White House may move to buy bad mortgages

[sabra]

Source: MSNBC

New proposal could break logjam of foreclosure relief efforts

The White House is considering a proposal to head off potentially millions more home foreclosures by using federal funds to buy up at-risk loans and then refinance them with more affordable terms.

Treasury Secretary Timothy Geithner and other Obama administration officials met Wednesday with a group of top bankers, community groups and financial industry representatives to discuss the plan.

So far, government efforts to prevent foreclosures have focused on pressing the lending industry to work with at-risk homeowners voluntarily and provide them with more affordable payment terms. But the new proposal signals a shift to a more direct government approach, according to John Taylor, president of the National Community Reinvestment Coalition, who attended the meeting with Geithner, Housing and Urban Development Secretary Shaun Donovan and other Obama administration officials.

“What they heard from all segments of the industry is nearly universal support for going in and purchasing these loans,” said Taylor.

Read more: http://www.msnbc.msn.com/id/29146768/

[Robbien]

1. Good luck with that. The loans have been sliced and diced

into thousands of tiny little pieces and are scattered throughout CDO instruments.

[unblock]

16. they can always issue new mortgages and pay off the old ones

the prepayments flow through no matter how they've been sliced and diced.

[HamdenRice]

17. Actually, they haven't -- although it's a popular misconception

It's pools of mortgages, not individual mortgages, that have been sliced and diced.

The individual mortgage is part of a pool that is held by a trustee. The "slice and dice" securities are issued against the pool. Those securities are called mortgage backed securities.

Those trusts have specific terms for how to take one mortgage out of the pool as long as you replace it with another mortgage. It's not really that hard to do.

CDOs are pools of mortgage backed securities -- securities of securities, so to speak. But there's nothing a CDO can do to change the terms of the trusts of the mortgage backed securities that the CDO holds. That would be kind of like a mutual fund having control over the terms of an individual stock or bond.

So the plan at least on the individual mortgage level is doable. I'm not sure it's the best plan, but the "slice and dice" problems are not severe.

[azul]

2. Hey, who hold the mortgage on the White House anyway?

Circular borrowing gets us where?

[slackmaster]

15. 1600 Pennsylvania Ave. is subdivided into three parcels

They're all owned outright by the United States of America.

Their combined market value is about $1.8 billion.

[earthside]

3. Buy ALL Mortgages!

Since the federal government will be borrowing funny money to buy 'bad' mortgages, why doesn't it just buy All the mortgages in America with the same funny money?

At least then I'll get some benefit out of this crisis ... like the bank CEOs.

Aren't law-abiding, taxpayers getting tied of playing the chump for all these schemes?

[PSPS]

4. Another giveaway to the banks and taxpayer-financed gifts of houses for liars

What "affordable terms" can be offered to the NINJA loan liar who bought a $750K house while really only making $40K/year? Even at zero percent interest and a 40 year term, they'd never be able to afford it.

Who comes up with this insanity? Is this more of that fabled "change" we were promised?

[Baby Snooks]

6. They can afford it now...

The "tax cuts" equate to an extra $7.70 a week added to the paychecks of middle-class Americans according to Mitch McConnell. A figure the Democrats aren't disputing. So they can apply the extra $7.70 a week to their mortgages. See how it works?

That $7.70 will quickly disappear at some point when the bill for all of this arrives. It will probably result in an extra $77.70 a week deduction from their paychecks.

The policies of the oligarchists/dominionists/Republicrats continue. But they did keep the Alternative Minimum Tax in place. To keep the middle class from becoming the rich and the rich from becoming the wealthy. We have to protect those who matter.

The few, the proud, the very, very, very rich. The ruling families of America.

[high density]

12. I'll take a free $400-500/yr

That's rent for half a month or car insurance for half a year. Fine by me.

[Baby Snooks]

23. Better than nothing..

The problem I have is that comparatively speaking, it really is absolutely nothing.

I have to wonder how fast the banks will pass out the bonuses in Stage Two of the Great American Ripoff.

[Robb]

5. By "all segments of the industry" they do not mean consumers.

...Although that should be what that means.

[Javaman]

7. Why don't they just freeze all resets?

instead of one bad economic shoe dropping one right after the other, they could just stop it now.

Then reset the mortgage rates back to the original offer rate.

This would stop the free fall in foreclosures in its tracks.

[dawgmom]

8. I would be opposed to anything that would reward irresponsible borrowers

While I really feel for people who are behind on their mortgages because of illness or job loss, I would be VERY opposed to any kind of plan that would bail out people who bought far more house than they could afford. Yes, the banks were shitheels for selling some of these mortgages, but borrowers also have personal responsibility. If you're making $40,000 and you bought a half million dollar house, counting on being able to cash out equity because values were rising so fast? Well, that's why it's called gambling. If you gamble like that, sometimes you lose. In Vegas, you can't go back to the dealer and say, "Gosh, I didn't understand the game, and I thought my chances were better than that."

[shaniqua6392]

9. I agree with you on that one.

Maybe they should require proof of job loss or illness as way to weed out those who just bit off more than they could chew.

[Baby Snooks]

10. What about the irresponsible lenders?

What about the lenders who told people they could afford it and not to worry about the possibility that they might not be able to afford it if interest and taxes went up?

Where is the responsibility in all of this? Blame the victims? That is disgusting. How about blaming the victimizers?

[dawgmom]

18. Blame BOTH

I think the lenders were irresponsible, yes. And I think that government needs to step in to see that there is some regulation of the industry so it never happens again. BUT....caveat emptor applies here, to the maximum degree. When you sign a mortgage, you're buying a product. You have the same responsibility that you have when buying any product, to use good sense and exercise personal responsibility. You have a responsibility to think about all the things that could possibly go wrong, and not just dream about all the things that you hope will go right. I have a niece with four kids, a deadbeat husband, a family income totalling about $70,000 -- and two mortgages totalling $450,000 on a house in Florida that's now worth half that. They bought it with no money down, on an ARM, and ONE YEAR after signing the first mortgage, they took out a second with all the imaginary equity they thought they had, to put in a freakin' pool and upgrade the kitchen because oh my gosh, she just couldn't live without stainless steel appliances and granite countertops. I have zero sympathy for her, or for the thousands of other people just like her out there who were living beyond their means and refused to buy a reasonably-price starter house that matched their real income, and build some real equity. I have sympathy for her kids, however, because they're the victims of the idiots parenting them.

[high density]

11. I feel like going out and buying a nice house I can't afford

Then I can live in it for about a year without making any payments. By then the house will be in foreclosure, and the Federal Government can come and give me "more affordable payment terms."

[dawgmom]

20. Heh!

Agreed. See my post above.

[Belial]

13. No one forced them to sign the loan documents..

At what point does common sense come in to play with ppl who signed those mortgages?? Before my wife and I bought our first home.. many years ago.. we rented until we had saved up enough to put 25% down. The amount of the house that we bought was not determined by what we could afford at the moment, rather, how much we could afford if neither of us could work for 4 months. We still live the same way today and our debt level is zero.. both used cars are paid for and other than monthly expenses and the current mortgage we don't owe anyone. Living in my subdivision.. which has maybe 50 homes.. I feel bad for the ones that have lost their homes.. but most made bad choices in many of the financial decisions that they made.

[dawgmom]

19. Bravo. See my post above -- agree completely. nt

[skeewee08]

14. So will this help someone like me who's house is in foreclosure?

We need help now, why do they want to help those in the future what about us that are in the process?

[Xenotime]

21. I feel so sorry for your suffering. I hope you find relief.

[girl gone mad]

22. Sounds like a fool's errand.

I think they need to let the foreclosures happen. In the vast majority of cases, people would be better off getting out from under the burden of a payment they can't afford.

[aquart]

29. Really. And the neighborhoods that are destroyed?

What are your plans for when you get West Nile Virus from the fetid, unattended ornamental pool in the house four blocks away?

What are your plans when they devalue your property and raise your property taxes at the same time to make up for the money they aren't getting from the abandoned house that is giving you West Nile virus?

[Stellabella]

33. Thank you.

That's what many of these people don't understand. This is a rolling tidal wave of disaster that just keeps building and affecting more people.

BTW, where, exactly, did someone who makes $40,000 a year buy a $750,000 house? That sounds to me like Limbaugh-speak.

[MarjorieG]

24. Industry will not take back the risk they created voluntarily. We'd be the bad bank?

(sp)

[LeftHandPath]

25. No point in paying my mortgage now...

They cant kick us all out.

[Robbien]

27. Yes they can

Go ahead and stop paying your mortgage.

Hopefully you have scoped out a good piece of pavement upon which to pile up your possessions.

[Stellabella]

26. I don't understand why President Obama can't just sign something

and limit ALL mortgage rates to 5 or 6%. It's ridiculous the amount of money we're charged and the hoops you have to go through to refinance.

And it would increase employment, because banks would have to hire people to do the paperwork.

[Belial]

31. basic economics.. is why you cannot set a limit..

[Stellabella]

32. That's not an answer.

Please explain why. I've taken econ in college and don't see why it's a problem.

[dipsydoodle]

28. One of the guys at Forbes

suggested that prior to the first bailout. Maybe they should've listened to him. Dumwits.

[Zhade]

30. So if you just don't feel like paying, you're in luck!

Oh, and us renters? Shafted again.