Comments on: In favor of wholesale mortgage refinance A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: hsvkitty Mon, 12 Sep 2011 17:55:55 +0000 russwinter, although you have a point about the debtor being “stuck,” oddly enough having a home and that roof over your head and keeping it doesn’t feel like serfdom and certainly not a good comparison. I suppose if the housing industry stays in a slump for more than the 10 years it is likely to suffer, we could look at this again and be more pessimistic.

With your concern for the economy, you would rather see them foreclosed upon and ousted, and the home destroyed to keep the prices “stable” but still too high and obscure the market? Or is your preference the more likely scenario that that the foreclosures continue unabated, with areas becoming empty and rundown, not only decreasing the value of the homes, but all the homes in the area and threatening the town itself given there are less taxes to collect and more vandalism, property damage and fires. ( there are a plethora of other snowball effects) How has that been working so far for the economy?

If would be good to have a solution that isn’t ripe for banks to collect more fees, and offer new inroads to corruption and fraud, as in the past. There is no easy fix, but a preference for all would be that the banks take the hit this time, and pay for the damage they caused.

@TFF I am actually waiting to see how the Insurance for the homes was done and who benefited from the foreclosures. It would seem that while people are clamouring to get the foreclosures on track and the banks are whining about how they are losing money, their insurance and returns say otherwise and often the taxpayers are the ones on the hook through FM$FM.

The majority of cost of foreclosure is also passed on to the Insurer, TFF. Do not feel sorry for the banks… there is a lot of the untold story that this HAS to now been highly profitable for some banks, servicers and many other parties perhaps incollusion. There is still that shoe that should have dropped by now, but the “saving” of FM&FM means that dirty little secret may never be known.

You really do have to think that if important documents were being robosigned thousands of times and hour by several different people at just one firm, how many other “paperwork problems” were swept under the carpet to ensure we don’t rattle the markets?

@silliness I knew you weren’t a homeowner by your posts … but good for you for sitting it out and not getting caught up in something you can’t afford. However,you are blaming “us all” because you aren’t sure where to affix the blame. Maybe you need to start reading a few of the hundreds of books about the recession and what caused it, rather then blaming “us’n” or Obama…

By: TFF Sun, 11 Sep 2011 19:47:37 +0000 P.S. I don’t personally care whether home prices rise or fall (we’re not moving, buying, or selling), and our mortgage will be fully paid off within three years. Maybe less. So don’t suggest I’m speaking from self-interest here.

By: TFF Sun, 11 Sep 2011 19:45:22 +0000 Did you truly believe that by “sitting out this silliness” you would be immune from the fallout? It might not destroy the economy, but we will certainly be feeling it for decades.

Falling home prices might sound good (and wouldn’t directly have any impact on my situation), but it would slaughter the banks and thus indirectly the federal government that backstops the financial system. Prices *should* fall another 30%, but paradoxically we can’t afford to allow that to happen. That is how you end up with economic zombies.

There is no hope of economic recovery while these zombies are roaming freely. You can kill them quickly through foreclosure, but you end up with the economic equivalent of sepsis. You can allow them to die slowly, but it will take a decade or more.

Do you have another answer? Please don’t pretend that we can suddenly dump the whole cost of the mess on the borrowers and banks (even if that is where it belongs). They are not sufficiently capitalized to survive that.

By: silliness Sun, 11 Sep 2011 19:15:45 +0000 FS once said: “In recent years lots of people have lost lots of money by making exactly that bet. Which would seem to indicate that a bit of prudence, and saving up money for a decent down payment, makes a lot more sense than a speculative plunge into a highly-leveraged and extremely illiquid asset.” ow-to-funnel-money-to-bankers-and-broker s-housing-edition

So it is depressing to see progressives try to recreate a failed economic model. I hope the President has the good sense to pass on this one, but if he doesn’t he loses my vote. As a renter who sat out this “silliness” while y’all made housing unaffordable for people like me, this scheme will only keep prices high. I understand why you want this option, but please don’t pretend it is going to help the economy or stimulate demand in any meaningful way. You are just guessing that it will.

By: McGriffen Sun, 11 Sep 2011 18:23:08 +0000 ^Perhaps that’s true. Still seems difficult to pull that off, en masse. Another means to think this through: if a given homeowner has managed to meet the mortgage commitments thus far, since mid-2007 / 2008, that’s 3+ years of making payments. Amid the housing deflation and the recession.

In some people’s minds, that would appear to reduce the credit risk (relative to the mid-2007 / 2008 timeframe. To be fair, this homeowner does not equate to getting any kind of award. But it’s apparent, to now, this homeowner example exhibited both the capacity / willingness to meet one’s obligations.

Too many of the earlier efforts were focused on the wrong subset of borrowers…last one’s in, making (very likely) the least amount required for the down payment. Those very juicy Alt-A and subprime borrowers were never really an owner to begin with, ie, if their cumulative LTV (1st lien, and 2nd lien) exceeded 110% at the time of purchase.

Loan servicing technology to do it should be cheap, and in certain areas of the US there’d be plenty of people to staff the place.

*Or go back in time, and implement a comparable RTC construct for dealing with all the badness of it. The unfortunate consequence of TARP, bailouts for FN / FRE, etc…, is that much of the delivery mechanisms just continued as is (more / less).

By: TFF Sun, 11 Sep 2011 17:29:27 +0000 “If anyone here understands mortgage servicing industry, please chime in with some positive examples.”

Wasn’t there a private program that involved negotiating a short-sale with the bank, then renting/selling the home back to the homeowner at a reduced price?

Foreclosure is very expensive, very bad for the bank. Retaining the current loans on an underwater property is very expensive, very bad for the borrower. (Probably shouldn’t call them a “homeowner” when they have negative equity.)

Given the magnitude of the numbers involved, there ought to be a highly profitable middle ground. The interesting question to me is figuring out how to frame the solution to improve the situation for all parties involved while grabbing a profit for a third party mediator (possibly the federal government).

By: McGriffen Sun, 11 Sep 2011 17:20:28 +0000 It’s an interesting dilemma. The unfortunate truth in all of it, is that the mortgage / loan servicing mechanisms were never properly prepared for this / similar outcomes.

I’ve lost count of the number of federal programs (HAMP, HARP, HAP(less)) intended to dissuade homeowners from default / foreclosure for a rewrite on the mortgage rate or payments. Has to be at least 3, perhaps 4. If anyone here understands mortgage servicing industry, please chime in with some positive examples. Mortgage servicing was in its hey-day between 2003-2006, and with annualized housing gains of 10-15% (broadly) little work was needed to process a default/foreclosure. Since 2007, not that much. The work is tedious, and bound to have trouble attracting or keeping talent. (I’ve toured one or two sites, and visited with servicing personnel previously; processing 90+ delinquent queues would be, well, problematic one could presume).

And to perform servicing successfully, well you’d need an available, lower-salary talent base to freely tap. Small wonder many of the big players have relocated into the DFW region; whether by merger or acquisition.

By: TFF Sun, 11 Sep 2011 16:27:56 +0000 LadyGodiva, the only reason to mention “honorable” is to explain why he hasn’t already walked away from the mess. He has a very simple and effective solution available to him — ask the tenants to move out of his former house, then mail the keys on the underwater property back to the bank. He lives in a non-recourse state, so there is literally nothing the bank can do about it. If he wanted to take advantage of the situation, he could simply stop making payments and wait (likely many months) until the bank got around to foreclosing. Living rent-free all the while. I have no particular sympathy for him, both because he created this mess for him and because he already has a (relatively) painless solution available to him.

From the societal perspective, however, I find it an intriguing puzzle. If he walks away from the loan, he is the ONLY entity involved who benefits from that decision. It would be a bad outcome for the bank servicing the loan. It would be a bad outcome for whoever owns or guarantees the loan. It would (perhaps) pass part of the loss along to taxpayers through Fannie/Freddie. And foreclosures are bad for the neighborhood/community.

Is foreclosure really the best outcome here?

Selfishly, I would also like to see these bad loans resolved more rapidly (even if some of the cost lands on me). The economy will not and cannot generate growth as long as zombies continue to trample through the financial system. Rather than face a decade or more of stagnation, I would rather take a one-time 15% haircut on my life savings and get back to a healthier situation.

Is admittedly fraught with moral hazard, however.

By: russwinter Sun, 11 Sep 2011 16:15:01 +0000 A big refi of underwater, income deficient debtors is really nothing more than a glorified cheap rent program, except the debtor is stuck in the property and has little mobility. No mention of any serious debt forgiveness. In medieval times this was called serfdom. Not clear to me what the economic benefits of this are.

By: hsvkitty Sun, 11 Sep 2011 13:57:45 +0000 @y2kurtus, being you have already stated you would walk away from your mortgage if you lose your job, I find it hard to read “the simple truth is there is no reason whatsoever that my fellow citizens should collectively contribute to correct my poor timing” when what you mean is they are suckers and you as a banker know walking away is a better strategy….

LadyGodiva silliness is just venting and wrong. He blames the homeowners when it was not the homeowners who made the bubble or brought the economy to it’s knees. While there are certainly deadbeats, he is broad brushing.

Don’t blame the homeowners, blame those who made the predicament they are in and welcome the possibility of stability, because if not there are plenty more foreclosures and more potentially underwater as the economy continues to falter.

Foreclosures aren’t exactly slowing down, they are simply being masked by some of the honest courts that value your rule of law and the procedural process. The economy isn’t going to recover until the housing situation is back on track … which won’t happen until there are more jobs so people can afford to pay their mortgages as opposed to walking or “figuring it out on his own” as you put it.

A total housing collapse will cost everyone a lot more (although that will solve everyone having a choice of what to do) and @silliness wants to give everyone a tax cut, but as Felix says, people were using their Mortgage Interest credit to balance their accounts, which makes it an incentive for more bubbles not a fix.

Letting the housing market collapse is an option, but then it won’t just be “a few million people” that aren’t presently you or @silliness needing help …