Why no forclosure moratorium?

[eridani]

http://www.truth-out.org/nomi-prins-why-is-white-house-against-freezing-foreclosures-face-rampant-fraud64193

But the real reason for Geithner’s reluctance about a foreclosure moratorium is that he’s scared stiff about those securities – because even if he won’t admit it, he knows that the bailout wasn’t just about TARP and Bernanke isn’t just an economic savior.
The government owns or is backing trillions of dollars worth of assets predicated on the same or similar suspicious loans that defaulted during the 2008 crisis period, which they did nothing to stop (or force banks to restructure).

Instead, the Fed now owns nearly $1.5 trillion of toxic assets that have no bid (meaning no one but the Fed wants them). They would have less of a bid if there was even more uncertainty about the loans that fill them. The Treasury is directly backing $400 billion of government-sponsored entity (GSE) securities, and is indirectly backing another $6.8 trillion. If foreclosed homes couldn’t be sold because of fraudulent paperwork or had to wait for more detailed inspections, you can imagine how difficult selling assets stuffed with faulty loans might be. If it’s tough to find a title for a foreclosed home, think how tough it is to back the related loan out of a pyramid of securities sitting on top of it.

See, the loan that might be analyzed in a foreclosure situation could be part of a chain connecting the underlying home to 20 or 50 different securitized assets, all depending on it for either the interest payments the loan was supposed to provide, or the value of the foreclosure property if those payments stopped (in Wall Street speak, the "recovery value"). If a foreclosed property isn’t selling, it’s not recovering any money back to any asset waiting for it. Think what that can do to the value of toxic assets living at the Fed and the Treasury Department. Kill it.

[dkf]

1. Yup. We are the investors that get screwed. How apropos.

[bluerum]

2. The ball of string is unraveling and Timmy can't protect his frriends anymore.

But you can be sure that between the banks and the FED they will find a way to stick the taxpayers with the tab - again.

[dixiegrrrrl]

3. And ...........

Here is something someone wrote in the comments section of an article on foreclosures:

"This is why lenders work so hard to foreclose now, rather than deal with the homeowner. They want that loan in default, since that triggers multiple insurance payoffs that covered the mortgage.
This is why HAMP only got 10% success for all that money.

This is why the banks really, really want to keep right on foreclosing, any which way they can. If these loans don’t payout through mortgage default, all the lender gets is the property and a lawsuit from the MBS investor, demanding their money back."

************************************************************

the many many many derivatives and CDOs on the OTHER side of the mortgage bet are worth trillions more.
Damn banks set it up to make money on the sales side and make money on the insurance side once the bond trusts
imploded.
Shades of AIG!!!!

However, betcha the insurance side had NO clue how big this mess is."This is why lenders work so hard to foreclose now, rather than deal with the homeowner. They want that loan in default, since that triggers multiple insurance payoffs that covered the mortgage.
This is why HAMP only got 10% success for all that money.

This is why the banks really, really want to keep right on foreclosing, any which way they can. If these loans don’t payout through mortgage default, all the lender gets is the property and a lawsuit from the MBS investor, demanding their money back."

[AtheistCrusader]

4. Yep, nobody wants to be the bank last holding a piece of property when the insurance industry

completely implodes and is unable to pay. So it's a race to default default default on as much as possible.

We'll see a bailout or two yet, but it won't be directly to the banks, it'll be to the insurance co.'s again. Until the tab is too large to bear. THEN we'll see a moratorium, long after the mortal damage is done. (And the banks have milked it for every last dollar they can)

The only thing I can't work out is: what then?

[truedelphi]

5. So in a sense, we see this as a criminal conspiracy. Basically our stock market has been set up

So that the Big Investors are insuring themselves against the bets that they have made against the welfare of the People of the Nation (Not that in a kleptocracy, the People mean anything to anyone except themselves.)

In a real democracy, Geithner/Bernanke(Paulson) would be being tried according to RICO provisions.

We have only to look to Ireland to see how the heads of state there used a much more sane approach. They saw to it that when the People's money was used by the Irish government to Bailout the Big Banks and Mortgage Holders, the underlying assets, ie, the homes, were to be secured by those Bailouts. So the foreclosure numbers in Ireland are not as bad as here. And the housing prices are not dropping so far so fast.

[westerebus]

7. You do know the Real IRA has warned the government?

It's not been widely presented by the MSM on this is of the lake. There's been two bombings that I'm aware of. Just a little something to get the government's attention.

The locals are pissed that the bond holder's would be made whole. Guess what part of the Irish Sea those bond holder's would be on?

[Primitive Mind]

6. A lot of those toxic assets....

A lot of those assets are not completely bad. The way they are put together binds some group of mortages together. These securities called CDOs are the main ones and usually they are in tranches with each tranch holding right to some of the value of the loan. If things are good and the default rate is below about 2.5% then everything is good and everyone is happy. The homeowner owns his home, the bank makes money off the securitization and sale of the mortage abd frees up more money for investment, and the investor has a nice relatively safe investment with a more or less known rate of return.

Then the whiz kids came up with a derivative of the CDOs, themselves derivatives, called CDS (credit default swaps) which are basically a bet on whether or not they would fail. By the way, Bernanke when he was at Goldman Sachs had a huge bet that they would either fail big or win big but, he would have lost his shirt had they performed normally. Then the people that created the CDS decided to start insuring them. The CDS, and CDS insurance market was in the uncounted trillions of dollars, several times larger infact than the entire world's GDP. These are the devices that Warren Buffet declared to be financial nuclear weapons. This market is unregulated even though it really should be, I think the Atlanta exchange would be a good place for it. The government would be entirely correct to do so.

The problem was, and still is the underlying mortage failure rate. When the rate creeped above the 2.5% that blew everyone's simulations. It no longer mattered whether or not most of the assets in a particular CDO were paying, albeit on property that may not be as valuable as the loan currently. What will eventually be done is that the "toxic assets" will be repackaged and new good CDOs sold back to the market, at a profit to the government I'll add, and the toxic stuff will be foreclosed and sold and again the government will likely make a profit there too.

It will be resolved. The housing bubble was a mania that went bust, as all manias eventually do. That doesn't mean that the free men who were wrong about the value of a thing are worthless or evil, it just means they are human and prone to error.