Is the U.S. Gov going to BailOut documented FRAUD??

[LA_Renter]

OK here is what I want to know in light of the growing bailout buzz. If they implement a government bailout program, what happens when all the people that got stated loans come in and have to show what their REAL ASSETS and REAL INCOMES are compared with what they put on the original application??? Making false statements on a loan application IS a felony. Are the President of the United States and members of congress suggesting we bailout FELONS?? I guess my initial gut reaction to this question is NOT OVER MY DEAD BODY! I suggest this is a question we should take to our law makers and have them explain in detail what they proposing. In the event such legislation is enacted it should be made very clear to people who are coming in for assistance that if any FRAUD is found on the original loan application they are subject to prosecution and will not qualify for any of my freaking tax dollars. Thats my 2 cents.

[lendingbubblecontinues]

Everyone here who cares about this issue should call the White House comment line at 202-456-1111 and share their opinion with a live operator. I shared mine, which echoed LA_Renters sentiment: 1) NO bailout but 2) IF bailout, THEN relief only to TRUE victims, otherwise PROSECUTION of the entire food chain where FRAUD is discovered (buyer, seller, realtor(s), appraisers, mortgage brokers, all the way up)

Call now and call often!

LBC

[bsrsharma]

LBC, Isn’t it a bit early since the parameters of the “bailout” haven’t even been outlined with any clarity? Till any taxpayer impact is written into a Congressional Bill, all the protestations may just be some premature noise.

Oh, BTW, if you have to call someone, it is better to call your Congressman & Senator. Tell them you are a Constituent and will consider this issue while voting in 2008. That concentrates their mind mightily. By the time any bill reaches Dubya’s desk, the game is in the last innings.

Another unpleasant thought: A half % cut in FFR by BB has far more impact on the economy than any puny Billion $ bailout attempt.

[Ozzie]

And the Fed just released a statment saying

“keeping families in their homes is a matter of great importance to the Federal Reserve.”

this was in a story about the Fed urging lenders to rework terms for those struggling with their mortgages. The Fed has been issuing more press releases in the past 2 weeks than the prior 2 years. It would appear that they are building their case for rate cuts.

[LA_Renter]

bsrsharma,

It is never too early, in fact right now is the prime time to let your feelings be known. Politicians have to know the consequences before they move forward. Here is an excellent Op-Ed from the LA Times on this subject

“Is America really pro-bailout?”

Politicians are sorely misreading public opinion of imperiled homeowners who bought into the bubble.

By Peter Viles
September 4, 2007
President Bush announced his intention last week to reach out a hand to the “many Americans” who “may have been misled” in the sub-prime mortgage market. Two days earlier, presidential hopeful Barack Obama called for fining “predatory lenders” to bail out “hoodwinked” families. L.A. City Councilman Richard Alarcon wants a $5-million revolving fund to “help homeowners on the verge of foreclosure.” The news media report on families losing homes, disabled owners facing foreclosure and newlyweds being tossed into the street.

Here’s one tale of sub-prime woe you may not have heard. Casey Serin, a twentysomething real estate investor in Sacramento, bought eight houses in four states with little or no money down, couldn’t sell them and couldn’t pay the mortgages, and so naturally began losing them to foreclosure. He then began keeping a self-pitying online diary he called Iamfacingforeclosure.com.

Serin hasn’t drawn much notice from politicians or the media, but real estate bloggers have so vilified him that CNet’s news.com granted him the title “world’s most hated blogger.” And cases like his help explain the disconnect between public opinion and bailout-happy politicians and the elite media: According to a recent Fox News poll conducted by Opinion Dynamics, there’s 70% opposition to a taxpayer sub-prime bailout.”

http://www.latimes.com/news/opinion/la-oe-viles4sep04,0,7874701.story?coll=la-opinion-center

CONTACT YOUR CONGRESSMAN TODAY!

[delicious irony]

Why work hard and save at all?

This is a slap in the face to everyone that does the ‘right thing’, lives below their means, forgoes needless luxury items and saves to buy a home properly and saves for rainy days.

Maybe I am a fool for not jumping on the cheap money credit fiesta.

[bsrsharma]

I agree. It is good to call your Congressman and Senators to warn them that they will lose your support if they use any taxpayer funds for bailout. I just felt jumping on the Whitehouse right away may be wasteful. Most attempts to steal from your pocket usually begin in Congress. That is where our focus should be. If anything, the WH would try not to spend any money on domestic issues due to idealogy (all available funds to be given to Pentagon).

[lendingbubblecontinues]

The White House call center seemed more interested in forwarding my comments than did Sen. Boxer’s office…that’s all. It may be too soon, I agree…I’d rather be early than late on this issue, however.

[bsrsharma]

Did you try calling your Congressman’s office? What was the response? I haven’t heard about any House initiatives or announcements yet.

[(former)FormerSanDiegan]

Why work hard and save at all?

This is a slap in the face to everyone that does the ‘right thing’, lives below their means, forgoes needless luxury items and saves to buy a home properly and saves for rainy days.

I have to disagree. Those who live below their means and save to buy a home properly will ALWAYS be better off than those who don’t.

[bsrsharma]

This seems to be the first legislation being proposed in the Senate post Bust. Seems fairly innoccuous with no taxpayer impact. I am for it since it seems to put a little anti-fraud provisions into law.

http://news.yahoo.com/s/nm/20070905/pl_nm/economy_subprime_dodd_dc

[bob007]

How can the US govt bailout forclosures ?

2.5 million x $100,000 = $250 billion

For every dude who forcloses there are 2-3 other homeowners who are sweating to avoid foreclosure ?

What message are you sending to those homeowners ?

[cr]

The irony is those that understate the foreclosure problem says it’s around 2% or fewer people defaulting. If that’s true why should the other 98% in a sense be punished for being fiscally responsible?

Here’s a seemingly delusional article from a guy who thinks the plan will work:

Bush’s mortgage bailout just might work
If insider buying is any indication, home builders and financial-services providers expect dramatic reversals of fortune in the coming months.
By Jon Markman
With his stunning decision last week to let a federal housing agency guarantee mortgages of distressed homeowners, President Bush appears to have launched a “surge” in the financial markets to match the Pentagon’s efforts in Iraq.
His plan seems straightforward: First, use winks and nods to convince his top Federal Reserve appointee, Ben Bernanke, that it would be in the best interest of both men to slash interest-rate targets by as much as a percentage point, and to do it quickly so the move has time to work its magic before the next election.
Second, use every lever available in the executive branch to provide a direct, emphatic bailout to overstretched mortgage holders at risk of foreclosure.
And third, dump as much of the financial burden for paying for the rescue of voters, aka homeowners, on the nation’s banks, rather than on taxpayers.
If the market comes to believe his plan will succeed — and the plan just might — you can expect a rally in the shares of financial-services providers and home builders that will stun even the bulls, with big-cap banks such as Wells Fargo (WFC, news, msgs) and SunTrust Banks (STI, news, msgs) rising as much as 25% over the next 12 months and some beaten-down home builders doubling in value.
Bush bailout No. 2
Bush’s surge solution for homeowners would, ironically, take a page from his father’s rescue of Latin American governments and bankers in 1989 with a set of financial instruments that came to be known as Brady bonds. In that case, U.S. banks had lent billions of dollars to Latin American companies for use in economy building without obtaining sufficient collateral.
After thousands of loans went into default, it became clear that the money had been siphoned off by kleptocrats and crooks, and there was therefore no cash flow available for repayments. When U.S. banks clamored to be made whole, Latin American governments took over their citizens’ obligations but did not have the ability to make payments, either.
Richard Bove, a banking analyst at brokerage Punk Ziegel, points out that the first Bush administration then had two choices: support U.S. banks and demand that the countries tax their people to pay back the loans, or blame the U.S. banks for making idiotic loans in the first place, force them to forgive the debts and let the crooks keep their booty.
President George H.W. Bush chose the latter in the interest of hemispheric amity and stability, and some creative geniuses in a Treasury Department headed by former Wall Street banker Nicholas Brady figured out a way for the governments of Mexico, Argentina and Brazil to convert the bad loans into dollar-denominated bonds that could be sold elsewhere. In effect, Bush 41 whisked bad credits off balance sheets south of the border with a stroke of a pen.
Now Bush 43 faces the same dilemma, only this time the bad loans are right here at home. His choices: He can thumb his nose at lenders who made stupid loans, castigate brainless homeowners who took out mortgages they could not repay, jail fraudster mortgage brokers who exploited a loosey-goosey system to generate exorbitant fees — and stand smugly by as families in Republican strongholds across the West and South lose their homes. Or he could follow his dad’s Brady bonds solution and basically forgive and forget by launching a mortgage bailout of unprecedented scope.
Ginnie and friends to the rescue
Based on Bush’s announcement last week of a new Federal Housing Administration program to help around 80,000 at-risk homeowners obtain debt relief — an effort modest in scope but stunning in its reversal of prior policy — it’s clear he will go for the latter in the interest of helping his party avoid a wipeout next November.
Bove notes that a precedent for a widespread mortgage-assistance program lies in the Emergency Home Finance Act of 1970, which established these mechanisms to help challenged households:
• Banks would originate mortgage loans with 1% interest rates.
• The Federal Housing Administration and Department of Veterans Affairs would insure the loans against loss.
• The Government National Mortgage Association, aka Ginnie Mae, would buy the mortgages at par from the banks, allowing the banks to make a small profit.
• Ginnie Mae, taking a sizable loss, would then sell these loans to Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs) at a discount so that the buyers would earn reasonable yields.
• Fannie and Freddie would fund these purchases with low-cost, government-guaranteed debt.
As a result, Bove speculates, tens of thousands of at-risk homeowners would get to keep their homes. Ginnie Mae would lose tens of billions of dollars that would be repaid by banks and taxpayers at a pace and in a manner similar to the Iraq reconstruction effort. Fannie Mae and Freddie Mac would end up with huge increases in the sizes of their portfolios. And, most importantly, the nationwide housing collapse would disappear as an election theme for Democrats.
Although this may seem a bit far-fetched, insiders in the financial services and home-building industries are buying their own companies’ shares these days at a record pace — essentially betting that something like this scenario will transpire. Home-building companies’ executives bought $15.9 million worth of their firms’ annihilated shares in August, the largest monthly purchase in the sector since Thomson Financial started keeping track in 1990.
The last time that insiders even came close to this level of buying, in September 2001, the sector rose 55% in value over the next six months while the S&P 500 Index ($INX) advanced 10%. Thomson analysts suggest raw valuation is a factor in insiders’ zeal for their stocks — as the price-to-book value of the sector hit 0.75 last month, the lowest since October 1990 — but clearly a larger motivating force is at work.
The bottom line is that Bush has ample tools at his disposal to make the foreclosure crisis vanish if he is willing to make a financial and political commitment on a par with his pledge to stabilize Iraq. With almost one in every 7.5 housing units in the United States empty due to overbuilding during the easy-money years, it would take years for enough demand to emerge under normal conditions to soak up supply. But don’t underestimate the president’s capacity and motivation to speed up the process with a surge of looser credit and check writing.
Fine Print
Wells Fargo, now trading at $36.50 a share, could easily go to $50 in a year in this scenario, as its competition from the likes of Countrywide Financial (CFC, news, msgs) and lesser mortgage bankers and brokers have been thrashed and it has its pick of the best talent fleeing those firms. SunTrust, now trading at $78, could go to $95. . . .
The three home builders with the most insider buying are Meritage Homes (MTH, news, msgs), where one insider bought $12.9 million in shares in August; Brookfield Homes (BHS, news, msgs), where three insiders bought $1.4 million; and Lennar (LEN, news, msgs), where one insider spent $845,100. Shares of these three builders are down 63%, 49% and 46%, respectively.

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