Shame on You Greedy Capitalists: Just Take a Haircut on your Mortgage Portfolio and Become Progressive.

Abstract: The New York Times prints a propaganda piece by a far left-liberal who spins a sad tale of greed and  inhumanity toward simple folk who cannot pay their mortgages and wish to have some or all of their debt retired or forgiven by the banks and other lenders. The sad saga is replete with sobs and accusations of greed and crime and insensitivities on a monstrous scale but omits salient points about how such projects have already failed and also ignoring the root cause of this toxic assets mess: the Community Reinvestment Act that forced banks to lend to people with no credit or a way to pay their bills. Thus, we read a soggy, tear-jerking lament with threats and innuendos and other crude leftist instruments of intimidation but with no reasonable solution offered for the problem. The banks are expected to throw even worse money after bad money as an act of charity. This is liberalism.

We now live in a narrowly-defined egalitarian society where, we are told, it is now time to share the wealth with our fellow persons—citizens or not.  The world could be such a happy place if we merely ‘spread around’ the wealth a bit and give everybody a chance to participate in the glory of socialism. Those greedy capitalists who must be accused of being the source of our societal problems need now, in recompense and in the absence of reasonable bankruptcy laws or any other notions except for Methodism, share our wealth with those who cannot manage [or refuse] to pay their monthly house payments. We would all feel so glad if we could fix this. We shame them if they do not.

We are proud to read the New York Times, celebrated in song and theater as the Walter Duranty Papers[1] in honor of their most beloved Pulitzer Prize winner, study the suggestions of one Peter S. Goodman who graduated from Reed College[2], a place renowned for its lax student drug policy[3] and some questionable rankings as the college seems to protest such affronts[4] in national surveys.  He later studied at Cal Berkeley and earned an M.A. in Asian Studies.  His writing skills were probably honed at the Sacramento Bee.  With an impressive set of liberal credentials we are expecting some well-reasoned suggestions as to how this housing price crash should be addressed.  Let us see how this proceeds.

“The Obama administration on Monday plans to announce a campaign to pressure mortgage companies to reduce payments for many more troubled homeowners, as evidence mounts that a $75 billion taxpayer-financed effort aimed at stemming foreclosures is foundering.”[5]--U.S. Will Push Mortgage Firms to Reduce More Loan Payments By Peter S. Goodman Published: November 28, 2009 [Emphasis is mine in all quotes.]

We wonder what the word ‘pressure’ means here in the far left lexicon.

““The banks are not doing a good enough job,” Michael S. Barr, Treasury’s assistant secretary for financial institutions, said in an interview Friday. “Some of the firms ought to be embarrassed, and they will be.””-- U.S. Will Push Mortgage Firms

To be fair, we need to recognize that many banks were forced to issue subprime mortgages[6] to an assortment of interesting individuals including drug addicts, illegal aliens, criminals, dead beats and home flippers and that now they are stuck with what we melancholily call toxic assets.[7][8] We might inject the observation that Fannie Mae and Freddie Mac are both bankrupt because of such defaulting mortgages and further speculate why they do not just ‘forgive’ a lot of loans.

Shame on you.

“Mr. Barr said the government would try to use shame as a corrective, publicly naming those institutions that move too slowly to permanently lower mortgage payments…. “They’re not getting a penny from the federal government until they move forward,” Mr. Barr said.”-- U.S. Will Push Mortgage Firms

Who is this guy to close the doors of the Treasury to groveling Zombie banks who would not be rescued in the next crash due to their shame index? Oh, he, Barr, is a liberal who “…provided expertise on the Community Reinvestment Act, fair lending, predatory lending, and community development financial policies.”[9] Ah, yes, the very program that generated a mere 3-5 trillion dollars worth of failed mortgages[10] offered to many minorities in some risky scheme to ‘redistribute the wealth.” That Barr. Yes, we know.

Is he part of the solution or is he part of the problem?

“Last month, an oversight panel created by Congress reported that fewer than 2,000 of the 500,000 loan modifications then in progress had become permanent under Making Home Affordable.”-- U.S. Will Push Mortgage Firms

Maybe that is because the first bunch selected produced a 70% default rate on those mortgages that were ‘fixed’ up with reduced principal and interest.  Is this salient point mentioned in this article?? No? Where is the balance here?

Here is what was deliberately left out of this ‘intellectual’ debate:

““HSA is showing high redefault rates on the early offerings,” FHFA director James Lockhart noted in a Congressional report this week. “Performance on the February through April offerings shows a redefault [or recidivism] rate of almost 70%, which calls into question the program’s assumptions that borrowers have the capacity to make payments going forward.””[11]-- Fannie Program Sees 70% Recidivism By Diana Golobay May 22, 2009.

Here, some collective of socialists schemed to get ‘affordable housing’ for the poor using federal law—i.e. the  CRA [Community Reinvestment Act][12][13] and political  harassment machines like Greenlining[14] and the criminals at ACORN[15] and thus perpetuate this failure.

The lament continues:

“Lawyers who defend homeowners against foreclosure increasingly say they doubt the Treasury program can be made effective. Under the plan, companies that agree to lower payments for troubled borrowers collect $1,000 from the government, followed by another $1,000 a year for up to three years. The program is premised on the idea that a small cash incentive will induce the banks to cut their losses and accept smaller payments.”-- U.S. Will Push Mortgage Firms

Let us think about some numbers here and try to reason as a banker or a person who buys mortgages:

[1] You lend, say, $200,000 to some minority who has some lawyers, government officials or maybe ACORN or greenlining folk with them as support during the process and issue the loan at some subprime  interest rate with zero down. The fine people, for many reasons, soon cannot make payments and the mortgage becomes ‘toxic’ in modern parlance.

[2] Since the mortgage agreement was broken by default by the mortgagor  as the  mortgagee we now look at the loses to reclaim the property given that we need to pay for bankruptcy costs, court costs, lawyer, costs and then deal with the fact that house prices have probably, on average, descended to $160,000 or so.

That looks like a 25% loss or $50,000 lost in this deal.

[3] But, with liberal politicians standing in the halls with Treasury officials accompanied by some SEIU goons and a letter from Obama we are now urged to accept the huge sum of $1,000 from our wonderful government for up to 3 years.

I rushed over to my account’s house with this neat plan and could not get a rational response to my queries as to the finances here as he was laughing so hard he ran out of air and passed out.

Snarls in securitized mortgage bundles:

“Under the Treasury program, borrowers who receive loan modifications must make their new payments on a trial basis and then submit new paperwork validating their income to make their modifications permanent.

But borrowers and their lawyers report that much of the required paperwork is being lost in a haze of bureaucratic disorganization. Servicers are abruptly changing fax numbers and mislaying files — the same issues that have plagued the program from its inception.”-- U.S. Will Push Mortgage Firms

I don’t think many persons who got mortgages were required to verify citizenship or income in the first place or we world have seen less of this, but we are looking directly at a failed and phony government program designed by liberals and cannot expect much more than disaster. And, here it is.

Now, what is the point of this NYT article? Do we find a reasonable avenue for refinancing some mortgages that offers the mortgagee some minimal losses on the original deal or do we just stick it to the lending institutions and their associates? Do we really believe that this loan process was not ill-conceived and poorly executed by the effects of the heavy-handed CRA [Community Reinvestment Act ]? Hardly.

Here is what happened in this propaganda piece by the Times:

[1] We were fed a sob story with threats of inflicting shame on businesses what ever that might mean.

[2] We were given a generous slate of complaints, moans and suggestions that such programs were not working well, which is not timely news.

[3] We were given indications that the lenders are avoiding major loses by not taking a mere $1000 for their costly restructured loans that might only give them a paltry 2% on the deal.  We are given no clue as to what happens if those in default should default again.

[4] Banks and other institutions, except Fannie Mac, were threatened with no further bailouts until they succumb to the threats of shaming and give away more money to people who have no credit or shouldn’t. [Given the sticky strings attached this might not be a threat—it might be an escape.]

Why doesn’t the Obama administration just print more money and buy up those mortgages and give them to their loyal voters! There would be no shame in that from the liberal point of view.

No wonder Obama’s ratings are in the latrines now with bunglers like these cited above  making and enforcing policy and broadcasting it around. The shame here is really upon the voters for being so naive as to think that Obama might ‘change’ anything from the standard, sordid left liberal prattle and practice. The shame is now on us so let’s correct some of this at the polls in November 2010.

These people are a disgrace.

rycK

Comments: ryckki@gmail.com