The American Bankers Association? Who is their patron saint? Herbert Hoover?

This guy?

Thanks masaccio.

digg

No, this guy.

I dunno. Would pointing out to the Blue Dogs that this will help people in their own states, people who voted for them, help?

This bill sounds like a good start- of course it will only help those who are willing to go through bankruptcy.

We cannot stop this economic meltdown without reducing drastically the rate of foreclosures. Bank owned properties are being offered at firesale prices and they continue to drive the market down. The biggest problem is that too many people are upside down on their homes- they owe more than they are worth. Those who are upside down walk at incredible rates, including millions who COULD make the payments but choose not to throw good money after bad.

Banks need to be able to reduce the amount of the mortgage to the market value of the home…if they were allowed to do such a reduction in exchange for a share in the upside potential (say 50% share in gains up to the amount of the write down) millions of people would stay in their homes.

Many of those walking are high income people who are taking advantage of the system- they don’t deserve a break- but unless they get one- this thing will go on for several more years. Workshops are now being held on how to walk from your house- and counselors are explaining how to get a loan on the replacement house which is purchased at firesale prices before walking from the one you are underwater on.

Knowing CITI groups history we will probably be looking at mortgage rates of 30 % in no time.
239 hrs & 1 min

There’s another problem in this mess, the mortgage backed securities are so screwed up that it seems difficult to figure out who owns what mortgages and who can say “yes” to a negotiated decrease. I’m not sure how this can be addressed.

Thanks Mas. I really like Durbin.

Mas “The great thing about this bill is it actually helps the real victims of the mortgage fraud perpetrated by the financial elites”

This is a miracle after the “financial elites” thugs and criminals walked away with 350 billion.

Saturday Night LIve nailed it. One of their best skits yet
Wall Street
http://patdollard.com/2008/10/…..rom-louie/

Complicated subject – thanks for walking us through it Masaccio.

Pat Buchanan has an article up at MSNBC that claims that the NEW DEAL didn’t work – that the depression lasted longer because of what FDR did and that only WW2 saved the US economy…

This is being echoed from the right in many circles- including from right wing economists…

Trouble is, the charts all show rapid gdp and employment growth beginning in 1933 and reaching new peaks somewhere around 1937..

It’s amazing that such bullshit gets spread and believed.

Would love to have someone do a story here on it.

I’m not sure they give a rip about their own citizens. Cooper voted for the Bankruptcy Bill in 2005, despite the opposition of the entire Bar Association, which includes several people who are nationally recognized experts on this area, and the remarkable number of people who choose Chapter 13 over Chapter 7 here.

I think the best argument is that the losses are real, and already there, and the only way to mitigate them is to keep people paying.

The strangest part is that practically all loans over the last few years were securitized, and the banks don’t hold them. It isn’t even clear how seriously most banks would be affected.

The NYT says that only existing mortgages are affected. That answers the fake argument that making it possible to restructure mortgages will raise the cost of credit. All it will do is fix the broken mortgages.

link to Buchanan article;

http://www.msnbc.msn.com/id/28579400/

Bankruptcy accomplishes this. The Plan is open to objection. The actual holder of the note will be able to appear and argue the terms of the plan, including the valuation and the amount of the risk premium to be added to the base rate. If the holder doesn’t appear, that is too bad. The mortgage is changed.

Link to “new deal” article at Wicki including charts on employment and GDP.

http://en.wikipedia.org/wiki/New_Deal

Yes, but it doesn’t help with the other more numerous cases where the upside down mortgage holder has no interest in bankruptcy- I was puzzling about what to do about THOSE cases.

it will continue for several more years if you are wanting the same unfair system to survive….

fortunately, most of us that have been sold the debt cycle by this system have woke up to this fact….

I understand how this will help people who are in foreclosure and I understand that it’s important to keep homes occupied to keep property values up. But I have a visceral reaction to allowing mortgages to be reset to the value of the home at the time of the petition, and to having the interest rates capped at some figure lower than what was agreed to (assuming there was no fraud). How is that in any way fair to those of us who bought a house and have made all the payments? It’s not. If this bill contained a provision that made any profit up to the original amount of the mortgage go directly to the IRS when the house is sold, then maybe I could get behind it. If it required that the alleged fraud be proved before resetting the value and the interest rate, again, I could get behind it, because those people were legitimately ripped off. But to just announce that anyone in bankruptcy can have his mortgage reduced and his interest rate whacked is the same as taking money from everyone who bought a house and continues to make the payments, and giving it to those who for whatever reason can’t make the payments. It may be that most of these people are in Chapter 13 because they paid too much for their house, or it may be that they bought a house they couldn’t really afford, or any number of reasons not having to do with their mortgage.

An example: If I paid 400,000 for my house, and my neighbor paid 400,000 for his, and we both bought them at about the same time and we both owe 350,000 at this point, and the two houses are substantially the same, and we have substantially the same mortgage, and we both sell for 425,000 at the same time (like in 5 or 10 years), if his mortgage was reset now to say $300,000, plus he gets favorable interest rates the value of which could easily go into hundreds of thousands of dollars, when he sells he gets a $50,000 reward plus whatever interest he has saved over the years for going into bankruptcy. I get nothing for making all my payments on time.

No, no, no, this is not the way to solve this problem. The way to solve it is to do the hard work necessary to figure out who committed the fraud, and prosecute them, and take their assets to make their victims whole. If the assets are insufficient, THEN we can have a discussion about how much the taxpayers should kick in to make the victims whole.

If there was no fraud, then let the bankruptcy take its normal course.

What “unfair system”? Are you saying that there is an unfair system and that if it goes away we can get out the real estate meltdown? I’m not understanding.

Is there any recapture of the written off amount for the note holder? Example: Person has $400K mortgage and the value is written down to $250K. The person goes two years then sells the house for $300K. Does the person who had the mortgage get the $50 K?
238 hrs & 42 min

Most of these cases were not caused by fraud…People bought houses with a bubble mentality thinking that they would continue going up forever and they didn’t. Now they owe more than the property is worth- often a LOT more. In some cases, the property owners took out second and third mortgages on the properties before the price declines and may owe a million dollars on a property worth $650K.

Currently they can simply walk away from the property with or without bankruptcy- when the do the problem continues to get worse.

When govt. policy attempts to mix justice up with economic solutions it often accomplishes neither.

Currently such an arrangement is illegal as I understand it. Making it legal could be a big step in solving the problem

The possibility of sharing in the upside is fascinating. However, I think there is just as much risk, especially in the medium term, that the value of the house will actually fall, and if the homeowner has to sell, the holder expects to collect a deficiency anyway. The upside for the next long time isn’t that strong. Take that with the technical problems, and the sharing isn’t likely to produce that great a return.

For many years people bought homes believing in inflation. Not necessarily for the home but on their wages. The thought being we could make it for a few years and their wages would go up both through advancement and by keeping up with inflation. The past few years have turned this concept on its head with real incomes declining.
238 hrs & 31 min

That’s a good point- if the lender feels that they’re going to take a bath anyway- they may prefer a smaller bath now to a larger one later.

That provides an argument for a reset that gives the debtor at least 10% equity to provide a cushion and/or a govt. guarantee to the lender.

Eventually this market will turn- but we need to make the turn happen sooner rather than later.

Well that was the good ol “sane” mentality….before we started seeing 20% annual appreciation rates. During that period (at least in southern california) people were betting on the come- and using money from second and third trust deeds to make the payments on the first. They KNEW that their salaries weren’t going to rise fast enough to make up the difference but they didn’t care because their McMansion had become a magic piggy bank that had thousands more in it every morning.

But to just announce that anyone in bankruptcy can have his mortgage reduced and his interest rate whacked is the same as taking money from everyone who bought a house and continues to make the payments, and giving it to those who for whatever reason can’t make the payments.

If you think about bankruptcy in general, what you have is people who can’t pay. They can’t pay for their car, their house, their credit cards, their medical bills and so on. Your complain that it isn’t fair to you unless they lose everything. You make no exception for anyone, regardless of how it happened that they can’t pay. You don’t care if they are bankrupt because of job loss, because they got sick and their insurance stiffed them, because they took a risk and started a business and failed, losing everything, because their spouse took off leaving them destitute, dependent on one income to raise their kids.

Bankruptcy is a safety net. I pray you never need it, but you should want it for yourself and yours.

Not to mention the reduction in value of every home in the neighborhood when one home is firesaled as well as the decreased revenue of the community through taxes based on evaluation.
238 hrs & 22 min

I don’t know how big this problem is. If the problem is that the person has a big debt on a house not worth the debt, and the person just doesn’t want to pay, the only real solution is to walk away. In CA, where it is hard to get a deficiency judgment, people can just walk away. That is a problem that doesn’t have a real solution other than dragging the lender to the table.

In most states, the deficiency judgment is backbreaking, and they have to file anyway.

It would be marvelous if there could be a policy that would cure our economic woes, and according to which only the righteous would prosper and the wicked would be adequately punished.

Unfortuantely- this is a fairy tale.

Yes I am in California and that is exactly what is happening. I would imagine that there are other states with similar legislative climates.

I have said before that the only fair way to handle the bailout is to pay off all American’s mortgage balances up to $250,000. This would give the banks their money and it would free up money for additional lending. It would also help those who paid their bills and those that were unable to. It is a no-brainer except the neocons would call that Socialism, when gifting it to failed businesses as a bailout.

One problem is CA has is that a lot of the new houses are very badly located. I visited in a town near Beaumont, and the entire way, we saw one development after another. Finally, we looked at a couple of models. We were stunned by the size and price of these houses. There was no obvious manufacturing base, and no other industry or obvious business to support the kinds of income we associate with those prices. I imagine that the buyers either had no business buying, or they were commuting long distances, to get near to the San Bernadino National Forest, or something.

Between the price of gas and the misery of commuting, I would not be surprised if these people just got tired of the life there.

There really isn’t a solution. Someone is going to have to start a business out there.

It had better apply to the 80/20 loans so popular in the last few years.

80% Conventional mortgage.
20% Heloc (Home equity line of credit)

This means the banks who lent Helocs (and many did not get sold to investors), will take further losses.

At present, in Chapter 13, you can get rid of the HELOC if the value of the house is less than the first mortgage. So, the underwater HELOCs are gone no matter what.

When are they ever going to do anything to help those of use who live within our means and play by the rules. Growing up I was always told there is no free lunch. Obviously my parents lied to me because in the America of today only suckers live within their means and play by the rules.

The upside down situation is hard to fix.

Perhaps these work outs have to look at what someone paid, when they paid it. If it was bought at the top of the bubble, the seller has walked away with the cash. That’s gone. The bank and and appraisers over valued the house and lent to much money. Poor them. They should not get out away without some pain. When a party walks away the bank is left with the property which is often worth less than they loaned and could get in a resale. Bank will take a hit. Owner took a hit because they lost their deposit and equity, but can view it (some of) as “housing expense /rent”. Uncle Sam should let them deduct the full value of their loss- less the “rent” from the taxes for 5 years out. This means the tax payers get to share the loss in value. The banks can get a tax credit for a lost after a reasonable return on their investment less the resale. Or, the homowner keeps the upside down mortgage and uncle sam pays the difference to the bank between the market value when bought and the depressed value today. Now the homeowner gets a reset mortgage on the new amount outstanding at reasonable rates from the Uncle Sam with only 1% going to the bank, the rest to uncle sam.

Sadly the investors and risk takers don’t live within their means. They hide behind a corporate veil to take enormous risks at no personal jeopardy. That’s how the debt financing works.

When you take a mortgage how do you know you can pay it for 30 years?

You have misunderstood me. I believe in the bankruptcy laws, what I am saying is IF no fraud was committed, then let the bankruptcy take its normal course. If the judge decides that the bankrupt should have his mortgage reduced and his interest rate whacked, the judge has that discretion under current law.

I am against making mortgage reduction and interest rate cuts a blanket policy for everyone no matter the situation. I am not advocating that bankruptcy laws be rewritten to make it harder on the bankrupt, in fact I think they are too stringent. I would like to see bankrupts allowed to keep more of their assets. I just think it is lazy for the government to ignore whether or not a problem was caused by fraudulent lending and real estate practices, or some other reason. If there was fraud involved, we need to do the hard work to bring the guilty to justice, and force them to pay reparations before the taxpayers get involved. I would also argue that the taxpayers are culpable to the extent they allowed government to look the other way when the fraud was committed, and should pay to make the victims whole, and to the extent looking the other way allowed the criminals to flourish. How you would quantify that with a dollar amount I have no idea. But it needs to be debated at the very least.

Let these people lose their homes. Yes its sad but they should have known better. They might have been pushed and encouraged but ultimately they signed the note accepting responsibility. bailing people out does extend recessions and depressions, look at Japan with it’s real estate boom and the government bailed them out and some would say they have never really recovered. Pull the band-aid off and let these wounds heal so the economy will return back to normal faster. The housing markets prices will continue to fall but with this announcement of letting foreclosures happen there will be an understood perception of how it will play out. This will give investors the confidence in a weird way to see what will happen and then stop waiting and buy houses and banks won’t drag their feet waiting for another bailout. Don’t wait for “mommy and daddy” to save your ass again get out their and do it your self. At worst you will know better next time. We need to learn a lesson obviously

Who do you think will buy those houses? At what price? When? How many neighbors will be punished by the huge housing overhang? By the rats and vandals? Right now you could buy a house in Detroit for $9,000. But there are no buyers. Those houses sit vacant, and will stay that way for a long time. They will rot. Is that what you think is the best way to go?

For those taking the bankruptcy route, since the proceedings are in court, the bk judge would presumably refer any evidence of fraud by the lender or the applicant to the proper authorities.

Cramdowns are not new or unique to mortgage-driven personal bankruptcies, btw. Any claimant who is forced to accept less than the original terms of a contract could be said to endure one, and courts force them on people and firms all the time. In business bankruptcies, they are quite routine and it is not clear that they have been restricted as a class the way they have been for the last 20 years or so regarding mortgages in the bankruptcies of individual people.

It so happens that the HJC subcommittee on commercial and administrative law held hearings on a mortgage cramdown bill almost exactly a year ago. At that time, the size of the underwater homeowner problem was becoming apparent, so much so that Jack Kemp and the chief economist at Moody’s, Mark Zandi (who has often been a good resource during the credit crisis), joined more expected homeowner advocates in support of the plan. Unfortunately there’s no hearing transcript, but the witnesses statements are here, and a commentary from Adam Levitin at Credit Slips is here. Credit Slips has a lot more on this and other bankruptcy-related matters, of course.

Ugh…this is so upsetting to see people so ill informed about what is happening in these mortgages. Please see my story here…and read it, don’t just assume you understand why people are ending up in chapter 13. I am telling you that the amount of fraud is HUGE. I have listed lots of links in my story but all you have to do is google “mortgage servicing fraud” and you will find literally thousands of posts all people who experienced the same things I did leading to the bankruptcy. These lenders “caused” these foreclosures and bankruptcies by violating TILA and RESPA laws.

And…judges at this time are not allowed to restructure these loans in chapter 13 bankruptcy. I have had many “experts” tell me that they can, but I am living it. For whatever reason my lawyer says that these mortgage companies are fighting the restructuring which means you end up in state supreme court having to sue for things like your payment history. My judge did threaten that he would apply punitive damages (which goes to a state school fund) if the company hauled me into court again saying I hadn’t paid my bill…”I could and proved it twice”. In both cases they just put all the fees on the end of the loan. My lawyer says the judge cannot get rid of these fees. That his hands are tied…and he’s not the only lawyer to tell me this. I have been to at least 5.

I am sick of people thinking they understand the problem when they don’t get it. The foreclosure rate is high in part due to financial problems like medical and child support, and lost jobs. However, what these banks do to you for one missed payment is what causes the avalanche and creates a situation quite lucrative for them (they lie and jack up the value of these loans and then sell em down the line) and makes it impossible for a normal person to recovery from one missed payment.

http://www.dailykos.com/story/…..609/601449

Please, before blaming home owners understand that the FDIC was dismantled by Bush. That the bankruptcy judges cannot restructure these loans at least not in MY state. And that it is the fees, the illegal application of payments and fraud that is the cause for a very large portion of these problems. If my judge could restructure he would. He was very angry at GMAC for what they did to me. It was obvious that they had misapplied my payments, that they had jacked with the escrow, that they had applied illegal fees (property inspection fees sometimes 3 times a month) and were sending statements that the judge said were “unreadable”. He couldn’t stop it.

You assume that many people who have mortgage problems are to blame. Real income has dropped. Manufacturing is gone. Health care costs are still soaring for no good reason but greed. Many took equity out of their homes to pay doctor bills, health insurance, etc. Certainly, many mismanaged their money but many more have suffered from the lack of regulation and oversight that defines our country now.

Don’t wait for “mommy and daddy” to save your ass again get out their and do it your self.

This is a value judgement with no real facts to back it up. Imagine what it is like to, say, get sick, lose your health insurance, file for bankruptcy, get sick again, have not health insurance or a job. Do you take the equity out of your house to live or land on the streets. I know this is an extreme example but there are variations of this scenario across our country.

While this plan sounds great, it may take a while to get approved and up and running. What I need though is mortgage help now. Is there a program caleld Hope Now> This site http://www.needhelppayingbills.com had some info, but I need info on those government programs, and I think it is Hope Now? Do you have any info on mortgage help? Thanks in advance.

Here’s a link to the hope now program. It doesn’t have a strong record, but it may get you to a place where you can hold on for a while.

I’m seeing a lot of those good solid repugnantly republican type sentiments here! Can’t make those payments-It’s obviously a moral shortcoming on your part, since I made every one of mine (See what a sparkling example of the American Ideal I am?) so you should suffer, if you were ignorant or lost your job or got sick! That’s the way the cookie crumbles, sucker. There’ll be no handouts, no nothing -YOU LOSE! I scrimped and saved, did like my grandma said and responsibly kept my money in my mattress until I could buy a house with cash money (Yay me). As to those of you who are in desperate straits, tough shit!

It’s a simple matter of personal responsibility! These irreponsible chumps must be penalized, I don’t care if their kids live in a refrigerator box and the economy goes to hell, cause I got mine…

You guys can give the compassionate conservatives a run for their money! Are you afraid somebody might get something you don’t?