and Freddie’s regulator, the Federal Housing Finance Agency, following requirements set out in 2008 by Congress, finalized affordable housing mandates that are likely to prove more risky than those that led to Fannie and Freddie’s taxpayer bailout. As required by Congress, these new goals almost exclusively relate to very low- and low- income borrowers. Meeting these goals will necessitate a return to dangerous minimal down-payment lending, along with other imprudent lending standards.
Of course, FHFA Director Edward DeMarco notes that Fannie and Freddie aren’t to undertake risky lending to meet these goals. As has already been noted, Congress doesn’t consider low down payments and poor credit as indicative of risky lending.
How convenient.
Return to Subprime
The Federal Housing Administration, in its actuarial study released late last year, projected that it will return to an average FICO credit score of 635 by 2013. This signals the FHA’s intention to return to subprime lending. Once again, Dodd-Frank supports this policy change.
The FHA, the Veterans Affairs Department and the Agriculture Department’s grip on the home-purchase market increases month by month. They now guarantee more than half of all home-purchase loans. However, skin in the game isn’t a requirement. For example, the FHA’s average down payment is just
4 percent. Even this meager amount disappears after adjusting for seller concessions and financed insurance premiums.
On Christmas Eve in 2009, the Treasury Department announced new terms to the bailouts of Fannie and Freddie. Starting on Jan. 1, 2013, the terms of the bailout agreement provide for a continuing obligation to provide about $274 billion in capital to Fannie and Freddie. This amount is in addition to the unlimited sums that are available between now and Dec. 31, 2012.
As a result, one or both of these entities can now continue indefinitely as zombie institutions under conservatorship.
As a society, we have to go back to at least 20 percent down, with limited exceptions. Credit histories need to be solid. Documentation has to be iron-clad. Lender capital levels need to be raised.
Here’s my proposal to bring Congress’s penchant for imprudent lending to a quick end: All congressional pension assets should be invested in funds backed solely by the high- risk loans mandated by federal housing legislation. I have a feeling that things would change fast.
Tuesday, September 7, 2010
Underwater mortgages are the real problem in housing
It doesn't make sense for the U.S. to spend money to prop up the housing market by giving buyers incentives, but that doesn't mean sitting back and letting prices crash would "magically" bring the housing market back to life, as some have suggested, according to The Economist. At the core of the problem are homeowners with underwater mortgages who can't afford to sell at prices buyers are willing to pay. "Driving those prices lower won't change that fact," the magazine notes.
Finally, recognition of the root of the housing problem!
Finally, recognition of the root of the housing problem!
Wednesday, August 25, 2010
Fewer recently modified mortgages are falling into foreclosure
LIES, Damn Lies and Statistics
Recent mortgage modifications in the U.S. are more successful at keeping borrowers from losing their homes in foreclosure than those completed earlier in the housing crisis, according to a report by the State Foreclosure Prevention Working Group. Homeowners who obtained a mortgage modification in 2009 were nearly 50% less likely to fall 60 days behind on their payments compared with those whose mortgages were modified in 2008, according to the report. Google
Exactly opposite of almost everything I have read. Curious.
Recent mortgage modifications in the U.S. are more successful at keeping borrowers from losing their homes in foreclosure than those completed earlier in the housing crisis, according to a report by the State Foreclosure Prevention Working Group. Homeowners who obtained a mortgage modification in 2009 were nearly 50% less likely to fall 60 days behind on their payments compared with those whose mortgages were modified in 2008, according to the report. Google
Exactly opposite of almost everything I have read. Curious.
Thursday, August 12, 2010
Mortgage Debt Solutions - Alan Greenspan makes the case
Alan Greenspan said it best on Meet the Press (click on heading above for full interview) recently:
"It's a critical issue because, as you point out and as I've always believed, we underestimate the impact of stock prices on economic activity. Asset prices are having a profoundly important effect.What created the extent of the contraction globally was the loss of $37 trillion in market value. It collapsed the value of collateral in the system and it disabled finance. We've come all the way back--maybe a little more than halfway, and it's had a very positive effect. I don't know where the stock market is going, but I will say this, that if it continues higher, this will do more to stimulate the economy than anything we've been talking about today or anything anybody else was talking about."
The whole mess started with the unravelling of mortgage values used in plain vanilla CMO's and their highly complex derivative securities. Fix the value of mortgages by arresting the drop in property values and voila! a Greenspan fix.
I have been recommending for more than two years now, that Government has an obligation to step in and underpin the value of the most important asset worldwide: the stock of real estate.
A very large number of companies with exchange listings of their stocks are in a real estate related business; bolstering the value of their collateral the right way by refinancing mortgages at a Federal Agency, can rocket the price of the collateral, and hence their stock prices.
It can also save some vital corporations with huge exposure to mortgages (GE)that when properly accounted for, must unmask their bankruptcy.
And the greatest benefit: preserving the American Dream of home ownership at an affordable level for homeowners. Who knows, a renewed sense of security migh change sentiment around and ignite the economic growth we all want.
The truth shall set you free!
"It's a critical issue because, as you point out and as I've always believed, we underestimate the impact of stock prices on economic activity. Asset prices are having a profoundly important effect.What created the extent of the contraction globally was the loss of $37 trillion in market value. It collapsed the value of collateral in the system and it disabled finance. We've come all the way back--maybe a little more than halfway, and it's had a very positive effect. I don't know where the stock market is going, but I will say this, that if it continues higher, this will do more to stimulate the economy than anything we've been talking about today or anything anybody else was talking about."
The whole mess started with the unravelling of mortgage values used in plain vanilla CMO's and their highly complex derivative securities. Fix the value of mortgages by arresting the drop in property values and voila! a Greenspan fix.
I have been recommending for more than two years now, that Government has an obligation to step in and underpin the value of the most important asset worldwide: the stock of real estate.
A very large number of companies with exchange listings of their stocks are in a real estate related business; bolstering the value of their collateral the right way by refinancing mortgages at a Federal Agency, can rocket the price of the collateral, and hence their stock prices.
It can also save some vital corporations with huge exposure to mortgages (GE)that when properly accounted for, must unmask their bankruptcy.
And the greatest benefit: preserving the American Dream of home ownership at an affordable level for homeowners. Who knows, a renewed sense of security migh change sentiment around and ignite the economic growth we all want.
The truth shall set you free!
Analysis: Major banks bolster reserves for mortgage repurchases
The four largest commercial banks in the country -- Bank of America, JPMorgan Chase, Citigroup and Wells Fargo -- booked $2.5 billion in second-quarter charges to cope with requests for mortgage repurchases.
Most of the requests came from Fannie Mae and Freddie Mac. The banks have faced soaring costs as mortgage buyers and insurers search borrowers' files for issues.
How in this wide world does the Government expect co-operation from the banking community in solving the mortgage crisis this way?
They force the banking community to sit on huge excess reserves, and prudent bankers now reserve a large portion of these excess reserves to give back to the Government via Fannie and Freddie mortgage repurchases!!
To make matters even worse, the uncertainty over the fate of said GSE's and the present panicked desperation surfacing in the form of clawbacks from the banks on any pretext, cannot make these "prudent" bankers enthusiastic about taking on any more risk with new mortgages or Heaven Forbid refinancing on terms favourable to the borrowers!
And now, to add misery to these woes the new Finance Reform contains provisions that mandate lending quotas....a major contributing factor in this mortgage mess in the first place!! ...the eggs of the next financial crisis have been laid and will soon hatch!
Imagine that your Government is here to help: you have made more loans to white borrowers than black and hispanics.
So in order to correct this unacceptable statistical anomaly you are ordered to make more loans the other way or face sanctions that will force you out of business!
It matters not a whit to the politicians that statistically, financially and in every other sane and rational deployment of centuries old criteria for lending that this population of borrowers is less credit worthy by any standard. Incomes are lower, collateral is poorer quality, credit histories are far worse, delinquencies are rife... but we are to ignore these inconvenient truths.
Rational business people dont make suicidal investment decisions guranteed to lead to their business demise.
The Federal Government does just that. It's sending more billions to 12 states that it deems most in need of mortgage help so that distressed borrowers can be forgiven parts of their loans. Of course, the new rules will apply. So how can this not again lead to lower lending standards just to meet quotas?
This morass is too difficult for lenders to negotiate. Better they make no loans to anyone except the Government which still allows them to borrow money at effectively no interest and lend it right back at a 2%-3% positive interest carry. And all this is risk free!
OF COURSE ALL THIS IS IRRELEVANT IF BUSINESS ACTIVITY IS SO DEPRESSED THAT NO-ONE WANTS TO BORROW ANY MONEY.
Marie Antoinette could not have said it better. They're hungry for bread? Let em eat cake. Sheesch!
Most of the requests came from Fannie Mae and Freddie Mac. The banks have faced soaring costs as mortgage buyers and insurers search borrowers' files for issues.
How in this wide world does the Government expect co-operation from the banking community in solving the mortgage crisis this way?
They force the banking community to sit on huge excess reserves, and prudent bankers now reserve a large portion of these excess reserves to give back to the Government via Fannie and Freddie mortgage repurchases!!
To make matters even worse, the uncertainty over the fate of said GSE's and the present panicked desperation surfacing in the form of clawbacks from the banks on any pretext, cannot make these "prudent" bankers enthusiastic about taking on any more risk with new mortgages or Heaven Forbid refinancing on terms favourable to the borrowers!
And now, to add misery to these woes the new Finance Reform contains provisions that mandate lending quotas....a major contributing factor in this mortgage mess in the first place!! ...the eggs of the next financial crisis have been laid and will soon hatch!
Imagine that your Government is here to help: you have made more loans to white borrowers than black and hispanics.
So in order to correct this unacceptable statistical anomaly you are ordered to make more loans the other way or face sanctions that will force you out of business!
It matters not a whit to the politicians that statistically, financially and in every other sane and rational deployment of centuries old criteria for lending that this population of borrowers is less credit worthy by any standard. Incomes are lower, collateral is poorer quality, credit histories are far worse, delinquencies are rife... but we are to ignore these inconvenient truths.
Rational business people dont make suicidal investment decisions guranteed to lead to their business demise.
The Federal Government does just that. It's sending more billions to 12 states that it deems most in need of mortgage help so that distressed borrowers can be forgiven parts of their loans. Of course, the new rules will apply. So how can this not again lead to lower lending standards just to meet quotas?
This morass is too difficult for lenders to negotiate. Better they make no loans to anyone except the Government which still allows them to borrow money at effectively no interest and lend it right back at a 2%-3% positive interest carry. And all this is risk free!
OF COURSE ALL THIS IS IRRELEVANT IF BUSINESS ACTIVITY IS SO DEPRESSED THAT NO-ONE WANTS TO BORROW ANY MONEY.
Marie Antoinette could not have said it better. They're hungry for bread? Let em eat cake. Sheesch!
Debts Rise, and Go Unpaid, as Bust Erodes Home Equity
Good article in yesterday's NY Times titled “Debts Rise, and Go Unpaid, as Bust Erodes Home Equity” (click on heading for full article link)saying the delinquency rate on home equity loans is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards.
Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.
The result is one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up, it says.
Lenders wrote off as uncollectible $11.1B in home equity loans and $19.9B in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows. So far this year, the trend is the same, with combined write-offs of $7.88B in the first quarter.
Even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar!
http://www.nytimes.com/2010/08/12/business/12debt.html
Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.
The result is one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up, it says.
Lenders wrote off as uncollectible $11.1B in home equity loans and $19.9B in home equity lines of credit in 2009, more than they wrote off on primary mortgages, government data shows. So far this year, the trend is the same, with combined write-offs of $7.88B in the first quarter.
Even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar!
http://www.nytimes.com/2010/08/12/business/12debt.html
Thursday, August 5, 2010
Mortgage Workout 4: The real urgency
China is warning the USA not to inflate the dollar. Economic activity is declining as unemployment rises and home prices fall further.
The investment banks are warning that the Fed Reserve Board is running out of options to fix the malaise and will soon turn to the problem of the GSE's Fannie Mae and Freddie Mac.... unless we focus laser-like on the problem a POLITICAL solution will compromise the recovery.
It is time for politicians to be patriotic and not parochial.
They MUST rescue the people of this great nation or the American Dream of home ownership will be lost forever.
They must do this for the benefit of the country. To do anything other than a clean fix aimed laser-like at the problem of home valuation is to charge the country headlong out of the current recession into a second Great Depression of unimagined magnitude and consequence.
Here is an example of how this would work to restore the great hope of prosperity for this great nation and the world:
EXAMPLE:
The Smith Family owns a house with a current mortgage of $700,000 ( Smith had refinanced to take out rising equity). It is their primary residence - they live in it.
Smith household income reported on 2009 Federal tax return was $125,000 gross before any deductions (ie NOT their taxable income).
Current US 30 year Treasury notes have an interest rate of approximately 4%.
So, 30% of $125,000 means Smith can afford to pay no more than $37,500 per year or $3,125 per month for Principal & Interest on the mortgage. He is still on the hook for taxes and insurance.
Smith gets a new mortgage under this program with a 30 year term at 4.5% (4+0.5) for a nominal value of approx $600,000 (arrived at through DCF analysis based on what Smith can afford to pay).
This may/may not be more than the current appraised value.
The Government gets the right to 80% of the difference between $600,000 and the original mortgage amount of $700,000 when the house is sold.
Ten years from now Smith sells the house for $700,000 the value of the original mortgage.
He has paid about $2,900/month in interest for 10 yrs or $348,000 that has gone back into the US treasury.
He has also paid about $27,000 in principal.
He owes $573,000 on the new government mortgage, and $100,000 difference between his old and new mortgage originally financed by the US govt. ( The Treasury has already recovered nearly 50% of the amount loaned).
His gross profit on the sale of his house is $127,000.
He owes 80% of this or $101,600, under his mortgage contract so that the Government gets the $573,000 and its $100,000 back and $1,600 more.
Smith has had his property written down to a reasonable value and his mortgage therefore becomes valuable in a resale.
Banks and the Government can resell it.
Smith has lived with a new lower payment and still got the tax deduction for interest AND has made a profit on the sale of the home!
Most importantly, Smith is not tempted to hand the keys of the house to the bank because he is upside down in the mortgage.
The bankruptcy/foreclosure process is completely avoided.
There is a very real potential for gain by the government.
Interest and principal on mortgages comes into the Fed Reserve balance sheet NOT from new taxes.
Potential for profit exists on sale of properties.
No new government agencies need to be established.
The Fed will hire the necessary personnel to administer the program. Unemployment declines!
The banking system is unclogged and consumer confidence is restored.
Economic recovery can begin.
The investment banks are warning that the Fed Reserve Board is running out of options to fix the malaise and will soon turn to the problem of the GSE's Fannie Mae and Freddie Mac.... unless we focus laser-like on the problem a POLITICAL solution will compromise the recovery.
It is time for politicians to be patriotic and not parochial.
They MUST rescue the people of this great nation or the American Dream of home ownership will be lost forever.
They must do this for the benefit of the country. To do anything other than a clean fix aimed laser-like at the problem of home valuation is to charge the country headlong out of the current recession into a second Great Depression of unimagined magnitude and consequence.
Here is an example of how this would work to restore the great hope of prosperity for this great nation and the world:
EXAMPLE:
The Smith Family owns a house with a current mortgage of $700,000 ( Smith had refinanced to take out rising equity). It is their primary residence - they live in it.
Smith household income reported on 2009 Federal tax return was $125,000 gross before any deductions (ie NOT their taxable income).
Current US 30 year Treasury notes have an interest rate of approximately 4%.
So, 30% of $125,000 means Smith can afford to pay no more than $37,500 per year or $3,125 per month for Principal & Interest on the mortgage. He is still on the hook for taxes and insurance.
Smith gets a new mortgage under this program with a 30 year term at 4.5% (4+0.5) for a nominal value of approx $600,000 (arrived at through DCF analysis based on what Smith can afford to pay).
This may/may not be more than the current appraised value.
The Government gets the right to 80% of the difference between $600,000 and the original mortgage amount of $700,000 when the house is sold.
Ten years from now Smith sells the house for $700,000 the value of the original mortgage.
He has paid about $2,900/month in interest for 10 yrs or $348,000 that has gone back into the US treasury.
He has also paid about $27,000 in principal.
He owes $573,000 on the new government mortgage, and $100,000 difference between his old and new mortgage originally financed by the US govt. ( The Treasury has already recovered nearly 50% of the amount loaned).
His gross profit on the sale of his house is $127,000.
He owes 80% of this or $101,600, under his mortgage contract so that the Government gets the $573,000 and its $100,000 back and $1,600 more.
Smith has had his property written down to a reasonable value and his mortgage therefore becomes valuable in a resale.
Banks and the Government can resell it.
Smith has lived with a new lower payment and still got the tax deduction for interest AND has made a profit on the sale of the home!
Most importantly, Smith is not tempted to hand the keys of the house to the bank because he is upside down in the mortgage.
The bankruptcy/foreclosure process is completely avoided.
There is a very real potential for gain by the government.
Interest and principal on mortgages comes into the Fed Reserve balance sheet NOT from new taxes.
Potential for profit exists on sale of properties.
No new government agencies need to be established.
The Fed will hire the necessary personnel to administer the program. Unemployment declines!
The banking system is unclogged and consumer confidence is restored.
Economic recovery can begin.
Mortgage Workout 3: Benefits to Mortgage Holders under water on the Mortgage
a.
Current law-abiding households who are seeing negative real value of their primary residence will be able to remain in their homes at affordable cost with a potential for some upside appreciation in the value of their property and a participation in the realization of that potential together with Government on sale of their property.
b.
Banks, issuers of mortgages and other mortgage owners will have a value, real and ascertainable, assigned to each and every such distressed mortgage AND they will have, therefore a viable asset to sell to mortgage re-packagers; this frees up capital to lend out on new mortgages under more appropriate terms ( minimum 20% down-payment, 30% max housing cost : household income)
c.
Government gets a real, visible path to recovery of money appropriated to this program, with interest.
d.
Government will be helping citizens who most need help and restoring their confidence in The American Dream.
e.
Government will restore confidence in the banking system worldwide by establishing a system of mortgage valuation and that establishes a valuation methodology that could easily be cloned by private investors and capitalized on by the Financial Services industry worldwide.
f.
Bankers and other lenders will now have a method of assessing the value of collateral offered interbank and lending between institutions, can be reinvigorated.
g. No new government agency needed. FNMA/FHLMC become effective arms of the Federal Reserve who is charged with housing stability as a third mandate.
The result will be a very viable, self-funding solution to the current housing/banking crisis.
Homeowners will see their property values written down to reasonable values.
Mortgages then become easy to value as the underlying properties have a value.
Homeowners have an affordable mortgage payment, freeing up discretionary income for spending on other goods and services.
Most importantly, homeowners will not be tempted to walk away from unaffordable payments, or houses worth less than they owe,
Foreclosure and bankruptcy is avoided completely.
There is a very real potential for gain by the government.
Interest on mortgages comes into the Fed Reserve balance sheet. Potential for profit exists on sale of properties. No new government agencies need to be established.
The banking system is unclogged and consumer confidence is restored. All without requiring additional tax burdens on unborn generations.
Current law-abiding households who are seeing negative real value of their primary residence will be able to remain in their homes at affordable cost with a potential for some upside appreciation in the value of their property and a participation in the realization of that potential together with Government on sale of their property.
b.
Banks, issuers of mortgages and other mortgage owners will have a value, real and ascertainable, assigned to each and every such distressed mortgage AND they will have, therefore a viable asset to sell to mortgage re-packagers; this frees up capital to lend out on new mortgages under more appropriate terms ( minimum 20% down-payment, 30% max housing cost : household income)
c.
Government gets a real, visible path to recovery of money appropriated to this program, with interest.
d.
Government will be helping citizens who most need help and restoring their confidence in The American Dream.
e.
Government will restore confidence in the banking system worldwide by establishing a system of mortgage valuation and that establishes a valuation methodology that could easily be cloned by private investors and capitalized on by the Financial Services industry worldwide.
f.
Bankers and other lenders will now have a method of assessing the value of collateral offered interbank and lending between institutions, can be reinvigorated.
g. No new government agency needed. FNMA/FHLMC become effective arms of the Federal Reserve who is charged with housing stability as a third mandate.
The result will be a very viable, self-funding solution to the current housing/banking crisis.
Homeowners will see their property values written down to reasonable values.
Mortgages then become easy to value as the underlying properties have a value.
Homeowners have an affordable mortgage payment, freeing up discretionary income for spending on other goods and services.
Most importantly, homeowners will not be tempted to walk away from unaffordable payments, or houses worth less than they owe,
Foreclosure and bankruptcy is avoided completely.
There is a very real potential for gain by the government.
Interest on mortgages comes into the Fed Reserve balance sheet. Potential for profit exists on sale of properties. No new government agencies need to be established.
The banking system is unclogged and consumer confidence is restored. All without requiring additional tax burdens on unborn generations.
Mortgage Workout 2: Funding
FUNDING for this Program: No new taxes.
Congress will authorize Treasury to issue up to $800 billion in 30 year Treasury bonds, at prevailing rates, to implement this program; or the balance of uncommitted TARP funds be used to reduce the amount of extra funding required until $800 billion is allocated to the Federal Reserve Banks for this purpose.
These funds will be placed in a separate segregated Federal Reserve Board administered fund that cannot be invaded by Congress. These funds will be used to purchase mortgages funded by Freddie Mac/Fannie Mae/Federal reserve Banks.
Chairman of Fed to be responsible for disbursement and oversight of the program through FNMA/FHLMC/Federal reserve banks so co-ordination with Monetary policy will be maximized.
Reporting to Congress on program status twice a year.
Congress will authorize Treasury to issue up to $800 billion in 30 year Treasury bonds, at prevailing rates, to implement this program; or the balance of uncommitted TARP funds be used to reduce the amount of extra funding required until $800 billion is allocated to the Federal Reserve Banks for this purpose.
These funds will be placed in a separate segregated Federal Reserve Board administered fund that cannot be invaded by Congress. These funds will be used to purchase mortgages funded by Freddie Mac/Fannie Mae/Federal reserve Banks.
Chairman of Fed to be responsible for disbursement and oversight of the program through FNMA/FHLMC/Federal reserve banks so co-ordination with Monetary policy will be maximized.
Reporting to Congress on program status twice a year.
Mortgage Workout Plan Revised
I first published this plan in this blog on January 20 2009, inauguration day for the new President. Since then the economic crisis has become immeasurably worse in all respects.
It is not arguable that housing prices are down 30%-50% from then; that the US deficit has hit the unprecedented level of $1.5 TRILLION and climbing;that consumer confidence is in the toilet that economic activity worldwide is decling rapidly; that welfare payments are rising to unsustainable levels worldwide;that harsh and punitive tax increases are being threatened in the USA;that the unintended consequences and uncertainties of new legislation are squelching the recovery of profitable, sustainable economic activities.
We face rising unemployment and the very real threat of deflation or what is worse a government induced runaway inflation.
This morning I drew your attention to the shot across the bows of the sinking ship USA fired by China. They are telling us in plain terms that inflating the dollar will not be tolerated. Dont believe for a moment that they have not already cornered a very significant share of gold and stockpiled natural resources and bought up resource and precious metals producers around the world just because they are short of these resources!
Certainly not! The Chinese KNOW that a confrontation with the USA is close.
The first week any Business School student hits the classroom is devoted to learning to correctly diagnose the problem.
Well: the thing that broke the banks in the USA and therefore the world, is mortgage securitazion run amok. The reasons for this are well analysed.
So: It is the DUTY of Government here in the USA, where the unwritten constitutional right to home ownership enshrined for decades in the tax code, to identify the problem, and fix it appropriately.
ALL POLITICS ASIDE...THE ROOT PROBLEM THAT MUST BE FIXED NOW IS HOME VALUATION
Home prices must be returned to an upward trajectory.
Here is how to do it:(reprised and updated from January 20 2009)
Tuesday, January 20, 2009
A Mortgage Workout for the People of the USA 1: The Plan
This is a plan to help every citizen of the USA whose current mortgage obligation exceeds the value of their primary home.
Principle no 1: No household should pay a housing cost (mortgage payment: principal + Interest only) that exceeds 30% of their gross income( before any deductions) as reported on their latest Federal Tax Return.
Principle no 2: The Federal Government will refinance through Fannie Mae and Freddie Mac or directly through the Federal Reserve Banks (buy existing mortgage and reissue a new 1st and 2nd mortgage to homeowner) existing mortgages for homeowners who are under water with their mortgage on their primary residences.
Principle no 3: New mortgages issued under this program, based on household ability to pay, will contain a provision that allows FNMA/FHLMC/Fed Reserve Bank to recover, on sale of such re-mortgaged property, 80% of the difference between the nominal value of the new mortgage issued and the then sale price of the property, until full amount of original refinanced mortgage is recovered. These agencies will be allowed to charge a 0.5% fee in addition to 30yr treasury rate to cover cost of implementing program.
Principle no 4: FNMA/FHLMC/Federal reserve Banks will be allowed to continue to repackage these new mortgages in CMO’s etc for resale through traditional resale channels.
Principle no 5: These newly issued mortgages will be transferrable to other citizens who meet the income qualifications to assume these mortgages provided they are to use the purchased home as their PRIMARY RESIDENCE.
The next 3 parts follow.
It is not arguable that housing prices are down 30%-50% from then; that the US deficit has hit the unprecedented level of $1.5 TRILLION and climbing;that consumer confidence is in the toilet that economic activity worldwide is decling rapidly; that welfare payments are rising to unsustainable levels worldwide;that harsh and punitive tax increases are being threatened in the USA;that the unintended consequences and uncertainties of new legislation are squelching the recovery of profitable, sustainable economic activities.
We face rising unemployment and the very real threat of deflation or what is worse a government induced runaway inflation.
This morning I drew your attention to the shot across the bows of the sinking ship USA fired by China. They are telling us in plain terms that inflating the dollar will not be tolerated. Dont believe for a moment that they have not already cornered a very significant share of gold and stockpiled natural resources and bought up resource and precious metals producers around the world just because they are short of these resources!
Certainly not! The Chinese KNOW that a confrontation with the USA is close.
The first week any Business School student hits the classroom is devoted to learning to correctly diagnose the problem.
Well: the thing that broke the banks in the USA and therefore the world, is mortgage securitazion run amok. The reasons for this are well analysed.
So: It is the DUTY of Government here in the USA, where the unwritten constitutional right to home ownership enshrined for decades in the tax code, to identify the problem, and fix it appropriately.
ALL POLITICS ASIDE...THE ROOT PROBLEM THAT MUST BE FIXED NOW IS HOME VALUATION
Home prices must be returned to an upward trajectory.
Here is how to do it:(reprised and updated from January 20 2009)
Tuesday, January 20, 2009
A Mortgage Workout for the People of the USA 1: The Plan
This is a plan to help every citizen of the USA whose current mortgage obligation exceeds the value of their primary home.
Principle no 1: No household should pay a housing cost (mortgage payment: principal + Interest only) that exceeds 30% of their gross income( before any deductions) as reported on their latest Federal Tax Return.
Principle no 2: The Federal Government will refinance through Fannie Mae and Freddie Mac or directly through the Federal Reserve Banks (buy existing mortgage and reissue a new 1st and 2nd mortgage to homeowner) existing mortgages for homeowners who are under water with their mortgage on their primary residences.
Principle no 3: New mortgages issued under this program, based on household ability to pay, will contain a provision that allows FNMA/FHLMC/Fed Reserve Bank to recover, on sale of such re-mortgaged property, 80% of the difference between the nominal value of the new mortgage issued and the then sale price of the property, until full amount of original refinanced mortgage is recovered. These agencies will be allowed to charge a 0.5% fee in addition to 30yr treasury rate to cover cost of implementing program.
Principle no 4: FNMA/FHLMC/Federal reserve Banks will be allowed to continue to repackage these new mortgages in CMO’s etc for resale through traditional resale channels.
Principle no 5: These newly issued mortgages will be transferrable to other citizens who meet the income qualifications to assume these mortgages provided they are to use the purchased home as their PRIMARY RESIDENCE.
The next 3 parts follow.
Tuesday, July 27, 2010
New York Banks compete for New Yorkers seeking jumbo mortgages
New York consumers interested in jumbo mortgages were recently being turned away by most large banks, but that trend has reversed this summer. Banks have been developing new products and offering attractive options for borrowers seeking jumbos, which are home loans too big to receive a guarantee from Fannie Mae, Freddie Mac or the Federal Housing Administration. The Wall Street Journal
Friday, July 23, 2010
Fed not looking to buy more mortgage securities, NY Times
So how in Gods name is the mortgage market to recover?
The Fed holds mortgage securities worth more than $1T, and is not eager to expand that portfolio further at this point, according to the New York Times
http://www.nytimes.com/2010/07/23/business/23banks.html?_r=2&adxnnl=1&ref=todayspaper&adxnnlx=1279881242-Cv3ErJ2b9rjLjOjVZUkfww
The Fed holds mortgage securities worth more than $1T, and is not eager to expand that portfolio further at this point, according to the New York Times
http://www.nytimes.com/2010/07/23/business/23banks.html?_r=2&adxnnl=1&ref=todayspaper&adxnnlx=1279881242-Cv3ErJ2b9rjLjOjVZUkfww
Wednesday, July 14, 2010
Interest rate dilemma
"At 4.6 percent, 30-yr mortgage rates are already at historic lows, yet housing demand cratered as soon as the government's homebuyer tax credit expired in April. If you think lowering long-term rates and reducing the spread between short and long rates will stimulate the economy,think again. The steep yield curve is the most powerful thing the economy has going for it right now."
Caroline Baum
Caroline Baum
Tuesday, July 6, 2010
The idea of disbanding Fannie and Freddie raises questions
U.S. government officials and housing experts are discussing the idea of eliminating or overhauling Fannie Mae and Freddie Mac. Either move would cause significant change for the banking system, and they also prompt the question of who will step in to buy mortgage-backed securities if Fannie and Freddie are not guaranteeing the mortgage payments. CNBC
Thursday, July 1, 2010
Bernanke and Geithner, did they deliberately mis-inform Congress?
From a story in Bloomberg today
Fed Made Taxpayers Unwitting Junk-Bond Buyers
By Caroline Salas, Craig Torres and Shannon D. Harrington - Jul 1, 2010
Federal Reserve Chairman Ben S. Bernanke and then-New York Fed President Timothy Geithner told senators on April 3, 2008, that the tens of billions of dollars in “assets” the government agreed to purchase in the rescue of Bear Stearns Cos. were “investment-grade.” They didn’t share everything the Fed knew about the money.
“Either the Fed did not understand the distressed state of some of the assets that it was purchasing from banks and is only now discovering their true value, or it understood that it was buying weak assets and attempted to obscure that fact,” Senator Sherrod Brown, an Ohio Democrat and member of the Senate Banking Committee, said in an e-mail when informed about the credit quality of holdings in the Maiden Lane LLC portfolio. The committee held the April 3 hearing.
If "the Fed did not understand the distressed state of some of the assets that it was purchasing from banks.." then we are allowing incompetent entities and disingenuous people to write rules and spend taxpayer money on another scam perpetrated on we the people by the smartest manipulators on earth.
Fed Made Taxpayers Unwitting Junk-Bond Buyers
By Caroline Salas, Craig Torres and Shannon D. Harrington - Jul 1, 2010
Federal Reserve Chairman Ben S. Bernanke and then-New York Fed President Timothy Geithner told senators on April 3, 2008, that the tens of billions of dollars in “assets” the government agreed to purchase in the rescue of Bear Stearns Cos. were “investment-grade.” They didn’t share everything the Fed knew about the money.
“Either the Fed did not understand the distressed state of some of the assets that it was purchasing from banks and is only now discovering their true value, or it understood that it was buying weak assets and attempted to obscure that fact,” Senator Sherrod Brown, an Ohio Democrat and member of the Senate Banking Committee, said in an e-mail when informed about the credit quality of holdings in the Maiden Lane LLC portfolio. The committee held the April 3 hearing.
If "the Fed did not understand the distressed state of some of the assets that it was purchasing from banks.." then we are allowing incompetent entities and disingenuous people to write rules and spend taxpayer money on another scam perpetrated on we the people by the smartest manipulators on earth.
Foreclosed Homes Sell at 27% Discount as Supply Grows
From a story by Dan Levy - Jun 30, 2010 on Bloomberg News, excerpts below
"Homes in the foreclosure process sold at an average 27 percent discount in the first quarter as almost a third of all U.S. transactions involved properties in some stage of mortgage distress, according to RealtyTrac Inc."
"The average price of a distressed property was $171,971, according to the Irvine, California-based data seller."
“The discount will probably stay between 25 percent and 30 percent as lenders carefully manage the number of new foreclosure actions in order to avoid flooding the market,” Rick Sharga, RealtyTrac’s senior vice president for marketing, said in an interview.
"The discount reflects the average sales price of homes in the foreclosure process compared with the average sales price of properties not in distress. About 31 percent of all U.S. sales in the quarter were of homes in some stage of foreclosure, RealtyTrac said. "
"Home foreclosures set a record for the second straight month in May, with increases in every state, as lenders stepped up property seizures, RealtyTrac said earlier this month. Bank repossessions climbed 44 percent from a year earlier and will probably set a record in the second quarter, the company said."
You have to ask yourself: are economic conditions that much worse or have banks found another outlet to dispose of these distressed properties?
Do I smell the stink of vulture investors again? How about buying a property for a third or so less than it is worth, slapping on a coat of paint and reselling it at a 50% profit (still way below what its market value might be)? And you dont even have to watch This Old House to find out how, or even get your hands dirty...there is an unlimited supply of undocumented workers literally dying to work for less than minimum wage paid in cash under the table to do the dirty work.
Who has the kind of resources to do this? Those dastardly hedge funds? Wilbur Ross ( owner of a mortgage servicer empire with inside access to the cherries of distressed homes) Carl Icahn? George Soros ( who undoubtedly has the ear of the Administration)?
And of course, those banks are being paid by the Government (TARP remember) using our tax dollars and servicers and banks are being given free money incentives to "try" and modify mortgages. These are the same banks that bought insurance against default on these mortgages from AIG.
And they were paid out 100% by the NY Federal Reserve under Tim Geithner, on these contracts so that they possibly have already been made whole on these home mortgages that they are now foreclosing.Do they even own them anymore? Shouldnt AIG have been given the collateral?
Double dipping, nay triple dipping comes to mind. The mortgage crisis was caused by irresponsible lending...but it was legal lending for the most part.
Today it appears that a nasty unintended consequence of the bailout of the banks is very likely a collusion between Government (in its burocratic ignorance), the Too Big To Fail crowd,the uber-Rich, those nasty Wall Street Types and compliant Politicians creating legislation written by lobbyists for those same beneficiaries that is setting up another scandalous rip off of the helpless populace.
"Homes in the foreclosure process sold at an average 27 percent discount in the first quarter as almost a third of all U.S. transactions involved properties in some stage of mortgage distress, according to RealtyTrac Inc."
"The average price of a distressed property was $171,971, according to the Irvine, California-based data seller."
“The discount will probably stay between 25 percent and 30 percent as lenders carefully manage the number of new foreclosure actions in order to avoid flooding the market,” Rick Sharga, RealtyTrac’s senior vice president for marketing, said in an interview.
"The discount reflects the average sales price of homes in the foreclosure process compared with the average sales price of properties not in distress. About 31 percent of all U.S. sales in the quarter were of homes in some stage of foreclosure, RealtyTrac said. "
"Home foreclosures set a record for the second straight month in May, with increases in every state, as lenders stepped up property seizures, RealtyTrac said earlier this month. Bank repossessions climbed 44 percent from a year earlier and will probably set a record in the second quarter, the company said."
You have to ask yourself: are economic conditions that much worse or have banks found another outlet to dispose of these distressed properties?
Do I smell the stink of vulture investors again? How about buying a property for a third or so less than it is worth, slapping on a coat of paint and reselling it at a 50% profit (still way below what its market value might be)? And you dont even have to watch This Old House to find out how, or even get your hands dirty...there is an unlimited supply of undocumented workers literally dying to work for less than minimum wage paid in cash under the table to do the dirty work.
Who has the kind of resources to do this? Those dastardly hedge funds? Wilbur Ross ( owner of a mortgage servicer empire with inside access to the cherries of distressed homes) Carl Icahn? George Soros ( who undoubtedly has the ear of the Administration)?
And of course, those banks are being paid by the Government (TARP remember) using our tax dollars and servicers and banks are being given free money incentives to "try" and modify mortgages. These are the same banks that bought insurance against default on these mortgages from AIG.
And they were paid out 100% by the NY Federal Reserve under Tim Geithner, on these contracts so that they possibly have already been made whole on these home mortgages that they are now foreclosing.Do they even own them anymore? Shouldnt AIG have been given the collateral?
Double dipping, nay triple dipping comes to mind. The mortgage crisis was caused by irresponsible lending...but it was legal lending for the most part.
Today it appears that a nasty unintended consequence of the bailout of the banks is very likely a collusion between Government (in its burocratic ignorance), the Too Big To Fail crowd,the uber-Rich, those nasty Wall Street Types and compliant Politicians creating legislation written by lobbyists for those same beneficiaries that is setting up another scandalous rip off of the helpless populace.
Thursday, June 24, 2010
US home forfeitures
This page is about distressed sales of homes. Its a little dry but is vital reading for all.
The main questions are whether the backlog is being cleared and whether distressed sales are affecting prices.
Thank you Clear on Money.
http://www.clearonmoney.com/dw/doku.php?id=public:us_home_forfeitures
Summary
23 Jun 2010.
The underlying trend in US distressed home sales has been upward for about a year. Despite some ambiguity and incompleteness in the seven available data series, it is clear that the upward trend remains intact.
House prices are inversely related to the fraction of all sales that is distressed, where bank sales and short sales constitute the distressed category. The rate of change in house prices is inversely related to the inventory of existing homes, measured in months of supply. Both of these measures now suggest falling prices.
The main questions are whether the backlog is being cleared and whether distressed sales are affecting prices.
Thank you Clear on Money.
http://www.clearonmoney.com/dw/doku.php?id=public:us_home_forfeitures
Summary
23 Jun 2010.
The underlying trend in US distressed home sales has been upward for about a year. Despite some ambiguity and incompleteness in the seven available data series, it is clear that the upward trend remains intact.
House prices are inversely related to the fraction of all sales that is distressed, where bank sales and short sales constitute the distressed category. The rate of change in house prices is inversely related to the inventory of existing homes, measured in months of supply. Both of these measures now suggest falling prices.
Fannie Mae plans to crack down on "strategic defaulters"
Fannie Mae plans to get tough on borrowers who
can afford to make their mortgage payments but walk away because the loan balance is bigger the the
property's value. People who engage in a "strategic default" would be banned from Fannie loans for seven
years. In some cases, the U.S. government-controlled company would tell loan servicers to go to court to get
back money owed to Fannie. Los Angeles Times
can afford to make their mortgage payments but walk away because the loan balance is bigger the the
property's value. People who engage in a "strategic default" would be banned from Fannie loans for seven
years. In some cases, the U.S. government-controlled company would tell loan servicers to go to court to get
back money owed to Fannie. Los Angeles Times
Analysis: U.S. home sales crash after tax credit ends
Sales of homes in the U.S., along with their prices,
soared after Congress gave first-time buyers an $8,000 tax credit. When the subsidy expired, so did the boost,
with only 28,000 home sold in May, the lowest number recorded for that month. The tax credit did nothing
about high inventory, unemployment close to 10% and millions of underwater homeowners, according to The
Economist. "And Americans are now left wondering when housing's second dip will find its bottom and real
recovery begin," The Economist notes. The Economist
soared after Congress gave first-time buyers an $8,000 tax credit. When the subsidy expired, so did the boost,
with only 28,000 home sold in May, the lowest number recorded for that month. The tax credit did nothing
about high inventory, unemployment close to 10% and millions of underwater homeowners, according to The
Economist. "And Americans are now left wondering when housing's second dip will find its bottom and real
recovery begin," The Economist notes. The Economist
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