12 replies to this topic

[NAV]

http://www.federalre...904/default.htm

Fed is now extending it's encouragement of Moral Hazard from instituitions to Joe6Pack.


Appropriate loss mitigation strategies may include, for example, loan modifications, deferral of payments, or a reduction of principal.

Geez, i should have bought a few more houses. Prudent financial management - screw it !!. That's too old fashioned. This ain't capitalism by any means.

P.S - All this has got nothing to do with my view of stock markets. I remain a LT bull.

[Sentient Being]

Yes but as the socialists in this country are determined to destroy our economy in the name of political correctness, we can always invest in socialist countries abandoning socialism in order to defeat America on the economic front. Thank goodness for foreign markets, when the day comes, move it!

[IndexTrader]

I would think it would make emminent sense that when faced with foreclosing on a property, which is certain to cause a substantial loss, that a lender would pursue loss mitigation strategies where possible in order to get the loan back on a paying basis. Actually, all lenders have a loss mitigation department which does exactly that, amongst other things, the above document notwithstanding. They've had these departments for years. I spoke with my first loss mitigation department about 17 years ago. Rather than an example of the demise of capitalism, this is an example of lenders undertaking to do what is in their rational self-interest....not lose money. IT

[greenie]

http://www.federalre...904/default.htm

Fed is now extending it's encouragement of Moral Hazard from instituitions to Joe6Pack.

Hi NAV,

Here is a video that may go well with your thread

http://www.nytimes.c...E_FEATURE.html#

[NAV]

I would think it would make emminent sense that when faced with foreclosing on a property, which is certain to cause a substantial loss, that a lender would pursue loss mitigation strategies where possible in order to get the loan back on a paying basis. Actually, all lenders have a loss mitigation department which does exactly that, amongst other things, the above document notwithstanding. They've had these departments for years. I spoke with my first loss mitigation department about 17 years ago.

Rather than an example of the demise of capitalism, this is an example of lenders undertaking to do what is in their rational self-interest....not lose money.

IT

I am sure the Fed would be aware of the existence of a loss mitigation department If you noticed, i am not talking about lenders at all. Lenders will do whatever is in their self-interest. It's none of Fed's business or State's business to sponsor such things or jawbone in that direction and still claim to maintain the free spirit of capitalism.

[pdx5]

A concrete example comes from India which is transforming itself from a socialist country to greedy capitalism. Now the economy is growing at 10% as opposed to the old days under prime minister Nehru when people were starving and American foreign aid was needed just to survive. Now India is giving foreign aid to other countries! As a life long practitioner of engineering, I know only too well never fight actual results no matter what the theory says.

[greenie]

I have been following this topic for a while and side with Indextrader here. Earlier, banks had loss mitigation departments, but there is no such mechanism in today's structured-finance world. Loan servicers today do not have as much authority as loss mitigation departments of yesterday. Fed, in their statement, extends the authority to loan service departments and indemnify them against SEC charges. Can't go too much into the details - sleepy. pdx5 - expect extreme surprises regarding India - and it may not be all pleasant.

[AChartist]

In this sort of "free market" all costs and fiat are socialized, all profits are privatized. I say ***** those dumb borrowers, bail out the big houses and get those homeowners on welfare, the American way!

[TTHQ Staff]

This is getting a little out of hand here, folks. As Maineman says, 'stay calm.' As the Admin says, 'no politics.'

[OEXCHAOS]

http://www.federalre...904/default.htm

Fed is now extending it's encouragement of Moral Hazard from instituitions to Joe6Pack.


Appropriate loss mitigation strategies may include, for example, loan modifications, deferral of payments, or a reduction of principal.

Geez, i should have bought a few more houses. Prudent financial management - screw it !!. That's too old fashioned. This ain't capitalism by any means.

P.S - All this has got nothing to do with my view of stock markets. I remain a LT bull.

Nav,

I'm very much against government created moral hazards.

This does NOT seem like such a thing. Basically, they're saying to those whom they regulate or whom they may be asked to help in the future, "Get proactive--what worked before could well explode in your face if you don't get out there and be smart about these non-traditional (and poorly understood) mortgages. Give a little now so you don't have to give a whole lot more a little later".

Strikes me as prudent and reasonable and nothing out of the ordinary. In fact, they'd be remiss if they didn't do that.

I have a BIG problem with the mortgage industry. These guys SOLD mortgages to people who already clearly don't have a good grasp of credit. If I had done that with, say, index options to similarly experienced people when I was a broker, well, I might be getting out of the hoosgow around now. Those folks may have been willing victims, but they have no adequate frame of reference nor any sort of CLEAR idea what they were getting into--I'm confident.

Right or wrong, there's a presumption of some level of consumer protection regulation of financial businesses. All that changed about 8-10 years ago with all the new lenders, and the expansion of loan aggregation. I'd say that some of these borrowers need to be cut a break at the expense of the lenders and loan holders. I also think it's perfectly smart for the Fed to mitigate SOME of the cost to the economy by lowering rates if it doesn't ruin the viability of the currency nor spur a new wave of inflation.

I'll tell you this, since lenders are going to be eating some losses, lower rates aren't going to bring on another lending/real estate boom.

Mark