Lawmakers Look for Home Foreclosure "Quick Fix"

[Jamisjockey]

The reality is that the market needs to bottom out to recover.  Holding prices at an unrealistic price when they should be forclosed on?  Just another way to prolong the pain.  Also, expect banks to become more stingy with loaning money.
The smart answer is to penalize banks severly for forclosing improperly on a home. 

[De Selby]

The reality is that the market needs to bottom out to recover.  Holding prices at an unrealistic price when they should be forclosed on?  Just another way to prolong the pain.  Also, expect banks to become more stingy with loaning money.
The smart answer is to penalize banks severly for forclosing improperly on a home.  

The problem is that the banks dug a hole so deep that having all that correction at once could literally wreck the currency - Zimbabwe style inflation/worthlessness being the result.  The banks successfully used that fact to get billions in taxpayer money without promising to do much for taxpayers in return.

I should add that any reasonable person with be with you on foreclosure penalties - if they'd stopped and not relied on phoney paper to begin with, we wouldn't be in this mess.

[Jamisjockey]

Lawmakers sleeping with big business and creating the laws, rules, and agencies started the whole ball rolling to begin with.  Congress holds a gun to their head and says "create low income loan vehicles".  Banks figure out how to make money off those vehicles.  And with a fistful of bad loans, wall street figures out how to make money off that, too.  The CRA got the whole thing going.  Everyone has a finger in the pie, and we expect Congess now to fix the mess they helped create?

[De Selby]

Lawmakers sleeping with big business and creating the laws, rules, and agencies started the whole ball rolling to begin with.  Congress holds a gun to their head and says "create low income loan vehicles".  Banks figure out how to make money off those vehicles.  And with a fistful of bad loans, wall street figures out how to make money off that, too.  The CRA got the whole thing going.  Everyone has a finger in the pie, and we expect Congess now to fix the mess they helped create?

Except it wasn't the Government loans that caused the problem - I just linked a report showing that CRA default rates had nothing to do with this, and how they have lower default rates which makes sense...Government scrutiny of the paperwork in those loans is more likely.

Securitisation was a way to make money off of all loans, irrespective of how badly reviewed - the banker/investor aspect had absolutely zero to do with the lending on the bottom end.  Those guys just didn't care; as long as a loan was made, any loan, they could sell it.

[Headless Thompson Gunner]

The problem is that the banks dug a hole so deep that having all that correction at once could literally wreck the currency - Zimbabwe style inflation/worthlessness being the result.  The banks successfully used that fact to get billions in taxpayer money without promising to do much for taxpayers in return.

Economics fail.  Expanding credit is inflationary; contracting credit is deflationary.

If the banks had to recognize all of the bad credit on their books all at once, it would lead to a Great Depression style deflationary depression (or worse), not a Zimbabwe type hyperinflation.  

[Headless Thompson Gunner]

On second thought, never mind.  Not worth it.

[roo_ster]

SS:

Didn't read the articles, huh?  Not surprising.

From 2008:
http://www.dallasnews.com/sharedcontent/dws/bus/stories/022908dnbusforeclose.1cbcd65.html
"Subprime loans make up less than 15 percent of the local mortgages, but they account for more than 50 percent of foreclosures."

Then, factor in that roughly 1/6 of white mortgages are sub-prime and 1/2 of NAM (Non-Asian Minority) mortgages are sub-prime, and the quantitative view gets clearer.

From 2008:
http://www.washingtonpost.com/wp-dyn/content/story/2008/06/29/ST2008062902089.html
"In New York City, for example, an analysis by the Furman Center for Real Estate and Urban Policy found that around 40 percent of subprime loans issued between 2004 and 2006 were made to blacks, and an additional third of such loans were given to Hispanics. Whites, by contrast, received around 10 percent of such loans, as did Asians.
40% + 33.3% = 73.3% of subprime loans to NAMs.

Thank you Community Reinvestment Act!  Thank you Fannie & Freddie! 

Oh, there are also McMansions and other top end houses getting foreclosed on, but the neighborhood foreclosure maps (DIY map I earlier linked to) show where the foreclosure center of mass is located (S Dallas, Oak Cliff, DeSoto, etc.).  More of the non-subprime foreclosures in DFW are located in new-built neighborhoods away from the city center or immediate suburbs (McKinney,Frisco, etc.). 

[ronnyreagan]

Thank you Community Reinvestment Act! 

You seem to be making a jump from subprime/minority to the CRA.  Weren't there plenty of institutions that the CRA didn't even apply to that were churning out those subprime loans too? I've read that the institutions it didn't apply to did more subprimes that went bad than those that it did apply to. How does that fit in?

[cassandra and sara's daddy]

an inconvenient detail

[Headless Thompson Gunner]

You seem to be making a jump from subprime/minority to the CRA.  Weren't there plenty of institutions that the CRA didn't even apply to that were churning out those subprime loans too? I've read that the institutions it didn't apply to did more subprimes that went bad than those that it did apply to. How does that fit in?

It's not just the CRA itself, though that is a big part of it.  It's the whole "affordable housing" BS that the libs have been pushing for decades.  It includes the CRA, the redlining shakedowns (given teeth  in part by the CRA), the Freddie/Fannie cronyism, the regulator stonewalling, the FASB gimmicks, subsidized loans of many different stripes, risk transference, on and on.  

It all adds up to a manipulated market that incentivised banks to to issue mortgages to risky borrowers in the name of "social justice" <spit>, rather than lend to borrowers based on their credit worthiness.  It's the cause of the historic economic collapse we're still enduring.  If you could put a face on our current economic troubles, it would be a toss up between either the CRA or the Banking Queen himself, Barney Frank.  (That's why he's been my avatar these past few years.)

It's been said that the CRA was the catalyst that got it all going.  To this day it's still the lightening rod that attracts all of the attention.  It was at the center of the fatally flawed thinking that destroyed the economy, the poster child for all that went wrong.

[HeroHog]

Foreclosure Fraud: It's Worse Than You Think

http://www.cnbc.com/id/39634568

[De Selby]

Economics fail.  Expanding credit is inflationary; contracting credit is deflationary.

If the banks had to recognize all of the bad credit on their books all at once, it would lead to a Great Depression style deflationary depression (or worse), not a Zimbabwe type hyperinflation.  

Yeah, you're missing the other side of it, when currency becomes worthless because the entire world loses confidence in your financial system. 

[De Selby]

You seem to be making a jump from subprime/minority to the CRA.  Weren't there plenty of institutions that the CRA didn't even apply to that were churning out those subprime loans too? I've read that the institutions it didn't apply to did more subprimes that went bad than those that it did apply to. How does that fit in?

Yep, this is exactly the problem - CRA does not equal subprime.

I love how the financial incentive (make a loan, take commission, sell to investor) is dismissed out of hand in favour of some mushy "affordable housing" ethic.  Like the banks were really operating that way in the 90's, they didn't care about the money, they just got caught up in all that liberal propaganda.  Haha.

[Headless Thompson Gunner]

Yeah, you're missing the other side of it, when currency becomes worthless because the entire world loses confidence in your financial system. 

I guess you've not been paying attention these past few years. 

[De Selby]

I guess you've not been paying attention these past few years. 

It's a lot easier to churn out one liners and insult other people than it is to make a point.

[Headless Thompson Gunner]

We've been providing you with data and explanation all throughout this thread.  You've consistently ignored it in favor of your skewed world view.

And I know from long experience that trying to explain economics and business concepts to you just doesn't work.  You're a bright guy, but you just don't want to accept that the world doesn't work the way you think it does.

So what's left for me to do but point out that your blindly wrong?

[De Selby]

We've been providing you with data and explanation all throughout this thread.  You've consistently ignored it in favor of your skewed world view.

And I know from long experience that trying to explain economics and business concepts to you just doesn't work.  You're a bright guy, but you just don't want to accept that the world doesn't work the way you think it does.

So what's left for me to do but point out that your blindly wrong?

See what I mean here is this - the data don't match the claims (as ronnyreagan noted), and the claim is entirely to do with the data.  I posted some data...but instead of responding to that or having other data, you boldly declare the truth, sometimes typing so quickly that you leave the " ' " and "e" out of "you're".

[Ben]

Let's debate the facts. No personal attacks.

[Headless Thompson Gunner]

See what I mean here is this - the data don't match the claims (as ronnyreagan noted), and the claim is entirely to do with the data.  I posted some data...but instead of responding to that or having other data, you boldly declare the truth, sometimes typing so quickly that you leave the " ' " and "e" out of "you're".

I read your study, and posted a reply to it (#30 in this thread).  I pointed out that the study was flawed and called your judgment into question for not noticing the flaws (or perhaps for thinking that we wouldn't notice them).

Then I edited it out.  It was unnecessarily provocative, and as I've said, it's pretty pointless trying to discuss biz and econ with you.  You'll believe what you will, based on whatever "evidence" you can turn up, whether it makes sense or not.  I'm not going to get into one of these line-by-line debates with you on this.  I've been there, done that, and I know it doesn't help anything. 

So, if you think your position on the greater CRA affordable housing issue makes any sense, then hold to it.  If you think your Traiger study is reliable, then shout it from the rooftops.  If you think loss of confidence in the banking system is bad for the dollar, then ignore the past few years of real-world experience.  Just don't be surprised if the rest of us snicker a little.

[roo_ster]

Yep, this is exactly the problem - CRA does not equal subprime.

I love how the financial incentive (make a loan, take commission, sell to investor) is dismissed out of hand in favour of some mushy "affordable housing" ethic.  Like the banks were really operating that way in the 90's, they didn't care about the money, they just got caught up in all that liberal propaganda.  Haha.

For all practical purposes it does.  CRA was a bludgeon over the heads of banks to lower lending standards.  Others not covered by CRA, Countrywide being the biggest, were pressured and declared they would follow CRA guidelines.  And who bought the lion's share of the subprime/junk loans right off the bat?  Fannie & Freddie, who made it their objective to make 50% or more of their business (as pointed out in links & quotes above).

Fannie, Freddie, and political pressure on AIG to insure the junk/subprime loans were critical for the whole "affordable housing" initiative.  Until F&F started to buy them up, there was no "market" for subprime loans ("We'll buy your sh!t loans!").  Until AIG was pressured into insuring the turds, there was no way to mix them in with other good loans. 

Like HTG wrote, CRA was the necessary but insufficient beginning of gov't distortion of the housing market and as such gets most the heat. 

Up until CRA, F&F's sucking up the bad paper, etc. lending standards had been static for decades and home ownership rates had been steady as well.  It took gov't pressure to increase home ownership rates and the only way to increase it was to make riskier and riskier loans, as the good risks already had theirs.

We've been providing you with data and explanation all throughout this thread.  You've consistently ignored it in favor of your skewed world view.

Pretty much.  Not only that, what occurred was predicted back in 1999 when folks saw the pieces fall into place.  It was just a matter of time.

[Harrison Bergeron]

some of the paperwork shenanigans that have gone on are way over the top    need to stop

Writes the AP:
In depositions released Tuesday, many of those workers testified that they barely knew what a mortgage was. Some couldn't define the word "affidavit." Others didn't know what a complaint was, or even what was meant by personal property. Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers' accusations about document fraud.

So yeah, this was probably a good thing.

As a conservative, i'm not a huge fan of government regulation, but there needs to be something, sometimes.

[cassandra and sara's daddy]

Countrywide being the biggest, were pressured and declared they would follow CRA guidelines.

how much pressure did it take to "force" them to make millions? 

http://www.nytimes.com/2007/08/26/business/yourmoney/26country.html?pagewanted=all


has their arm recovered from all that twisting?


heres a hint  countrywide is not your best pick for "victim" posterchild

Mr. Mozilo has ridden this remarkable wave to immense riches, thanks to generous annual stock option grants. Rarely a buyer of Countrywide shares — he has not bought a share since 1987, according to Securities and Exchange Commission filings — he has been a huge seller in recent years. Since the company listed its shares on the New York Stock Exchange in 1984, he has reaped $406 million selling Countrywide stock.

As the subprime mortgage debacle began to unfold this year, Mr. Mozilo’s selling accelerated. Filings show that he made $129 million from stock sales during the last 12 months, or almost one-third of the entire amount he has reaped over the last 23 years. He still holds 1.4 million shares in Countrywide, a 0.24 percent stake that is worth $29.4 million.



Countrywide’s entire operation, from its computer system to its incentive pay structure and financing arrangements, is intended to wring maximum profits out of the mortgage lending boom no matter what it costs borrowers, according to interviews with former employees and brokers who worked in different units of the company and internal documents they provided. One document, for instance, shows that until last September the computer system in the company’s subprime unit excluded borrowers’ cash reserves, which had the effect of steering them away from lower-cost loans to those that were more expensive to homeowners and more profitable to Countrywide.



my heart bleeds for them

[roo_ster]

I did not mention Countrywide as a victim, I mentioned them as one if not the largest non-bank lender not covered by the CRA.

They were part of the problem and were busy tossing $$$ at Dobbs and Franks.  Campaign contribs, sweetheart mortgage deals for congresscritters and their buddies, doing business as Franks & Dobbs wanted it done.  In return for other benefits.  It is one of the nastiest examples of corporatism(1) unearthed in the last few decades.

That doesn't change the fact that Dobbs, Franks, and regulators pressured them (& others in the industry), even if they are slimy in their own way.  No matter how slimy CW is, CW does not have the power of gov't.




(1) Not "corporations are bad, boo, hiss" but, "gov't and large corporations colluding" bad.  See ADM, the GM/Chrysler buy/bailouts, and many others.

[cassandra and sara's daddy]

and countrywide wasn't cra.....

[roo_ster]

and countrywide wasn't cra.....

You don't say...

CRA was a bludgeon over the heads of banks to lower lending standards.  Others not covered by CRA, Countrywide being the biggest...

I did not mention Countrywide as a victim, I mentioned them as one if not the largest non-bank lender not covered by the CRA.