Rescues for Homeowners in Debt Weighed

They are working hard to figure out a way for YOU, Mr. Responsible, living within your means, to pay for THEM... all of THEM. The mortgagors AND the mortgage lenders.


Rescues for Homeowners in Debt Weighed

By EDMUND L. ANDREWS and LOUIS UCHITELLE
Published: February 22, 2008
WASHINGTON — Prodded in part by some of the nation’s biggest banks, the Bush administration and Congress are considering costly new proposals for the government to rescue hundreds of thousands of homeowners whose mortgages are higher than the value of their houses.

Not since the Depression has a larger share of Americans owed more on their homes than they are worth. With the collapse of the housing boom, nearly 8.8 million homeowners, or 10.3 percent of the total, are underwater. That is more than double the percentage just a year ago, according to a new estimate of the damage by Moody’s Economy.com.

Administration officials say they still oppose any taxpayer bailout for either people who borrowed more than they could afford or banks that made foolish loans during the height of the speculative bubble in housing.

But with the current efforts to arrest the housing collapse so far bearing little fruit, Washington is being forced to explore new ideas, among them the idea of a federal mortgage guarantee for troubled borrowers.

And policy makers are listening to proposals from industry and community groups to use government funds to purchase and refinance billions of dollars in mortgages now in danger of default.

.....

In Washington, it will be difficult to engineer a bailout similar to the one for savings and loan companies in the early 1990s, because Democrats and Republicans alike cringe at the very word bailout and fear a backlash by people who never became overextended.

But with millions of homeowners already underwater and the prospect that millions more may face the same situation, Democrats and Republicans alike are scrambling for ideas to keep people from simply walking away from their homes and to help those struggling to pay their bills.

Bank of America, which is in the process of acquiring Countrywide Financial and has potentially huge exposure, has circulated a proposal to create a new federal agency that would buy vast quantities of delinquent mortgages at a deep discount and replace them with fixed-rate federally guaranteed loans.

http://www.nytimes.c...amp;oref=slogin





Many owners are only gradually becoming aware that their homes would sell for less than the debt against them — a phenomenon, said Richard T. Curtin, director of the Reuters/University of Michigan Surveys of Consumers, that is “beginning to weigh on people, making them uncertain and nervous about the future.”

That nervousness is evident across the country, particularly in places like Memphis, a city of nearly 1.3 million people where falling home prices and negative equity are new experiences.

The housing slumps of the mid-1970s and late 1980s were confined to the coasts. The current bust, while leaving some cities relatively unscathed, has cut a far wider path and it comes just when home debt is at its highest level since World War II.

Like we said here BAC buying CFC was a big mistake. BAC bought CFC in order to save face to save their first $2 Billion investment from going down the toilet. CFC has huge liabilities. So in order to save $2 Billion BAC has assumed $200 Billion in liabilities that is even bigger than BAC can handle. Now they want government to buy the junks out of their hands. These people have already stopped paying their mortagages. Why should the tax payers give them another loan that they will not be able to pay anyway? This is about bailing out BAC/CFC, not the home owners. We know the banks and Bush couldn't care less about the poor people who couldn't afford mortages. Let the banks go bankrupt then tax payers will assume the liabilities, not before.

Like we said here BAC buying CFC was a big mistake. BAC bought CFC in order to save face to save their first $2 Billion investment from going down the toilet. CFC has huge liabilities. So in order to save $2 Billion BAC has assumed $200 Billion in liabilities that is even bigger than BAC can handle. Now they want government to buy the junks out of their hands.

These people have already stopped paying their mortagages. Why should the tax payers give them another loan that they will not be able to pay anyway? This is about bailing out BAC/CFC, not the home owners. We know the banks and Bush couldn't care less about the poor people who couldn't afford mortages. Let the banks go bankrupt then tax payers will assume the liabilities, not before.

Yes, of course Mike, the real focus of wealth transfer here is from the middle class, the taxpayer to the banks. A paragraph I almost added to my highlights from the article, I decided to skip but, it is telling...

"Credit Suisse executives said they have held lengthy meetings with F.H.A. officials and have urged the agency to relax rules that currently disqualify many borrowers.
One idea, company officials said, was to allow borrowers who had simply made six payments during the course of their mortgage to qualify."

Again, the banks are writing the laws. Their chattel in Congress will enact them. That is how we got into this mess in the first place. The trick is putting enough lipstick on the pig so that there isn't a "backlash by people who never became overextended" as the article describes it. They realized quickly the $1,200.00 per home bribe ain't gonna be enough.



And my favorite line from the whole article...


In an interview, Mr. Reich [John M. Reich, director of the Office of Thrift Supervision, the agency that regulates savings and loan companies.] said he hoped that most of the old mortgages would be replaced by cheaper mortgages insured through the F.H.A.

“It isn’t a bailout,” Mr. Reich said. “It is a market-driven solution.”


“It isn’t a bailout, it is a market-driven solution.”
One of the classic punchlines of all time. Suitable for any occasion.

Edited by milbank, 22 February 2008 - 08:25 AM.

Short the Dollar. It will break 75.