Has President Obama's Mortgage Modification Plan Failed?

By Mike Konczal

click to enlarge

Obama’s mortgage modification plan, HAMP (Home Afforable Modification Program), isn’t working very well. Designed to help prevent foreclosures by incentivizing and giving legal protection to previously indifferent middle-men servicers, it isn’t producing anywhere near the number of modifications that were anticipated. Is it likely to work in the future? My guess is no. Let’s discuss some reasons why.

Servicers Gaming the System

Over the past few months, more and more stories have come out about servicers finding ways to line their pockets while consumers and investors are getting shortchanged. The one that brought the gaming issue to everyone’s attention is Peter Goodman’s article in the New York Times. Here are my favorite three since then:

Story One, Financial Times:

JPMorgan Chase (JPM), one of the first mega banks to champion the national home loan modification effort, has struck a sour chord with some investors over the risk of moral hazard posed by certain loan modifications.

Chase Mortgage, as servicer of several Washington Mutual option ARM securitizations it inherited last year in acquiring WAMU, has in several cases modified borrower loan payments to a rate that essentially equals its unusually high servicing fee, according to an analysis by Debtwire ABS. Simultaneously, Chase is cutting off the cash flow to the trust that owns the mortgage. In some cases, Chase is collecting more than half of a borrower’s monthly payment as its fee.

Story Two, Credit Slips

Countrywide Home Loans (which is now part of Bank of America) has been the subject of proceedings in several bankruptcy courts because of the shoddy recordkeeping behind their claims in bankruptcy cases. Judge Marilyn Shea-Stonum of the U.S. Bankruptcy Court for the Northern District of Ohio recently sanctioned Countrywide for its conduct in these cases…The resulting opinion makes extensive reference to Credit Slips regular blogger Katie Porter and guest blogger Tara Twomey’s excellent Mortgage Study that documented the extent to which bankruptcy claims by mortgage servicers were often erroneous and not supported by evidence. Specifically, the court adopted Porter’s recommendation from a Texas Law Review article that mortgage servicers should disclose the amounts they are owed based on a standard form. Judge Shea-Stonum found that such a requirement would prevent future misconduct by Countrywide.

Mary Kane, Washington Independent

Even as the Obama administration presses the lending industry to get more mortgage loans modified, the practice of forcing borrowers to sign away their legal rights in order to get their loans reworked is a tactic that some servicers just won’t give up on…

In a dramatic confrontation last July, Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, told representatives of Bank of America (BAC) to get rid of waivers in their agreements. His pronouncement came after Bank of America representatives denied they were using the waivers – and Julia Gordon, senior policy counsel at the Center for Responsible Lending, produced one from her briefcase.

Check out those stories. The first has the servicers set the payment to maximize their fees, and not anything beyond (to make sure very poor and desperate mortgage holders are able to pay each month), making sure their interests are above the lender’s ones. The second one shows that it is very difficult to determine incompetence from maliciousness with the way that servicers are handling their documents on the borrowers' end. And the third would be a great piece of classic comedy if it wasn’t so terrible. I bet these guys sleep like babies at night too.

The servicers' interests are their own – and if they can rent-seek at the expense of the parties at either end, ‘nudging’ them with $1,000 isn’t going to make a big difference.

Redefault Risk

There’s another story where the servicers aren’t modifying loans because it isn’t profitable for the lenders. There’s a very influencial Boston Federal Reserve paper by Manuel Adelino, Kristopher Gerardi, and Paul S. Willen titled “Why Don’t Lenders Renegotiate More Home Mortgages? Redefaults, Self-Cures, and Securitization.” They point out that, according to their regressions, redefault risk is very high – the chances that even under a modification there will still be a foreclosure, so why not foreclose immediately?

I’d recommend Levitin’s critique (Part 1, Part 2), notably that the securitization regression doesn’t control for type of modification, specifically they don’t variable whether or not the modification involved principal reduction, which is probably does for the on-book loans and not for the off-book loans.

But regardless, this is a valid argument as U3 unemployment starts its final march to 10% we are going to see consumers become riskier and riskier, and that will be a problem for modification that will get worse before it gets better.

General Inexperience

Servicers were never designed to do this kind of work; they don’t underwrite, and paying them $1,000 isn’t going to give them the experience needed for underwriting. It’s hard work that requires experience and dedication, skills that we don’t have currently. (Isn’t it amazing with the amount of money we’ve put into the real estate finance sector over the past decade we have a giant labor surplus of people who can bundle mortgages into bonds but nobody who can actually underwrite a mortgage well?)

But isn’t it at least possible that as the sophistication of the servicers increases, they’ll become equally good at learning how to game the system? I don’t mean this as a gotcha point, because I think it is the fundamental problem here, and there isn’t any way to break it. The servicers get paid when they have to get involved, and learning the contracts better will give them more reasons to get involved.

It’s been known for several years now that this was a weak spot in the mortgage backed security instruments. In the words of the creator of this instrument, Lewis Ranieri in 2008:

” The problem now with the size of securitization and so many loans are not in the hands of a portfolio lender but in a security where structurally nobody is acting as the fiduciary. And part of our dilemma here is ‘who is going to make the decision on how to restructure around a credible borrower and is anybody paying that person to make that decision?’ … have to cut the gordian knot of the securitization of these loans because otherwise if we keep letting these things go into foreclosure it’s a feedback loop where it will ultimately crush the consumer economy.”

He’s right of course; the people we are trying to ‘nudge’ into acting as the fiduciary are going to be more than happy to rent-seek these instruments while they crush the consumer economy. This ‘gordian knot’ has to be broken, but it’ll need to be done outside the instruments – in the bankruptcy court.

Comments

[vvvvviking:]

I agree the program is, and will be, a failure, but one point you miss is that the option with the highest expected value for the bank is foreclosure. Why do you think the government has to pay servicers? To tip the balance a bit. But ultimately it won't be enough.. Principal forgiveness is the only way out of this mess.

Aug 20 04:03 PM

[Loulun:]

It seems Obama is failing at everything Bail out failure,Cash for clunkers failure, Loan modification failure, Healthcare reform Failure, Afganastan will be a failure and Iraq will become a diaster. Then the stupid 51% will vote for him again in November 2011

Aug 20 05:54 PM

[User 474465:]

The bank have absolutely no incentive to modify loans. Congress blew it when they shot down the bill that would have allowed bankruptcy judges to modify consumer loans if they could show they attempted to modify with their lender and were denied.... The bill would have forced lenders to work with consumers if the end result was likely to be the same and the bank would lose even more money defending itself in court... but of course, the banks get away with lining the pockets on Congress and offering them loan programs not available to you and me...this guarantees the consumer will never be protected... special interest $$$$ is all congress cares about...

Aug 20 06:32 PM

[Tomos:]

Everything Obama has put his hands on has failed.

Aug 20 09:35 PM

[j-dub:]

INCORRECT, TOMOS

His initial attempt to trick the American people into believeing that he would not be a total failure had succeeded.
HE WON THE ELECTION!!!!!


On Aug 20 09:35 PM Tomos wrote:

> Everything Obama has put his hands on has failed.

Aug 20 10:23 PM

[Jimmy Lathrop:]

The biggest problem with the mortgage modifications is that they shave off payments for a period of time and stick it on the end of the loan capitalized as extra principal or paid in a balloon note. This has the effect of driving the mortgage rates higher pushing the home deeper underwater. When the modification period ends, the borrower is right where they were in the beginning unless they manage to drastically increase their income to manage the original payment. Worse yet, this increases the true cost of borrowing and probably removes any equity which may be in the home by the end of the loan. Until serious efforts are made to reduce principal by federal subsidy guaranteed personally by the borrower and non-dischargeable in bankruptcy will any true progress be made in granting relief to homeowners.

Aug 20 10:25 PM

[Moon Kil Woong:]

#1 what in Bush Jr. and Obama's stimulus plans have been a sucess let alone a long term success? A big fat 0. Why do I lump them together, because they are essentially the same broken tired, run mass deficits through a corrupt broken government system that gives money to friends at the expense of everyone else and pray things get better (Of course the ones that get money say things are much better suprise suprise.)

So far, there is no difference that I can see between Bush Jr. and Obama, nor Republican or Democrat. They are both giant government spending machines that care only about their friends and campaign donors and 0 for the middle class or American public.

But isn't that what we have made our political system to be? If I have learned anything in this recession it's how nothing will get better until the root of the problem is fixed, government and politics and their big money politics which strips American's of their money so that the few can totter around without a care in the world. Call it stimulus or what you like, but every big government program ends up being a givaway to a select interest group who spend a few million lobbying really hard. It doesn't do justice justice.

Aug 20 10:47 PM

[JosephN:]

Not to turn this into a political debate, but what alternative did the republicans present us with?

A integrity lacking former torturee who now supports torture and his 'when the going gets tough I quit' quitter sidekick. And the candidates seem to get ideologically weirder and more incompetent, if not outright corrupt, by the year.

I voted for Obama because I knew he wouldn't let the banks fail, which has kept us out of great depression 2. Something that McCain has already said he would have let happen. And he is new enough to washington not to be completely corrupted by it yet.

Until the republicans jettison the religious crazies and corrupted ideologues and put forth the next Reagan I, and most sane americans, will continue to vote for the democrats.

The republicans brought it on to themselves, it is time for them to put their house in order but I still see no real effort to do the hard work it will take. Mostly because they cannot take responsibility for their own internal issues.

Aug 20 11:00 PM

[Dan in mpls:]

WHAT?????? Its too late, this has devolved into a politcal, well, tirade. Please get over the waterboarding of exactly 3 mass murderers. No broken bones, all toes intact - they just got em wet. I was livid as Obama sat in silence for 2 weeks as all the major banks sped toward the brink of bankrutcy due to his administrations' fool hardy talk of nationalizing the banking system. ( I went on to make a ton on that easy trade.) I think we'd have been better off to let half of em go under and this thing is no where near over yet. Only McCain, who wanted the "surge" 4 years before it happend led every Republican on his committee to vote with him to stop the mortgage insanity on 2005 - but lost. As far as Im concerned, thats the end of that story. if Mcain had been in control in 2005 we would not be where we are today. Instead Barney Frank won the day (along a boat load of money from the bankers) so we will be digging out for a decade.

Aug 20 11:24 PM

[a fat panda:]

The biggest problem with this program is that it doesn't require the home owner to put additional skin in the game. More skin is the only way to lower the likelihood of future foreclosures. People have capital, but the have no reason to put it in housing.

Aug 21 12:23 AM

[icandoitdon:]

kind of a replay of bush in his second term, wouldn't you say?


On Aug 20 05:54 PM Loulun wrote:

> It seems Obama is failing at everything Bail out failure,Cash for
> clunkers failure, Loan modification failure, Healthcare reform Failure,
> Afganastan will be a failure and Iraq will become a diaster. Then
> the stupid 51% will vote for him again in November 2011

Aug 21 01:20 AM

[MarkitWacha:]

From my perspective, the mortgage servicers in my area are expanding their IT workforce. That means that they have a multi-million dollar profit-making opportunity in the works.

This is market manipulation by the US government. The mortgage servicers are the ones who will make money, not individuals. They must have good lobbyists. Looks to me like our government is for sale.

Breaking up the sanctity of contracts to do this is folly. No one wins. I agree with Buffett that we're dangerously close to turning the country into a Banana Republic, without even the bananas.

Aug 21 02:03 AM

[Brad Johnson:]

If the government really wants to put a clamp on home foreclosures, they should make it more painful for borrowers when they foreclose. In my state, all that can happen when someone defaults is the bank takes the house.

This makes it incredibly easy for people to walk away, even when they have no trouble making the payments. I know several people who are making strategic decisions simply because they're technically underwater, despite being quite comfortable financially.

The U.S. is unique in the way they handle foreclosure, most countries allow the lender to pursue the lender through other avenues besides just the home itself.

Aug 21 02:16 AM

[Up Yours SP500:]

You seem to think Obama created this mess. What about the stupid 51% who voted for Bush 8 years in a row, or the stupid greedy people who got us into this mess in the first place? How easily we forget Obama as been on the job only since January! He has done more in 8 months than Bush did in 8 years and if you want to refute that, give me any topic so I can crush your stupid mentality: 2 wars, the economy, taxes for the rich, lack of his understanding about healthcare, Dick Cheney, global relations, etc etc.....take your pick....someone has to clean up after Bush's colossal f up. You are probably one of those idiots shouting at these health care town halls, get a clue.


On Aug 20 05:54 PM Loulun wrote:

> It seems Obama is failing at everything Bail out failure,Cash for
> clunkers failure, Loan modification failure, Healthcare reform Failure,
> Afganastan will be a failure and Iraq will become a diaster. Then
> the stupid 51% will vote for him again in November 2011

Aug 21 02:33 AM

[TinyTim:]

Renegotiating the loan of someone just laid off is basically the same as giving the original NINJA loans that started the problem.
The redefault risk is like 100%.

Face it. There is only a very small percentage of renegotiations that will fly once you leave off the people who can still pay, but want lower payments. For these folks, it's a game of chicken since nobody will talk to them until they're 3 months delinquent.

Lastly, let's not forget the banks that don't want to settle because that would force the bad loan onto the books.

Aug 21 03:39 AM

[David Van K...:]

Perhaps the most fundamental problem with loan modifications is, "who is the lender?" Once a mortgage note has been bundled, securitized, and sold in an MBS package, the "lender" side of the equation has disappeared. So the party that formerly would have had a natural incentive to work with the borrower and try to find a path to saving the debt relationship has disappeared.

Every other problem falls into place once you understand that. The mortgage servicer is not the lender. No wonder they are gaming the system and/or don't know how to do decent modifications--that's never been their job. No wonder borrowers with modified mortgages default anyway--they don't have the same incentives (or the money in many cases) that home borrowers used to have when they actually qualified under sensible standards for their loans. No wonder some other borrowers make "strategic" decisions to walk away--they have no personal or local relationship with their lender any more. Walking away has become socially acceptable. It's the borrowers' answer to ridiculous bank fees.

On another note, I'd like to see the political discussions taken off-site. Why don't you guys go outside and settle it? This forum is meant for financial and investing discussions.

Aug 21 07:18 AM

[jimocarroll:]

The fundamental problem, as it is in all of the Marxists' plans, is that they are discovering all manner of new "rights" -- and the "right" to "own" your own home is just one of a long list.

You cannot charge someone to exercise their "rights".

Aug 21 08:32 AM

[Alakh N Singh:]

I agree to you. it has not been even 8 months since Obama took to reins and has done a lot of good things. At least I see hope that US will be back to Clinton times, when Americans had voted bush for second time, I was sure of disaster.


On Aug 21 02:33 AM Up Yours SP500 wrote:

> You seem to think Obama created this mess. What about the stupid
> 51% who voted for Bush 8 years in a row, or the stupid greedy people
> who got us into this mess in the first place? How easily we forget
> Obama as been on the job only since January! He has done more in
> 8 months than Bush did in 8 years and if you want to refute that,
> give me any topic so I can crush your stupid mentality: 2 wars,
> the economy, taxes for the rich, lack of his understanding about
> healthcare, Dick Cheney, global relations, etc etc.....take your
> pick....someone has to clean up after Bush's colossal f up. You
> are probably one of those idiots shouting at these health care town
> halls, get a clue.

Aug 21 08:42 AM

[paulsjj:]

Tammny Hall D.C.

Aug 21 09:01 AM

[John Bowman:]

You will have to wait a long long time. The main reason that the Clinton era looked so good is that the capital gains from short term traders were filling the Treasury's coffers. A secondary reason was the false hope generated from the dotcom era (which in the long run helped our competitors more).

A third reason is that the downturn in the late eighties and early nineties made houses affordable. And a fourth is the incredible amount of money spent on Y2K solutions.

Aug 21 09:09 AM

[BenderRodri...:]

I work for a large national bank. I don't work on modifications at all, I have a much different role. But, I do work with all sorts of different business units within home mortgage. From my viewpoint it looks like HAMP is costing my company a TON of money. Everyone is working on something around HAMP. So much money to help so few people. What is the point? Why don't we all just take up a collection and give these people money to pay their mortgages(sarcasm)? It would probably cost less to all in the end.

I agree this is going to fail, maybe not for the cynical reasons portrayed in this blog, but it will fail. I don't believe everyone is trying to game the system. I do believe these stupid propaganda programs created by the gov't are costing companies a lot of money so why should they be motivated to alter loans?

Aug 21 09:15 AM

[enigmaman:]

falling home prices is the biggest problem facing mortgage modifications, unless there is a sizable spread between its current loan to value lenders will be less inclined to do modifications. Since values continue to drop and its been estimated that currently 25% of mortgaged homes are underwater and will rise to 50% in the next few years lenders have little incentive to erode their portfolio any more then it is. No lender wants to refi a questionable loan carrying a higher rate for a still questionable loan at a lower rate, especially with home prices continuing to fall, if the property value is going to drop why not keep it on the books with a lower loan amount carrying a higher rate, then provide a higher loan amount at a lower rate, it makes no sense, there is no real upside to the lender, yes the program is a failure and should be accepted as such.

Aug 21 09:33 AM

[Jimbo:]

I have to heartily endorse "Mr. Moon" here. Both political parties have freely sold their soul to the Wall Street bankster gangsters. The mortgage and debt mess go straight to "Government" Sachs and all its' friends and competitors. People scream about "socialism" but we now have a Corporate State run for the benefit of the oligarchy. In November of 2010, please go to the polls and eject all incumbents and lets' start again.

Aug 21 09:47 AM

[Henry Buttal:]

Good comment, Bender...

For those of you that actually READ the linked articles, a couple of things were made clear:
- Ocwen, and some of the others are making good faith attempts to rework loans
- Barney's blow up was last year (July 08), which makes for great politics, but lousy policy. While Barney Frank was blowing up at the banks like BOA, he should have been working with the GSEs, which based on historical evidence, he has influenced in their business operations. I thought it highly ironic that while Barney Frank was dramatically addressing BOA, the GSEs did not modify their waiver paperwork UNTIL JANUARY 09! Great job BF...

Irrespective of the who is president, the problems continue to be the key committee members in the (so called) House of Representatives. Frank and Rangel being two of the major problem children.

Aug 21 09:52 AM

[cbc:]

If we want to help people, let them walk away from their homes. Let them start over. That is how the system is supposed to work. The program only helps banks. And no matter that Bush is largely to blame. Obama and team just don't have a clue. Ever heard of borrowing from Peter to pay Paul. An old saying. Just substitute "unborn Americans" for Peter and "the wealthy" for Paul.

And UPYours SP500. The poster did not say Obama created this mess. Take a sedative and go elsewhere for someone to blame.

Aug 21 09:55 AM

[MichaelJ007:]

I just don't get the Obama Bashers/Bush Worshippers. I voted for neither of those 2, nor McCain and dimwitted Palin. However, this whole mess started with trying to pay for 2 "wars" (foregin occupancy is more accurate as we are not fighting any uniformed or clearly defined enemy). And YES Clinton's housing policies had some influence, as did Bush's and Obama's. The Waterboarding is totally F'd up- it is torture don't underplay it tough guy Dan in mpls you wouldn't last 10secs "just getting wet"- r u really that dense? The GOV is, has and will continue to expand its powers and role in society whether it is BUSH or OBAMA. However, I will admit that in my impartial opinion it seems as if Obama seems to care for the interest of middle and lower class americans more than Bush and the GOP ever have. He's only been cleaning up the mess of the last 8 yrs for the last 8 mths. Perhaps if the "conservative" Repubs would actually provide some alternative options rather than spewing anti-Obama/Marxist/Soc... rhetoric they'd accomplish something.

Aug 21 10:11 AM

[swaps:]

The comments are not universal enough. It can easily be argued that everything George Bush touched failed too - the wars, the economy, balanced budgets, free marketing, historic foreign policy alliances, credit markets. This mess clearly started with him and the bozos he surrounded himself with..

Clinton left behind a functioning government and economy when his mission was accomplished.

Bush left behind what is essentially a drug war in Afghanistan, a useless ground war against a Third World nation that never attacked us, a federal budget in ruins, an economy falling off the cliff, a free market economy that required massive government intervention and takeovers, shattered foreign alliances, collapsing corporate values and an money market industry that froze up due to lack of trust, morals and courage.

This was and is an Obama - Bush failure, a Republicrat failure.

Aug 21 10:20 AM

[The Geoffster:]

"The difference between free-market capitalism and state capitalism is precisely the difference between, on the one hand, peaceful, voluntary exchange, and on the other, violent expropriation."
-- Murray N. Rothbard, A Future of Peace and Capitalism, 1973

Aug 21 10:30 AM

[Dave Shafer:]

The loan modification program was never going to work. It is simply government attempt at doing something in the face of fear. The vast majority of loans going into foreclosure are of two types: people who never could have qualified under any real underwriting matrix and never should have been given a loan, and people who have lost their income due to lay-offs or sickness or divorce or some other social issue. No amount of modification is ever going to be able solve the income problems of those two groups of people. It will take an end to the recession and decreasing unemployment to lower the foreclosure rate for the second group and for the first group, foreclosure is a certainty.

Aug 21 10:55 AM

[TeresaE:]

A stoned, blind and deaf monkey could have ruled the good times that a multi-trillion dollar one-second problem gifted this country.

Keep believing that Clinton was a financial god while realizing our JOBS went to China because of his signature.

BOTH sides have done this and Clinton is no shining example of non-corrupt politics. He "balanced" the budget by taking pensions and unfunded liabilities off the books.

My budget would be balanced too.


On Aug 21 08:42 AM Alakh N Singh wrote:

> I agree to you. it has not been even 8 months since Obama took to
> reins and has done a lot of good things. At least I see hope that
> US will be back to Clinton times, when Americans had voted bush for
> second time, I was sure of disaster.

Aug 21 10:55 AM

[Living4Divi...:]

The program has been a failure. Much is promised, little is delivered.

The residential mortgage totals in the US is appx 10T. Most of these mortgages are FHA Conforming. The ultimate holder of a huge chunk of these mortgages is the US Govt thru Fannie and Freddie at $3T-$5T. Therefore the holder of the bulk of prime mortgages is the US Govt.

They are free to forgive principal/renegotiate and do whatever they want. The Fed balance sheet has exploded by 7-9T to bailout the banks. (2.5T in actual money, with the rest as future guarantees) The automakers have been bailed out. Banks have been bailed out. AIG (insurer) has been bailed out.

Where is the homeowner's bailout?


On Aug 21 07:18 AM David Van Knapp wrote:

> Perhaps the most fundamental problem with loan modifications is,
> "who is the lender?" Once a mortgage note has been bundled, securitized,
> and sold in an MBS package, the "lender" side of the equation has
> disappeared. So the party that formerly would have had a natural
> incentive to work with the borrower and try to find a path to saving
> the debt relationship has disappeared.
>
> Every other problem falls into place once you understand that. The
> mortgage servicer is not the lender. No wonder they are gaming the
> system and/or don't know how to do decent modifications--that's never
> been their job. No wonder borrowers with modified mortgages default
> anyway--they don't have the same incentives (or the money in many
> cases) that home borrowers used to have when they actually qualified
> under sensible standards for their loans. No wonder some other borrowers
> make "strategic" decisions to walk away--they have no personal or
> local relationship with their lender any more. Walking away has become
> socially acceptable. It's the borrowers' answer to ridiculous bank
> fees.
>
> On another note, I'd like to see the political discussions taken
> off-site. Why don't you guys go outside and settle it? This forum
> is meant for financial and investing discussions.

Aug 21 10:56 AM

[Econ 101:]

Why not just liquidate Fannie and Freddy? Take their loans and mark them paid? The 25% of the mortgages in America would be paid off. Sure, the share holders would get screwed, but the economy would jump start because 25% of households would now have no mortgage payment!

Oh, those people who own Fanny and Freddie are big political contributers and dont like the idea? Sorry

Aug 21 12:03 PM

[JPDX:]

The first comment has it right. The only way foreclosures will really go back to a normal level is to either have mass job creation to get people working and creating income ongoing. Or to forgive so much principle that they can make payments with savings, and unemployment checks. That option will help them in the short term but cause major deflation and basically extend the mess to a lot more households.

Aug 21 12:42 PM

[Windsun33:]

The big difference then was that Clinton had a mostly Republican congress, so they sort of balanced each other out. But now we have a Left-leaning executive and congress together.

In the past, whenever a single party controls both branches the results have often not been very good.

On Aug 21 08:42 AM Alakh N Singh wrote:

> I agree to you. it has not been even 8 months since Obama took to
> reins and has done a lot of good things. At least I see hope that
> US will be back to Clinton times, when Americans had voted bush for
> second time, I was sure of disaster.

Aug 21 12:53 PM

[munny:]

The program relies upon lenders doing something. I entered the process for fun and my lender was so unresponsive that I finally wrote and simply withdrew my application. Two days later the lender (Taylor Bean) was reported as having its own financial problems and had laid off many employees. It was a huge lender and its problems certainly meant that it couldn't sell paper, so my process was apparently doomed anyway. Hard to pin that on Obama.

Of course, why refinance a loan for a borrower who has never missed a payment and had enough of a down payment that the mortgage is apparently not "upside down"?

Aug 21 01:16 PM

[Crocodilian:]

@BradJohnson
" If the government really wants to put a clamp on home foreclosures, they should make it more painful for borrowers when they foreclose. In my state, all that can happen when someone defaults is the bank takes the house. "
----------------------...

Very few people are aware of the enormous state-to-state variation in rules surrounding foreclosures. Most of the states with the worst problem (but not all) are "non-recourse" states, meaning that the lender can't look to the borrower for anything more than the title to the property. California, Arizona & Florida are all non-recourse states and comprise a big part of the problem

The only full recourse state that ranks high in foreclosures is Nevada.

These rules are state rules-- whether or not it would be a good thing to create national rules, particularly when mortgages are sold into national markets which don't necessarily appropriately distinguish between the various states, is an open question.

Aug 21 01:41 PM

[awake09:]

What a laughable diatribe... get real. For you to propose Democrat as the sane ones, and the current elected clown posse as superior to Republicans is ridiculous. And "religious crazies" are who GAVE YOU THIS NATION, dimwit.


On Aug 20 11:00 PM JosephN wrote:

> Not to turn this into a political debate, but what alternative did
> the republicans present us with?
>
> A integrity lacking former torturee who now supports torture and
> his 'when the going gets tough I quit' quitter sidekick. And the
> candidates seem to get ideologically weirder and more incompetent,
> if not outright corrupt, by the year.
>
> I voted for Obama because I knew he wouldn't let the banks fail,
> which has kept us out of great depression 2. Something that McCain
> has already said he would have let happen. And he is new enough
> to washington not to be completely corrupted by it yet.
>
> Until the republicans jettison the religious crazies and corrupted
> ideologues and put forth the next Reagan I, and most sane americans,
> will continue to vote for the democrats.
>
> The republicans brought it on to themselves, it is time for them
> to put their house in order but I still see no real effort to do
> the hard work it will take. Mostly because they cannot take responsibility
> for their own internal issues.

Aug 21 02:03 PM

[BRUCE E. W.:]

There's a good deal of talking points from the brainless here; but if you are serious about evaluating a real constructive proposal...this guy worked with mortgages and has (at least) the foundations of an alternative plan to reorganize the mortagage crisis (realistically) from the bottom up. Check it out @ themortgagenews.info.

themortgagenews.info. themortgagenews.info.

Aug 21 02:22 PM

[Bruiser:]

Because of the decline in real estate values, we are now "under water" and just for grins we applied for a loan modification from our lender. We were completely shocked when we ended up talking to underwriters in INDIA!!!

Aug 21 03:05 PM

[CLH:]

In England debtors were sent to prison. I think if those who walk away were given 20 years at hard labor, there would be few foreclosures. If anyone walks away from a legal contract, they should not walk away scot free.

Aug 21 03:44 PM

[been there:]

yeah and falling oil prices caused the depression in the oilfield in the 1980's as the saying goes no shit sherlock


On Aug 21 09:33 AM enigmaman wrote:

> falling home prices is the biggest problem facing mortgage modifications,
> unless there is a sizable spread between its current loan to value
> lenders will be less inclined to do modifications. Since values continue
> to drop and its been estimated that currently 25% of mortgaged homes
> are underwater and will rise to 50% in the next few years lenders
> have little incentive to erode their portfolio any more then it is.
> No lender wants to refi a questionable loan carrying a higher rate
> for a still questionable loan at a lower rate, especially with home
> prices continuing to fall, if the property value is going to drop
> why not keep it on the books with a lower loan amount carrying a
> higher rate, then provide a higher loan amount at a lower rate, it
> makes no sense, there is no real upside to the lender, yes the program
> is a failure and should be accepted as such.

Aug 21 09:34 PM

[ossiefus:]

The Bush Bashers and the Obama Bashers should get over themselves...

Its Congress and the Senate that Legislate. Look the them for the reasons for our problems...and god help us...they'll have to get us out.

So say thanks to Pelosi, Frank , and Reid for their brilliant decisiions. They are the constant for the last 6 years.

Aug 24 05:25 PM

[ossiefus:]

But not to worry everyone.. the day is saved because people on SS won't get their cost of living raise (about $25 dollars a month per person).

Because of the way Clinton changed the COLA interpretations (which of course balanced everything) there is no inflation.

So this should balance the budget, against the trillions to banks.

Aug 24 05:31 PM

[Paul5003:]

I and my family cannot wait to vote the Dems and Dud Republicans out of office all the ones that voted for the Cap and Trade and the Eugenics Obama-Care Bill!
Then in 2012 we need to vote this most corrupt in history ( along with George Bush cut from the same cloth puppets for the Elite ) President Barack Barry Obama out of office along with his Elitist friends actually I hope we can get the Globalists out before that!
We want Government out of our face, freedom, our money and our country back! We won't quit until we have it all back! American citizens got a dirty dirty deal in this last election, talk about a change for the worst!

Sep 01 09:14 PM

[Paul5003:]

Can't wait to vote out all the Dems and Pubs that voted in the Cap and Trade Bill along with all the other Bills that Obama and his minnions thought up none of them Democratic and against our Constitution in Congress and the Senate! Then in 2012 I pray to vote out President Barack Barry Obama ( the most corrupt President along with George Bush, that has ever been in office in the United States ) along with his Elitist friends! Hope they Audit and Abolish the Fed as well! Those old tricks just don't work any more we can see right through you! We want Government and Elitists out of our Face , we want our Freedom and money back and we want America back and we will not stop until we have it all back by the Grace of God!

Sep 01 09:30 PM

[cati:]

What is meant by 'skin' ?


On Aug 21 12:23 AM a fat panda wrote:

> The biggest problem with this program is that it doesn't require
> the home owner to put additional skin in the game. More skin is
> the only way to lower the likelihood of future foreclosures. People
> have capital, but the have no reason to put it in housing.

Sep 27 12:02 AM

[cati:]

In England debtors were sent to prison ..... IN THE 1800's check your facts. Most people do not 'walk' away from their home unless they have no choice, its sad. Now tell me what would you do with the children of those 'debtors' you want to put in prison? Maybe we could send them to the work house like they did in England ?


On Aug 21 03:44 PM CLH wrote:

> In England debtors were sent to prison. I think if those who walk
> away were given 20 years at hard labor, there would be few foreclosures.
> If anyone walks away from a legal contract, they should not walk
> away scot free.

Sep 27 12:07 AM