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DaCounselor.
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June 7, 2007 at 5:06 PM #9245June 7, 2007 at 5:13 PM #57715
drunkle
Participant“We have an obligation to prevent fraud and abusive lending,” Federal Reserve Chairman Ben Bernanke said in a speech Tuesday. “At the same time, we must tread carefully so as not to suppress responsible lending or eliminate refinancing opportunities for subprime borrowers.”
since when is ben bernanke a law maker…
June 7, 2007 at 5:13 PM #57740Participant“We have an obligation to prevent fraud and abusive lending,” Federal Reserve Chairman Ben Bernanke said in a speech Tuesday. “At the same time, we must tread carefully so as not to suppress responsible lending or eliminate refinancing opportunities for subprime borrowers.”
since when is ben bernanke a law maker…
June 30, 2007 at 4:59 PM #63129DaCounselor
ParticipantWe’re probably not going to see any new law, per se, regarding mortgages this year, but lawmakers and government agencies are certainly all over the emerging re-cast crisis. Barney Frank and his crew are aggressively pursuing clarification of FAS 140, for instance, which may very well result in an interpretation very favorable to borrowers and servicers. If loan servicers can modify loans without any negative impact on their in-house accounting, the rise in modifications may dwarf the rise in NODs/foreclosures. Moody’s latest analysis of pooling/servicing agreements indicates that 95% of subprime paper can be modified by the servicer, so now it’s just a matter of impact on servicer accounting that is standing in the way of mass modifications.
Technically, no new laws/reform are really needed. Borrower/servicer-friendly interpretations of existing standards will probably be enough to ease the crisis. And I said ease, not eradicate.
June 30, 2007 at 4:59 PM #63179ParticipantWe’re probably not going to see any new law, per se, regarding mortgages this year, but lawmakers and government agencies are certainly all over the emerging re-cast crisis. Barney Frank and his crew are aggressively pursuing clarification of FAS 140, for instance, which may very well result in an interpretation very favorable to borrowers and servicers. If loan servicers can modify loans without any negative impact on their in-house accounting, the rise in modifications may dwarf the rise in NODs/foreclosures. Moody’s latest analysis of pooling/servicing agreements indicates that 95% of subprime paper can be modified by the servicer, so now it’s just a matter of impact on servicer accounting that is standing in the way of mass modifications.
Technically, no new laws/reform are really needed. Borrower/servicer-friendly interpretations of existing standards will probably be enough to ease the crisis. And I said ease, not eradicate.
June 30, 2007 at 9:25 PM #63158Bugs
ParticipantNationally it could work out, but regionally I doubt there are enough of the borrowers who are “only” marginal for restructuring to have any noticable impact. Restructuruing a mortgage so that it’s $200/month cheaper in a $100,000 market like Kansas City is one thing; trying to do the same with a $1,200/month extra payment in a $600k market like SD is completely different. Night and day different.
The debts are owed, the investors are holding the paper and they’ve foregone payment so far. They can’t do it forever even if they wanted to and they DON’T want to.
Talk about restructuring sounds warm and fuzzy but it’s not even going to put a dent in the market here. It’ll just prolong the agony for a few of these marginal borrowers, and when the conventional rate finally does take effect they’ll lose it all then. Meanwhile the prices will continue to decline, thus creating more and more of these marginal and downright unviable refi situations.
June 30, 2007 at 9:25 PM #63210ParticipantNationally it could work out, but regionally I doubt there are enough of the borrowers who are “only” marginal for restructuring to have any noticable impact. Restructuruing a mortgage so that it’s $200/month cheaper in a $100,000 market like Kansas City is one thing; trying to do the same with a $1,200/month extra payment in a $600k market like SD is completely different. Night and day different.
The debts are owed, the investors are holding the paper and they’ve foregone payment so far. They can’t do it forever even if they wanted to and they DON’T want to.
Talk about restructuring sounds warm and fuzzy but it’s not even going to put a dent in the market here. It’ll just prolong the agony for a few of these marginal borrowers, and when the conventional rate finally does take effect they’ll lose it all then. Meanwhile the prices will continue to decline, thus creating more and more of these marginal and downright unviable refi situations.
July 1, 2007 at 1:24 PM #63214patientrenter
ParticipantOFHEO opens the spigots..
http://www.ofheo.gov/media/pdf/PMConf61107.pdf
Yal on Calculated Risk posted a link to this OFHEO presentation by James Lockhart. Note the 2 new programs on page 23. There is no $ limit on the “Home Stay” program to ease terms for homeowners who don’t pay their originally agreed loan obligations.
Between this and FAS 140 ‘clarifications’ and lots of other actions in process or under consideration, the full force of federal and other regulatory and private intervention is being readied. I’d be (pleasantly) surprised if prices fell by more than 20-30% in So Calif before these measures put a floor under the prices. There’s a Greenspan put for stocks. Housing goes beyond the Fed. To whom should we give credit for the nationwide housing put?
Patient renter in OC
July 1, 2007 at 1:24 PM #63266ParticipantOFHEO opens the spigots..
http://www.ofheo.gov/media/pdf/PMConf61107.pdf
Yal on Calculated Risk posted a link to this OFHEO presentation by James Lockhart. Note the 2 new programs on page 23. There is no $ limit on the “Home Stay” program to ease terms for homeowners who don’t pay their originally agreed loan obligations.
Between this and FAS 140 ‘clarifications’ and lots of other actions in process or under consideration, the full force of federal and other regulatory and private intervention is being readied. I’d be (pleasantly) surprised if prices fell by more than 20-30% in So Calif before these measures put a floor under the prices. There’s a Greenspan put for stocks. Housing goes beyond the Fed. To whom should we give credit for the nationwide housing put?
Patient renter in OC
July 2, 2007 at 11:27 AM #63341Participant“To whom should we give credit for the nationwide housing put?”
__________________________Hard to say exactly – probably a combination of folks. There has been alot of input so far above and beyond Barney Frank & Co., including the ASF and MBA. The SEC and the FASB are obviously major players in this thing. There is alot of interest in keeping homes off the institutional books and keeping the revenue streams coming in. About the only entities I can think of off the top of my head that would truly benefit from mass defaults are the hedgies that have bet against borrowers by purchasing derivatives.
MBS investors have and will always face risks, some more than others depending upon which tranche they have bought into. The hope is that the money will keep rolling in. If the investor isn’t happy with the tranche performance, they can sell.
The extent of loan modification impact in SD, assuming the doors are open for them to be made on a grand scale, will depend upon the scope of the modifications offered. It’s just too early to tell. It’s definitely going to be interesting to see how this plays out. There is alot going on that is not widely reported.
July 2, 2007 at 11:27 AM #63394Participant“To whom should we give credit for the nationwide housing put?”
__________________________Hard to say exactly – probably a combination of folks. There has been alot of input so far above and beyond Barney Frank & Co., including the ASF and MBA. The SEC and the FASB are obviously major players in this thing. There is alot of interest in keeping homes off the institutional books and keeping the revenue streams coming in. About the only entities I can think of off the top of my head that would truly benefit from mass defaults are the hedgies that have bet against borrowers by purchasing derivatives.
MBS investors have and will always face risks, some more than others depending upon which tranche they have bought into. The hope is that the money will keep rolling in. If the investor isn’t happy with the tranche performance, they can sell.
The extent of loan modification impact in SD, assuming the doors are open for them to be made on a grand scale, will depend upon the scope of the modifications offered. It’s just too early to tell. It’s definitely going to be interesting to see how this plays out. There is alot going on that is not widely reported.
July 2, 2007 at 9:35 PM #63488ParticipantWho’sAfraidofBigBadHousingPut..
It’s fun putting catchy lipstick on the pig of housing finance.
“There has been a lot of input so far above and beyond Barney Frank & Co., including the ASF and MBA.”
DaC, can you shed a little light on what the other players driving mortgage practices, especially loand mods and guarantees, are doing? Until I looked them up just now, I didn’t know who the ASF or MBA were, and there are just hints on their websites of upcoming guidelines. Being involved in other regulatory processes, I know that if they say they are preparing guidelines, they are far along and a lot of people know what’s likely, or at least possible.
Patient renter in OC
July 2, 2007 at 9:35 PM #63542ParticipantWho’sAfraidofBigBadHousingPut..
It’s fun putting catchy lipstick on the pig of housing finance.
“There has been a lot of input so far above and beyond Barney Frank & Co., including the ASF and MBA.”
DaC, can you shed a little light on what the other players driving mortgage practices, especially loand mods and guarantees, are doing? Until I looked them up just now, I didn’t know who the ASF or MBA were, and there are just hints on their websites of upcoming guidelines. Being involved in other regulatory processes, I know that if they say they are preparing guidelines, they are far along and a lot of people know what’s likely, or at least possible.
Patient renter in OC
July 3, 2007 at 11:17 AM #63619ParticipantPR – both the ASF and the MBA have produced position papers in strong support of loan modifications (and the requisite favorable interpretation of the existing language of FAS 140). The ASF’s position paper can be found here:
I also have the MBA’s paper saved somewhere, I can post a link when I get a minute to look for it.
My industry source advises me that a forum was held several weeks ago by the FASB and it was well attended by regulators, mortgage servicers, attorneys, etc., and that the MBA paper was discussed at length. No objections were raised to the MBA’s analysis, including no objections by the FASB and the SEC reps in attendance. All indications are that the analysis is sound.
The ultimate result may well go beyond a favorable reading of FAS 140 in support of modifications and end up with the FASB modifying FAS 140 to clarify the accounting and regulatory issues surrounding loan modifications. I would not be surprised to see this happen and if the SEC is on board then it’s a done deal.
Reading FAS 140 and the ASF and MBA position papers is a good start to understanding what is going on out there and the magnitude of the players involved in opening the gates for loan modifications.
July 3, 2007 at 11:17 AM #63672ParticipantPR – both the ASF and the MBA have produced position papers in strong support of loan modifications (and the requisite favorable interpretation of the existing language of FAS 140). The ASF’s position paper can be found here:
I also have the MBA’s paper saved somewhere, I can post a link when I get a minute to look for it.
My industry source advises me that a forum was held several weeks ago by the FASB and it was well attended by regulators, mortgage servicers, attorneys, etc., and that the MBA paper was discussed at length. No objections were raised to the MBA’s analysis, including no objections by the FASB and the SEC reps in attendance. All indications are that the analysis is sound.
The ultimate result may well go beyond a favorable reading of FAS 140 in support of modifications and end up with the FASB modifying FAS 140 to clarify the accounting and regulatory issues surrounding loan modifications. I would not be surprised to see this happen and if the SEC is on board then it’s a done deal.
Reading FAS 140 and the ASF and MBA position papers is a good start to understanding what is going on out there and the magnitude of the players involved in opening the gates for loan modifications.
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