THINK ABOUT OUR CHILDRENS’ VIEW AND WHAT WE ARE TEACHING THEM

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downward mobility is not just a scary sound bite. It’s a real possibility.” Samuelson

EDITOR’S COMMENT: The largest impact is on the children. Our children — expecting and needing their parents to protect, provide and nourish them to adulthood with good values and commitment to our society — are being systematically undermined by our actions and inactions.

If you look at the numbers that everyone agrees are valid, there are some 100 million Americans who are in unworkable situations in which they are stressed out beyond reason, with no help from government, friends or family all of whom are virtually bankrupt. Children coming into this world are presented with hopeless parents who have little other than spiritual faith (if that) to get them through the day, with no time for parenting, nurturing, guiding and teaching.

In a world of progress, life is driven by hope and optimism, creativity and ambition. At the moment virtually every part of our society is under pressure, undermining any possibility that the parents will communicate hope, ambition, morality, creativity or optimism. The number of economically driven suicides is skyrocketing as you have seen on these pages and those of other bloggers and media. For every person who commits suicide there are probably hundreds who are thinking about it rather than face the prospect of admitting to their spouse and children that the situation is dire.

I hope there is enough hope left in this country that we will insist on restoring normal discourse and practical problem solving. Failing that, what will our world and the world of our children’s children look like when it is driven by depressed, unambitious people whose creativity and drive was stomped out of them when they were developing as children? If I may paraphrase a statement from Golda Meier: this will change when we care more about our grandchildren than we do about our grandfathers. Every step we take should be toward the goal of producing a brighter future together, and every attempt to divide us in that endeavor should be met with total rejection.

Robert J. Samuelson
Robert J. Samuelson
Opinion Writer for Washington Post

Why our children’s future no longer looks so bright

By , Published: October 16

Aspecter haunts America: downward mobility. Every generation, we believe, should live better than its predecessor. By and large, Americans still embrace that promise. A Pew survey earlier this year found that 48 percent of respondents felt that their children’s living standards would exceed their own. Although that’s down from 61 percent in 2002, it’s on a par with the mid-1990s. But these expectations could be dashed. For young Americans, the future could be dimmer.

Along with jobs, the 2012 presidential election could be fought over this issue. “Can the Middle Class Be Saved?” worried a recent cover story in the Atlantic. Pessimism rises with schooling. In the Pew poll, 54 percent of respondents with a high-school diploma or less felt their children would do better; only 35 percent of graduate school alums agreed. “A kind of depression has set in,” writes Washington Post columnist Richard Cohen. “We’ve lost our mojo, our groove.”

Robert J. Samuelson

Samuelson writes a weekly economics column.

It can be argued that all this glumness repeats a historical error: projecting the present onto the future. Just because the economy is rotten today doesn’t mean that it will always be. After World War II, the Nobel Prize-winning economist Robert Fogel has recalled, there was widespread “alarm about massive unemployment.” Eleven million veterans and 9 million defense industry workers had to be re-employed. People feared a new Depression. It didn’t happen, because pent-up demand for homes, cars and appliances fueled a hiring boom.

Unfortunately, this caveat is only half relevant now. Our future would certainly be brighter if the economy resumed strong growth, but that wouldn’t automatically ensure higher living standards. A society generates those through productivity — increases in efficiency, technology or business organization that lower costs or enable firms to pay higher wages. Without higher productivity, broad living standards won’t rise. But even with it, the young may not enjoy gains.

The explanation is that productivity improvements have already been committed to demographic trends we can’t alter (aging) or problems we haven’t addressed (runaway health costs, deteriorating infrastructure). Future productivity and income gains will be diverted to these uses: higher taxes to pay for an older population; health spending; and taxes and fees to repair roads, schools and water systems.

It’s already happening. “A decade of health care cost growth has wiped out real income gains for an average U.S. family,” report two Rand Corp. researchers in the journal Health Affairs. From 1999 to 2009, total compensation of a typical four-member family with employer-paid health insurance rose by $23,000. About 95 percent of this (almost $22,000) went to inflation and health care, including employer costs, family premiums, out-of-pocket payments and taxes. For most families, higher costs didn’t deliver parallel benefits. The reason: Health spending is concentrated; the sickest 5 percent account for half the total.

Meanwhile, spendable incomes — what people consider their living standards — stagnate. The squeeze will continue. In 1990, there were 32 million Americans 65 and over; by 2040, that’s reckoned at 80 million. Rising costs for Social Security and Medicare have created a new political dynamic: If benefits for the elderly aren’t cut, burdens on the young will go up. Decaying infrastructure poses similar choices. Either pay for repairs or tolerate substandard roads and dilapidated schools.

Our children’s futures have been heavily mortgaged. That’s true even if the economy returns in a few years to “full employment” (say, 5 percent unemployment) and past productivity gains (about 1.7 percent annually since 1966) continue. If today’s weak recovery persists, the outlook darkens. Unemployment will remain high, say 7 percent to 9 percent. Wage increases will remain depressed. Young workers will have trouble finding jobs to develop the skills and contacts that lead to better jobs. Productivity growth might falter.

America is a competitive society. It’s not guaranteed that children achieve their parents’ relative economic status: The children of parents in the richest 20 percent won’t automatically stay in the richest 20 percent. Some children advance; some fall. But if overall incomes are rising, even those who don’t advance relatively often have higher absolute incomes than their parents. Studies by the Pew Economic Mobility Project confirm this. Two-thirds of Americans have higher incomes than their parents; half of those either ranked in the same spot of the economic distribution as their parents or lower.

Generational gains tempered individual setbacks. We may now lose this comforting cushion. Our leaders might try to avoid that by boosting economic growth, controlling health spending and trimming benefits for the elderly. But we aren’t sure how to do the first and lack the political will to do the second and third. The future is never entirely predictable, but downward mobility is not just a scary sound bite. It’s a real possibility.

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THE PROBLEM WITH PRINCIPAL “REDUCTION” VS PRINCIPAL “CORRECTION”

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While Wall Street has us all thinking that this is so complicated that it can never be unraveled, the reverse is true. If the homeowner was the victim of a crime or misfeasance or malfeasance, then the homeowner has every right to restitution and redress of his grievances. If the homeowner was treated fairly and there were no material violations of the Federal and state lending laws, then there is no restitution or redress, because nothing bad happened. Anyone opposed to this plan of action is taking a position against our centuries old system of common law, statutes and procedural due process.” — Neil Garfield

The problem is that the Courts are looking at policy instead of legal precedent. The pretender lenders are doing everything they can, and doing it successfully, to make sure that the Court never considers or hears the factual question of whether the homeowner was harmed by a wrongful act committed by some or all of the people at the closing of the loan. This isn’t magic or rocket science. If the wrongful act occurred we all know that the law requires the wrongful actor to be punished and the victim is to be made as whole as possible given the reality of the circumstances.” — Neil Garfield

EDITOR’S ANALYSIS: The Washington Post editorial below hits the nail on the head as to the political and legal problems associated with principal REDUCTION. Where does it end? The current plan being discussed is too little, too late and carries political liability equivalent to a third rail. It also is probably not legal.

And THAT is why words make all the difference. Principal REDUCTION stands for the proposition that we are going to arbitrarily pick a number of people and reduce the balances due on the amount demanded, as evidenced by the promissory note. I see nothing but problems in such an approach. The principal problem is that it does not address WHY lowering the obligation from the amount stated on the promissory note is necessary or proper?

On the other hand principal CORRECTION stands for the proposition that the amount demanded is not the right amount and that we are going to correct it to  assure that it matches up with reality. There is no arbitrary or political decision necessary. The only basis for doing it would be that the amount stated on the note is wrong, or was procured by fraud, or some other long-standing legally recognized doctrine of law in which the borrower is the victim who has suffered damages that require redress.

If the Obama administration wants to propose a program of principal correction, it can do so by rule or regulation, just as the Federal Reserve can do in Reg Z. Given the fact that table-funded loans (i.e., all securitized loans for practical purposes) are improper and that the appraisals were false along with other violations of underwriting standards relied upon by homeowners and investors, they only need to state that upon proof of one or more of the violations of the consumer’s rights to disclosure and fairness, the terms of the obligation shall be adjusted to reflect terms of the transaction proposed to the borrower at the time of closing as opposed to the deal claimed by the pretender lender now.

If the mortgage is legally invalid and requires reformation or a substitute to make it valid, then the party seeking protection under the terms of the alleged mortgage must negotiate terms with the homeowner, same as any other case where such things have happened.

As in all other cases where such things have occurred before the latest mortgage foreclosure rampage, these things are self-evident if taken on a case by case basis. In some cases, the property will be foreclosed by a party who is in fact the creditor and has the right to do so. In other cases there will be adjustments to the terms of the obligation which might include a correction of principal (where the appraisal was inflated), interest rate (where the rate was not properly disclosed), term where the “reset” was not properly disclosed etc.

While Wall Street has us all thinking that this is so complicated that it can never be unraveled, the reverse is true. If the homeowner was the victim of a crime or misfeasance or malfeasance, then the homeowner has every right to restitution and redress of his grievances. If the homeowner was treated fairly and there were no material violations of the Federal and state lending laws, then there is no restitution or redress, because nothing bad happened. Anyone opposed to this plan of action is taking a position against our centuries old system of common law, statutes and procedural due process.

The problem is that the Courts are looking at policy instead of legal precedent. The pretender lenders are doing everything they can, and doing it successfully, to make sure that the Court never considers or hears the factual question of whether the homeowner was harmed by a wrongful act committed by some or all of the people at the closing of the loan. This isn’t magic or rocket science. If the wrongful act occurred we all know that the law requires the wrongful actor to be punished and the victim to be made as whole as possible given the reality of the circumstances.

LLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLL

A questionable plan to aid underwater homeowners

THE U.S. ECONOMY can’t truly recover until the housing market revives. Yet recent data indicate that prices, already off an average of 30 percent from their peak in 2006, have still not touched bottom. Lending conditions are tight, and mortgage rates are ticking up again. Nearly a quarter of mortgage borrowers are “underwater,” owing more than their houses are worth. Massive federal assistance – $1 trillion in Federal Reserve mortgage-bond purchases; dramatic expansion of Federal Housing Administration (FHA) loans; an Obama administration push to modify existing home loans – has slowed the collapse but not, apparently, ended it.

What more, if anything, should be done? The latest administration idea is to use the two government-controlled mortgage-finance firms, Fannie Mae and Freddie Mac, to help underwater borrowers. Under the plan, Fannie and Freddie, which back about half of all U.S. home loans, would identify creditworthy borrowers who are underwater but still current on their payments – and then turn their loans over to the FHA, which would refinance them in return for a write-off of at least 10 percent of the unpaid principal balance. Though the administration notes that this is no panacea, officials argue it could make a significant difference to between 500,000 and 1.5 million borrowers, reducing their debt and their risk of eventual foreclosure. Fannie and Freddie would absorb losses from the principal writedown, but proponents of the plan argue that Fannie and Freddie would be even worse off if foreclosures occur later – and the Treasury, which is covering the two entities’ losses, would be on the hook either way.

The entities and their regulator, the Federal Housing Finance Agency (FHFA), are cool to the idea. In addition to the threat to Fannie and Freddie’s already disastrous bottom lines, an obvious drawback is moral hazard: If government starts paying off some people’s debt principal, what’s to stop others from demanding the same break? Preventing moral hazard, of course, limits any plan’s impact. Previous loan-modification efforts also have attempted to target that elusive cohort of distressed-but-capable borrowers, with disappointing results. Analysts at Credit Suisse recently described the potential benefits of the administration plan as “more symbolic and psychological than fundamental.”

Republicans in Congress have started to push back as well. On Monday, the incoming chairman of the House subcommittee that oversees Fannie and Freddie, Rep. Randy Neugebauer (R-Tex.), published a letter to FHFA noting that “the program targets performing loans” and asking “why it would be in the best interest of the U.S. taxpayer for Fannie and Freddie to write down principal on these types of loans.”

Mr. Neugebauer wants a public report detailing the potential costs of the program. More transparency might be a good idea before Fannie and Freddie proceed. Given the mixed results of past loan-modification schemes, a formal public statement of the potential costs and benefits of the latest one doesn’t seem too much to ask.

“Mere” Technicalities? OR Gross Malfeasance

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“… maybe the crisis will make the banks realize that they ought to be doing fewer foreclosures and more loan modifications — sensible adjustments that allow deserving families to stay in their homes. And if this happens, we’ll have the lawyers to thank.

“These may be technicalities, but there’s nothing mere about them. For one thing, if borrowers are expected to play by the rules, lenders should be expected to do the same. For another, there can’t be a functioning real estate market without the ability to establish clear title. Lawyers probing this aspect of the foreclosure crisis are doing the system a favor.

“Sharp-eyed attorneys, representing delinquent homeowners, have unearthed cases in which high-volume “robo-signers” submitted affidavits attesting that they reviewed all the loan files personally — when, in fact, they had not. This is just the sort of thing that puts judges in a really bad mood.

Lawyers got it right on the foreclosure mess

Homeowners facing foreclosure protest outside a J.P. Morgan Chase Bank in Oakland, Calif., in July.

by Eugene Robinson, Washington Post
Homeowners facing foreclosure protest outside a J.P. Morgan Chase Bank in Oakland, Calif., in July. (Paul Sakuma/associated Press)
Don’t blame the lawyers. The crisis over faulty or fraudulent paperwork in mortgage foreclosures — which is either a big deal or a humongous deal, depending on which experts you believe — is the fault of arrogant, greedy lenders who played fast and loose with the basic property rights of homeowners.Banks and other lenders, it seems, made statements in courts of law that turned out not to be true. Because judges have such an underdeveloped sense of humor when it comes to prevarication, this mess may be with us for a while. 

The mortgage industry would love to blame the whole thing on predatory, opportunistic lawyers who are seizing on mere technicalities to forestall untold numbers of foreclosures that should legitimately proceed. The bankers are right when they complain that the delays are gumming up the housing market, as potential buyers for soon-to-be-foreclosed properties are forced to bide their time until all the questions about documentation and proper title are answered.

But it’s the bankers’ fault that there are so many instances of foreclosure documentation with legal loopholes big enough to drive a moving van through. During the years of the real estate boom, lenders cut corners with paperwork to make as many loans — and sell them to other lenders, which often sliced and diced them into securities that were then sold to investors — as quickly as possible. This haste and inattention to detail, now coming to light, are partly responsible for the current crisis.

Laws vary from state to state, but all accept the principle that borrowers who fail to meet the contractual obligation to pay their mortgages can be subject to foreclosure and eviction. The process is devastating for families and for neighborhoods. In many cases, I believe, all parties would be better off if some way could be found to avoid foreclosure — modifying the terms of the loan, say, by lowering the interest rate or even reducing the principal to reflect the fall in housing prices. I recognize, however, that there are many other cases in which foreclosure is the preferable option or perhaps the only option.

But it’s also necessary that the mortgage holder have the legal right to foreclose. Anyone who has ever bought a house is familiar with the inches-thick stack of documents that have to be signed, sealed, initialed and notarized. It turns out that financial institutions often didn’t dot every “i” or cross every “t” — meaning that in some cases, it may not be clear that the nominal mortgage holder has the clear and undisputed right to take possession of the property.

These may be technicalities, but there’s nothing mere about them. For one thing, if borrowers are expected to play by the rules, lenders should be expected to do the same. For another, there can’t be a functioning real estate market without the ability to establish clear title. Lawyers probing this aspect of the foreclosure crisis are doing the system a favor.

The other big problem is that lenders have been processing foreclosures with assembly-line speed, eliminating delay wherever possible — sometimes substituting electronic signatures for the ink-on-paper kind, for example. In the information age, some of this qualifies as sensible streamlining. But what doesn’t make sense is moving the foreclosure documents along so quickly, and in such overwhelming volume, that the people signing them — whether by computer or quill pen — couldn’t possibly have time to read them. We now know that some individuals, working as processors, have been signing off on up to 10,000 foreclosure documents a month.

In 23 states, every foreclosure must involve a court hearing. Sharp-eyed attorneys, representing delinquent homeowners, have unearthed cases in which high-volume “robo-signers” submitted affidavits attesting that they reviewed all the loan files personally — when, in fact, they had not. This is just the sort of thing that puts judges in a really bad mood.

The Obama administration has declined to call for an official moratorium on foreclosures. This is understandable: In most cases a moratorium would just delay the inevitable, while impeding any momentum the housing market might otherwise be able to build.

But maybe the crisis will make the banks realize that they ought to be doing fewer foreclosures and more loan modifications — sensible adjustments that allow deserving families to stay in their homes. And if this happens, we’ll have the lawyers to thank.

eugenerobinson@washpost.com

Mortgage Meltdown: State and Local Action Could Save Everyone

 

  • By slowing down the progression of foreclosures in the courts, judicial sales and bankruptcies, states can effectively bring the fall of housing to a point of equilibrium where at least the opportunity will arise for recovery. It is distinctly possible, particularly with the effect of inflation and devaluation of the dollar, that the numbers can work out even without a strong market. 
  • Borrowers, lenders, investment bankers and owners of CMOs might breathe a sigh of relief in a few years if they cooperate in these procedural mechanisms designed to slow down foreclosures. Kudos to Philadelphia Sheriff John Green who took the stand. That’s not just politics, it is courage. 
  • And it’s not socialism, it is reality: those people who would oppose these measures are arguing against their own interests. These measures are what Government is for — to step in and NOT let the the fabric of society get ripped apart and by the way, to prevent the precipitous decline in YOUR equity in YOUR home even though YOU are not in foreclosure. Do you really think that this mortgage meltdown is not going to cost YOU?
Philadelphia suspends sales of foreclosed homes (more socialism will fix it).

Reuters ^ | March 28th, 2008 | Jon Hurdle 

Posted on March 31, 2008 6:50:08 AM MST by 2banana

PHILADELPHIA (Reuters) – Authorities in Philadelphia will suspend foreclosure sales of homes whose owners have fallen behind on adjustable-rate subprime loan payments — potential relief for tens of thousands of struggling debtors.

Sheriff John Green said on Friday he would halt sales of foreclosed properties in April and would seek a court order extending a moratorium for an unspecified period.

His action follows a nonbinding resolution passed unanimously by the Philadelphia City Council on Thursday calling on Green to stop the sales to give borrowers more time to seek a settlement that would prevent them from losing their homes.

Philadelphia becomes the first U.S. city to halt foreclosure sales in the current crisis, although Cleveland and Baltimore are considering similar measures, said ACORN, an advocacy group for low-income families.

The group said 45,470 subprime foreclosures are expected in Pennsylvania between the third quarter of 2007 and the end of 2009.

Green, the sheriff of Philadelphia city and county, is trying to identify and track homeowners with weak credit histories who took out the loans with initially low repayments but who are no longer able to afford them because their rates have adjusted sharply higher.

Such loans are expected to lead to a flood of foreclosures throughout the United States this year, and have led to severe losses among financial firms trading in securities backed by the mortgages. ACORN estimates 2.2 million mortgage loans will go into foreclosure in 2008 due to the subprime crisis.

“Given the severity and complexity of mortgage foreclosures, a moratorium will allow for more time to identify and help distressed home owners,” Green said in a statement.

  • There is a most interesting by-product of all this is that the refusal of the Federal Government to get involved in the remedy to a problem that was created by intentional non-regulation and non-enforcement at the Federal level: 
  • States are rediscovering their power, their rights and their obligations. The fact is that the Federal government cannot be be trusted (or at least IS not trusted) by most participants in the mortgage meltdown. 
  • The unintended consequence of the mortgage meltdown, which adds to the Katrina fall-out is that states will take action on their own and that they might form regional unions through agreements that will look very much like treaties between sovereign nations.

 

 

States Tackle Foreclosures In Absence of Federal Help

By Dina ElBoghdady and Renae Merle
Washington Post Staff Writers
Wednesday, April 16, 2008; A01

 

This month alone, Philadelphia‘s sheriff delayed foreclosure auctions of 759 homes at the city council’s urging. Maryland extended the time it takes to complete a foreclosure. State leaders in Ohio recruited more than 1,000 lawyers to aid distressed borrowers.

Frustrated by the slow pace of federal action on behalf of struggling homeowners, some states and cities have struck out on their own to stem an alarming rise in foreclosures that has depressed home prices in most parts of the country and eroded local governments’ revenues as property taxes and utility bills go unpaid.

Nine states have committed more than $450 million to “loan funds” aimed at refinancing the mortgages of at-risk borrowers, according to a study by the Pew Charitable Trusts. A handful have brokered deals with major lenders who have pledged to ease terms for some troubled loans. A few states have lengthened the time it takes to complete a foreclosure.

“What the states are saying is: ‘We can’t wait any longer for the federal government. We have to get ahead of this,’ ” said Tobi Walker, a senior officer at the Pew Charitable Trusts. “The states are experiencing this pain more directly than the federal government is.”

 

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