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Barney Frank: Name Names

[We used to have something called moral hazard and it worked great.]

Yeah, and that rule still applies.

To homeowners.

Housing Is Moving Towards Disaster

[We assume that these folks can count better than that and there is a typo somewhere in the press release.]

Don't assume anything. Insiders know that their "information" is often faulty and outdated.

[Employment picks up significantly over the next 6-9 months, starting now.]

Not gonna happen. 80% of big co. CEO's have no plans to hire in the next 6-12 months. And even small business owners in thriving industries are hesitant to add employees due to the unpredictability, insanity and incompetence of this administration, not to mention the preferential treatment given to big biz by this administration.

Oh yeah, I forgot to mention the specter of health insurance "surcharges" and increased costs due to cap and trade.

Small Business Lending: Why the Programs Need to Change

[My solution, which would be really radical, especially for Harvard and Wharton grads to swallow, would be to just eliminate the MIDDLE MAN, which are in this case "banks" or any entity that sets itself up in the middle skimming profits between government and entrepreneurs. ]

While it's popular to bash the evil middleman who "skims profits," most systems NEED middlemen in order to function effectively.

One of the fundamental flaws in government-run programs is that they try to eliminate middlemen, so decisions that would best be made in the field or on the ground are made by someone who's completely out of touch. The main criticism in this article more or less proves the point.

Like you, I used to be enamored by the idea of government "partnering" with business.

Now that I've seen how it works, a la Goldman Sachs and GE, I now realize that the only "partnering" that takes place is with the well-connected.

In addition, I have not one example of something that the federal government does well, other than obfuscate, confuse, major in minors, and expense magnification.

The less the federal government does, the better.

And yes, that includes small business lending.

Don't Worry, the Government Will Pay Your Rent or Mortgage

[When the housing market turns around they will take all the upside. ]

Don't be so sure. This is yet another ploy on the denial trail. They're going to eventually take back properties that have substantial deferred maintenance that's been neglected. And there is just no way those properties will see 2005 price levels in our lifetime. The game is to slow the flow of REO properties as much as possible.

Income Tax, Not Wealth Tax: That's Another Story

[Why tax income, which people work hard for, but not unearned wealth?]

What, exactly, is unearned wealth?

SOMEBODY earned it. If they CHOSE to give it to someone else, that doesn't change the fact.

Why Mortgage Modifications Have Failed

[We’ve tried the “let housing values fall’ plan, ]

Have we? When? Every federal initiative has been presented as a means to "backstop" housing prices.

[“as housing goes, so goes the general economy.” ]

So you advocate propagating the fake, bubble economy at whatever costs?

[The FDIC plan, and subsequent industry efforts, was designed to formulate custom solutions to each homeowners situation.]

Again, wrong. The FDIC plan was designed to STREAMLINE the process. As was the latest "Obama plan." The best way to handle these files- if you're looking for sustainability- is to do so on a case-by-case basis. Nearly every action taken to address this situation, by both the servicers and the feds, has been to figure out a way to handle the onslaught without having to provide adequate capacity increases.

A "one size fits none" approach, whether your proposed flavor or someone else's, will not make things better.

You're proposing a 6% rate with no NPV analysis. So if we can't get a win/win, you've now filled a niche: the lose/lose solution to the housing crisis.

[My proposal on this matter is that lender REO sales, or lender managed/participated sales (short sales) need to be priced within the middle of the range of the subject neighborhood. ]

Are you saying that they're "giving these homes away" by offering them at prices below their market value? Are you kidding me?

Your basic premise seems to be that if we can support housing prices, that the economy will be fixed. You're wrong. Housing prices were pushed far too high due to a number of artificial influences.

I, for one, have had enough of the "If we manipulate the numbers enough, we can pretend that everything's peachy" approach.

Let's not pretend. Let's just face the fact that homes are no longer worth their 2004 prices and get on with a REAL recovery, as opposed to a fake, engineered one.

Are Financiers Overpaid?

Isn't that the way of things? A topic, or a sector, gets hot... there's an exciting story to tell, brain power and resources get over-diverted... eventually, that market becomes overloaded with participants, driving profits down, or it collapses... then, on to the next "thing."

Have we reached equlibrium yet?

Mortgage Defaults and Skin-in-the-Game: Why This Correlation Is Wrong

[When I work with a client on a mortgage modification, I gather a lot of personal information, so I have real data in real time. ]

All of the shouting about negative equity has been coming from people who are not in the trenches, like you and me.

Here is the reason why there is such a strong correlation between negative equity and foreclosure:

Historically, the vast majority of defaults occur within the first 24-36 months of the loan.

Because that still holds true, it's only natural that the majority of these borrowers are underwater- they bought at the top, were not required to pay (much of) a down payment, and housing prices have collapsed.

If you're doing a fair amount of volume of loan mods, the majority of the loans you're seeing are vintage 2005 and later... so OF COURSE most of those loans are underwater.

How much time and money was spent finding this out?

And what difference does it make?

If there's something USEFUL to be learned, it's what separates re-defaulters from those who stay current on their mods.

It will take the industry 3-5 years to figure out what we, on the front lines, already know.

Are Stocks Always Best for the Long Run?

What impact might the GM bankruptcy outcome have on those bond returns?

The Real Cause of Foreclosures: No Skin in the Game

Negative equity: Is this causation or correlation?

Hasn't anyone had any statistics here?

Just because there's a strong correlation doesn't mean it's a cause.

Thus far, nobody's been able to document a significant number of borrowers who are able to make their payments that choose to walk away.

Probably because it's not happening on a large scale.

What *is* happening is that those who fall behind because they CANNOT afford the payments- whether due to a temporary or permanent change- ARE looking at the LTV before deciding what to do.

That's not the same thing... although it's a much less interesting story.

Increasing Taxes in the U.S.: Accepting the Inevitable

[Perhaps eight or ten years ago, had we taken appropriate measures we could have avoided arriving at this crossroads, but we didn’t.]

Who are "we?" Some of us did see this coming, did call and write our Congressman, while they did whatever they wanted.

[Rather it’s to admit to reality and try and shape something that will do the least damage and perhaps improve on the current system. ]

The current system sucks. It doesn't need fine-tuning, it needs a substantial overhaul. I think people are realizing it, which is why BO was so popular.

Problem is, he isn't delivering the kind of change that we need.

The first step: replacing our "leaders" with people who don't want to make a career out of being a politician.

Why Banks Prefer Foreclosures over Mortgage Modifications

[Frank, a Newton Democrat, said he is holding a hearing Thursday on his proposal to provide government loans to homeowners who have lost their jobs and can't qualify for loan modifications and other help because they don't have income.]

Loans to homeowners who don't have income... Hey, didn't we do that already?

["The problem is worse than we thought," Frank said. "The failure to do these modifications means the whole situation stays bad longer."]

He's got it exactly backwards. I cannot believe that someone who's in charge of regulating an industry has so little understanding of the subject matter.

Is he really that ignorant of how this industry works, or is he that far into someone's pocket that he can spout this nonsense with a straight face?

Either way, not good.

Why Banks Prefer Foreclosures over Mortgage Modifications

[ true loan modification must include a principal balance reduction that reflects the current market value of the home.]

Once you do that, it fails the NPV test, making it better to foreclose.

You see, this game is more complicated than people think it is.

The loudest commentary seems to come from those who've done the least amount of homework, or have ignored the information contrary to their pre-determined viewpoint.

Minimum Wage Increase Will Send Teenage Jobless Rate to a Record High

Actually, what it will do is push teenagers to seek work where they incur no taxes.

There's plenty of work to be done, and a lot of it can be done off the books, and out of sight of the tax collector.

Perhaps this will lead to a generation of people who see the government for what it truly is.

Here's hoping.

Boston Fed: We Don't Understand Foreclosures

[We refer to this group as “redefaulters,” and our results show that a large fraction (between 30 and 45 percent) of borrowers who receive modifications, end up back in serious delinquency within six months.]

That's actually lower than the numbers reported from other sources. The OCC's report was 58%.

Re-default was less of a problem during the go-go days, as the property would likely be worth more with the passage of time.

Now, the reverse is true, compounding the losses on the fall-throughs.

There are solutions to the problem of re-default, but they take a substantial amount of time and effort. But rolling up the sleeves is not very popular, and it's a concept that's hard to sell.