We heard a lot of hoohah about the new mortgage workout plan, including the 30 day foreclosure freeze, and the toll free 1-888-995-HOPE for consumers.
Shorter version, in trader lingo: "Nothing done!"
Longer version, via the WSJ:
"As the Bush administration announced a fresh plan to aid homeowners overburdened by their mortgages, initial figures suggest much-touted earlier efforts have done little to help most troubled borrowers.
An earlier plan, brokered in December by the Treasury Department, called for the mortgage industry to freeze interest rates or expedite refinancing for potentially hundreds of thousands of subprime borrowers, so long as they were current on their payments. In a companion move, the administration announced a toll-free number for homeowners, but the hotline has provided counseling to just 36,000 borrowers in the past two months, and representatives have suggested loan workouts for fewer than 10,000 of them — a small fraction of borrowers in need…
The preliminary numbers throw into sharp relief the difficulty of finding a workable solution to the housing crisis, with hundreds of billions of dollars in potentially troubled loans flowing through the financial system and foreclosures hitting recent highs. Adjustable rates on some two million subprime mortgages are expected to rise in the next two years, raising the specter of further delinquencies and more financial turmoil."
Here’s an overview of the process:
click thru for free WSJ interactive
Source:
Early Effort to Fix Mess In Mortgages Falls Short
RUTH SIMON and TOM MCGINTY
WSJ, February 13, 2008
http://online.wsj.com/article/SB120285480915463431.html
The Housing Market and the House http://online.wsj.com/public/resources/documents/info-Housing080212-sort.html?s=1
Thank God Greenspan did everyone a favor by suggesting they pile into adjustable rate loans… That worked out well…
Gee what a surprise. All that pomp and ceremony at it’s launch, nothing more than a photo shot for Bush, Paulson, Jackson et al… If only we could coral some of that hot air in D.C., our energy crisis would be over.
Ha! “Case by case analysis.” I guess that means helping you find a mover and a bankruptcy lawyer.
I think that chart is missing something. There is no row for
Buyer is underwater on a home in San Diego that has lost 30% even before the mortgage resets —>
Buyer just… walks away —>
CFC is forced to repurchase the mortgage at 40% more than the house will sell for —>
Countrywide = BK.
I find it very interesting that if a Bank still holds the note, you are not eligible for help………
That “borrower remains in current mortgage” should be “borrower walks away”….
They should extend the foreclosure freeze until November 5, 2008.
I love the ‘can afford reset’, ‘cannot afford reset’ alternatives. I wonder if we’ll see another surprise increase in retail sales for February as those facing this scenario decide to spend their way out of one category into the other… or are planning to use the ‘walk away option’ regardless.
Isn’t this like enticing people into AA with the promise of free booze?
This is an idea I’ve been kicking around in my head, but how much is actually out there in subprime and how hard would it be to rejigger the securities?
Wall Street wants to unload all this paper just to get it over with and move onto the next bubble. So could the US Government, Cities and States make a fire sale offer to buy back the securities at five cents to the dollar.
Then it gets fun.
The loans are then concentrated geographically into their political boundaries. The City takes ownership of the land for below market prices reducing the outstanding mortgage, giving the homeowner some equity. The City gives a 30 year lease to the land for the homeowner at a reasonable rate.
And since the city paid .05 cents on the dollar for this, they’ll have much more flexibility in working with the family so they can keep their homes and it provides a fairly established revenue system for the government – outside of taxes.
Are you fucking kidding me?
Here’s a solution. If they can’t pay the mortgage they have, kick them out, and let someone who can pay buy the house.
How fucking complicated is that?
…getting angrier and angrier about all this because it is becoming more and more of a joke…
Michael C:
That would work great! Except for two things.
(A) Nobody wants to live in Detroit. Or the rest of Michigan, for that matter. It doesn’t matter if the price is seven digits or five, people gotta leave. So after “Kick them out” all you have left is refugees and empty houses. Oh, and bankrupt bagholders who have pissed off a lot of refugees by evicting them.
(B) Nobody wants to rent a 2nd-mortgage investment home in Irvine for $3500/month when they can buy the same house out of foreclosure for $1400/month. The math just doesn’t work. So all the people in SoCal (and the CA central valley, and Phoenix, and Denver) who bought the bubble thinking they were buying rental property are fucked.
If you want a quick laugh, see if you can find a 12-month history of sale prices for homes in Merced, CA.