The federal government recently figured out what mortgage experts (like us) have been telling them since they put taxpayers on the hook for FNMA & FHLMC – appraised values don’t matter when refinancing upside down homes!

Way back on February 18, 2009 when Obama’s announced his Home Affordable Refinance Program (HARP) and bragged it would help 4 to 5 million homeowners lower their payments to make them more affordable, we wrote the following in a post titled, “The Obama Housing-O-Rama, get Your Tickets Now!”:

“IT DOESN”T GO FAR ENOUGH! As I’ve been writing since October of last year, they need to just do away with appraisals altogether on no cashout refinances. HELP homeowners lower their payments and they’ll be more likely to stay as they have to live somewhere. If they can rent a comparable home cheaper than they’re paying to own, it makes more sense for them to walk-away and many more will.”

Over two and a half years later, we’ve been proven right.  A very shallow victory as no one’s talking about how many foreclosures could have been avoided if HARP had been launched as we recommended.

Before you get all excited and rush out to contact a lender to refinance your underwater home, you should know about the program limitations:

• Your mortgage must have been in effect prior to May 31, 2009.
• You’re only allowed one 30 day late payment on the mortgage in the 12 months preceding a refinance.
• You can’t have any late payments on the mortgage in the 6 months preceding a refinance.
• The program has been extended until December 31, 2013.
• You can read the entire FHFA press release here.

Oh, and the program probably won’t be available until the end of December or January.

One more important fact that many people are misunderstanding – appraisals have not unilaterally been done away with.  The new guidelines still require an appraisal if an acceptable Automated Valuation Model (AVM) is not available from FNMA or FHLMC.  We’ll comment more on this later.
Separating Truth from Political Hype

First, let’s start out by stating that it’s better late than never. 

This HARP 2.0, as many are calling it, will help many families save a few extra bucks each month on their homes, lowering the chances of them letting their home go to foreclosure in the future.

Now let’s look at some issues we have with the program and the political hype.

HARP is a DUD:  Overall the HARP program has not been the success Obama bragged it would be.  When HARP was first announced the political hype claimed 3-4 million homeowners would be helped.  To date, only around 900,000 upside down homeowners have benefited from the program.  This graph is right from the FHFA press release:

It’s obvious that HARP refinances have made up less than 10% of all FNMA/FHLMC refinances.

Big Banks Don’t Care:  One of the big reasons for so few refinances is that lenders don’t have to participate and offer the program to their mortgage borrowers.  The To-Big-To-Fail-Banks, Bank of America, Chase, Citi & Wells Fargo being the 4 largest, have not embraced HARP.  Wells Fargo for instance, will not refinance anyone with an LTV over 105%.

Income Proof Still Required:  We feel the second biggest reason is that a large percentage of homeowners can’t show enough income to qualify for a refinance of any kind.  HARP 2.0 should have removed this roadblock also.  

The argument that it doesn’t matter how upside down a borrower is in their home to justify waiving LTV as a refinance requirement, can also be used to justify waiving income requirements.  If the borrower is making their payments on time, who cares about their income! 

This requirement is even more perplexing as FNMA & FHLMC both had No Income Verification (NIV) programs for several years that were terminated with the Mortgage Meltdown.  How many NIV mortgages did they make that aren’t eligible for HARP because the borrowers can’t prove their income?  How many homeowners that proved their income when they got their existing mortgage, can no longer do so because of the economy?

Risk Premiums Raise Refinance Mortgage Rates:  The original version of HARP, while allowing refinances up to 125% of appraised value, penalized homeowners for being upside down by charging them higher mortgage rates.  For many upside down homeowners, the rate penalty took away any incentive to refinance.   Many phone calls to lenders went something like this: “Mr. Homeowner, your current rate is 6.5% but current rates are 5.75%.  If we add the risk hit because you’re upside down though, you’re only eligible to refinance at 6.25%”. 

Traditionally, higher risk has always meant higher interest rates – just look at junk bond rates.  What never made sense is with HARP is that FNMA & FHLMC already own the upside down debt, so what additional risk did they have on the refinanced mortgage? 

Chalk this one up to the syndrome of, “this is the way we’ve always done it”, and no one involved being smart enough to ask why!  When HARP 2.0 was announced the government indicated the risk pricing will be lowered.  It should really be just done away with altogether.

One-Shot at Refinancing:  Most people don’t fully understand the HARP requirement that to be eligible, the mortgage being refinanced MUST have been originated prior to May 31, 2009.  What this means is that any upside down homeowner that’s already refinanced cannot do so again.  Not only have mortgage rates dropped significantly since HARP started, think of all the upside down homeowners that were penalized by the HARP interest rate risk premium!  This limitation should really be removed in our opinion.

Stumbling over Second Mortgages:  HARP doesn’t care about 2^nd mortgages, but try telling that to 2^nd mortgage lenders.  HARP 1.0 only looked at an upside down homeowner’s first mortgage balance for the 125% LTV limit.  HARP 1.0 didn’t care if there was a 2^nd mortgage or how much was owed on it.  The problem was that the 2^nd mortgage lenders had to agree to subordinate their 2^nd mortgage to the new HARP refinance mortgage – and many didn’t care to do so.  So, many eligible HARP refinances weren’t done because 2^nd mortgage lenders either charged exorbitant subordination fees, took forever to do the subordination paperwork or just had a policy against subordinating their 2^nd mortgages if the homeowner was upside down.  HARP 2.0 still doesn’t address this issue so it will continue to thwart hundreds of thousands of upside homeowners from taking advantage of the program.

What’s sad is that this goes back to the ignorant mindset of, “this is the way we’ve always done it.”  Allowing an upside down homeowner to refinance and lower the payment on their 1^st mortgage, will free up money in that homeowner’s budget each month.  That additional money will make it easier and more likely that the homeowner will be able to make their 2^nd mortgage payment – lowering the risk of default to the 2^nd lender!  So, by not embracing HARP and aggressively subordinating, 2^nd lenders are being extremely short-sighted, if not stupid.

Worse-case, if we were a 2^nd mortgage lender solicited for a subordination to a HARP refinance, we would require the upside down homeowner to put some of the monthly savings from the 1^st refinance towards paying off their 2^nd mortgage faster.  This would require some type of modification agreement, but would make a lot of sense.

Private Mortgage Insurance:  This is another hurdle for many upside down homeowners taking advantage of HARP.  In theory, if you’ve got PMI on your mortgage the mortgage insurance company is supposed to reissue a new certificate for the HARP refinance.  In reality, the process is difficult and takes far too long.  Rate locks are often blown, application documents become stale and homeowners and mortgage originators just get frustrated and quit the refinance process.

Again this makes no sense as lower mortgage payments mean less likelihood of a mortgage default, which means less insurance payouts/losses for the mortgage insurance companies.

NOTE: the recent insolvency of the mortgage insurer PMI, means even more delays and frustrations for those looking to refinance using HARP.  Read more about this at our blog post, “Another Bailout Fiasco on the Way.”

All these hurdles to a more successful HARP program, that should be obvious to any mortgage expert, beg the question of why aren’t they being addressed.

As we pointed out above several times, there’s a severe issue with the mindset of “this is the way we’ve always done it.”  Our government is so big and complicated now, that no one is really fully in control.  Even the best politicians and bureaucrats are just “cat-herders”.  This is not an acceptable excuse.  What it leads to is special interests and big business taking advantage of the system.  And that is what’s stopping changes to HARP to make it more effective.

The To-Big-To-Fail on Wall Street don’t really want homeowners to refinance.  Same goes for the bureaucrats running FNMA and FHLMC.  Accounting standards allow lenders to book profits NOW on FUTURE loan payments.  So, all the existing mortgages have already been booked on some lenders profit & loss statement.  What do you think happens when a mortgage is paid off early?  The lender has to make an adjustment and take a hit to their earnings.  Even if they get the homeowner to refinance with them and put the new mortgage on their books, it’s at a lower interest rate and doesn’t offset the loss from the early pay-off.  Not only are Wall Street firms and the To-Big-To-Fail-Banks struggling to show profits, their executives have also become addicted to high bonuses and like any addict, they will go to great lengths to get their next “fix”.

Our government isn’t for the people, it’s only for the rich people.

Last week it was announced that PMI, the largest mortgage insurance company in the country, was effectively shut down by the state of Arizona due to insolvency.

Before we go any further let’s clear up some confusion – PMI the company, was in the business of selling Private Mortgage Insurance, also known as PMI.  Going forward in this article, we’ll refer to the company via PMI, while spelling out private mortgage insurance.

The company has suffered too many losses from the foreclosure crisis, paying out too many claims on loans it covered with private mortgage insurance on.  The state of Arizona announced that the company will only be allowed to pay out 50% on filed claims.

I’ve read a few articles since the announcement where the writers (one of them a self-proclaimed mortgage expert) asked why should mortgage borrowers with PMI coverage keep paying their premiums if the company isn’t going to pay full claims.  Well, that’s a real ignorant question for so called experts to be asking.  Private mortgage insurance doesn’t insure borrowers, it insures lenders against a borrower default.  Borrowers do pay the monthly premiums, but the only beefit they receive is the lender allowing them to put less than 20% down.

I do see a few issues with the failure of PMI and the way it’s been handled so far.

1.  More losses for FNMA & FHLMC – which means more costs to taxpayers as the government took them over more than 2 years ago.  When a loan with private mortgage insurance fails, the lender files a claim with PMI to pay the difference between what the borrower owes at that time and about 80% of the purchase price or appraised value at the time the loan was made.  Lenders count on this mortgage insurance coverage to offset the higher risk of making loans with less than 20% down.  So a lender that has coverage from PMI will now get 50% less than they expected, which means more losses for the lender.  FNMA & FHLMC are now the largest holders of mortgages with private mortgage insurance coverage in the country.  So, their losses will be even higher.  It’s interesting that both just asked for several billions of dollars more in funds to cover losses this week – money that’s coming from taxpayers.

2.  If the losses for PMI keep piling up, it’s highly likely that the company may get a Bernanke Bailout.  To protect FNMA & FHLMC?  No, it’ll be to protect the Too-Big-To-Fail banks from more losses on the rest of the PMI covered loans in this country.  The TBTF banks will pay their Bernanke Bribe and get another get out of jail free bailout when the federal government bails out PMI to keep it from failing.

3.  I find it interesting that the state of Arizona shut down PMI, when most of their business crosses state lines, so the company should fall under the domain of the federal government.  I’ve got two thoughts on this:

    a)  Arizona got tired of waiting for the federal government to act and is forcing the issue.
    b)  Or, the federal government put Arizona up to this to give the feds an excuse to step in and take over.

In the end it really won’t matter which direction this issue takes – the end result is that the taxpayers will get saddled with more debt.

This should be a rallying point of the Sit-in on Wall Street movement!

You are way underwater with the mortgage balance on your home. You’ve tried everything to get a modification from your lender and they’re still claiming they lost the documents. Unfortunately, you can’t modify your mortgage in chapter 13 because the U.S. Senate voted down a bill that would have allowed mortgage modifications in chapter 13. Why? Because the banking industry and Wall Street bribed them with campaign contributions to do so.

So your next best option is sell your home on a short sale. No problem. You hire a real estate agent, they find a buyer and you send all the required paperwork into your lender. Then they want more paperwork or they lost what you already sent and you wait for months – only to lose the buyer or find out that the bank wants an offer for more than your home is worth. So, you let your home go to foreclosure, as you have no other options, and further depress the real estate market, which leads to more homeowners starting the process.

According to research firm Campbell Communications, fewer than 23% of short sale transactions are actually successful. “Three out of four potential short sale transactions fail, principally because the mortgage servicer takes too long to respond to the offer,” said Tom Popik, author of a February survey of real estate agents. “When these same properties are later sold it further depresses real estate prices.”

The fix is easy – force politicans to pass a law allowing judges to modify mortgages as part of a Chapter 13 bankruptcy. 

With this “gun at their heads” banks will suddenly have a change of heart and miraculously stop losing paperwork (that’s really imaged and NEVER lost), and start approving loan modifications and short sales!

But that may never happen as politicians don’t really work for the American people.  They work for Wall Street, too-big-to-fail banks, and businesses in general.

What’s wrong with America?

Think about it – it’s long-term politicians that are more concerned with selling out to the highest bidder to get re-elected than doing what’s right for the American people.

Politicians that vote themselves raises when everyone gets pay cuts.

Politicians that have voted themselves the best healthcare plan for life, no matter how short a period they serve.

Politicians that have voted themselves exemptions from many of the taxes they voted to charge everyone else.

Politicians that are so out of touch with mainstream America that they can’t truly comprehend what Americans are upset about.

There’s an easy fix for all this – term limits for ALL politicians and removal of ALL special perks they’ve given themselves.

This won’t happen overnight so, it won’t your home, but it will save your children from having to go through the pain of this mess.

The news says those involved in the sit-ins need something to focus on to make something happen. Forward this to anyone you know involved. It’s a great place to start.

Word “slipped” out of Washington last week that the Obama administration is considering allowing homeowners with FNMA, FHLMC & FHA mortgage loans to refinance them at a 4%, 30 year fixed rate. 

Understand, that nothing “slips” out of Washington and this was basically the administration’s attempt to “test market” the idea.  If the feedback was negative, Obama could claim it was never his idea in the first place and never discussed seriously.  If the idea was well received the Obama administration would move to put it into action.  The jury’s still out on how well the idea has been received.  Homeowners obviously love it, academics & economists hate it.  Neither really matters as Obama only wants to know what Wall Street and the Banks think and if the idea will lead to them supporting him for re-election.

What’s Obama’s reason for considering this move at this time?

Purely a re-election ploy of course. 

He could have fostered this same plan back in 2009 when he announced HARP, HAMP and a host of other acronym programs to help underwater homeowners.  He didn’t then because he was riding his popularity wave from just being elected.  Now, his popularity at the polls is at it’s lowest, but more importantly, Wall Street isn’t too keen on supporting him for re-election next year. 

So, first and foremost, this plan is all about increasing public support and thereby “encouraging” Wall Street to back him again.

Analyzing the 4% Refinance Plan

Now that the political truths have been covered, let’s look at the plan itself, who it’ll affect and what ripples it will cause.

Who the Plan Will Help

With mortgage rates in the neighborhood of 4% already (disclaimer: you’ll need to pay points to get down that far at this time) many homeowners already have access to the rate Obama is offering.  Through HARP (Home Affordable Refinance Program), even homeowners with a mortgage balance up to 125% of what there home is worth have access to the 4% rate Obama is peddling.  Of course, Obama the politician never tells anyone about the risk-pricing that comes with HARP.  Meaning that if you owe more than 100% of what your home is worth and want to refinance to lower your interest rate & payment, you’ll have to pay a either a higher rate or higher fees than the rest of the market.  Don’t you like how they always leave that part out?  Shouldn’t Obama have to follow Truth-in-Lending disclosure statutes like everyone else? 

So who is this plan really going to help?  The homeowners that don’t qualify for HARP.  These are homeowners that owe more than 125% of their home’s current value, or can’t qualify for a refinance due to credit, income or liquid asset issues.  The question is, which of these will the Obama plan address? 

The easiest roadblock to refinancing to address is the appraisal issue.  Allowing an upside homeowner, that’s still got good credit and income, to refinance will cause the least amount of negative backlash from academics and economists.  We made this point several times when HARP was first announced.  FNMA & FHLMC were by that time taken over by the federal government, so the government really owned their mortgages.  The government has always insured FHA mortgage and owned VA mortgages and guess what?  Both FHA & VA allow homeowners to refinance without having to get a new appraisal – which means it doesn’t matter how upside down a homeowner is, they can still refinance.  Why Obama introduced HARP and only allowed homeowners owing up to 125% to be eligible is still a mystery that makes no logical sense.  It must mean then it was done for political reasons.

I don’t think the plan will allow those with significant credit issues to refinance.  The backlash would be quite large if people that weren’t paying their bills were allowed access to this plan.  The cutoff for qualifying would be ths same as it is now – around a 660 FICO score.  A better option for homeowners with credit issues would be a HAMP (Home Affordable Modification Program) loan modification.  Don’t get us started on the realistic chances of actually getting a loan modification under HAMP.  Read our other posts about that.

Allowing homeowners with good credit, but unable to prove enough income to qualify for the plan sounds like a logical idea – if they’re making their payments, they must have income somewhere.  The problem is the new Dodd-Frank statutes make it very difficult for a lender to give a borrower a loan they don’t demonstrate the income to qualify for.  But, hey this is Obama’s idea and he’s never let laws stop him from doing what he wants before!  Of course, the same can be said of many past Presidents also – another topic for another day.

Homeowners without the liquid assets to pay for closing costs are the last problem-children to discuss.  Many are living paycheck to paycheck and would welcome the extra savings per month a refinance could offer.  They could be allowed to roll the costs into their new mortgage, making them even further upside down.  Never underestimate the greed of some banks and lenders when it comes to refinance generated revenue.  A cap on the amount that could be rolled would have to be put in place to allow these homeowners to participate.  Even then, a few crooks will find a way around the system and screw a few thousand homeowners.

Of course, we can’t ignore that the 4% Obama Refinance Plan will help everyone in the mortgage refinance business by boosting their income for a period of time.  Loan originators, underwriters, mortgage staff, banks, appraisers, title companies, mortgage service providers, etc., will all think it’s the “good ol’ days” again in the mortgage biz.

Who the Plan Will Hurt

The winners were fairly obvious, but there will also be losers. 

The biggest will be those holding the current mortgages and getting the interest from them.  They’ll lose money every time a homeowner pays off a mortgage with a rate higher than the Obama 4%.  Who are these people & entities?  Banks, Wall Street investors, retirement funds, insurance funds, and oh, wait – our own federal government!

Huh?  How can Obama’s 4% Refinance Plan hurt the federal government?  Well, remember TARP and its sister bailout programs?  Our own wonderful Mr. Ben Bernanke & his Federal Reserve empire now owns around $900 billion of Mortgaged Backed Securities (MBS).  On top of that, remember above that we mentioned the federal government now owns FNMA & FHLMC, the biggest issuers of MBS?  They own almost $1.5 trillion worth of MBS they never sold off to investors. 

This is actually a very important matter.  Think of it this way, the federal government is receiving the interest from the $2.4 trillion in mortgages mentioned above.  Most of these mortgage have rates over 4.5%.  Compare this interest income to the interest rates the federal government is paying to borrower - the rates on the 30 year bond and 10 year T-Bills.  As of the writing of this article the 30 year bond was trading under 3.5% and the 10 year was around 2%.  What this means is that our government is borrowering at a lower rate than it’s receiving on the MBS it owns and this moey is helping our budget deficit.  Allowing the entire $2.4 trillion portfolio to refinance to a lower rate of 4%, will increase the federal deficit. 

Bet you didn’t see that coming!

Wall Street and institutional investors will experience losses in the same way explained above for our federal government.  For those who think it’s all fine and dandy to screw Wall Street and the Too-Big-Too-Fail Banks that caused the housing crisis (by the way, we’d like to see some of them in jail), don’t think it won’t hurt homeowners also.  Wall Street & Banks will lay workers off, cut interest rates they pay on deposits even more and homeowner retirement plans will have lower annual returns.  These are just a couple of the ripple effects.

The Economic of the Plan – Is it a Good Idea?

What a loaded question!  The Obama 4% Refinance Plan will be good for some, bad for others as briefly outlined above. 

Evaluating the plan should depend on comparing who it helps and who it hurts, along with what the overall effect on the economy will be.

Boiling it down the plan will put more money in the hands of homeowners – many who are struggling with unemployment, underemployment, high debt and are just hanging on.  Any benefit to homeowners will come at a cost to the federal government, Wall Street, institutional investors and the retirement plans of the those same homeowners. 

Will any of this improve the country’s employment issues?

How many homeowners will the plan save from foreclosure?

What effect will the plan have on growing the economy?

The answers are beyond our expertise.

Before you read the FDIC publication below, a few editorial comments:

So many were conned because they wanted so desperately to believe this time would be different…

The more things change, the more they stay the same.  Obama promised change, but it didn’t happen.

Wall Street won again over Main Street and it wasn’t even close, much less fair.

Banks were lent hundreds of billions in TARP funds to lend and save homes.  Somewhere though, Congress “forgot” to attach legal strings to the money and require banks accepting the funds to follow the intent of HAMP.

Just like the curtain being pulled back on the Wizard of Oz, Obama “great” housing plans have been shown to be a fraud.

There won’t be any ruby slippers at the end of this tale though.

FDIC Statement on Enforcement Orders Against Large Servicers Related to Foreclosure Practices

 The Federal Deposit Insurance Corporation (FDIC) today issued the following statement commenting on the enforcement orders against large servicers related to their foreclosure practices:

“Today, the three primary federal regulators of the nation’s 14 largest mortgage servicers published final enforcement orders against these institutions based on the findings of a review of their foreclosure policies and practices. While the FDIC is not the primary federal regulator for any of the largest mortgage servicers, the FDIC participated in this interagency horizontal review, at the invitation of the primary regulators, as the back-up regulator to protect the interests of the deposit insurance fund and to provide resources and support for this important review. The FDIC was also a signatory to one of the orders as the primary federal regulator of an insured depository whose loans were serviced by an affiliated servicer under the holding company. The effect of this order is to require the bank to ensure that its affiliated servicer takes corrective measures to fully address deficiencies identified in the interagency review.”

“The findings of the interagency review clearly show that the largest mortgage servicers had significant deficiencies in numerous aspects of their foreclosure processing. These deficiencies included the filing of inaccurate affidavits and other documentation in foreclosure proceedings (so-called “robo-signing”), inadequate oversight of attorneys and other third parties involved in the foreclosure process, inadequate staffing and training of employees, and the failure to effectively coordinate the loan modification and foreclosure process to ensure effective communications to borrowers seeking to avoid foreclosures. The interagency review was limited to the management of foreclosure practices and procedures, and was not, by its nature, a full scope review of the loan modification or other loss-mitigation efforts of these servicers. A thorough regulatory review of loss mitigation efforts is needed to ensure processes are sufficiently robust to prevent wrongful foreclosure actions and to ensure servicers have identified the extent to which individual homeowners have been harmed.”

“In its role as the primary federal regulator of a large number of state nonmember banks, which collectively service less than four percent of residential mortgages, the FDIC has been reviewing and conducting targeted exams to determine whether any of these institutions have engaged in the types of practices identified at the major servicers. To date, the review has not identified “robo-signing” or any other deficiencies that would warrant formal enforcement actions. The FDIC will continue to monitor these servicers, as well as the performance of institutions servicing loans through FDIC securitizations or resolution programs.”

“The enforcement orders incorporate some important requirements that, if fully implemented, will help prevent a recurrence of the serious problems with foreclosure processing revealed by the regulators’ review. In particular, the FDIC supports the inclusion in these orders of a single point of contact for homeowners to give homeowners a single person to work with throughout the stressful and often confusing loan modification and foreclosure process. Assigning a single point of contact will also provide for greater servicer employee accountability and, as such, will serve as an important quality control to ensure that modification and foreclosure activity are conducted in full compliance with applicable federal and state laws. Having a single point of contact will not prevent all foreclosures, but it will reduce the numbers of avoidable foreclosures as well as operational risks associated with foreclosure processes that violate the servicers’ legal obligations. It is essential that the implementation of the orders require specific, measurable actions of these servicers to address the deficiencies identified in the interagency review. The FDIC will continue to work with the primary federal regulators of these servicers to promote this result.”

“The enforcement orders issued today are important, but they are only a first step in setting out a framework for these large institutions to remedy these deficiencies and to identify homeowners harmed as a result of servicer errors. While today’s orders put these large servicers on a path to improving their management of the foreclosure process, they do not purport to fully identify and remedy past errors in mortgage-servicing operations of large institutions. Much work remains to ensure that the servicing process functions effectively, efficiently, and fairly going forward. Importantly, these enforcement orders do not contain monetary remedial measures. There is evidence that some level of wrongful foreclosures has occurred. It is important that servicers identify any harmed homeowners and provide appropriate remedies. This is essential to managing litigation and reputation risk, as well as fairness to borrowers. In addition, the FDIC continues to fully support the separate federal and state collaboration between the State Attorneys General and federal regulators led by the U.S. Department of Justice. The enforcement orders announced today complement, rather than preempt or impede, this ongoing collaboration.”

There’s more to the LO Compensation Rule than meets the eye.

Well the dust is settling and mortgage brokers lost the fight to control their earnings in the first round, by a technical knockout.

What did everyone expect when they were going up against Ben Bernanke and the our new “Big Brother” government?

Think our country is still 100% for capitalism?

Who’s next to get their earnings capped and controlled?

In case you missed, the new health care bill capped doctors.

But, I digress so let’s get back to LO compensation.

One has to ask why Ben Bernanke himself, has been so concerned about the hundreds of thousands of dollars that LO’s make, when many on Wall Street make millions and even billions?

Wall Street is much more corrupt than the LO’s on Main Street.

Bigger numbers always attract bigger cheating, scams and fraud!

So why is Bernanke so concerned about limiting how much LO’s make?

Let’s look a little deeper at who the rule really affects.

To make any real money under the new rules, LO’s have to do VOLUME, not a few “fat” deals.

Now to do more volume you can do one of two things (or both):

1. You can just do bigger loans.
2. You can do more loans.

So, every LO in the country will be chasing bigger deals that they can close fast to pump more volume through the origination system and make more money.

That means every commission LO in the country will be avoiding small deals and/or deals that take a lot of time.

Now who do you think that will affect?

Let’s see, small deals would be first-time homebuyers.

Tough deals will be those with borderline or no credit, income issues and those that don’t have a decent down payment.

Who are these people?

Immigrants, the poor, the small-time self-employed, those at the lower end of the socio-economic ladder.

LO’s & Realtors, just think of all the money you’ve made working hard to put together loans & homes for people that fit these descriptions.

How much of your business have they been since the real estate bubble burst?

Now why would the government be interested in making it harder for people like this to get a mortgage to buy a home?

Could it be because they are statistically the most likely to historically default?

And the bankers on Wall Street don’t like anyone to default … except their comrades who are too big to fail…

So, there you have it.

The real affect of the LO Compensation Rule.

I’ll leave you with one more sobering thought to ponder – what’s more profitable than collecting interest on a loan for 30 years?

…how about collecting rent on someone for a lifetime?

No, it’s a homeowner and taxpayer.

Read this article from the New York Times.

In Prison for Taking a Liar Loan
By JOE NOCERA
Published: March 25, 2011

A few weeks ago, when the Justice Department decided not to prosecute Angelo Mozilo, the former chief executive of Countrywide, I wrote a column lamenting the fact that none of the big fish were likely to go to prison for their roles in the financial crisis.

Soon after that column ran, I received an e-mail from a man named Richard Engle, who informed me that I was wrong. There was, in fact, someone behind bars for what he’d supposedly done during the subprime bubble. It was his 48-year-old son, Charlie.

On Valentine’s Day, the elder Mr. Engle said, his son had entered a minimum-security prison in Beaver, W.Va., to begin serving a 21-month sentence for mortgage fraud. He then proceeded to tell me the tale of how federal agents nabbed his son — a tale he backed up with reams of documents and records that suggest, if nothing else, that when the federal government is truly motivated, there is no mountain it won’t move to prosecute someone it wants to nail. And it was definitely motivated to nail Charlie Engle.

Mr. Engle’s is a tale worth telling for a number of reasons, not the least of which is its punch line. Was Mr. Engle convicted of running a crooked subprime company? Was he a mortgage broker who trafficked in predatory loans? A Wall Street huckster who sold toxic assets?

No. Charlie Engle wasn’t a seller of bad mortgages. He was a borrower. And the “mortgage fraud” for which he was prosecuted was something that literally millions of Americans did during the subprime bubble. Supposedly, he lied on two liar loans.

“The Department of Justice has made prosecuting financial crimes, including mortgage fraud, a high priority,” said Neil H. MacBride, the United States attorney for the Eastern District of Virginia, in a statement. (Mr. MacBride, whose office prosecuted Mr. Engle, declined to be interviewed.)

Apparently, though, it’s only a high priority if the target is a borrower. Mr. Mozilo’s company made billions in profit, some of it on liar loans that he acknowledged at the time were likely to be fraudulent and which did untold damage to the economy. And he personally was paid hundreds of millions of dollars. Though he agreed last year to a $67.5 million fine to settle fraud charges brought by the Securities and Exchange Commission, it was a small fraction of what he earned. Otherwise, he walked. Thus does the Justice Department display its priorities in the aftermath of the crisis.

•

It’s not just that Mr. Engle is the smallest of small fry that is bothersome about his prosecution. It is also the way the government went about building its case. Although Mr. Engle took out the two stated-income loans, as liar loans are more formally called, in late 2005 and early 2006, it wasn’t until three years later that his troubles began.

As a young man, Mr. Engle had been a serious drug addict, but after he got clean, he became an ultra-marathoner, one of the best in the world. In the fall of 2006, he and two other ultra-marathoners took on an almost unimaginable challenge: they ran across the Sahara Desert, something that had never been done before. The run took 111 days, and was documented in a film financed by Matt Damon, who served as executive producer and narrator. Mr. Engle received $30,000 for his participation.

The film, “Running the Sahara,” was released in the fall of 2008. Eventually, it caught the attention of Robert W. Nordlander, a special agent for the Internal Revenue Service. As Mr. Nordlander later told the grand jury, “Being the special agent that I am, I was wondering, how does a guy train for this because most people have to work from nine to five and it’s very difficult to train for this part-time.” (He also told the grand jurors that sometimes, when he sees somebody driving a Ferrari, he’ll check to see if they make enough money to afford it. When I called Mr. Nordlander and others at the I.R.S. to ask whether this was an appropriate way to choose subjects for criminal tax investigations, my questions were met with a stone wall of silence.)

Mr. Engle’s tax records showed that while his actual income was substantial, his taxable income was quite small, in part because he had a large tax-loss carry forward, due to a business deal he’d been involved in several years earlier. (Mr. Nordlander would later inform the grand jury only of his much lower taxable income, which made it seem more suspicious.) Still convinced that Mr. Engle must be hiding income, Mr. Nordlander did undercover surveillance and took “Dumpster dives” into Mr. Engle’s garbage. He mainly discovered that Mr. Engle lived modestly.

In March 2009, still unsatisfied, Mr. Nordlander persuaded his superiors to send an attractive female undercover agent, Ellen Burrows, to meet Mr. Engle and see if she could get him to say something incriminating. In the course of several flirtatious encounters, she asked him about his investments.

After acknowledging that he had been speculating in real estate during the bubble to help support his running, he said, according to Mr. Nordlander’s grand jury testimony, “I had a couple of good liar loans out there, you know, which my mortgage broker didn’t mind writing down, you know, that I was making four hundred thousand grand a year when he knew I wasn’t.”

Mr. Engle added, “Everybody was doing it because it was simply the way it was done. That doesn’t make me proud of the fact that I am at least a small part of the problem.”

Unbeknownst to Mr. Engle, Ms. Burrows was wearing a wire.

Lying on a stated-income loan is, without question, a crime, and one ought not to excuse it even though, as Mr. Engle says, “everybody was doing it” — usually with the eager encouragement of their brokers. But the Engle case raises questions not just about the government’s priorities, but about something even more basic: did he even commit the crimes he is accused of?

Partly, I concede, Mr. Engle is easy to root for. He is a personable, upbeat man who has conquered some serious demons. Part of his Sahara expedition was aimed at raising money for a charity to help bring clean water to Africa. “Every experience in life has the ability to teach lessons if I am open to them,” he wrote on a blog as he prepared to enter prison. How can you not like someone like that?

But the more I looked into it, the more I came to believe that the case against him was seriously weak. No tax charges were ever brought, even though that was Mr. Nordlander’s original rationale. Money laundering, the suspicion of which was needed to justify the undercover sting, was a nonissue as well. As for that “confession” to Ms. Burrows, take a closer look. It really isn’t a confession at all. Mr. Engle is confessing to his mortgage broker’s sins, not his own.

Perhaps anticipating that problem, when Mr. Nordlander finally arrested Mr. Engle in May 2010, he claims to have elicited a stronger, better confession while Mr. Engle was handcuffed in the back seat of his car. Mr. Engle fervently denies this. This second supposed confession, however, was never captured on tape.

As for the loans themselves, on one of them Mr. Engle claimed an income of $15,000 a month. As it turns out, his total income in 2005, according to his accountant, was $180,000, which amounts to … hmmm …$15,000 a month, though of course Mr. Engle didn’t have the kind of job that generated monthly income. (In addition to real estate speculation, Mr. Engle gave motivational speeches and earned around $50,000 a year as a producer on the hit show “Extreme Makeover: Home Edition.”)

The monthly income listed on the second loan was $32,500, an obviously absurd amount, especially since the loan itself was for only $300,000. It was a refinance of a property Mr. Engle already owned, allowing him to pull out $80,000 of the $215,000 in equity he had in the property.

Mr. Engle claims that he never saw that $32,500 claim and never signed the papers. Indeed, a handwriting analysis conducted by the government raised the distinct possibility that Mr. Engle’s signature and his initials in several places in the mortgage documents had been forged. As it happens, Mr. Engle’s broker for that loan, John J. Hellman, recently pleaded guilty to mortgage fraud for playing fast and loose with a number of mortgage applications. Mr. Hellman testified in court that Mr. Engle had signed the mortgage application. Early this week, Mr. Hellman received a reduced sentence of 10 months, less than half of Mr. Engle’s sentence, in no small part because of his willingness to testify against Mr. Engle.

Even the jurors seemed confused about how to think about Mr. Engle’s supposed crime. When it came time to pronounce a verdict, the jury found him not guilty of providing false information to the bank, which would seem to be the only fraud he could possibly have committed. Yet it still found him guilty of mortgage fraud. “I think the prosecution convinced the jury that I was guilty of something but they weren’t sure what,” Mr. Engle wrote in an e-mail.

Like many people, Mr. Engle’s biggest mistake was believing that housing prices could only go up. When the market collapsed, Mr. Engle defaulted on the two properties, which of course is not a crime. Although his accountant tried to persuade the banks to do a complicated refinancing, they refused and foreclosed on the properties. Like many Americans, Mr. Engle wound up being punished by the market for his mistake, losing all his remaining equity along with the properties themselves. Thanks to the government, though, his punishment was far more severe than most.

At his sentencing, Mr. Engle told the judge: “I can say with confidence that I can turn negatives into positives. I have no doubt I will make the best of it.” With his inspiring prison blog, Running in Place: A Blog About Surviving Adversity, he has already begun to do that.

Even when he emerges from prison, though, his ordeal will not be over. As part of his sentence, Mr. Engle was ordered to pay $262,500 in restitution to the owner of his mortgages. And what institution might that be? You guessed it: Countrywide, now owned by Bank of America.

Angelo Mozilo ought to get a good chuckle out of that one.

In a bold speech at the Summit On Residential Mortgage Servicing For the 21st Century, FDIC Chief Sheila Bair called out the mortgage servicing industry and blamed them for extending the mortgage crisis.

Ms. Bair stated that the housing industry has been stabilized by emergency government measures but that the effects of the housing crisis still weigh heavily on the country.  FDIC insured institutions have collectively lost more than half a trillion dollars with more losses on the way.  Mortgage markets remain in a “cycle of credit distress, securitization markets remain frozen, and now chaos in mortgage servicing and foreclosure is introducing a dangerous new uncertainty into this fragile market”.

Ms. Bair implied that the mortgage servicing industry extended the housing/mortgage crisis by not taking prompt action from the earliest days to modify mortgages.

“Prompt action to modify unaffordable subprime loans in 2007 could have helped to limit the crisis in its early stages. Instead, we saw one and a half million foreclosures that year, contributing to a decline in average home prices that eventually totaled about one-third. Mortgage servicers have remained behind the curve as the problem has evolved to include underwater mortgages and, now, foreclosure practices that sow confusion and fear on the part of homeowners and fail to fully conform to state and local legal requirements.”

According to Ms. Bair, the basic business model and monetary structure of the mortgage servicing industry are flawed and in urgent need of reform.  The industry was never properly structured to handle large volumes of problem loans.  Cost cutting and industry consolidation left the industry without the expertise needed to engage in effective loss-mitigation programs.

Mortgage servicers, according to Ms. Bair, still refuse to commit the resources necessary to properly pursue loss mitigation in an efficient manner.  “The bottom line is that we need more modifications and fewer foreclosures. When foreclosure is unavoidable, we need it to be done with all fairness to the borrower and in accordance with the law”.

Ms. Bair sees “more modifications and fewer foreclosures” as the solution to stabilizing the housing market.  In order to accomplish this, Ms. Bair recommends a single point of contact with troubled borrowers, a greater commitment of resources by servicers, simplification of the loan modification process and broad industry agreement on resolving the competing interests of first and second lien holders.

Ms. Bair warned that we are at a critical phase in the mortgage crisis.  “If we fail to act decisively now to deal with the foreclosure crisis, we risk triggering a double-dip in U.S. housing markets that could roll back the progress that has been made to date. The problem is serious, and the need for action is urgent. We cannot afford to wait for Congress to take action on this issue”.

COMMENTS

Remember the saying, “People in glass houses shouldn’t throw stones”?

Well, Sheila Bair is in a glass castle with an Uzzi in her hands.

Her speech would have hit home deeper if she’d admitted that the FDIC, along with numerous areas of the government, is just as much to blame for how the housing crisis played out.

Can anyone please name a government agency that didn’t turn a blind eye to the housing bubble?  Agencies and politicians at every level of government were corrupt or incompetent, letting lenders do whatever they wanted.

Also, why hasn’t Blair done more to force the mortgage servicing monopoly to do more?  Want a list of what she could have done?

• The original modification programs introduced were all voluntary. 
• From day 1, the participation rates weren’t going to make a difference.
• The government’s lack of acknowledgement & action, regarding the mortgage servicing monoploy’s nightmare experience they put homeowner’s through for a loan modification, should be a criminal offense.

Sheila Blair, like the majority of those in politics, could’ve and should’ve done more, but wants to point a finger at everyone else.  The problem is when she does that, her other three fingers are pointing right back at her.

Increases in employment, both more jobs and better paying ones, will spark a housing recovery.

After several years of depreciation every homeowner wants to know when their home, most American’s biggest piggy bank, will start increasing in value again.

Well that’s not going to happen until we see gains in employment and incomes.

It’s simple math – what you can afford to pay monthly for housing is directly related to how much you make.

So first you need a job, so you can afford something, and then you need to get periodic raises so you can afford more and more and more.

How many homeowners bother to look at unemployment and employment numbers?  Hmmm…

How many have been to the website of the Bureau of Labor Statistics (BLS)?

….?

Just as I suspected – not many.

Well, before we go visit the BLS, let’s examine how housing prices and unemployment are connected.

Comparing Housing Prices & Unemployment

Notice in the chart above that when unemployment (the blue line) goes down, housing prices usually go up.

Simply put, when people have more money to spend the economics of supply & demand show that they will use this money to drive prices up on the things that they want.

The opposite is also true as the next graph shows by comparing drops in housing values to job losses in the top 100 metro areas:

Given this important link between jobs and housing prices, we should probably take a look at where the nation’s job picture is.

So let’s go take a look at what we can at the Bureau of Labor Statistics the numbers they report.

Unemployment Numbers

As of August 2010, the official unemployment rate, according to the Bureau of Labor Statistics, is at about 9.6%.

Supposedly, it’s starting to level off as all the stimulus money plowed into the economy (and onto the federal debt) works its way through the system.

According to the government, without the stimulus, unemployment would have been a lot worse:

Here’s exactly what the BLS site says about unemployment in August:

Nonfarm payroll employment changes little (-54,000) in August, and the unemployment rate was about unchanged at 9.6 percent, the U. S. Bureau of Labor Statistics reported today.  Government employment fell, as 114,000 temporary workers hired for the decennial census completed their work.  Priveate-sector payroll employment continued to trend up moestly (+67,000).

The number of unemployed persons (14.9 million) and the unemployment rate (9.6 percent) were little changed in August.  From May through August, the jobless rate remained in the range of 9.5 to 9.7 percent.

Ah, but the BLS is part of our federal government and they’re not above a little slight-of-hand to make the numbers look better and improve their odds of getting re-elected.

Let’s dissect the August report a bit to see what we can see…

Well in the BLS quote above, they state the number of unemployed is 14.9 million people, which leads to an unemployment rate of 9.6%.

But wait there’s more!  Look at these tidbits:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 331,000 over the month to 98.9 million.  These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

About 2.4 million persons were marginally attached to the labor force in August, little changed from a year earlier.  (The data are not seasonally adjusted.)  These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months.  They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

So, you’re stuck working a part time job because you can’t find a full time job, even though you may desperately need one, you’re not included in the unemployment numbers?  What happens if you’re trying to feed your family by working two or three part time jobs?  Talk about skewing the numbers!

If we add these people into the mix, we get much higher numbers on unemployment – 26.2 million Americans are out of work or underemployed.

That’s an unemployment rate of 16.4% not the reported 9.6%!

Surprising, this number is published by the BLS and is referred to as the U-6 number.

Why does the media publish the 9.6% number when the truer 16.4% number is so easy to find?

Your guess is as good as mine.

Summary

Well, where does all this leave us?

There’s been a lot of media mention of the term, “jobless recovery”.  The term refers to how companies seem to be improving their profits without hiring workers back.

My question is, if workers don’t go back to work where are people going to get the money to actually buy things like cars and houses?

How can that be called a recovery?

For homeowners out there wondering when they’ll see the values of their homes rebound, I hope you now realize how important the unemployment rate is to that happening.

Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy

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You think Bernie Madoff pulled a con?  The government may have pulled a huge “con” on American homeowners & taxpayers to save the banking industry.

HAMP, HARP, HASP, NSP, FHFA, HAFA, etc, are all brought to you today by the letter “F”, as in failure.

Don’t read on if you like to live in the fantasy that our government is here to protect us and knows what’s best for us.

A Timeline of Government Efforts

Let’s go over a brief history of the government’s efforts to address the worst housing crisis since the Great Depression.

November 11, 2008, Veterans Day (with all the banks closed), the HOPE NOW Streamlined Loan Modification program is announced under President George W. Bush.  To qualify a homeowner must be 90 days behind on their mortgage payments which must exceed 38% of their income.

On February 18, 2009, after only a month in office, newly elected President Obama announced his yet unnamed plan to address the growing home mortgage crisis from Arizona, one of the hardest hit states.  In his speech, Obama stated his goal was to help 3-4 million homeowners modify their mortgages to a lower payment.

That announcement had few details, as it was rushed for positive press purposes.  It wasn’t until March 4, 2009 that the full details were released of his Home Affordable Modification Program (HAMP).

July 28, 2009 senior officials from the Treasury Department and HUD, concerned about the slow implementation of Obama’s HAMP program,  met with top banking executives to press them to complete 500,000 loan modifications by November.

September 9, 2009 the Obama administration releases its first MHA report to grade lender execution of HAMP and to push lenders to do more modifications.  The report only covered trial modifications as permanent mods weren’t really happening yet.  Only 12% of eligible homeowners had been offered a trial modification up to that point.  By September the number was up to 16%, by October it was 20%.  The December report included permanent mods for the first time, but less than 1% of those eligible had gotten one.

By the March 2010 report, only 6.7% of eligible homeowners had been approved for a permanent mod.  The government starts changing what’s reported on the reports in an apparent attempt to obscure how bad lenders are implementing the program while shifting the blame to homeowners.  The HAMP Program starts to be called a dud by media and numerous experts.

Lenders Going Through the Motions

When HAMP was first announced it was hailed as the cure to the housing woes caused by rising foreclosures.  Lenders were supposed to help homeowners reduce their payments so they could afford to stay in their homes and not become another foreclosure statistic.

Like anything else when first starting out, delays and snags were expected.  After 18 months though, the problems with HAMP are only getting worse, not better.

One of the biggest reasons lenders give for not doing more modifications is that they claim homeowners don’t send them the requested information needed to process a loan modification.

Hundreds of thousands of homeowners on the other hand, claim that they send their documents numerous times only to be told they can’t be found.

Who do you think is telling the truth – a homeowner desperate to keep their home for their family or large institutions dragging their feet to follow federal regulations?

Let’s take a look at some interesting numbers from a couple of top lenders.

Bank of America (an oxymoron if I’ve ever heard one) has its 2010 3rd quarter results online.

There are some very interesting numbers in that report:

• Bank of America funded $72 billion in first mortgages, helping over 342,000 people either purchase a home or refinance their existing mortgage in the quarter.
• They completed more than 80,000 loan modifications in the same quarter.

See any contradictions here?

How could they have the staff to “help” over 342,000 people purchase or refinance in the third quarter, but only modify 80,000 loans in the same period?

Wells Fargo also publishes it’s financial reports online, but doesn’t break its numbers down as well as BOA.  With a little sleuthing though, the following can be found in its 2010 2nd quarter report:

• Funded $81 billion in first mortgages, helping over 384,000 people either purchase a home or refinance their existing mortgage in the quarter.
• From January 2009 through June 30, 2010 completed 505,043 loan modifications.  That’s an average of about 84,000 per quarter.

Again there’s a bit of a discrepency – 384,000 new mortgages versus only 84,000 modifications.

Bank of America and Wells Fargo are two of the top 4 mortgage lenders in the country.  Chase & CitiMortgage are the other two, but their online financial reports don’t break down mortgage originations or modifications.

Anyone that’s gone through the process of getting a purchase mortgage knows that it requires a lot of documentations – appraisals, credit checks, proof of income and assets.

A loan modification though, only requires income.  No appraisal is required, credit doesn’t matter and neither do assets.  So if loan modifications are so much easier, why are so few approved?

Something else to think about – all those mortgage loans require a lot of documents to be faxed to the lenders.  How come hardly any of those documents get lost, but so many loan modification documents end up missing?

The Government Admits the Truth

Responding to increasing criticism of the pitiful results all the government efforts on loan modifications has produced, a spokesperson for the Treasury Department, Andrea Risotto, spoke to TheStreet in August. Andrea of course defended the program, stating:

The mortgage lenders weren’t set up for loan modifications at the beginning

• That the government’s modification model led to lenders adopting it and using it on their own private loans
• The top reasons why homeowners aren’t able to get permanent modifications – they don’t get their paperwork in, not able to sustain trial payments, & they’re payments are already less than 31% of their income so they don’t qualify.
• The best place to go for help is HUD approved counselors and to work with their lenders.

Wow, can Andrea sell ice to Eskimos or what?  Does she work for our government or the banks?  Is there any difference anymore?

Oh, but it gets better.

On August 16th & 18th, Treasury Secretary Tim Geithner invited several financial bloggers to visit the Treasury Department.  One of the several topics covered was the performance of HAMP.  I was unable to find any press release from the Treasury Department regarding these two visits, but all the bloggers invited reported it.  Here’s a few links where you can draw your own conclusions:

• Kid Dynamite — A Sit Down With Senior Treasury Officials – Part I
• Accrued Interest — Financial Regulation: How would you have it work?
• John Jansen — Bond Market Opening November 03 2009
• John Jansen — Bond Market Opening November 04 2009
• David Merkel — My Visit to the US Treasury, Part 1
• David Merkel — My Visit to the US Treasury, Part 2
• Michael Panzner — A Few Observations of My Own
• Yves Smith — Curious Meeting at Treasury Department
• Felix Salmon – The Cruelty of HAMP
• http://www.huffingtonpost.com/2010/08/19/obama-foreclosures-tarp_n_688355.html
• http://www.interfluidity.com/v2/933.html
• http://www.marginalrevolution.com/marginalrevolution/2010/08/afternoon-at-the-treasury.html

Here’s a disturbing excerpt from one of the posts:

The conversation next turned to housing and HAMP. On HAMP, officials were surprisingly candid. The program has gotten a lot of bad press in terms of its Kafka-esque qualification process and its limited success in generating mortgage modifications under which families become able and willing to pay their debt. Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of “extend and pretend”, but I don’t think that’s quite right. This was extend-and-don’t-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”. Treasury officials are not cruel people. I’m sure they would have preferred if the program had worked out better for homeowners as well. But they have larger concerns, and from their perspective, HAMP has helped to address those.

Wow and wow again.

It appears the truth about HAMP was that it was meant to help banks stem foreclosures.  Any benefit realized by homeowners was an afterthought.

In that context, the whole struggle for homeowners to actually get permanent modifications makes sense.  No one really cares if a homeowner gets one.

All the pressure on lenders by the government to approve more modifications, has been done to slow foreclosures and the number of properties banks take back, not keep taxpayers in their homes.

Disgusting isn’t it?

Failure was not an Option

If this is the truth about loan modifications and HAMP what other options did the government have?

If we all knew when we were going to die, the world would be a mess.  People would stop going to work, stop paying their debts and start borrowing everything they could to live up their last days.  Chaos would result.

I hate to defend the government on this matter, but if they had told the truth, the foreclosure mess would have been so much worse.

Already Strategic Walk-Aways, are a  rising problem.  Upside down homeowners that can afford their mortgage payments are walking away instead because they owe so much more than their homes are worth.

Imagine what would happen to our economy if all the estimated 25% of upside down homeowners walked away from their mortgages and homes.  It would decimate home values and cause even more homeowners to be upside down and then walk-away, which would cause a never ending spiral down for housing.

Summary

I would not want to be person in charge of fixing the housing mess.

You’d be damned if you told the truth and damned if you fooled everyone to address the problem.

One thing that does amaze me is that with the instantaneous communication of the internet, so few people realize that this could be the truth.

TV and now the internet, truly are “opium for the masses”.

BTW: For a great timeline of the financial & housing crisis check out this link.