Why It's Better to Bail Out Borrowers than Banks 35 comments
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Justin Fox does us all the favor of asking — again — why we’re bailing out banks rather than borrowers. If I had to give a simple answer, I’d say that it was because the failure of Lehman Brothers has shown us that we simply can’t afford not to bail out the banks. If banks’ creditors in general, and their senior unsecured bondholders in particular, are forced to take massive haircuts on their holdings, we could suffer another sickening downward lurch in the fragile credit markets, with nasty knock-on effects for the economy.
But I’m not entirely convinced that the simple answer is necessarily the correct one. I just got a very smart question via email from Liaquat Ahamed, author of the excellent Lords of Finance :
Lehman had a balance sheet of around $800 billion, $30 billion of equity, $120 Billion of unsecured debt and $650 billion of secured debt (repo etc). The secured debt was fine, the unsecured debt got paid out at 20 cents on the dollar and the equity went to zero. Total loss was $100-120 billion.
As I understand it no counterparties in the US lost any significant amounts of money. Counterparties had been worried about Lehman for a while and had collected margin on unrelaized gains on outstanding trades. In the UK there were some losses from the practice of rehypothecation by the prime broker but even here the losses were only in the tens of billions.
The main impact of the Lehman failure was psychological. The Reserve fund broke the buck the next day from losses on Lehman commercial paper but even then the run on money market funds was contained. Everything the Fed then did that week was designed to contain the psychological damage from the Lehman collapse.
I sort of buy the John Taylor idea that it was the failure of Congress to approve Tarp on the first go around that really spooked everyone and raised the specter that the US would not bail out its banking system.
I’d add to this the fact that when Washington Mutual went bust with massive losses for unsecured bondholders, the systemic implications were relatively small: while it’s received opinion that the Lehman bankruptcy was devastating, very few people (other than John Hempton) think that of the WaMu implosion.
Politically, it’s extremely difficult to pass a bill giving hundreds of billions of dollars to people who borrowed money and now find themselves incapable of repaying it. But then again, it’s politically just as difficult to give that money to the banks who lent it, too. And as Steve Waldman notes, the alternative to not bailing people out is basically to force “prudent” investors and savers to take losses instead:
Don’t go all Rick Santelli on me about the injustice of paying for your asshole neighbor’s granite countertop. We are bailing out a banking system that served as a vast criminal conspiracy built around plausible deniability and limited liability. We are bailing out “savers”, who not only demand to be made whole by the government on risky loans they chose to make to banks for profit, but are smugly self-righteous about it, like it’s their “right” because after all they were the “prudent ones”. Of the three groups we might bail out, these crybabies and criminals are no more deserving than some nearly-broke bastard who believed his financial adviser, his banker, his mortgage broker, and the Wall Street Journal op-ed page when they told him that a cash-out refi was as good as money earned, and that granite countertops were a luxury that would pay for themselves. Don’t get me wrong — I’d rather we could bail out no one, just do a rip-off-the-band-aid kind of reset and let everybody take their lumps. But households and firms in debt are by far the most sympathetic villain in this horror show we wake up to every day.
So maybe we should be spending less time on the banks and more time on the borrowers. Yes, bail out the banks — but don’t do it directly; do it indirectly, instead, via the borrowers. Maybe the banks will take slightly more losses that way. Fine. That just means the banks' creditors will be more bailed in than they have been to date, and the current market price of the debts will be justified. And at least it will be ordinary Americans getting the government bailout, rather than multi-billion-dollar corporations who utterly failed at their primary job of managing risk.
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Berkshire Hathaway's Clayton Homes is a home builder & mort. originator. Their increase in mortgage delinquency is nil. Why? In March, Buffet said (paraphrasing), "It's simple, we require 10% down and full doc." Yup, real rocket science.
So what was required for a Fannie Mae mort. in 2003? 5% down, except for "gifts and contributions" which really made it 2% down. Remember, it was really Barney and Chris who wanted to roll the dice on this one (and Clinton and Bush and a couple RINO's). What did they think was going to happen?
The independent brokers were much worse, but this was entirely under the control of the Fed, not the bankers.
Finally, I think we are the only developed nation that does not have any recourse on mortgage debt. So are the Euros and Aussies insane to garnish the wages of their citizens when they try to blow-off their bad real estate bets?
I am not sure what makes you think the world would have ended if other mismanaged banks had failed and been taken over by the government, just like the successful resolution of failed banks in the 1980's. It would have ended up costing the public treasury less than the cost of all the tortured programs now underway, and would have kept the system fundamentally fair and transparent.
WaMu and Wachovia went under, their investors lost out (myself included). Yet the world did not end, and would not have ended had Citi, or others, also gone under. I made a bad choice when I bought WB stock and WaMu bonds, and took my losses as the natural consequence of making poor investment decisions. I blame no one but myself, and will be more judicious about speculative investments in mismanaged, over-leveraged banks that engage in irresponsible lending within a clearly unsustainable bubble.
This is how capitalism and free markets foster the wise allocation of capital: You make a good decision, you win, you make a bad one, you lose. Unfortunately, when government distorts the free market in non-transparent and unpredictable ways, the problem of capital misallocation grows, instead of diminishing.
On Apr 11 04:57 PM mathgeek wrote:
> Felix, while I prefer to keep the details private, I was living fairly
> close to the fire in this chain of events... and it was all about
> psychology. Everyone, from market participants to the media was playing
> the game of "whose next?"
>
> While Leman was alive, the focus was there. The moment Leman fell,
> the focus shifted to WaMu and Wachovia... and please remember...
> WaMu was wiped out in less than two weeks not by losses... but by
> panic deposit withdrawls. As soon as WaMu went under, the pressure
> shifted almost instantly to Wachovia and Morgan Stanley.
>
> What the regulators realized they needed to do was to draw a line
> underneath the financial system and say, this far, and no further.
> That is why TARP funds were crammed down all of the largest banks...
> the government needed to make it clear that the government would
> not allow either speculative attacks nor a deposit runs to close
> any more major institutions.... Period.
>
> And, for better or worse, it worked. Almost overnight, speculation
> about who would be the next to go ended and that phase of the crisis
> ended. Now, its not at all clear that WaMu or Lehman share or bondholders
> were treated fairly... why let them hang while protecting Citigroup,
> for example? But the decisions were not made on principle, they were
> made in response to a chain of events, and by the time WaMu and Wachovia
> were gone, the Fed realized that they had to stop what had basically
> become a rolling bank run, and consistancy of policy was far less
> important than changing the psychology... and at the point, the train
> had already left the station on bailing out borrowers. The Fed needed
> to credibly back the remaining financial institutions, and they did.
>
>
>
>
>
It is the New American Way. We can get used to it or... what?
On Apr 11 04:41 PM @TexasER wrote:
> I thought...
>
> Folks who bought too much house at clearly inflated prices should
> lose. Folks who loaned them the money should lose.
>
> The prudent folks who have cash to buy the assets at bargain prices
> should win, and then assume their new position at the top of the
> power structure.
>
> Wasn't that that how America became great?
Why can't the gov't. take over where Rex & Co. left off, by offering homeowners a premium (say 15% of the house's current valuation) in exchange for a share of future profits (say 50% beyond its current market value) on the sale of the house? This would buffer the effects of the current crunch on the homeowner, allowing him to make his mortgage payments and/or renegotiate his mortgage, while being a good long-term buy for the gov't. It’s win/win.
Here's another suggestion. Since the gov't. is throwing money at make-work projects and infrastructure improvements, it seems to me that there's a project that could get under way much faster, with less likelihood of fraud or ineffectiveness than the ones I've been reading about. Namely, the gov't should offer to pay for home-improvement projects for home-owners in exchange for a share of future profits on the sale of the house. This would stimulate lots of economic activity, would upgrade the country's housing stock, would make life pleasanter for home-owners and their neighbors (who'd live in an upgraded neighborhood), and would be a good investment for the gov't. in the long run. It would also be politically popular (assuming it would work). (There are certain desirable home improvements that wouldn’t require skilled labor, such as adding fencing, and improving home security, insulation, and earthquake protection. Millions could be hired to do these tasks nearly immediately.)
This technique could also be used to fund attic fans, south-side awnings, white-painted roofs, and heat pump installation. The US needs to cut its energy consumption, and a little governmental nudging--or even frog-marching--is OK to get us there. (provided the solution it is peddling WORKS.)
And mainstream Main Street businesses and households do not. They will continue to go bankrupt--and households homeless--for years while Summers, Geithner, & Bernanke try to make the banks and bankers whole at taxpayers' expense.
The folly of the debt paradigm,and to some degree NAFTA.et al
If The Powers That Be(TPTB) really wanted to "fix" this mess that they created,I have some ideas that may help.
No corporate taxes on American companies manufacturing their products in the USA with legal American workers.
Build it here,buy it here.Remember buy American?(China is already hinting that while they are very uncomfortable holding 2 trillion of our currency,and in the near term they may continue to loan us money to buy their products,at some point in the near future,they may no longer need us.)
No new credit card debt,until the balances are fully paid,with reasonable interest rates on those balances.
Strict enforcement of the law re;corrupt individuals responsible for the crisis.This list should include the loan originators all the way to the CEO's.Including all our Political enablers,regardless of party affiliation.
"Claw Backs"may help to recover the ill gotten gains.
Community service for people who cannot repay their debt......
( in which their debt is paid in full)
as well as responsible courses and training for adults as well as school children regarding money management.
Off course with TPTB playing CYA and an ignorant complicit media
none of this really matters.
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By Scott Lanman
April 10 (Bloomberg) -- Policies aimed at easing home-loan terms for troubled borrowers may not be as effective in preventing foreclosures as more-direct aid to homeowners, Federal Reserve economists found.
Job losses and falling home prices have a bigger impact on delinquencies than mortgage terms, and modifications aren’t necessarily a better deal for investors than foreclosures, according to a paper by two current and one former economist at the Boston Fed Bank and one Atlanta Fed researcher.
The conclusion poses a challenge to housing advocates and to some extent the prevailing views of President Barack Obama’s administration, Fed officials and other U.S. regulators. Obama announced a $75 billion plan in February that concentrates on refinancing or modifying loans for as many as 9 million homeowners.
“One of the most influential strands of thought contends that the crisis can be attenuated by changing the terms of ‘unaffordable’ mortgages,” the economists said in the paper posted on the Boston Fed’s Web site today. Yet policies aimed at reducing a borrower’s debt-to-income ratio “face important hurdles in addressing the housing crisis,” the authors said.
Instead, the government should consider alternatives such as loans to homeowners to bridge the loss of income for one or two years caused by unemployment, or helping borrowers become renters, the economists said.
Boston, Atlanta
The authors include Christopher Foote and Paul Willen, who are senior economists and policy advisers at the Boston Fed; Kristopher Gerardi, a research economist and assistant policy adviser at the Atlanta Fed; and Lorenz Goette, a professor at the University of Geneva and former economist at the Boston Fed.
The paper doesn’t specifically discuss the merits of the White House plan.
The federal government has used policies to encourage loan modifications as a principal tool of attacking the surge in foreclosures over the past year. Fed Chairman Ben S. Bernanke, in a December speech, called for “greater standardization and efficiency” in programs to ease loan terms, while FDIC Chairman Sheila Bair has pressed the Treasury and mortgage companies to step of the pace of modifications.
Eric Rosengren, president of the Boston Fed, said in a January speech that loan servicers should be able to increase mortgage modifications as interest rates decline.
At the same time, many borrowers should be able to refinance through Federal Housing Administration loans, Rosengren said in the speech. Also, some borrowers just won’t be able to make their mortgage payments and could instead receive assistance to move to a rental property, he said.
To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net.
Last Updated: April 10, 2009 15:33 EDT
On Apr 11 04:57 PM mathgeek wrote:
> Felix, while I prefer to keep the details private, I was living fairly
> close to the fire in this chain of events... and it was all about
> psychology. Everyone, from market participants to the media was
> playing the game of "whose next?"
>
> While Leman was alive, the focus was there. The moment Leman fell,
> the focus shifted to WaMu and Wachovia... and please remember...
> WaMu was wiped out in less than two weeks not by losses... but by
> panic deposit withdrawls. As soon as WaMu went under, the pressure
> shifted almost instantly to Wachovia and Morgan Stanley.
>
> What the regulators realized they needed to do was to draw a line
> underneath the financial system and say, this far, and no further.
> That is why TARP funds were crammed down all of the largest banks...
> the government needed to make it clear that the government would
> not allow either speculative attacks nor a deposit runs to close
> any more major institutions.... Period.
>
> And, for better or worse, it worked. Almost overnight, speculation
> about who would be the next to go ended and that phase of the crisis
> ended. Now, its not at all clear that WaMu or Lehman share or bondholders
> were treated fairly... why let them hang while protecting Citigroup,
> for example? But the decisions were not made on principle, they
> were made in response to a chain of events, and by the time WaMu
> and Wachovia were gone, the Fed realized that they had to stop what
> had basically become a rolling bank run, and consistancy of policy
> was far less important than changing the psychology... and at the
> point, the train had already left the station on bailing out borrowers.
> The Fed needed to credibly back the remaining financial institutions,
> and they did.
>
>
>
>
On Apr 11 03:18 PM battman wrote:
> If they were to bail out the borrowers and not the banks, then everyone
> would stop paying their debts. Those who could afford to would stop
> paying and become one of the people who would then get government
> help. Why not? Why should they be punished for being responsible
> and prudent (or just having a good paying job). Besides, and unfortunately,
> give a borrower a government cheque for two thousand dollars and
> I'd bet you anything that most of them would suddenly have a brand
> new 50 inch plasma tv and and a blu ray player. Oh, and still the
> same debt they had before they got the cheque.
> While the banks may be the low life scum bag big evil in this game,
> saving the banks is the lesser of the two evils in trying to resolve
> it.
Politically, this is scapegoating at its best. Faced with the decision to vilify the banking sector or a large swath of the American population (who have jealous friends, relatives, etc), politicians found the expedient choice and laid the blame to an area where votes don't matter (as much).
On Apr 11 02:22 PM E Nuff Sed wrote:
> The bail out (seekingalpha.com/symbo...) money is not free.
> The banks are paying a 5% - 8% dividend to the government who had
> just printed a lot of "free money" to liquidate/dilute the shareholders.
>
> I suspect when the dust settles in a few years the government and
> the tax payers will come out ahead and they would have saved the
> system as well. This is what happened in the 90's with the S&L's.
>
The problem is EVERYONES greed period. I only think we have to help the banks because without banks, we would have nothing. Do you think the FDIC can insure everyones deposits? I doubt it. Imagine now your bank closed its doors and the FDIC couldn't keep its end of the bargain.
You can be mad, but don't be foolish. We, as sane individuals need to force change so that it doesn't happen again.
On Apr 12 01:42 PM dcb wrote:
> so if you commit a multi billion dollar fraud it is OK. House hold
> debt relief in primary home. not rental, etc. cut out the middle
> man (banks) for refinancing so they don't take their cut. simple.
> but government policy to to ensure banks get as much of any relief
> efforts as they can/ after all they bought this right. I'd rather
> have then have a blu ray player than chuck prince or blankfein their
> millions . (prince about 160 I believe). the current system just
> gives incentives for banks to play loose cannon once again. this
> increases systemic risk. Sngle cases of fraud do not create systemic
> risk. the individual fraud would never had happened unless promoted
> by banks, and lenders in the first place. I can only get a NINJA
> loan if you give me one. Usually by giving me one, you got a bonus.
> Can't blame the poor guy for actually wanting a taste of the good
> life. can blame a multimillionare who could retire in wealth already
> for wanting more.
Best Solutions Fl Real Estate
9804 S Military Trail E-10
Boynton Beach, Fl 33436
561-738-5188
THANK YOU
PLEASE
Change it,
Challenge It
or Endorse it.PASS IT ON
A SOLUTION TO THE HOUSING MORTGAGE CRISIS with accountable Bank Funding at NO COST to the taxpayers. By using the 1930's method,i.e., lower interest rates with a longer payback period.The ranch had to be paid for using a 5 year mortgage,till someone created the 25 year mortgage.
Using today's rates and knowledge,the entire inventory of troubled homes will become EXTREMELY AFFORDABLE and thereby
AAA and 100% asset based.At no cost to the taxpayer and with an option for a profit to the taxpayers.
A special 10 year year mortgage with an automatic 30 year
mortgage that includes :
PRINCIPAL
INTEREST
TAXES and
INSURANCE.
PER $100,000 loan there would be a total fixed 10 yr. PITI payment of
.........$475........PITI followed with a 30 year fixed mortgae with a principal and interest payment of around $510 to $540.
FOR HOMEOWNERS;
Let them stay in their homes,
Let them be able to afford it,
and be able to manage it.With this low affordable payment there will be people waiting in line to take over any home available.AND THIS IS A PROFITABLE BUSINESS SOLUTION THAT MAKES A OROFIT.
THIS IS THE REAL AMERICAN DREAM.
Help the 8% (not for their sake but because it is the only way to stop the 92% that have done no harm from being destroyed by that 8%)
Small type because everyone should read the small print.We simply must get off the idea that we should only help "the good" people and leave the "reckless" ones to their own ends. Whether the foreclosed house next to me was owned by a good guy or a reckless flipper doesn't matter.. my home value goes down either way due to the foreclosure.
We simply have to set aside moral judgments and fix the problem.Why not at the same time create revenue for all taxpayers.
Turn this challenge into a greater good for all.Re-establishing "CREDARE" .Faith in the American people,that we are credit worthy and will clean up this mess made by GREED.
This is a fast and great solution to the problem and it allows for time
to fix the blame and to do what is nessecary for future prevention.
.................Contact information:
Carmen Basilovecchio,Broker/o... Solutions Fl,9804 S Military Trail E-10,Boynton Beach,Fl 33436
561-738-5188, Fax 561-364-7677, bestsolutionsfl at aim dot com
Problem solved: All homes become owner occupied.All housing supply will be eliminated by demand,created by those who wish to stay in their homes(85%) and by new homeowners (15% foreclosed or rented,Investor owned) because of the extremely low affordable payments.An 18 year old sibling working a fast food job could afford selter payments for their single parent and two siblings.
ACTION:Solve Trillions of dollars crisis at no cost to the taxpayers,and allowing for a tax payer profit.
RESOLVED:ALL "underwater" loans and foreclosed homes to be purchased at 110% of FAIR MARKET VALUE.Loan to be marked "paid-in-full"This is a one time deal and could be done in 6 months are less.As allowed by Freddie and Fannie as part of their interest in securing mortgages and with others a condition for banks if they desire any federal help.
PURCHASE to be made with the use of 10 Year US Treasury Notes at 2.7%.NOTES will be given as payment in full.
Legislation is already in place for GSE agency to do this and also funding is already approved (TARP).
NEW LOAN: is a special "EVERYBODY WINS PLAN" loan
A 10 Year loan that has fixed payments (120) with payment number 121 (the magic bullet) ...... paying the balance in full.Because of the low cost of the funding(12/31/08 @ 2.08%)now @ 2.6% with the special long term payback this will be a very affordable payback.
TERMS FOR THE NEW LOAN:120 fixed, low, and affordable monthly payments of........
.................. (A) payment of total interest;
.................. (B)15% of principal ;
.................. (C)15% for taxes and insurance.
This is a total payment ,known as P.I.T.I.
MAGIC BULLET:Payment number 121..the new 30 year mortgage.. is given by a third party lender to the owner at a fixed prevailing rate,for the 85% balance.NOTE:IF A TAXPAYER PROFIT IS DESIRED AT 5%,then the 30 year is to be 90% of the original new loan.(If 3 Trillion needed that's 150 Billion profit).
Example:$100,000 "EVERYBODY WINS LOAN"
LOAN AMOUNT $100,000 with payments to include:
A...Total 10 years interest............... $27,000
B...15% for principle reduction........ .$15,000
C..15%..TAXES and INSURANCE.....$15,000
TOTAL....................
paid by 120 fixed equal payments of $475.00 each...... (wow, how affordable is a $100,000 mortgage at a total P.I.T.I. payment of $475.00 per month???)Then the 10 year treasury bond is paid-in-full since a new 30 year fixed mortgage is acquired for the $85,000 balance.NOTE: if 5%taxpayer profit is desired then the new 30 year loan is for $90,000.
To calculate payment for 10 year portion use a factor of 4.75 per $1,000.
Example:, if loan amount is $250,000;payments of $1187.50
($250 X 4.75 = TOTAL PITI FOR A HOME VALUE OF $250,000
at an unbelievabe low $1187.50
REPEAT: Extremely affordable.It is total payment...P.I.T.I.
Thank you,Paul Volcker......"An outside agency" Fannie Mae and Freddie Mac create
Freddie Aff (Federal Affordable housing)
Robert Shiller...."properly funded"(10 year Treasury Note)
Dr. Yunus..........." a profittable business that does
a social good."(Freddie Aff a business plan with a
social agenda)
THIS is in small print because everyone is told,"You must read the small print"
If Americans do not help the 8% that distroyed their home values and helped push us into this depression
because they are "greedy pigs,or why should we?We have been financially responsible".BEWARE
The result you reap will be done to you.If you wish to bury them be prepared to be buried.
For this to be a full solution,that is making the asset 100% whole,the difference between the new borrowers loan and the UNPAID LOSS has to be addressed
Lenders are given 110% of Fair Market Value which the borrowers pay back.The lenders would also be given the
"PHANTOM AMOUNT" ( the actual amount of the bad loan that is loss).
The payment is in the same form-the 10 year Treasury.
Once again,with terms and conditions for repayment at a profit!
Out of money loan to lender:10 year payback that includes Principle and Interest
25% of loan amount full interest plus .25% with payment 121 being the 75% balance making the loan paid in full.
If 10 years recovery is not sufficient the payment
could be a repeat of the process( repeat with a new
10 year loan)
Example:per $100,000
120 payments for.............$25,000 principle
............. $29,500 Interest (2.7+.25)
at $425 per month.
Banks will easily earn that money from using the money given , PLUS THE FREED RESERVES. The lenders will have DOUBLE the money to lend at DOUBLE the rate.Make a profit to pay off it's losses.
NOT TO BE A BAILOUT.A BUSINESS PLAN WITH A PROFIT!
And please no court imposed "cramdown" with a bankrupcy.The banks should ask for a hand out if the government uses that against them,as it may literally
force them out of business as it will wipe out any possible recovery of the
LEVERAGED losses.
We do not want to see where that will lead.
THE ******MOST UNBELIEVABLE PART*********
the agency(GSE's) and the funding ($700 Billion "plus what is needed") is already legally there,so this could be done within 90 days!!!!!!!
An anouncement of this plan
with details would create an immediate RELIEF and "CREDARE"-CREDIT-TRUST in the AMERICAN SYSTEM.
Carmen Basilovecchio
Best Solutions Fl Real Estate 9804 S Militar yTrail E-10
Boynton Beach,Fl.33436 &nb sp; 1-800-284-8600
cbasilovecchio@aol.com ********* bestsolutionsfl@aol.com
REQUEST DETAILS,ASK QUESTIONS
More details:
A fair ,fast action business plan ; a loan modification to end foreclosures, defaulting or soon to be defaulting loans,establish firm housing prices,re-
establish the faith and credit of the American homeowner.At no cost ,rather a profit to the taxpayer.
* EVERYBODY WINS PLAN*
PERHAPS The first step is to form a NEW agency
to last for ten years,owned by taxpayers,hopefully with 5 or 7 Directors .
( Former Pres.Clinton,with Former Pres.Bush,Bill Gates with Warren Buffett, Sheila Bair, Paul Volcker,Robert J Shiller ????)
This new agency will be adequately funded,and as described will operate as a profit driven business,not a bailout plan.THE LEGALITY is already there.
we could call this agency "FREDDIE AFF" (FERERAL AFFORDABLE HOUSING)
THE MAGIC BULLET"
Freddie Mac and Fannie Mae can create legally a branch,(Freddie AFF)
that legally can re-modify all loans it has using power it already has had legislated to them,and it has already been funded by congress at an UNLIMITED AMOUNT.(There is no limit on TARP).
All passed and signed in law!!!
A 10 year fixed rate Treasury Bond bond is used by this new agency to pay for all foreclosures , defaulting and "underwater" loans.The discount rate still allows for a 2.7 10 year Treasury Note! !(10 Year Treas.@ 2.7% an unbelievable high with the discount rate at 0%).
THEY ARE NOT SOLD ON THE MARKET!They are issued as replacement for the present loans.
Freddie Aff is to purchase from lenders all loans that seek modification,and pay lenders 110% fair market value(the real asset value) and 100% of lost portion of asset that was packaged and sold.Asset must be made whole,100%
Everybody must win in order to succeed..This Fair Market Value can be a written document acquired in days ,one for each and every single home out there.There are over one million real estate agents just a phone call away that can do this at an extremely low cost effective method.Cost could be capped at $99 per household. OR GET IT FREE ON THE NET!
Lender must sell all loans on which borrowers seek modification,because all American homeowners were and are victims.(Remember blame fixing will come)Loans are marked "paid-in-full".In this portion (borrowers) pay off the new loans which shall be a "HOMESAFE 10/30 LOAN.(As Described.)Yes,borrowers will be winners.
There is a gap between this new true asset loan amount and the bad or "toxic" loan,we shall call this amount the "out of money" amount. This must be made whole from the bottom up.
The "out of money" loss- 100% of which will be paid directly to the lenders ,thereby covering 100% of the refinanced CDO's "true asset value" of their money already loss.This portion (lenders)will be dealt with a by the EVERYBODY WINS 10 year loan special loans.YES,even the lenders will be winners.Yes at NO cost to taxpayers rather as an investment with a net profit.This is a business plan that has a payback agreement attached to it.
NEW LOAN with an AFFORDABLE PAYMENT is then set with collectable terms and conditions,thereby turning Bad Loans into Good LOANS.
THE BORROWER WINS,the LENDER WINS,but yet we need everybody to win.YES,even the taxpayer,the real provider of the money shall win because beginning with immediate payments that end in just 120 months this entire "EVERYBODY WINS PLAN"
INVESTMENT will have ALL principle,interest and profit paid back!
For EVERYBODY TO WIN the payments Must be affordable , collectable and AAA credit worthy.
Freddie Aff will be a totally taxpayer owned corporation with a ten year life span,it will be a profit making venture , fully funded by the use of 10 Year Treasury Bonds.
The bonds will be used to purchase all the bad loans in afore mentioned manner.This could be done in an unbelievable speedy manner at an extremely cost effective method.As mentioned a Market evaluation in just days with a million real estate agents begging for the opportunity.The
home owner will then make an appointment with a title company or attorney of their choice,who will complete a HUD-1 Statement once again at an extremely cost effective method ( This could be capped at $499)
The new agency can then settle (close ) the contract with Freddie Aff. Immagine payment will start immediately on a 100% asset backed AAA loan at settlement (closing) with two months payment.
HOME SALES INVENTORY DRASTICALLY REDUCED,NEW HOMEOWNERS CREATED!
AFFORDABLE HOUSING.WOW!
This is a business plan that will let everybody win,"EVERYBODY WINS"
This can be done within 90 days.
"CREDARE" latin CREDIT......TRUST will be restored.
Carmen Basilovecchio
Broker/owner Best Solutions Fl
9804 S Military Trail E-10
Boynton Beach,Fl 33436
561.272.4200
THANK YOU
PLEASE
Change it,
Challenge It
or Endorse it.PASS IT ON
A SOLUTION TO THE HOUSING MORTGAGE CRISIS with accountable Bank Funding at NO COST to the taxpayers. By using the 1930's method,i.e., lower interest rates with a longer payback period.The ranch had to be paid for using a 5 year mortgage,till someone created the 25 year mortgage.
Using today's rates and knowledge,the entire inventory of troubled homes will become EXTREMELY AFFORDABLE and thereby
AAA and 100% asset based.At no cost to the taxpayer and with an option for a profit to the taxpayers.
A special 10 year year mortgage with an automatic 30 year
mortgage that includes :
PRINCIPAL
INTEREST
TAXES and
INSURANCE.
PER $100,000 loan there would be a total fixed 10 yr. PITI payment of
.........$475........PITI followed with a 30 year fixed mortgae with a principal and interest payment of around $510 to $540.
FOR HOMEOWNERS;
Let them stay in their homes,
Let them be able to afford it,
and be able to manage it.
THIS IS THE REAL AMERICAN DREAM.
Help the 8% (not for their sake but because it is the only way to stop the 92% that have done no harm from being destroyed by that 8%)
We simply must get off the idea that we should only help "the good" people and leave the "reckless" ones to their own ends. Whether the foreclosed house next to me was owned by a good guy or a reckless flipper doesn't matter.. my home value goes down either way due to the foreclosure.
We simply have to set aside moral judgments and fix the problem.Why not at the same time create revenue for all taxpayers.
Turn this challenge into a greater good for all.Re-establishing "CREDARE" .Faith in the American people,that we are credit worthy and will clean up this mess made by GREED.
This is a fast and great solution to the problem and it allows for time
to fix the blame and to do what is nessecary for future prevention.
.................Contact information:
Carmen Basilovecchio,Broker/o... Solutions Fl,9804 S Military Trail E-10,Boynton Beach,Fl 33436
561-738-5188, Fax 561-364-7677, bestsolutionsfl at aim dot com
Problem solved: All homes become owner occupied.All housing supply will be eliminated by demand,created by those who wish to stay in their homes(85%) and by new homeowners (15% foreclosed or rented,Investor owned) because of the extremely low affordable payments.An 18 year old sibling working a fast food job could afford selter payments for their single parent and two siblings.
ACTION:Solve Trillions of dollars crisis at no cost to the taxpayers,and allowing for a tax payer profit.
RESOLVED:ALL "underwater" loans and foreclosed homes to be purchased at 110% of FAIR MARKET VALUE.Loan to be marked "paid-in-full"This is a one time deal and could be done in 6 months are less.As allowed by Freddie and Fannie as part of their interest in securing mortgages and with others a condition for banks if they desire any federal help.
PURCHASE to be made with the use of 10 Year US Treasury Notes at 2.7%.NOTES will be given as payment in full.
Legislation is already in place for GSE agency to do this and also funding is already approved (TARP).
NEW LOAN: is a special "EVERYBODY WINS PLAN" loan
A 10 Year loan that has fixed payments (120) with payment number 121 (the magic bullet) ...... paying the balance in full.Because of the low cost of the funding(12/31/08 @ 2.08%)now @ 2.6% with the special long term payback this will be a very affordable payback.
TERMS FOR THE NEW LOAN:120 fixed, low, and affordable monthly payments of........
.................. (A) payment of total interest;
.................. (B)15% of principal ;
.................. (C)15% for taxes and insurance.
This is a total payment ,known as P.I.T.I.
MAGIC BULLET:Payment number 121..the new 30 year mortgage.. is given by a third party lender to the owner at a fixed prevailing rate,for the 85% balance.NOTE:IF A TAXPAYER PROFIT IS DESIRED AT 5%,then the 30 year is to be 90% of the original new loan.(If 3 Trillion needed that's 150 Billion profit).
Example:$100,000 "EVERYBODY WINS LOAN"
LOAN AMOUNT $100,000 with payments to include:
A...Total 10 years interest............... $27,000
B...15% for principle reduction........ .$15,000
C..15%..TAXES and INSURANCE.....$15,000
TOTAL....................
paid by 120 fixed equal payments of $475.00 each...... (wow, how affordable is a $100,000 mortgage at a total P.I.T.I. payment of $475.00 per month???)Then the 10 year treasury bond is paid-in-full since a new 30 year fixed mortgage is acquired for the $85,000 balance.NOTE: if 5%taxpayer profit is desired then the new 30 year loan is for $90,000.
To calculate payment for 10 year portion use a factor of 4.75 per $1,000.
Example:, if loan amount is $250,000;payments of $1187.50
($250 X 4.75 = TOTAL PITI FOR A HOME VALUE OF $250,000
at an unbelievabe low $1187.50
REPEAT: Extremely affordable.It is total payment...P.I.T.I.
Thank you,Paul Volcker......"An outside agency" Fannie Mae and Freddie Mac create
Freddie Aff (Federal Affordable housing)
Robert Shiller...."properly funded"(10 year Treasury Note)
Dr. Yunus..........." a profittable business that does
a social good."(Freddie Aff a business plan with a
social agenda)
THIS is in small print because everyone is told,"You must read the small print"
If Americans do not help the 8% that distroyed their home values and helped push us into this depression
because they are "greedy pigs,or why should we?We have been financially responsible".BEWARE
The result you reap will be done to you.If you wish to bury them be prepared to be buried.
For this to be a full solution,that is making the asset 100% whole,the difference between the new borrowers loan and the UNPAID LOSS has to be addressed
Lenders are given 110% of Fair Market Value which the borrowers pay back.The lenders would also be given the
"PHANTOM AMOUNT" ( the actual amount of the bad loan that is loss).
The payment is in the same form-the 10 year Treasury.
Once again,with terms and conditions for repayment at a profit!
Out of money loan to lender:10 year payback that includes Principle and Interest
25% of loan amount full interest plus .25% with payment 121 being the 75% balance making the loan paid in full.
If 10 years recovery is not sufficient the payment
could be a repeat of the process( repeat with a new
10 year loan)
Example:per $100,000
120 payments for.............$25,000 principle
............. $29,500 Interest (2.7+.25)
at $425 per month.
Banks will easily earn that money from using the money given , PLUS THE FREED RESERVES. The lenders will have DOUBLE the money to lend at DOUBLE the rate.Make a profit to pay off it's losses.
NOT TO BE A BAILOUT.A BUSINESS PLAN WITH A PROFIT!
And please no court imposed "cramdown" with a bankrupcy.The banks should ask for a hand out if the government uses that against them,as it may literally
force them out of business as it will wipe out any possible recovery of the
LEVERAGED losses.
We do not want to see where that will lead.
THE ******MOST UNBELIEVABLE PART*********
the agency(GSE's) and the funding ($700 Billion "plus what is needed") is already legally there,so this could be done within 90 days!!!!!!!
An anouncement of this plan
with details would create an immediate RELIEF and "CREDARE"-CREDIT-TRUST in the AMERICAN SYSTEM.
Carmen Basilovecchio
Best Solutions Fl Real Estate 9804 S Militar yTrail E-10
Boynton Beach,Fl.33436 &nb sp; 1-800-284-8600
cbasilovecchio@aol.com ********* bestsolutionsfl@aol.com
REQUEST DETAILS,ASK QUESTIONS
More details:
A fair ,fast action business plan ; a loan modification to end foreclosures, defaulting or soon to be defaulting loans,establish firm housing prices,re-
establish the faith and credit of the American homeowner.At no cost ,rather a profit to the taxpayer.
* EVERYBODY WINS PLAN*
PERHAPS The first step is to form a NEW agency
to last for ten years,owned by taxpayers,hopefully with 5 or 7 Directors .
( Former Pres.Clinton,with Former Pres.Bush,Bill Gates with Warren Buffett, Sheila Bair, Paul Volcker,Robert J Shiller ????)
This new agency will be adequately funded,and as described will operate as a profit driven business,not a bailout plan.THE LEGALITY is already there.
we could call this agency "FREDDIE AFF" (FERERAL AFFORDABLE HOUSING)
THE MAGIC BULLET"
Freddie Mac and Fannie Mae can create legally a branch,(Freddie AFF)
that legally can re-modify all loans it has using power it already has had legislated to them,and it has already been funded by congress at an UNLIMITED AMOUNT.(There is no limit on TARP).
All passed and signed in law!!!
A 10 year fixed rate Treasury Bond bond is used by this new agency to pay for all foreclosures , defaulting and "underwater" loans.The discount rate still allows for a 2.7 10 year Treasury Note! !(10 Year Treas.@ 2.7% an unbelievable high with the discount rate at 0%).
THEY ARE NOT SOLD ON THE MARKET!They are issued as replacement for the present loans.
Freddie Aff is to purchase from lenders all loans that seek modification,and pay lenders 110% fair market value(the real asset value) and 100% of lost portion of asset that was packaged and sold.Asset must be made whole,100%
Everybody must win in order to succeed..This Fair Market Value can be a written document acquired in days ,one for each and every single home out there.There are over one million real estate agents just a phone call away that can do this at an extremely low cost effective method.Cost could be capped at $99 per household. OR GET IT FREE ON THE NET!
Lender must sell all loans on which borrowers seek modification,because all American homeowners were and are victims.(Remember blame fixing will come)Loans are marked "paid-in-full".In this portion (borrowers) pay off the new loans which shall be a "HOMESAFE 10/30 LOAN.(As Described.)Yes,borrowers will be winners.
There is a gap between this new true asset loan amount and the bad or "toxic" loan,we shall call this amount the "out of money" amount. This must be made whole from the bottom up.
The "out of money" loss- 100% of which will be paid directly to the lenders ,thereby covering 100% of the refinanced CDO's "true asset value" of their money already loss.This portion (lenders)will be dealt with a by the EVERYBODY WINS 10 year loan special loans.YES,even the lenders will be winners.Yes at NO cost to taxpayers rather as an investment with a net profit.This is a business plan that has a payback agreement attached to it.
NEW LOAN with an AFFORDABLE PAYMENT is then set with collectable terms and conditions,thereby turning Bad Loans into Good LOANS.
THE BORROWER WINS,the LENDER WINS,but yet we need everybody to win.YES,even the taxpayer,the real provider of the money shall win because beginning with immediate payments that end in just 120 months this entire "EVERYBODY WINS PLAN"
INVESTMENT will have ALL principle,interest and profit paid back!
For EVERYBODY TO WIN the payments Must be affordable , collectable and AAA credit worthy.
Freddie Aff will be a totally taxpayer owned corporation with a ten year life span,it will be a profit making venture , fully funded by the use of 10 Year Treasury Bonds.
The bonds will be used to purchase all the bad loans in afore mentioned manner.This could be done in an unbelievable speedy manner at an extremely cost effective method.As mentioned a Market evaluation in just days with a million real estate agents begging for the opportunity.The
home owner will then make an appointment with a title company or attorney of their choice,who will complete a HUD-1 Statement once again at an extremely cost effective method ( This could be capped at $499)
The new agency can then settle (close ) the contract with Freddie Aff. Immagine payment will start immediately on a 100% asset backed AAA loan at settlement (closing) with two months payment.
HOME SALES INVENTORY DRASTICALLY REDUCED,NEW HOMEOWNERS CREATED!
AFFORDABLE HOUSING.WOW!
This is a business plan that will let everybody win,"EVERYBODY WINS"
This can be done within 90 days.
"CREDARE" latin CREDIT......TRUST will be restored.
Carmen Basilovecchio
Broker/owner Best Solutions Fl
9804 S Military Trail E-10
Boynton Beach,Fl 33436
561.272.4200
it would shift the debt balance up without resetting all banks to 0, which benefits the bad banks most and the good banks the least.