Obama quietly funding principal reduction

The Treasury Department will divide the $1.5 billion in assistance programs among those states and Arizona, California and Michigan. (Editor’s Note: That is about .01% of what is required. And the method need not be by issuing MORE MONEY. The method is to let the loss fall on the banks and let the targeted victims — investors and homeowner/borrowers arrive at direct settlements of this mess — cutting out the banks altogether)

The news supposedly is that there was a slight drop in the number of people falling behind on their mortgages. This small blip is supposed to mean something but it doesn’t. We are still headed for another crash in home values, which will echo through our economy and throughout the world.
Like it or not most of our wealth was tied up in housing. Wall Street spotted this and being the predators they have come to be, they pounced and took it. Clawing it back is logistically simple but politically impossible right now because the elected representatives respond to the banks who “own the place” as Senator Dick Durbin said.
As Elizabeth Warren has repeatedly said, echoing the comments of Paul Volcker and others who have the interests of our nation at heart, both problem and the solution is ridiculously simple. We just can’t seem to summon the will to get them together.
So here is my suggestion: STOP listening to anyone in government or the media. START getting your own information from the internet and government sites. START finding alternative news sources from the left and the right side of the political spectrum and START getting practical. That means START getting mad and START acting on it — not in violence but visibly in the streets, in the corridors of power and in your gatherings of your family and friends.
February 20, 2010

Fewer People Late Paying Mortgage

Even as the Obama administration stepped up efforts to aid homeowners facing foreclosure, data released Friday indicated that the housing crisis might finally have stopped getting worse.

The number of homeowners falling behind on their mortgage payments almost always rises with the start of winter. But late last year, the total fell slightly, the Mortgage Bankers Association said in its quarterly delinquency report.

“We’ve got fewer new problems coming into the system,” Jay Brinkmann, the group’s chief economist, said in a briefing. The improvement in the fourth quarter, he added, “frankly surprised us.”

The system, however, is still overwhelmed with millions of distressed homeowners. In a series of events in the Las Vegas area on Friday, President Obama said he was designating $1.5 billion from the Troubled Asset Relief Program to develop assistance programs in five of the most troubled states, including Nevada.

The money will go to state housing finance agencies, which are being told to use it in innovative ways. The administration has not ruled out using some of the money to write down the loan amounts for underwater borrowers, though $1.5 billion would not go far for that purpose.

The housing market is at a difficult juncture. Last summer’s modest recovery in home prices has apparently ceased. The government’s effort to compel lenders to modify troubled mortgages has done relatively little. And the pool of pending foreclosures is so large that it is likely to be a drag on the market for years.

About one in seven homeowners with a mortgage is struggling to pay it, an unprecedented level of distress that threatens to undermine the fragile economic recovery.

The Obama administration has been under pressure to take more drastic steps, including developing programs that would cut the mortgage balance for distressed owners. Any such program that used taxpayer dollars could prove highly controversial, but Friday’s announcement seemed to open the door, at least slightly.

“This fund’s going to help out-of-work homeowners avoid preventable foreclosures,” Mr. Obama told a public forum in Henderson, Nev. “It will help homeowners who owe more than their homes are worth find a way to pay their mortgages that works for both the borrowers and the lenders alike.”

The administration is consciously leaving details of the new program to state agencies that are closest to the problem.

The mortgage bankers’ group defines its broadest delinquency category as those who have missed at least one payment but are not yet in foreclosure. That number fell to a seasonally adjusted rate of 9.47 percent in the fourth quarter, down from 9.64 percent in the third quarter.

Much of the improvement was because of a drop in the mildest category of default, those who have missed only one payment. The bankers said that only three times before in the history of their survey, which began in 1953, had the 30-day delinquency rate dropped from the third quarter to the fourth quarter, and never by this magnitude.

Mr. Brinkmann credited a stabilizing employment picture for the decline. If the normal seasonal patterns hold in the first quarter, he said, the rate should continue to fall.

Any celebration would likely be premature, however. A report this week from the credit bureau TransUnion measured a group of slightly more stressed owners and found less hopeful news.

Owners who missed two payments increased to 6.89 percent in the fourth quarter, from 6.25 percent in the third quarter, TransUnion said.

“We definitely saw things getting worse,” said F. J. Guarrera, TransUnion’s vice president for financial services. “Our forecasters are projecting it will now take longer for us to emerge from the housing crisis.”

The bankers’ data showed the number of owners missing at least three payments was up significantly. By that point, foreclosure is often inevitable.

The number of owners in this category rose in the quarter, to 9.67 percent, from 8.85 percent. Since the fourth quarter of 2008, the number of seriously delinquent owners has risen by half.

The percentage of loans in foreclosure went up in the fourth quarter, rising to 4.58 percent from 4.47 percent in the third quarter, the Mortgage Bankers said. In the fourth quarter of 2008, the rate was 3.30.

Banks have been reluctant to proceed to full foreclosure with many of their seriously delinquent borrowers. In some cases, this is to give the borrowers a chance to win a modification. Critics say another factor is that banks do not want to acknowledge on their balance sheets the loss that foreclosure brings.

This supply of distressed properties, often called the “shadow inventory,” will eventually need to be cleared. A report this week from Standard & Poor’s estimated it would take three years for all the delinquent loans to make their way through the process at their current rate of liquidation.

These foreclosures will continue to push prices down, which would be good for new buyers but could also push more owners further underwater and perhaps encourage them to abandon their properties.

“While the bulk of the problem has presented itself, there is still a universe out there we have to deal with,” said Diane Westerback, an S.& P. managing director.

By far the states with the highest percentage of delinquencies are Florida and Nevada, where one out of four homeowners with a mortgage is behind.

The Treasury Department will divide the $1.5 billion in assistance programs among those states and Arizona, California and Michigan. (Editor’s Note: That is about .01% of what is required. And the method need not be by issuing MORE MONEY. The method is to let the loss fall on the banks and let the targeted victims — investors and homeowner/borrowers arrive at direct settlements of this mess — cutting out the banks altogether)

11 Responses

  1. Very interesting your blog, I have come through a link on another and you have a very good material and well written. A Kiss

  2. OMG… People, our US democracy don’t looks like it seems to function so well lately. Sometimes i wonder if european or communist countries are laughing the the US. We are starting to become like a third world country nowadays …

  3. Indy Mac has no incentive to do principle reduction loan mods. Good luck if you are going to try one.

  4. I for one would like to know what makes Arizona, CA & Michigan so special. That is the real story here. Exactly what is the criteria. And if as stated this amounts to only %1 of what is required, why is the American Taxpayers money being wasted, when so many around this country are out of work or underemployed due to the CRA & the subsequent MBS fraud.

    No doubt this is being done “quietly”, since it reeks of being “politically motivated” to me. Lets see,what elected radicals with their hands dirty up to the elbows in the sub-prime mess in each of these states is in danger of not being re-elected in November.

    This need’s to be de-railed immediately with calls, faxes, e-mails etc to all elected officials. It is either effective relief for all or none! In fact until the banks, hedge funds and investors take the hit they deserve things will only get worse.

  5. By Zachary A. Goldfarb
    Washington Post Staff Writer
    Saturday, January 24, 2009

    Freddie Mac disclosed yesterday that it would ask for up to $35 billion in additional taxpayer dollars, eating up roughly half of the funds the government has pledged to keep the mortgage giant on firm financial footing.

    This I just saw in above paper.
    I do not articulate politics and money well, I guess many in my situation don’t or would not be here. I sit here with my heart pounding anxious, the country is like this vast planet in outer space, completely unfamiliar.

    In NJ for example they are pushing this “Facilitated Foreclosure” Mediation, I really don’t know how many people fall, I mean go for this, I was so afraid they would make me go. Everytime some NEW big disaster happens in our US the magician and his clever distractions refocusing our trance. Did every body forget about the what is it NO CEILING limit on Fred and Fannie and their kid what’s her face, like some crazy $450,000 billion to go to them. Why hmm just another way for the Govt. to end up with control of private property. I am not a conspiracy theorist, and feel a little crazy even talking about this, but I think there are American’s who are out there spiking the koolaide before they drink it.

    I don’t know where people here are on this, but I and trying my absolute best to fight off the wolves myself, but only because I can’t afford an attorney. I don’t think it takes much energy for them to just ignore the motions one files. It is so draining, if everyone faught do you think it would be easier? Or is the Judicial system siding with the Koolaide Klub? There isn’t that much money in the Treasurey, it is funny money.

    I have this little theory, everytime I come up with one of these crazy feelings I say, no that is too out there.
    I think a possible scenario is that there have been mortgages that have truly been moved around from
    refinance little to no cash out, from bank to bank no actual money trading hands, the “lender” “pays off” the balance due to the previous lender “the servicer gets paid monthly, until the homeowner can’t pay anymore, and the paper,(the worthless mortgage) gets tossed into the deep end of the pool, and then investers throw their money to the trust or whom ever is holds that position, eventually a buyer comes along and buys out the loans maybe some, maybe all, and the whole thing starts over, the big Lenders never having to put any money out but bringing in the bucks, in this or similar scenario. I have looked back and I don’t see any paperwork, figures don’t match with a company like Countrywide, they were going to lose all that money anyway when they had to pay off so many in court. No one could ever know for sure because there is no accounting on many curves in the road. I don’t know this, it is just one theory that seems to pop out when the details all jump out at me like one of those fake snakes that pop out to surprise you.

    What I can say for sure is that everytime I think I have the law on my side, I get pressured from another direction and before you know it, I have spent weeks and weeks on something no one is going to even read.

    Still I try to hold on and not give in, to the end. It will only be a matter of perfect timing that helps me to win.

    In my case a modification is a disguise for legalizing the illegal. do I just have an active imagination?

  6. Is it really possible that these entities cannot take the loss on their own? At least in the many instances when any wrongful or illegal actions took place on their part. How can we accept them getting away with this behaviour and continuing to do so as we go onward.

    Looking the other way is getting a lot of practice in NJ.

    I don’t mean it is wrong for some help for those who will not survive with out. However there are intentional deceptions that apparently after we all getting so good at looking the other way, there are still some sneaky things going on out there. If they pay for these actions they may learn to handle business in better ways.

  7. Does anyone know about IndyMac (under FDIC receivership) and the quality of loan modifications to include principal reductions?

  8. LA Dodger:

    Please!!!! find something real/positive to do, will you?

  9. LA Dodger – enough already!!

  10. Here is a real way to get principle reduction…

    Bankruptcy Court OKs Mortgage Cramdown on Primary Residence…

    February 16, 2010

    In re: Bradsher, Case No. 09-80942, USBC M.D. N.C., Durham Division


  11. LA Dodger – enough already.

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