Bailout plan: hot off the press

[Coronita]

Just released, hot off the press. Enjoy

http://money.cnn.com/2007/12/06/real_estate/Bush_plan_is_limited/index.htm?cnn=yes

 

Bush subprime plan limited but a step forward

Mortgage interest rates will be frozen only for ARM borrowers who are not yet in foreclosure.

NEW YORK (CNNMoney.com) — President Bush's foreclosure relief plan will only help a small percentage of homeowners facing unaffordable jumps in their mortgage payments, according to a report, but many consumer advocates say it's a step in the right direction.

The program, announced by President Bush at the White House Thursday afternoon, allows a five-year freeze in interest rates only for borrowers current with their monthly payments, according to sources involved in the plan.

It will streamline the mortgage modification process for many distressed borrowers, according to Bush. It willl offer "more relief to more homeowners, more quickly," he said.

But the plan is limited. It excludes anyone more than 30 days late at the time the mortgage would be modified or anyone who has been more than 60 days late at any time within the previous 12 months.

It also only covers borrowers with adjustable rate mortgages (ARMs) resetting beginning in 2008 and leaves out any who are judged capable of continuing to make mortgage payments at the higher reset rates. And borrowers who can't afford the loan even at low introductory rates also will be ineligible, according to Anne Canfield, executive director of the Consumer Mortgage Coalition, which represents lenders and mortgage servicers.

Bush press secretary, Tony Fratto, has claimed that as many as a million potential borrowers could benefit.

But of the 2.2 million subprime ARMS that are expected to reset through the end of 2008, only 240,000 of those would be covered according to an analysis made by investment banker Barclays Capital as reported in The New York Times.

"I think the plan is good in theory," said Mark Zandi, chief economist for Moody's Economy.com, "but, in practice, it's going to come up short. There are too many impediments to its widespread adoption by investors and servicers."

Obstacles include contractual obligations between servicers and investors as well as logistical difficulties. When loans have been sliced up and resold through the securitization process, it's hard to determine who ultimately decides what modifications are possible and still in the best interests of the investors.

Furthermore, said Zandi, "There's no stick in the plan; it depends on moral suasion."

But just because every homeowner won't benefit under the Bush plan, help will be available, according to Canfield.

"The industry will still work to modify these loans," she said. "We have every incentive to do that."

Delinquent loans increase financial pressure on servicers because they still have to make payments to investors, as well as tax payments to local governments, according to Canfield.

The principle aim of the Bush plan is to streamline the modification process, at least for that limited number of borrowers, allowing them to get fast help. Lenders will examine readily available loan criteria, such as loan-to-value ratios, loan amount, credit scores and payment history, to make a quick determination of qualifications.

That makes it a "start in the right direction," said Darla Keegan, speaking for Novadebt, a national nonprofit housing and credit counseling agency, because it will move some borrowers through the system quickly.Mortgage counseling services are currently stretched.

For the rest, she said, "We can still see if lenders will work out agreements with lenders for these borrowers."

"Qualified borrowers will get their modifications much more quickly," said Kurt Pfotenhauer, senior vice president for government affairs with the Mortgage Bankers Association. "A whole cohort will be done on an accelerated basis."

Still, said Bruce Marks, chief executive of the Neighborhood Assistance Corporation of America, a community advocacy group, "The number of borrowers affected by the plan is very small, but it sets the precedent and standard so that more borrowers can be helped down the road."

He expects more of that help to come. "An important point is why they're doing it. They're seeing the numbers of delinquencies. They can't say publicly that it will have a huge impact on the economy, but this action says that."

If the impact of subprime foreclosures increases, pressure will build for the government to do more.

The agreement does leap one of the thorniest hurdles to making wholesale mortgage modifications work: resistance from the investment community, who were sold a bill of goods, according to John Taylor, CEO of the National Community Reinvestment Coalition.

"They were promised a product that looked very safe and had attractive rates," he said. "Now they're getting little or nothing in return and are being asked to take bigger losses."

As the foreclosure crisis deepened it became apparent that many sensible modifications were being shot down because investors would not agree. An analysis by Moody's earlier this autumn revealed only about 1 percent of resetting ARMs had been modified this year.

The administration had to use its powers of persuasion to get investors aboard at all, according to Don Lampe, a real estate attorney who has testified before Congress on subprime mortgage issues. "Investor push-back probably weakened the plan," he said.

Despite all the criticism, the initiative was welcomed by nearly all the players, including consumer groups. Many wish it were stronger but were happy to see some response from the administration.

As Lampe put it, "Perfection is the enemy of progress."

The president also used the announcement as an opportunity to call on Congress to act quicker on passing mortgage relief legislation, including the FHA Modernization bill, the change in tax code and a bill enabling local and state governments to issue bonds to finance mortgage refinancings. All have been bottled up in the Senate for weeks or months. 

[CMcG]

Thanks for the link. What about the rumors that you don’t qualify if you owe more than your house is worth? I know two people in that situation. The article (or Bush) is kind of vague on the loan to value thing.

[GoUSC]

Looks like the majority of people are thinking this thing is a bad idea…Not to say online polls are really valuable but regardless..

http://www.cnbc.com/id/22117618

[NeetaT]

I put my vote in.

http://www.cnbc.com/id/22117618

[Anonymous]

This is just an insurance policy Dubyah is buying, so that he doesn’t get Katrinaized again. Perception is reality.

[Anonymous]

This is just an insurance policy Dubyah is buying, so that he doesn’t get Katrinaized again. Perception is reality.

[Anonymous]

This is just an insurance policy Dubyah is buying, so that he doesn’t get Katrinaized again. Perception is reality.

[Anonymous]

This is just an insurance policy Dubyah is buying, so that he doesn’t get Katrinaized again. Perception is reality.

[Anonymous]

This is just an insurance policy Dubyah is buying, so that he doesn’t get Katrinaized again. Perception is reality.

[NeetaT]

I put my vote in.

http://www.cnbc.com/id/22117618

[NeetaT]

I put my vote in.

http://www.cnbc.com/id/22117618

[NeetaT]

I put my vote in.

http://www.cnbc.com/id/22117618

[NeetaT]

I put my vote in.

http://www.cnbc.com/id/22117618

[GoUSC]

Looks like the majority of people are thinking this thing is a bad idea…Not to say online polls are really valuable but regardless..

http://www.cnbc.com/id/22117618

[GoUSC]

Looks like the majority of people are thinking this thing is a bad idea…Not to say online polls are really valuable but regardless..

http://www.cnbc.com/id/22117618

[GoUSC]

Looks like the majority of people are thinking this thing is a bad idea…Not to say online polls are really valuable but regardless..

http://www.cnbc.com/id/22117618

[GoUSC]

Looks like the majority of people are thinking this thing is a bad idea…Not to say online polls are really valuable but regardless..

http://www.cnbc.com/id/22117618

[CMcG]

Thanks for the link. What about the rumors that you don’t qualify if you owe more than your house is worth? I know two people in that situation. The article (or Bush) is kind of vague on the loan to value thing.

[CMcG]

Thanks for the link. What about the rumors that you don’t qualify if you owe more than your house is worth? I know two people in that situation. The article (or Bush) is kind of vague on the loan to value thing.

[CMcG]

Thanks for the link. What about the rumors that you don’t qualify if you owe more than your house is worth? I know two people in that situation. The article (or Bush) is kind of vague on the loan to value thing.

[CMcG]

Thanks for the link. What about the rumors that you don’t qualify if you owe more than your house is worth? I know two people in that situation. The article (or Bush) is kind of vague on the loan to value thing.

[DWCAP]

The perception is that the Republicans are gonna get creamed this coming election, so they can’t be seen as insensitive, like Katrina. They found a band-aid and put it on a shotgun wound. The Sub-prime hole may stop bleading for a time, but the Alt_A wounds and option arm hits are about to bleed this market out. Now itll just take more time.
Besides, wont this make the NEXT reset even worse? If they havn’t been paying off capital, in 5 years the repayment part will be even higher.

[DWCAP]

The perception is that the Republicans are gonna get creamed this coming election, so they can’t be seen as insensitive, like Katrina. They found a band-aid and put it on a shotgun wound. The Sub-prime hole may stop bleading for a time, but the Alt_A wounds and option arm hits are about to bleed this market out. Now itll just take more time.
Besides, wont this make the NEXT reset even worse? If they havn’t been paying off capital, in 5 years the repayment part will be even higher.

[DWCAP]

The perception is that the Republicans are gonna get creamed this coming election, so they can’t be seen as insensitive, like Katrina. They found a band-aid and put it on a shotgun wound. The Sub-prime hole may stop bleading for a time, but the Alt_A wounds and option arm hits are about to bleed this market out. Now itll just take more time.
Besides, wont this make the NEXT reset even worse? If they havn’t been paying off capital, in 5 years the repayment part will be even higher.

[DWCAP]

The perception is that the Republicans are gonna get creamed this coming election, so they can’t be seen as insensitive, like Katrina. They found a band-aid and put it on a shotgun wound. The Sub-prime hole may stop bleading for a time, but the Alt_A wounds and option arm hits are about to bleed this market out. Now itll just take more time.
Besides, wont this make the NEXT reset even worse? If they havn’t been paying off capital, in 5 years the repayment part will be even higher.

[DWCAP]

The perception is that the Republicans are gonna get creamed this coming election, so they can’t be seen as insensitive, like Katrina. They found a band-aid and put it on a shotgun wound. The Sub-prime hole may stop bleading for a time, but the Alt_A wounds and option arm hits are about to bleed this market out. Now itll just take more time.
Besides, wont this make the NEXT reset even worse? If they havn’t been paying off capital, in 5 years the repayment part will be even higher.

[JPJones]

So from reading several articles this morning, these are a few points about this “bail-out”:

-Minimum 660 FICO requirement

-No more than 60 days past due on payments

-Must have at least 3% equity

Please correct me if I’m wrong about any of them, but if accurate, that doesn’t sound like much of a bailout to me.

[JPJones]

So from reading several articles this morning, these are a few points about this “bail-out”:

-Minimum 660 FICO requirement

-No more than 60 days past due on payments

-Must have at least 3% equity

Please correct me if I’m wrong about any of them, but if accurate, that doesn’t sound like much of a bailout to me.

[JPJones]

So from reading several articles this morning, these are a few points about this “bail-out”:

-Minimum 660 FICO requirement

-No more than 60 days past due on payments

-Must have at least 3% equity

Please correct me if I’m wrong about any of them, but if accurate, that doesn’t sound like much of a bailout to me.

[JPJones]

So from reading several articles this morning, these are a few points about this “bail-out”:

-Minimum 660 FICO requirement

-No more than 60 days past due on payments

-Must have at least 3% equity

Please correct me if I’m wrong about any of them, but if accurate, that doesn’t sound like much of a bailout to me.

[JPJones]

So from reading several articles this morning, these are a few points about this “bail-out”:

-Minimum 660 FICO requirement

-No more than 60 days past due on payments

-Must have at least 3% equity

Please correct me if I’m wrong about any of them, but if accurate, that doesn’t sound like much of a bailout to me.

[pbnative]

I’m curious what the people who hold all these loans think they should do. They don’t like this idea of a freeze, and put lots of requirements around it. Seems like they want to continue foreclosing if the borrower can’t pay as scheduled. Of course that’s the reasonable, legal thing to do, but how can that be in their own financial best interest in the current situation?

Do they think people will start to magically make more money and pay their bill? Do they think the market is coming back any sec? Or do they want the whole situation to get so bad the govt has to truly bail them out?

[pbnative]

I’m curious what the people who hold all these loans think they should do. They don’t like this idea of a freeze, and put lots of requirements around it. Seems like they want to continue foreclosing if the borrower can’t pay as scheduled. Of course that’s the reasonable, legal thing to do, but how can that be in their own financial best interest in the current situation?

Do they think people will start to magically make more money and pay their bill? Do they think the market is coming back any sec? Or do they want the whole situation to get so bad the govt has to truly bail them out?

[pbnative]

I’m curious what the people who hold all these loans think they should do. They don’t like this idea of a freeze, and put lots of requirements around it. Seems like they want to continue foreclosing if the borrower can’t pay as scheduled. Of course that’s the reasonable, legal thing to do, but how can that be in their own financial best interest in the current situation?

Do they think people will start to magically make more money and pay their bill? Do they think the market is coming back any sec? Or do they want the whole situation to get so bad the govt has to truly bail them out?

[pbnative]

I’m curious what the people who hold all these loans think they should do. They don’t like this idea of a freeze, and put lots of requirements around it. Seems like they want to continue foreclosing if the borrower can’t pay as scheduled. Of course that’s the reasonable, legal thing to do, but how can that be in their own financial best interest in the current situation?

Do they think people will start to magically make more money and pay their bill? Do they think the market is coming back any sec? Or do they want the whole situation to get so bad the govt has to truly bail them out?

[pbnative]

I’m curious what the people who hold all these loans think they should do. They don’t like this idea of a freeze, and put lots of requirements around it. Seems like they want to continue foreclosing if the borrower can’t pay as scheduled. Of course that’s the reasonable, legal thing to do, but how can that be in their own financial best interest in the current situation?

Do they think people will start to magically make more money and pay their bill? Do they think the market is coming back any sec? Or do they want the whole situation to get so bad the govt has to truly bail them out?

[SHILOH]

I don’t understand how they can change the terms of a loan…when these loans have been split up and sold as MBS with contracts….
Since when can you just start changing contracts? If both parties agree?

What about all the other people who were foreclosed on under the contract? Will they have recourse if the contract has changed?

[kev374]

-Minimum 660 FICO requirement

-No more than 60 days past due on payments

-Must have at least 3% equity

This bailout is an eyewash. If a buyer had an exotic loan or teaser rate ARM it’s almost certain they haven’t built any equity!!

And there is an additional requirement that the purchase must be post 2005. Since that time housing values have only gone down so almost 100% of these people are upside down. Any equity requirements rules them out completely!

[drunkle]

it’s optional for the lenders to do this. this plan has no teeth.

the determination of whether or not a homeowner can afford to continue payments on a frozen basis will require documentation, ie., w2. how many “homeowners” bought using a w2?

the people who can afford it are not the people that need help, obviously. if anything, this plan is to get ignorant investors back into the financial stocks to prolong the life of the banks, allow hedgies to buy shorts, etc.

[LA_Renter]

I found this on the KBH chatboard. The poster was heavily involved in S&L crisis in the 80’s. He found this quote on Calculated Risk, anyway I found this to be very interesting. The first paragraph is from the poster the following paragraphs are from the former FDIC examiner.

“From Calculated Risk comments, from former FDIC examiner:

A former FDIC employee sent these comments out today. I try to place value in comments from people like this who actually worked to clean up the S&L Bank crisis we felt in 1980s Texas.

____

One of the things they are leaving out of this story about the sub-prime rate freeze is that the owners of the debt (sub-prime mortgages or anything tainted by sub-prime such as mortgage backed securities) are NO LONGER required to re-price these assets on a monthly or quarterly basis as has been the case. The balance sheets in question will no longer reflect market value. This will allow institutions to hold securities of unknown value on their books without any valuation reserve or write-down (Regulations on the freeze action have not been released). This is exactly what the Japanese banks did in the 90’s when they did not quickly clean up their balance sheets and deal with the problem, and many of them still have bad debt from the late 80’s on their books. SO, the result of this is that there will be a ticking time bomb in the banking / financial system AGAIN.

This action is too late to make any real impact on the housing problem. Real estate prices everywhere have already fallen and will continue to do so until there is something of a more normal relationship between real estate prices and their historic place in the proverbial “basket of goods”. Again, the last time real estate markets peaked in the middle of the decade was in the 1920’s (1925 to be exact) and they did not begin to level out until 1934 and not rise until the early 1940’s. Today’s action only moves off the inevitable day of dealing with these underwater loans and thereby creates a longer-term problem than would otherwise be the case. This freeze requires homeowners to have 3% equity in their property in order to qualify, as prices continue to decline this will be fewer and fewer. Unfortunately, the ball has already gone over the edge of the building

This action is very similar to the actions taken in the early part of the S&L disaster when the sick institutions were allowed to keep “goodwill” on their balance sheets and classify it as core capital… and we all remember where that mess ended up. Not dealing with real problems in the financial and banking systems always ends in disaster eventually. However, it allows those in power a quick fix and allow them to pass the problem on the next administration to deal with… Regan did it to old Bush and now little Bush is doing it to whomever…

Earnings at the financial institutions will appear to be significantly improved soon as they will not have to make any of those HUGE (billions of dollars) write-downs on their portfolios any time soon, but they will come.”

[temeculaguy]

I don’t see how this will help the liquidity problem, it’s new rims with old tires. Why would any investor in the future buy mortgage backed securities if they are going to get strongarmed out of their profit, more risk, no reward. Within those pooled assets are a chunk of borrowers who will continue to make the payments at higher rates to offset a little of what the foreclosures cost them. Based on the critera, 660 fico, no lates, equity, they are being told to not make any money off of the best borrowers in the pool while those who don’t qualify are really the ones who will be foreclosing.

Almost every attempt in history to trick the invisible hand of economics has backfired, this will be no different. Where did Laize faire go? This is akin to a casino changing the rules in blackjack after I’ve bet and the cards have been dealt, telling me that I lose on a tie. They will do nothing other than ensuring I stop betting because they can’t be trusted. They may save a few people but they will make sure that private equity steers clear of anyone without stellar credit and large downpayments, while that is not a bad thing, it will hurt the very market they are trying to manipulate.

[temeculaguy]

I don’t see how this will help the liquidity problem, it’s new rims with old tires. Why would any investor in the future buy mortgage backed securities if they are going to get strongarmed out of their profit, more risk, no reward. Within those pooled assets are a chunk of borrowers who will continue to make the payments at higher rates to offset a little of what the foreclosures cost them. Based on the critera, 660 fico, no lates, equity, they are being told to not make any money off of the best borrowers in the pool while those who don’t qualify are really the ones who will be foreclosing.

Almost every attempt in history to trick the invisible hand of economics has backfired, this will be no different. Where did Laize faire go? This is akin to a casino changing the rules in blackjack after I’ve bet and the cards have been dealt, telling me that I lose on a tie. They will do nothing other than ensuring I stop betting because they can’t be trusted. They may save a few people but they will make sure that private equity steers clear of anyone without stellar credit and large downpayments, while that is not a bad thing, it will hurt the very market they are trying to manipulate.

[temeculaguy]

I don’t see how this will help the liquidity problem, it’s new rims with old tires. Why would any investor in the future buy mortgage backed securities if they are going to get strongarmed out of their profit, more risk, no reward. Within those pooled assets are a chunk of borrowers who will continue to make the payments at higher rates to offset a little of what the foreclosures cost them. Based on the critera, 660 fico, no lates, equity, they are being told to not make any money off of the best borrowers in the pool while those who don’t qualify are really the ones who will be foreclosing.

Almost every attempt in history to trick the invisible hand of economics has backfired, this will be no different. Where did Laize faire go? This is akin to a casino changing the rules in blackjack after I’ve bet and the cards have been dealt, telling me that I lose on a tie. They will do nothing other than ensuring I stop betting because they can’t be trusted. They may save a few people but they will make sure that private equity steers clear of anyone without stellar credit and large downpayments, while that is not a bad thing, it will hurt the very market they are trying to manipulate.

[temeculaguy]

I don’t see how this will help the liquidity problem, it’s new rims with old tires. Why would any investor in the future buy mortgage backed securities if they are going to get strongarmed out of their profit, more risk, no reward. Within those pooled assets are a chunk of borrowers who will continue to make the payments at higher rates to offset a little of what the foreclosures cost them. Based on the critera, 660 fico, no lates, equity, they are being told to not make any money off of the best borrowers in the pool while those who don’t qualify are really the ones who will be foreclosing.

Almost every attempt in history to trick the invisible hand of economics has backfired, this will be no different. Where did Laize faire go? This is akin to a casino changing the rules in blackjack after I’ve bet and the cards have been dealt, telling me that I lose on a tie. They will do nothing other than ensuring I stop betting because they can’t be trusted. They may save a few people but they will make sure that private equity steers clear of anyone without stellar credit and large downpayments, while that is not a bad thing, it will hurt the very market they are trying to manipulate.

[temeculaguy]

I don’t see how this will help the liquidity problem, it’s new rims with old tires. Why would any investor in the future buy mortgage backed securities if they are going to get strongarmed out of their profit, more risk, no reward. Within those pooled assets are a chunk of borrowers who will continue to make the payments at higher rates to offset a little of what the foreclosures cost them. Based on the critera, 660 fico, no lates, equity, they are being told to not make any money off of the best borrowers in the pool while those who don’t qualify are really the ones who will be foreclosing.

Almost every attempt in history to trick the invisible hand of economics has backfired, this will be no different. Where did Laize faire go? This is akin to a casino changing the rules in blackjack after I’ve bet and the cards have been dealt, telling me that I lose on a tie. They will do nothing other than ensuring I stop betting because they can’t be trusted. They may save a few people but they will make sure that private equity steers clear of anyone without stellar credit and large downpayments, while that is not a bad thing, it will hurt the very market they are trying to manipulate.

[LA_Renter]

I found this on the KBH chatboard. The poster was heavily involved in S&L crisis in the 80’s. He found this quote on Calculated Risk, anyway I found this to be very interesting. The first paragraph is from the poster the following paragraphs are from the former FDIC examiner.

“From Calculated Risk comments, from former FDIC examiner:

A former FDIC employee sent these comments out today. I try to place value in comments from people like this who actually worked to clean up the S&L Bank crisis we felt in 1980s Texas.

____

One of the things they are leaving out of this story about the sub-prime rate freeze is that the owners of the debt (sub-prime mortgages or anything tainted by sub-prime such as mortgage backed securities) are NO LONGER required to re-price these assets on a monthly or quarterly basis as has been the case. The balance sheets in question will no longer reflect market value. This will allow institutions to hold securities of unknown value on their books without any valuation reserve or write-down (Regulations on the freeze action have not been released). This is exactly what the Japanese banks did in the 90’s when they did not quickly clean up their balance sheets and deal with the problem, and many of them still have bad debt from the late 80’s on their books. SO, the result of this is that there will be a ticking time bomb in the banking / financial system AGAIN.

This action is too late to make any real impact on the housing problem. Real estate prices everywhere have already fallen and will continue to do so until there is something of a more normal relationship between real estate prices and their historic place in the proverbial “basket of goods”. Again, the last time real estate markets peaked in the middle of the decade was in the 1920’s (1925 to be exact) and they did not begin to level out until 1934 and not rise until the early 1940’s. Today’s action only moves off the inevitable day of dealing with these underwater loans and thereby creates a longer-term problem than would otherwise be the case. This freeze requires homeowners to have 3% equity in their property in order to qualify, as prices continue to decline this will be fewer and fewer. Unfortunately, the ball has already gone over the edge of the building

This action is very similar to the actions taken in the early part of the S&L disaster when the sick institutions were allowed to keep “goodwill” on their balance sheets and classify it as core capital… and we all remember where that mess ended up. Not dealing with real problems in the financial and banking systems always ends in disaster eventually. However, it allows those in power a quick fix and allow them to pass the problem on the next administration to deal with… Regan did it to old Bush and now little Bush is doing it to whomever…

Earnings at the financial institutions will appear to be significantly improved soon as they will not have to make any of those HUGE (billions of dollars) write-downs on their portfolios any time soon, but they will come.”

[LA_Renter]

I found this on the KBH chatboard. The poster was heavily involved in S&L crisis in the 80’s. He found this quote on Calculated Risk, anyway I found this to be very interesting. The first paragraph is from the poster the following paragraphs are from the former FDIC examiner.

“From Calculated Risk comments, from former FDIC examiner:

A former FDIC employee sent these comments out today. I try to place value in comments from people like this who actually worked to clean up the S&L Bank crisis we felt in 1980s Texas.

____

One of the things they are leaving out of this story about the sub-prime rate freeze is that the owners of the debt (sub-prime mortgages or anything tainted by sub-prime such as mortgage backed securities) are NO LONGER required to re-price these assets on a monthly or quarterly basis as has been the case. The balance sheets in question will no longer reflect market value. This will allow institutions to hold securities of unknown value on their books without any valuation reserve or write-down (Regulations on the freeze action have not been released). This is exactly what the Japanese banks did in the 90’s when they did not quickly clean up their balance sheets and deal with the problem, and many of them still have bad debt from the late 80’s on their books. SO, the result of this is that there will be a ticking time bomb in the banking / financial system AGAIN.

This action is too late to make any real impact on the housing problem. Real estate prices everywhere have already fallen and will continue to do so until there is something of a more normal relationship between real estate prices and their historic place in the proverbial “basket of goods”. Again, the last time real estate markets peaked in the middle of the decade was in the 1920’s (1925 to be exact) and they did not begin to level out until 1934 and not rise until the early 1940’s. Today’s action only moves off the inevitable day of dealing with these underwater loans and thereby creates a longer-term problem than would otherwise be the case. This freeze requires homeowners to have 3% equity in their property in order to qualify, as prices continue to decline this will be fewer and fewer. Unfortunately, the ball has already gone over the edge of the building

This action is very similar to the actions taken in the early part of the S&L disaster when the sick institutions were allowed to keep “goodwill” on their balance sheets and classify it as core capital… and we all remember where that mess ended up. Not dealing with real problems in the financial and banking systems always ends in disaster eventually. However, it allows those in power a quick fix and allow them to pass the problem on the next administration to deal with… Regan did it to old Bush and now little Bush is doing it to whomever…

Earnings at the financial institutions will appear to be significantly improved soon as they will not have to make any of those HUGE (billions of dollars) write-downs on their portfolios any time soon, but they will come.”

[LA_Renter]

I found this on the KBH chatboard. The poster was heavily involved in S&L crisis in the 80’s. He found this quote on Calculated Risk, anyway I found this to be very interesting. The first paragraph is from the poster the following paragraphs are from the former FDIC examiner.

“From Calculated Risk comments, from former FDIC examiner:

A former FDIC employee sent these comments out today. I try to place value in comments from people like this who actually worked to clean up the S&L Bank crisis we felt in 1980s Texas.

____

One of the things they are leaving out of this story about the sub-prime rate freeze is that the owners of the debt (sub-prime mortgages or anything tainted by sub-prime such as mortgage backed securities) are NO LONGER required to re-price these assets on a monthly or quarterly basis as has been the case. The balance sheets in question will no longer reflect market value. This will allow institutions to hold securities of unknown value on their books without any valuation reserve or write-down (Regulations on the freeze action have not been released). This is exactly what the Japanese banks did in the 90’s when they did not quickly clean up their balance sheets and deal with the problem, and many of them still have bad debt from the late 80’s on their books. SO, the result of this is that there will be a ticking time bomb in the banking / financial system AGAIN.

This action is too late to make any real impact on the housing problem. Real estate prices everywhere have already fallen and will continue to do so until there is something of a more normal relationship between real estate prices and their historic place in the proverbial “basket of goods”. Again, the last time real estate markets peaked in the middle of the decade was in the 1920’s (1925 to be exact) and they did not begin to level out until 1934 and not rise until the early 1940’s. Today’s action only moves off the inevitable day of dealing with these underwater loans and thereby creates a longer-term problem than would otherwise be the case. This freeze requires homeowners to have 3% equity in their property in order to qualify, as prices continue to decline this will be fewer and fewer. Unfortunately, the ball has already gone over the edge of the building

This action is very similar to the actions taken in the early part of the S&L disaster when the sick institutions were allowed to keep “goodwill” on their balance sheets and classify it as core capital… and we all remember where that mess ended up. Not dealing with real problems in the financial and banking systems always ends in disaster eventually. However, it allows those in power a quick fix and allow them to pass the problem on the next administration to deal with… Regan did it to old Bush and now little Bush is doing it to whomever…

Earnings at the financial institutions will appear to be significantly improved soon as they will not have to make any of those HUGE (billions of dollars) write-downs on their portfolios any time soon, but they will come.”

[LA_Renter]

I found this on the KBH chatboard. The poster was heavily involved in S&L crisis in the 80’s. He found this quote on Calculated Risk, anyway I found this to be very interesting. The first paragraph is from the poster the following paragraphs are from the former FDIC examiner.

“From Calculated Risk comments, from former FDIC examiner:

A former FDIC employee sent these comments out today. I try to place value in comments from people like this who actually worked to clean up the S&L Bank crisis we felt in 1980s Texas.

____

One of the things they are leaving out of this story about the sub-prime rate freeze is that the owners of the debt (sub-prime mortgages or anything tainted by sub-prime such as mortgage backed securities) are NO LONGER required to re-price these assets on a monthly or quarterly basis as has been the case. The balance sheets in question will no longer reflect market value. This will allow institutions to hold securities of unknown value on their books without any valuation reserve or write-down (Regulations on the freeze action have not been released). This is exactly what the Japanese banks did in the 90’s when they did not quickly clean up their balance sheets and deal with the problem, and many of them still have bad debt from the late 80’s on their books. SO, the result of this is that there will be a ticking time bomb in the banking / financial system AGAIN.

This action is too late to make any real impact on the housing problem. Real estate prices everywhere have already fallen and will continue to do so until there is something of a more normal relationship between real estate prices and their historic place in the proverbial “basket of goods”. Again, the last time real estate markets peaked in the middle of the decade was in the 1920’s (1925 to be exact) and they did not begin to level out until 1934 and not rise until the early 1940’s. Today’s action only moves off the inevitable day of dealing with these underwater loans and thereby creates a longer-term problem than would otherwise be the case. This freeze requires homeowners to have 3% equity in their property in order to qualify, as prices continue to decline this will be fewer and fewer. Unfortunately, the ball has already gone over the edge of the building

This action is very similar to the actions taken in the early part of the S&L disaster when the sick institutions were allowed to keep “goodwill” on their balance sheets and classify it as core capital… and we all remember where that mess ended up. Not dealing with real problems in the financial and banking systems always ends in disaster eventually. However, it allows those in power a quick fix and allow them to pass the problem on the next administration to deal with… Regan did it to old Bush and now little Bush is doing it to whomever…

Earnings at the financial institutions will appear to be significantly improved soon as they will not have to make any of those HUGE (billions of dollars) write-downs on their portfolios any time soon, but they will come.”

[drunkle]

it’s optional for the lenders to do this. this plan has no teeth.

the determination of whether or not a homeowner can afford to continue payments on a frozen basis will require documentation, ie., w2. how many “homeowners” bought using a w2?

the people who can afford it are not the people that need help, obviously. if anything, this plan is to get ignorant investors back into the financial stocks to prolong the life of the banks, allow hedgies to buy shorts, etc.

[drunkle]

it’s optional for the lenders to do this. this plan has no teeth.

the determination of whether or not a homeowner can afford to continue payments on a frozen basis will require documentation, ie., w2. how many “homeowners” bought using a w2?

the people who can afford it are not the people that need help, obviously. if anything, this plan is to get ignorant investors back into the financial stocks to prolong the life of the banks, allow hedgies to buy shorts, etc.

[drunkle]

it’s optional for the lenders to do this. this plan has no teeth.

the determination of whether or not a homeowner can afford to continue payments on a frozen basis will require documentation, ie., w2. how many “homeowners” bought using a w2?

the people who can afford it are not the people that need help, obviously. if anything, this plan is to get ignorant investors back into the financial stocks to prolong the life of the banks, allow hedgies to buy shorts, etc.

[drunkle]

it’s optional for the lenders to do this. this plan has no teeth.

the determination of whether or not a homeowner can afford to continue payments on a frozen basis will require documentation, ie., w2. how many “homeowners” bought using a w2?

the people who can afford it are not the people that need help, obviously. if anything, this plan is to get ignorant investors back into the financial stocks to prolong the life of the banks, allow hedgies to buy shorts, etc.

[kev374]

-Minimum 660 FICO requirement

-No more than 60 days past due on payments

-Must have at least 3% equity

This bailout is an eyewash. If a buyer had an exotic loan or teaser rate ARM it’s almost certain they haven’t built any equity!!

And there is an additional requirement that the purchase must be post 2005. Since that time housing values have only gone down so almost 100% of these people are upside down. Any equity requirements rules them out completely!

[kev374]

-Minimum 660 FICO requirement

-No more than 60 days past due on payments

-Must have at least 3% equity

This bailout is an eyewash. If a buyer had an exotic loan or teaser rate ARM it’s almost certain they haven’t built any equity!!

And there is an additional requirement that the purchase must be post 2005. Since that time housing values have only gone down so almost 100% of these people are upside down. Any equity requirements rules them out completely!

[kev374]

-Minimum 660 FICO requirement

-No more than 60 days past due on payments

-Must have at least 3% equity

This bailout is an eyewash. If a buyer had an exotic loan or teaser rate ARM it’s almost certain they haven’t built any equity!!

And there is an additional requirement that the purchase must be post 2005. Since that time housing values have only gone down so almost 100% of these people are upside down. Any equity requirements rules them out completely!

[kev374]

-Minimum 660 FICO requirement

-No more than 60 days past due on payments

-Must have at least 3% equity

This bailout is an eyewash. If a buyer had an exotic loan or teaser rate ARM it’s almost certain they haven’t built any equity!!

And there is an additional requirement that the purchase must be post 2005. Since that time housing values have only gone down so almost 100% of these people are upside down. Any equity requirements rules them out completely!

[SHILOH]

I don’t understand how they can change the terms of a loan…when these loans have been split up and sold as MBS with contracts….
Since when can you just start changing contracts? If both parties agree?

What about all the other people who were foreclosed on under the contract? Will they have recourse if the contract has changed?

[SHILOH]

I don’t understand how they can change the terms of a loan…when these loans have been split up and sold as MBS with contracts….
Since when can you just start changing contracts? If both parties agree?

What about all the other people who were foreclosed on under the contract? Will they have recourse if the contract has changed?

[SHILOH]

I don’t understand how they can change the terms of a loan…when these loans have been split up and sold as MBS with contracts….
Since when can you just start changing contracts? If both parties agree?

What about all the other people who were foreclosed on under the contract? Will they have recourse if the contract has changed?

[SHILOH]

I don’t understand how they can change the terms of a loan…when these loans have been split up and sold as MBS with contracts….
Since when can you just start changing contracts? If both parties agree?

What about all the other people who were foreclosed on under the contract? Will they have recourse if the contract has changed?

[Author]

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