posted
The Idiot's Guide to Republican Economics, Ten Thousand Foreclosures a Day, and Why Our Economy is the Only Issue News Type: Opinion — Wed Sep 17, 2008 6:33 AM EDTpolitics, george-bush, foreclosures, home-foreclosures, federal-bailoutsRobert Blevins - AB of Seattle
Image credit - Robert Blevins
Image credit - Robert Blevins 'Enough!'
This is what Barack Obama said in a recent speech in Pueblo, Colorado. He's used this word before when referring to the Republican fiscal policies of the last eight years, and for good reason.
These are the irresponsible, poorly-regulated policies that allowed investment banks and firms to make predatory loans and risky investments. And now these same institutions come calling to the taxpayer with their hands out. They claim they've lost billions in the housing market, and it's not their fault. Now they want huge taxpayer-financed bailouts.
According to the MBA (Mortgage Bankers Association) home foreclosures reached about 7,700 per day as of March, 2008. This number is now approaching 10,000 every single day across this country. It means about a quarter of a million Americans are now losing their homes each month.
Republicans have the unmitigated gall to defend their economic plan for America. John McCain wants to appoint a 'blue-ribbon 911 panel' to study the problem. Not only do they try to push this worthless idea on you, but they insult your intelligence with a campaign based on lies, fear, and excuses.
Americans are sometimes slow to react, but when they do, they usually act decisively. Things are NOT good, unless you are a fat cat corporate buzzard or the CEO of an oil company.
What these Wall Street greedbags didn't tell you is that they helped bring their problems on themselves. By engaging in predatory lending in the hundreds of billions of dollars, they forgot that sometimes people have trouble paying back those predatory loans. And to make things worse, many of these loans were based on fraudulently inflated home values in order to finance bigger loans - thereby making fatter profits. It just didn't work out for them.
I have a message for religious, right-wing Republicans. If Jesus were around, his first stop would be at Wall Street to flip over a few tables.
These banks and investment firms were allowed to go crazy with greed, sucking the life from the most basic of American goals - owning a home - and their unregulated activities are rapidly sending this country into a full-blown depression.
The 7,700 per day foreclosure rates for March, according to both RealtyTrac and the USB are on par with the severity of foreclosures in the Great Depression. Foreclosures are now up from that point to about 9,800 a day. If this is allowed to continue for another year, three million more Americans will lose their homes by September of 2009. Couple that with higher gas prices, higher food prices, and the loss of thousands of jobs a month, and it is a recipe for an economic disaster that could affect not just the U.S. but the entire world.
When a house goes into foreclosure, it typically lowers the average value by 10-15% of almost every home in an eighth of a mile radius. This is also according to the MBA. So what happens is that as home prices fall due to foreclosures, the problem begins to spread. People find their home values eroding under their feet. They are trapped into making payments on a home that isn't worth what they paid for it. In addition, if they sold a previous home and made some hard-earned equity on it before they sold, well that's gone too.
It's a vicious circle that feeds on itself. Now it is leading to a complete collapse of some major financial institutions on Wall Street - and these same companies who ripped you off, who tempted you with usury-rate loans that were allowed by George Bush are now asking taxpayers to bail them out.
That's like being raped and then going down to the jail to bail out your rapist.
Have no illusions.
-------------------- Wise men learn more from fools than fools from the wise. Posts: 3827 | From: beautiful California | Registered: Sep 2008
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posted
Based on the politicians involved it seems to be more of a Democrat housing crisis than anything.
Banks poured billions in loans into poor communities requiring no money down and no verification of income. Promoted by Rep. Barney Frank and Sen. Chris Dodd.
The Democrats were forcing banks to satisfy quotas for sub-prime and minority loans to get a satisfactory CRA rating! I mean CMON!
Typical politics being played on this one.
-------------------- It isn't so much that liberals are ignorant. It's just that they know so many things that aren't so. Posts: 6949 | Registered: Apr 2004
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posted
Ha,Ha, good one ccm stand up comedy won't be hurt by this coming 2nd depression brought to you by the new republican parties idiots.
They did a better job on us than the terrorist.
Having Bush look after us is like having the fox guard the hen house.
After he leaves office he can move to south america with all of the offspring of Presscott's old nazi buddies
-------------------- Wise men learn more from fools than fools from the wise. Posts: 3827 | From: beautiful California | Registered: Sep 2008
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He is like the vast majority of the right-wing republicans, willing to foster whatever lie he can get from the idiot fringe of the Party on whichever radio they are lying on, and then decide to believe that BS.
Cow, If it had been a democratic effort, then tell me exactly why your glorious and all knowing Party managed to control the congress for 8 years, the latter 6 of which they also held the white house and never bothered to change it?
Even in the last 2 years, good ol' boy dubya, who cranks out signing statements and presidential orders (constitutional or not) whenever the Party calls (and when they don't call too) did exactly zilch to change the system.
Get real, they didn't change it because it was and is 100% an ingredient of republican mantra.
Posts: 11304 | From: Fort Worth, Texas | Registered: Mar 2005
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"The roots of this crisis go back to the Carter administration. That was when government officials, egged on by left-wing activists, began accusing mortgage lenders of racism and "redlining" because urban blacks were being denied mortgages at a higher rate than suburban whites."
Oh so true. This didnt get started by forcing banks to give loans to suburban homebuyers.
"Barney Frank's fingerprints are all over this fiasco."
Rep. Frank is the head of the House Financial Services Committee which oversees the entire financial industry including the banking, securities, insurance, and housing industries.
-------------------- It isn't so much that liberals are ignorant. It's just that they know so many things that aren't so. Posts: 6949 | Registered: Apr 2004
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Rep. Frank is the head of the House Financial Services Committee which oversees the entire financial industry including the banking, securities, insurance, and housing industries.
LOL... he has been since 2007 when the new Dem congress was seated..
unfortunately for the GOP, all of the problems were already created and and just waiting to explode.
CCM, while i understand your desire to stir things up? this crapola is simply playing a blame game, and quite frankly? that's all over and done with now.
the next step is to get the problems fixed. The GOP made the case for less regualtioon and no matter how you try to slice it? the less regulation/freemarket iealism is to blame for where we are now.
poor people are not the reason the economy self destructed.
as Greenspan clearly stated? The lack of instinct for self-preservation in the lending community across the board (not just in sub-prime) is the real reason for this mess.
That lack of instinct for self-preservation is IMO due to corporations having too much "protection" for individual liability for it's employees..
Corporations have long been a "scheme" to avoid individual responsibiltiy. I'm not against having corps, it's just that you always have bad with good and that's the major bad in the corporation laws...
blaming sub-prime is merely a diversion from the real problem, and that is dishonesty, lack of integrity and lack of basic good management skills on WALL ST...
you really don't beleive that Lehman Bros and Bear failed because of Barney Franks do you? I don't like the guy at all, but blaming him is simply an attempt to remove blame from the guilty parties. As long as people refuse to accept responsibilty for their own actions? then nothing will ever be fixed...
laying blame where it belongs is neither conservative nor liberal, it is constructive.
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
Oh no glass I know it has been a problem since the carter administration. I dont think Lehman failed because of Frank. I think it failed because of man's greed not because of any government system. The lust/love of money drives men to such evil. Look at Urban Casavant with CMKX for example.
-------------------- It isn't so much that liberals are ignorant. It's just that they know so many things that aren't so. Posts: 6949 | Registered: Apr 2004
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but? one of the prime peices of legislation that ALLOWED this mess to get so bad was this:
The Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, Pub.L. 106-102, 113 Stat. 1338, enacted November 12, 1999, is an Act of the United States Congress which repealed part of the Glass-Steagall Act of 1933, opening up competition among banks, securities companies and insurance companies. The Glass-Steagall Act prohibited a bank from offering investment, commercial banking, and insurance services.
The Gramm-Leach-Bliley Act (GLBA) allowed commercial and investment banks to consolidate. For example, Citibank merged with Travelers Group, an insurance company, and in 1998 formed the conglomerate Citigroup, a corporation combining banking and insurance underwriting services under brands including Smith-Barney, Shearson, Primerica and Travelers Insurance Corporation. This combination, announced in 1993 and finalized in 1994, would have violated the Glass-Steagall Act and the Bank Holding Company Act by combining insurance and securities companies, if not for a temporary waiver process [1]. The law was passed to legalize these mergers on a permanent basis. Historically, the combined industry has been known as the financial services industry.
Bill Clinton signed that piece of crap legislation..
Phil Gramm was a GOP Senator whose wife was on the Commodities and Future oversight commission... (the SEC for the futures traders) and Leach was Mike Oxley's (GOP Congressman from Ohio) predecessor who was in turn Franks predecessor at the House Financial Services Committee...
if we are going to fix this mess? people have got to look past these ideological myths and get real.
we have to have fair rules and they have to be enforced strictly...
Gramm and Leach and this law they passed set the whole mess up to collapse just like in '29, and it did collapse, but the bailout worked. That's why the banks aren't lending much money right now... that bailout package was not for MORTGAGES like they told everybody at first. That was a shell game and and excuse, in other words? they lied like hell! the real reason they had to be bailed out was because the banks just loaned out more money than they really had.
if we didn't have Fannie Mae out there making loans to "poor people"? millions of young couple just starting out would have had to rent. Fannie Mae has actually helped everybody allot over the years. Young people have been able to buy a home much earlier in life than their grandparents could. This in turn makes housing prices increase more for their parents and grandparents who already owned homes...
this collapse has never been about "poor people" getting homes they didn't deserve. sure it got real crazy in 2006, and the COMMERCIAL banks loaned out money to anybody that asked and that was stupid, but the only reason that happened was because the banks were able to buy "insurance" on the loans that took them "off the hook" for defaults. Wait till you see how many "rich people" have defaulted on 400,000$ and up homes, the numbers are staggering and getting worse every day... those Jumbo's have nothing to do with sub-prime at all... sub-prime is the boogeyman... it's a real problem, but it's not THE real problem.
AIG sold a boatload of that insurance so blame them for starters... they got killed.. who was on the winning side of those deals they lost so much money on?
what happened that really trashed the whole system tho was people were buying CDO's (insurance) on OTHER peoples loans.... and then shorting the hell out them on the stock market... by shorting the stock of EITHER party? you can cause the loans to go into default.. the loans are contracts that have clauses like that in them, if your net worth drops below XXXX$, you're in default.
that's like you buying insurance on your neighbors house and then lighting it up with a molotov to collect the insurance. How come nobody is asking who the winners have been in this, cuz every trade has winner doesn't it
the fact is that Paulson himself went to the Congress before he was appointed as SecTres and told them he didn't think it was a good idea to regulate the CDO's...
sure this could just be a mjor mal-function of a whole s-load of idiots... but i doubt it. somebody has stolen about a trillion US$ and i'd really like to know who it is
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
I want to make sure that everyone here understands that sub-prime lending, predatory lending, and ARM mortgages are three different beasts and are only marginally affecting the lending industries cash problem.
Sub-prime lending is lending to folks with mid to low-range FICO scores. Missed payments are only one of the categories that can keep a FICO scores low. Not having other credit to create a credit history is another. Not everyone who is in a sub-prime loan is irresponsible. Many investors prefer sub-prime loans because they can get a .5-2% higher ROI. When packaged into MBS they do have a higher risk of default but when looked at individually they can be quite lucrative. Lenders can demand a downpayment large enough to cover bankruptcy filing fees, and then pocket the higher interest rate. If the individual defaults they use the downpayment to go through the courts to get the property back and sell it all over again. If the individual does not default they get a higher ROI than their peers for no extra work. It should be noted that while sub-prime lending carries a higher interest rate due to low FICO scores true sub-prime lending follows the same up-front payment schedule as with any conventional mortgage.
One aside to CCM specifically. As to the Community Reinvestment Act that was enacted in the Carter Era. Here's just one paragraph about the program that was linked within the same Boston Globe article you were using to blame democrats for this "crisis".
quote:Neither the CRA nor its implementing regulation gives specific criteria for rating the performance of depository institutions. Rather, the law indicates that the evaluation process should accommodate an institution's individual circumstances. Nor does the law require institutions to make high-risk loans that jeopardize their safety. To the contrary, the law makes it clear that an institution's CRA activities should be undertaken in a safe and sound manner.
Predatory lending is when one of the following occurs: A loan offer is made even when the individuals assets/income fall well below the set standards for reasonable loan repayment expectations. The terms of the loan are not fully disclosed (i.e. selling a interest-only product without disclosing the fact that principle will have to be paid at a later date.) The rate changes of the loan exceed the industry standards of practice. I can tell you that any loan that has had a rate jump of more than 2 percent since 2006 is a loan that likely is predatory (barring interest only loans which IMO are predatory in their very structure and should be eliminated completely). I say this because all the major indexes that banks base their rates off of have been stagnant or declining since that time. So any loan that you hear of a 3,4, or 5% rate hike (like Tex's) unless it is an interest only loan is likely predatory.
Finally ARM's. Quite honestly, the people who are likely to make out best in this depressive economic environment are people (like myself) with genuine Adjustable Rate Mortgages. Despite all the bad press about ARM's and all the talk about historically low fixed interest rates individuals with ARM's will be making out better (speaking 5-year-short-term-depression-time-frame here) than anyone who refinances into a 30yr 5.5% loan. Anyone who took out a good 3 or 5 yr ARM in 2003-2005 is probably looking at mortgage rates in the 2.75-3.75% range until some form of recovery or major inflation starts to happen. And due to caps ARM holders can count on a year of less than 6% rates even after inflation or growth starts pushing the Indexs back up. Plenty of time to plan a course of action.
Anyway you slice it the items listed above don't amount to pigeon**** when we are talking about the financial crisis of America's lending industry. For that you need to look at three things: Capitalization requirements, Credit Default Swaps, and the Mark to Market legislation.
All have been spoken of before so I won't now but seriously...this has everything to do with lack of responsibility at the top and very little at all to do with lack of responsibility at the bottom. It also has everything to do with just how much distance there is between those two points. We have let Giants loose upon this world and their names are trademarked, copyrighted, and branded. God help us all.
-------------------- No longer eligible for government service due to lack of tax issues. Posts: 5178 | From: Up North | Registered: Dec 2005
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posted
"The roots of this crisis go back to the Carter administration. That was when government officials, egged on by left-wing activists, began accusing mortgage lenders of racism and "redlining" because urban blacks were being denied mortgages at a higher rate than suburban whites."
this is simply propaganda (and it's false)...
The CRA has almost no involvement in Mortgages anymore because the local banks don't handle most mortgages anymore.
Country wide was one of the first mortgage institution to go under.
When is a bank branch not a branch? By Barragan, Roberto Publication: San Fernando Valley Business Journal Date: Monday, September 15 2003
Countrywide Bank says it has no such CRA obligation in California. Why? Because its branches are not really branches. This despite the facts, "Countrywide Bank" signs mark their offices. The bank has ATMs on site. Two members of the bank's staff are available to assist bank customers. Consumers can go to the bank to open bank accounts, with assistance as necessary from bank staff. Bank customers can bring their cash deposits into the bank. leave them on the premises in a "lock box." and the bank arranges for these deposits to be credited to customer accounts. Bank customers can also apply for home loans in the branch. How is this not a bank branch? Countrywide maintains that by not having California bank staff technically accept deposits to open accounts. Countrywide has not triggered the regulatory definition of "branch." and therefore, has no CRA responsibility in the state.
let's face it. the real problem is now and always is INDIVIDUAL people passing the buck and expecting someoen else to pay for their mistakes or outright greed.
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
The Glassy Eyed one posts: "poor people are not the reason the economy self destructed."
The young Pie-Eyed one posts: Banks poured billions in loans into poor communities requiring no money down and no verification of income. Promoted by Rep. Barney Frank and Sen. Chris Dodd.
Our young, exuberant patriot has apparently stumbled across the White House's response to the recent New York Times piece, entitled "White House Philosophy Stoked Mortgage Bonfire."
The White House response (see following) focuses on Frank and Dodd. The response lists three main points, with five subpoints (two under #1, three under #2).
By way of comparison, the NY Times article is only one of three in a series that attempts to examine the entire meltdown (see following).
Readers can judge how effectively the various points are argued. However, what's really interesting is how many numerous and very serious points the White House declines to address in its purported "refutation."
I think it would be superbly beneficial if everybody who can spare the hard-drive space would copy all pertinent re these links.
Now, CCM? I can deconstruct this entire pissing contest. You may have been on duty while others were watching me deconstruct various claims.
Perhaps most important, I realize a little, tiny, small portion of your pain: In a way, I, too, wish that it were real...the country you thought you were fighting for.
That being said, I agree with Glass, as far as getting on with the future of the country. The main point now is 1) how to recover and 2) how to prevent this from EVER happening again.
quote:Originally posted by The Bigfoot: I want to make sure that everyone here understands that sub-prime lending, predatory lending, and ARM mortgages are three different beasts and are only marginally affecting the lending industries cash problem.
Sub-prime lending is lending to folks with mid to low-range FICO scores. Missed payments are only one of the categories that can keep a FICO scores low. Not having other credit to create a credit history is another. Not everyone who is in a sub-prime loan is irresponsible. Many investors prefer sub-prime loans because they can get a .5-2% higher ROI. When packaged into MBS they do have a higher risk of default but when looked at individually they can be quite lucrative. Lenders can demand a downpayment large enough to cover bankruptcy filing fees, and then pocket the higher interest rate. If the individual defaults they use the downpayment to go through the courts to get the property back and sell it all over again. If the individual does not default they get a higher ROI than their peers for no extra work. It should be noted that while sub-prime lending carries a higher interest rate due to low FICO scores true sub-prime lending follows the same up-front payment schedule as with any conventional mortgage.
One aside to CCM specifically. As to the Community Reinvestment Act that was enacted in the Carter Era. Here's just one paragraph about the program that was linked within the same Boston Globe article you were using to blame democrats for this "crisis".
quote:Neither the CRA nor its implementing regulation gives specific criteria for rating the performance of depository institutions. Rather, the law indicates that the evaluation process should accommodate an institution's individual circumstances. Nor does the law require institutions to make high-risk loans that jeopardize their safety. To the contrary, the law makes it clear that an institution's CRA activities should be undertaken in a safe and sound manner.
Predatory lending is when one of the following occurs: A loan offer is made even when the individuals assets/income fall well below the set standards for reasonable loan repayment expectations. The terms of the loan are not fully disclosed (i.e. selling a interest-only product without disclosing the fact that principle will have to be paid at a later date.) The rate changes of the loan exceed the industry standards of practice. I can tell you that any loan that has had a rate jump of more than 2 percent since 2006 is a loan that likely is predatory (barring interest only loans which IMO are predatory in their very structure and should be eliminated completely). I say this because all the major indexes that banks base their rates off of have been stagnant or declining since that time. So any loan that you hear of a 3,4, or 5% rate hike (like Tex's) unless it is an interest only loan is likely predatory.
Finally ARM's. Quite honestly, the people who are likely to make out best in this depressive economic environment are people (like myself) with genuine Adjustable Rate Mortgages. Despite all the bad press about ARM's and all the talk about historically low fixed interest rates individuals with ARM's will be making out better (speaking 5-year-short-term-depression-time-frame here) than anyone who refinances into a 30yr 5.5% loan. Anyone who took out a good 3 or 5 yr ARM in 2003-2005 is probably looking at mortgage rates in the 2.75-3.75% range until some form of recovery or major inflation starts to happen. And due to caps ARM holders can count on a year of less than 6% rates even after inflation or growth starts pushing the Indexs back up. Plenty of time to plan a course of action.
Anyway you slice it the items listed above don't amount to pigeon**** when we are talking about the financial crisis of America's lending industry. For that you need to look at three things: Capitalization requirements, Credit Default Swaps, and the Mark to Market legislation.
All have been spoken of before so I won't now but seriously...this has everything to do with lack of responsibility at the top and very little at all to do with lack of responsibility at the bottom. It also has everything to do with just how much distance there is between those two points. We have let Giants loose upon this world and their names are trademarked, copyrighted, and branded. God help us all.
Big,
have only skimmed your post, so far--BUT, I don't notice any mention of "Alt-A" loans or of "Option ARMs." Have you addressed those?
posted
"Phil Gramm was a GOP Senator whose wife was on the Commodities and Future oversight commission."
It should be noted, that Gramm's wife was also on the Board of Enron, as was the wife of Delay, They were each paid 0ver $270K per year for that, though there is no record of either having ever attending a meeting of that Board, or ever having any actual contact with that Board other than cashing the checks they recieved, or providing any other service for Enron.
Posts: 11304 | From: Fort Worth, Texas | Registered: Mar 2005
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posted
yeah, and ken lay slept in the clinton white house too...
so now the new question is does Obama have the moral fiber to be willing to stand up for average people? and if he does? does he have the intestinal fortitude to risk the bad press that "the powers that be" will bring to him when he does?
this is why it is so important (IMO) to get rid of the political spin and quick.
i do not think Obama is superman, but i do think he is new enough to politics that the lobbyists han't already bought his soul.
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
Occasionally, there is one of them that is not susceptible to the lure of money and can't be bought. (Yes, it is very very few, but there are examples. Sam Rayburn was such a person.)
Thus far, Obama has not been shown to be of the norm. I will hope.
(One thing that bothers me about the example of Rayburn is that he was a life long bachelor. Is the fact that there was no nagging wife important?)
Posts: 11304 | From: Fort Worth, Texas | Registered: Mar 2005
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posted
Reuters How one family's mortgage is linked to meltdown Monday December 29, 12:16 am ET
By Daniel Trotta HAMPTON BAYS, New York (Reuters) - Cynthia Goldrick's daughter is in and out of the hospital for brain surgery, her mother has Stage 4 lung cancer and her father has moved into a home for the elderly.
So when the Goldrick family's adjustable rate mortgage reset while husband Patrick was off work for a job-related injury, it eliminated the thin margin between their income and the mortgage payment and put them on the road to foreclosure.
While these circumstances may seem extreme -- a perfect storm of bad luck -- the basic economics of a hike in mortgage rates and a bank's inability or unwillingness to modify terms have been shared by many Americans over the past year.
The Goldricks took out a $375,000 mortgage in 2005, when they refinanced a previous mortgage on their 1,800-square-foot house in semi-rural Hampton Bays, some 90 miles east of New York city.
At first, the interest rate was 6.5 percent and the monthly payment was $2,370. After two years, it rose to 9.5 percent and suddenly the payment of $3,850 was beyond the means of a family living off Patrick Goldrick's salary as a cable guy.
Appraised at $605,000 in 2005, the house today is surrounded by others with "For Sale" signs out front and is probably worth less than the outstanding loan.
It is also the only home the Goldrick children have known. "It's just walls. But this is where my daughter comes home after surgery, so they're comfortable walls," Cynthia Goldrick said.
The loan was granted by Rose Mortgage Inc. of New Jersey and is being serviced by Saxon Mortgage Services, a unit of Morgan Stanley.
But the mortgage is in the hands of neither because it was securitized, pooled with $700 million worth of mortgages into an investment vehicle created by Morgan Stanley known as IXIS 2005-HE4, and sold to investors.
Such pools constitute much of the so-called toxic assets at the heart of the worst financial crisis in the United States since the 1930s.
Today's investors in IXIS 2005-HE4 include Prudential Insurance, Pimco Advisors, Western Asset Management and Legg Mason -- institutions that manage money for the wealthy and the population at large.
NOT JUST A HOUSE BUT A HOME
"We didn't jump on the refinancing bandwagon to take a cruise or buy a Mercedes," Cynthia Goldrick said. "We refinanced to give my child a life, not a lifestyle, but a life."
The Goldricks' 10-year-old daughter, Erin, has had 10 operations for hydrocephalus, a Chiari malformation and spina bifida. Most of the medical bills are paid by insurance and a fund established from the settlement of a malpractice suit over Erin's treatment as a baby.
Erin is an honor student who would have made high honors but for a score of 83 in dance. She bears little outward sign of her medical history, unless she pulls up her hair to show scars on her neck and an open wound on her scalp. She looks after her little sister, Emily, 6, and their room is decorated by dozens of stuffed animals.
But her constant medical needs prevent Cynthia from going back to work. "How can you go to work when your daughter's on the operating table?" Cynthia said.
At one point, the Goldricks considered selling their home and moving to a larger and cheaper one in North Carolina, but that would separate Erin from the doctors who have been treating her since she was 2.
So they enlisted the services of Sal Pane, president of AmeriMod, a company specializing in modifying mortgages, a process in which banks agree to lower mortgage payments and interest rates to avoid the cost of foreclosures.
"Modifications can save this economy," Pane said. "My company could do 60,000 loan modifications a month with our current staffing. Give us government assistance and I can modify the entire country in a year."
But modification efforts have encountered difficulties. Increasingly, people are falling behind on loans that have already been modified and regulators warn the trend may worsen. Of all the modifications made in the first quarter, 55 percent were at least 30 days delinquent after six months, according to a government report.
Then there are the rights of bondholders -- the financial institutions that invest in mortgage-backed securities like the pool that contains the Goldrick mortgage.
While modification advocates say it is better for investors to accept a lower rate of return rather than nothing, bondholders don't see much benefit if modifications just delay an inevitable foreclosure.
Moreover, some securitizations prohibit modifications, as is the case with the pool containing the Goldrick mortgage. Such clauses are meant to protect bondholders -- sometimes a hedge fund, sometimes a pension fund -- who have been guaranteed a certain return.
So even though the Goldricks could afford to stay in their home if the interest rate was 6.5 percent, and the bondholders would benefit by continuing to receive income on the loan rather than have it stuck in foreclosure, the servicer of the loan -- Saxon -- cannot budge.
"Your loan modification request has been denied because the investor does not allow modifications for this loan. We apologize for any inconvenience," a Saxon customer service representative wrote to AmeriMod on December 19.
Saxon referred inquiries on the Goldrick mortgage to its parent, Morgan Stanley, which declined to comment.
Despite the notice, Pane vowed to continue fighting to modify the loan, citing the extraordinary circumstances of the Goldrick family and a clerical error that put the Goldricks further into arrears when a payment to cover property taxes was credited to the wrong account.
POOL RULES
Back in 2005, the securitization pool containing the Goldrick mortgage looked like a safe bet for fixed-income investors. Fitch Ratings gave the senior debt in that pool a grade of AAA -- a rating it maintains to this day -- and Fitch said 80 percent of the AAA bonds have been repaid in full.
The lower-rated debt in the pool has not fared as well, resulting in multiple downgrades.
Three years after the deal closed, 24.3 percent of what is left in the fund is in foreclosure and another 13.1 percent delinquent by at least 30 days, according to November data on Morgan Stanley's website.
And 2005 was still a pretty good year. Mortgage bonds from 2006 and 2007 are even more "distressed."
Until the credit crisis blew up in 2007, Wall Street institutions were piling into mortgage-backed securities. It was dominated by Lehman Brothers, which has since collapsed, and Bear Stearns, which was sold to JPMorgan Chase & Co in an emergency deal.
Investment banks were making 1.25 to 1.35 percent on securitizations, which would mean a profit of $875,000 to $945,000 on a $700 million pool.
"That doesn't sound like a lot, but mortgage markets are so big there's a lot of profitability," said Brad Hintz a securities industry analyst for Sanford C. Bernstein & Co.
Firms were in frenzied competition for market share at a time when mortgage companies were handing out easy credit.
Now, that bubble has burst and new issues of securitized mortgages have come to a halt. Investors are buying mortgage bonds at a steep discount on the secondary market.
"Distressed yields are on the order of 15 to 20 percent, so people are kind of responding to that," said JPMorgan analyst Chris Flanagan.
For example, Whitney Tilson, founder of the hedge fund T2 Partners LLC, said he was betting that losses on underlying loans won't be as bad as the market expects. In other words, enough people will continue to make their mortgage payments.
"For the first time in our 10-year history we are buying distressed debt, and we are selling equities to do it," Tilson told the Reuters Investment Outlook Summit earlier this month.
But that won't help the Goldricks, who like many other families are in danger of losing their house and not likely to benefit from the $700 billion that Congress has allocated to Wall Street for bailing out financial institutions.
"I am absolutely bitter," said Patrick Goldrick, who sees the scandal surrounding investment advisor Bernard Madoff as further evidence of Wall Street wrongdoing. "I am bitter toward Congress and bitter toward the big banks and the creepy billionaires who get away with stealing pensions."
"I just don't even listen anymore. I turn it off. It's all bad news."
posted
This entire mess is not about sub-prime, alt-A, arms, or any other such nonsense. Nor is it the result of one person or one party. It is the result of the US Government and the US population living above their means. It's really just that simple. People are drowning in debt to live a lifestyle they can't afford. The US government is drowing in debt to support social programs they can't afford. The bottom line is the game is over and the bill is now due! Paying it is going to be painful!
Posts: 1577 | From: Ohio | Registered: Oct 2007
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posted
The US government is drowing in debt to support social programs they can't afford.
i've asked this before, i'll ask again, instead of rhetoric? show some figures. in specific? provide the figures that show the US Govt has unfunded social programs. you cannot, because it's not true. in the future it may become true, but it is not the case at the moment. the fact is? the money is collected and spent on other projects that are not taxed in specific, while social programs are taxed in specific.
in fact, our social programs are not the problem. the problems is unfunded wars. the figures do not lie. when the war in Iraq was begun? the Govt had a responsibility to levy a specific tax to fund the war, Afghanistan too, for that matter
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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quote:the money is collected and spent on other projects that are not taxed in specific, while social programs are taxed in specific.
True. The bottom line is that we can not afford everything we're promising and spending.
Posts: 1577 | From: Ohio | Registered: Oct 2007
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some call it supply-side economics, others call it Reaganomics, or trickle down economics, but it requires deficit spending by the govt to keep the system running.Reagan raised deficit spending to its highest level (relative to GDP) since World War II. Of course that had to do with the cold war, and the way they cacckklack GDP now is pure fiction since most of it only considers an exchange of funds and has nothing to do with actually producing anything.
wanna fix our economy in one year? tax all imports heavily at eh border.
people will say that will cause prices on imports (particularly from china) to sky rocket, but the reality is that the markup in Chinese goods is generally around 500%.
the Chinese would lower their prices some, and the importers would only make 100% instead of 500%.
the govt coffers would fill very quickly until the imports slowly dwindled as US labor replaces foreign labor again...
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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posted
Say we can't afford anything the government will pull dollars out of a hat to bail out banks and insurance companies.
AS SOON AS AMERICANS UNDERSTAND THAT THERE TAX MONEY SHOULD GO TO THEM TO BETTER THE COUNTRY FOR ALL OF US AND NOT LINE THE POCKETS OF THE WEALTHY AT THE EXPENSE NATION,AS FAR AS EDUCATION,ECOLOGY,SANITATION,JOBS,AND HEALTH CARE TONAME A FEW THINGS THAT THE RIGHT LIKES TO BLEED DRY. ONCE THAT HAPPENS AMERICA WILL REALLY BE GREAT.
-------------------- Wise men learn more from fools than fools from the wise. Posts: 3827 | From: beautiful California | Registered: Sep 2008
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posted
Republican Idiot Jack Kingston Gets Pwned Over Lapel Pins Published February 29, 2008 in 2008 Election. Jack Kingston is a Republican Rep. from Georgia.
Jack Kingston is a wingnut.
Jack Kingston is loved by the conservative ****s.
Jack Kingston attacked Barack Obama for not wearing a flag pin.
Jack Kingston looked like a jackass when Dan Abrams of MSNBC pointed out that his stupid ass wasn’t wearing one.
ShareThis
-------------------- Wise men learn more from fools than fools from the wise. Posts: 3827 | From: beautiful California | Registered: Sep 2008
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wanna fix our economy in one year? tax all imports heavily at eh border.
people will say that will cause prices on imports (particularly from china) to sky rocket, but the reality is that the markup in Chinese goods is generally around 500%.
the Chinese would lower their prices some, and the importers would only make 100% instead of 500%.
the govt coffers would fill very quickly until the imports slowly dwindled as US labor replaces foreign labor again...
That is exactly what needs to happen...
it really doesn't matter what we do if we don't look at getting good paying manufacturing jobs back in this country...
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It's all in the timing... Posts: 4303 | From: DSA | Registered: Dec 2003
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quote:Originally posted by raybond: Say we can't afford anything the government will pull dollars out of a hat to bail out banks and insurance companies.
AS SOON AS AMERICANS UNDERSTAND THAT THERE TAX MONEY SHOULD GO TO THEM TO BETTER THE COUNTRY FOR ALL OF US AND NOT LINE THE POCKETS OF THE WEALTHY AT THE EXPENSE NATION,AS FAR AS EDUCATION,ECOLOGY,SANITATION,JOBS,AND HEALTH CARE TONAME A FEW THINGS THAT THE RIGHT LIKES TO BLEED DRY. ONCE THAT HAPPENS AMERICA WILL REALLY BE GREAT.
Raybond....do you mind if I ask your age?
Posts: 6410 | Registered: Jul 2006
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posted
raybond...it takes a village to be paranoid about a vast right wing conspiracy.
-------------------- It isn't so much that liberals are ignorant. It's just that they know so many things that aren't so. Posts: 6949 | Registered: Apr 2004
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posted
There is no conspiracy other than the right has had political control for almost thirty years same as now the left will have its time.
If you must know my age i am sixty years old and I really don't know why you want to know but that is all my personal information I want to tell anybody,unless there is a good reason for doing so.
-------------------- Wise men learn more from fools than fools from the wise. Posts: 3827 | From: beautiful California | Registered: Sep 2008
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1. Republican Collective Mind The tendency of the radical right faction of the Republican Party to think and act with a hive mind, like insects or birds. They flock together, reacting together. The Republican Collective Mind has lost its mind; they're considering Mel Gibson to run against Arnold Schwartznegger for Governor of California because he could energize the Christian Base.
-------------------- Wise men learn more from fools than fools from the wise. Posts: 3827 | From: beautiful California | Registered: Sep 2008
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posted
An individual who believes that the white male Christian God should be the only object of worship on the planet, that power and wealth should remain in the hands of 1% of the world's population while the remaining 99% starve, that health care should be privatized so the poor can't afford basic medication, that a rape victim living on welfare should be forced to care for a baby she didn't even ask for, and that America is the only real country on Earth while all those other countries they read about are just fakes invented by communists...oh wait, it's terrorists now, isn't it? We can all hope that the standard of education in America improves to the point where a Republican can no longer be voted into office
-------------------- Wise men learn more from fools than fools from the wise. Posts: 3827 | From: beautiful California | Registered: Sep 2008
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posted
The Republican Party has to go back to conservative ideals like smaller government.
The Bush Administration and the last republican congress forgot those ideals and spent like drunkin sailors.
Hopefully the Obama administration and the next Democratic congress will realize big government spending is a flawed policy and work to limit Federal government spending.
If they don't a similar fate as that of the last Administration will be theirs also.
-------------------- Let's Go METS!!! Posts: 3317 | From: CT | Registered: Dec 2006
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posted
The Bush Administration and the last republican congress forgot those ideals and spent like drunkin sailors.
until very recently i considered myself republican...
please tell me the last GOP administration or Congress that actually practiced "conservative ideals like smaller government."... i can't remember who did it
all i 'member is alotof talking about it
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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quote:Originally posted by glassman: The Bush Administration and the last republican congress forgot those ideals and spent like drunkin sailors.
until very recently i considered myself republican...
please tell me the last GOP administration or Congress that actually practiced "conservative ideals like smaller government."... i can't remember who did it
all i 'member is alotof talking about it
I'm having a similar problem relating to the Republican Party. Actually it appears there is not alot of difference between parties, whoever gets the power abuses it.
-------------------- Let's Go METS!!! Posts: 3317 | From: CT | Registered: Dec 2006
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posted
i really am looking for the GOP to re-invent itself, and that's about the only reason i cannot stand limbugger and his ilk, the gOP won't change as long a there are millions of dittoheads bobbing all day long...
none of 'em make sense..
oh, and BTW? i don't care what Church you go to either or if you even go...
watching the Dems have this hen-party over the Illinois Governor would be alot more fun if we had anything to look forward to....
the Senate (Harrry Reid) cannot boot the guy cuz they don't like his appointer, the law is still the law... the Governor appoints the guy even if the Governor is under indictment LOL...
-------------------- Don't envy the happiness of those who live in a fool's paradise. Posts: 36378 | From: USA | Registered: Sep 2003
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quote:An individual who believes that the white male Christian God should be the only object of worship on the planet
There is only one God, so that shouldn't be so puzzling.
quote:that power and wealth should remain in the hands of 1% of the world's population while the remaining 99% starve,
Are 99% of the world's population really starving? Personally, although I deal with low income people every day, I have yet to see one starve. In fact, many are too fat because they sit an eat all day in lieu of working. They certainly aren't starving.
quote:that health care should be privatized so the poor can't afford basic medication,
The poor could choose to work and pay for healthcare like the rest of us.
quote:that a rape victim living on welfare should be forced to care for a baby she didn't even ask for,
I didn't know that the republicans were targeting 'rape victims living on welfare'.
quote:and that America is the only real country on Earth while all those other countries they read about are just fakes invented by communists...
You're the first person that I've heard float the idea that other countries aren't "real". Many of them are real socialist and communist countries.
Posts: 1577 | From: Ohio | Registered: Oct 2007
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