YOU
CAN BLAME THE OLD WHORE SEN. DIANNE FEINSTEIN FOR THE FACT AMERICANS CAN’T
RENEGOTIATE THEIR MORTGAGES IN BANKRUPTCY COURT.
WHORE
FEINSTEIN, AMERICA’S BIGGEST WAR PROFITEER, HAS TAKEN HUGE BRIBES FROM CRIMINAL
BANKSTERS WELLS FARGO and BANK of AMERICA. SHE FRONTED FOR THE BANKSTERS’
BANKRUPTCY REFORM EVEN THOUGH HER PAYMASTERS AT WELLS FARGO HAD HAD THEIR CA
MORTGAGE LICENSE REVOKED SINCE 2003 FOR CORPORATE FRAUD.
NO
CRIME BY ANY OF HER CRIMINAL BANKSTER PAYMASTERS UPSETS THIS OLD WHORE!
WHEN
THE BANKSTER-WRITTEN “REFORM” CAME TO A VOTE, FEINSTEIN, BOXER, CLINTON AND
BIDEN VOTED AS THE BANKSTERS INSTRUCTED. WHILE OBAMA DID NOT VOTE FOR THE
BANKSTERS’ “REFORM”, HE WENT LIMP WHEN HE WAS HANDING OUT TO HIS BANKSTER
DONORS BILLIONS IN WELFARE.
NO
PRESIDENT IN HISTORY HAS TAKEN MORE MONEY FROM BANKSTERS THAN OBAMA!
HIS
CRIMINAL BANKSTERS’ PROFITS ARE SOARING… SO ARE THEIR CRIMES…. And FORECLOSURES!
California Gold Rush? Righting Underwater Mortgages
Posted: 07/16/2012 5:21 pm
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Ever since the
housing bubble collapsed, the Federal government has refused to take major
initiatives to help underwater homeowners. As a result, we are likely to see
close to one
million foreclosures
both this year and next, with the numbers only gradually slipping
back to normal levels by
the end of the decade.
The inaction cannot
be attributed to a lack of opportunity. At the time the TARP bailout was being
debated in the fall of 2008 many progressive members of Congress wanted to have
a provision that would at least temporarily alter bankruptcy law to allow
judges to rewrite the terms of a mortgage.
Under current law,
home mortgages are treated differently than any other type of debt. Bankruptcy
judges are prohibited from altering the terms of a mortgage in any way. If a
homeowner cannot meet the terms of the mortgage, they lose the house. Congress
could have allowed bankruptcy judges to rewrite mortgages that were written
during the housing bubble frenzy, but it backed away from this opportunity.
Similarly, Congress
could have temporarily
changed the rules on
foreclosure to allow foreclosed homeowners to stay in their homes for a
substantial period of time (e.g. five years) as renters paying the market rent.
This would have assured underwater homeowners substantial housing security.
Either of these
measures would have radically altered the relationship between investors and
homeowners. They would have given homeowners a serious weapon that they could
use to threaten lenders and hopefully persuade them to agree to modify
underwater mortgages. However, since Congress did not take any action to shore
up the position of homeowners, we are still sitting here with more
than 11 million
homeowners underwater five years after house prices began their plunge.
This failure at the
national level provides the backdrop for a plan by a group of investors,
Mortgage Resolution Partners (MRP), to try to get through some of the morass in
the housing market. MRP has been working with public officials in San
Bernardino, California, to arrange to use the government's power of eminent
domain to condemn underwater mortgages.
As background, San
Bernardino is ground zero in the housing bubble. Prices doubled or even tripled
in the bubble years. They then plunged when the bubble burst, with prices now
often less than half of their 2006 peaks. Half of the mortgages in the county are
underwater.
This collapse has not
only destroyed the life savings of hundreds of thousands of homeowners, it also
has wrecked the economy of the region. In this context, the prospect of using
the power to condemn property to bring many underwater homeowners back above
water must sound very appealing.
MRP's plan is to have
the county condemn underwater mortgages in private mortgage pools. The logic is
that these underwater mortgages are causing serious harm to the community. When
people are seriously underwater in their homes they are likely to lack both the
means and the incentive to properly maintain their home. Of course, the monthly
payment on a mortgage that might exceed the current value of a home by 50
percent or more (and carry a high interest rate) is a huge drain on the
purchasing power of homeowners.
The case for focusing
on mortgages in private mortgage pools is that it is generally quite difficult
to sell these mortgages out of the pool. This means that even if, in principle,
it might be advantageous for both the investors and the homeowners to have
pools sell underwater mortgages to third parties like MRP who would rewrite the
terms, the rules of the mortgage pools makes it unlikely that the mortgage will
be sold.
This is exactly the
sort of situation where public action like condemnation is appropriate. The
public action allows for a solution that can benefit all the parties but is
obstructed by bureaucratic rules that were written to cover a different set of
circumstances. (It is important to remember that investors can contest in court
the compensation they are provided for condemned mortgages to ensure that they
get fair market value.)
It is difficult to
see a good argument against this approach. Some have claimed that this sort of
tactic will cause lenders to be more reluctant to lend in the future. If the
point is that lenders may have second thoughts the next time house prices go into
a bubble, then we should certainly hope that condemnation will have this
effect.
Others have been
critical because MRP is a private company that is doing this to make a profit.
I've met with several of the top people at MRP, they certainly don't hide the fact
that they expect to make money on this deal. But that hardly seems a reason for
nixing the plan. There are very few instances where there has been a public
condemnation in which private firms didn't stand to profit in some way.
MRP's plan is not
going to rescue the country's underwater homeowners. At best it will directly
help the limited segment of this group whose mortgages are in private label
securities. However, it may serve as an example of the benefits of principal
write-downs and perhaps prod Fannie and Freddie, as well as the banks, to be
more willing to go this route.
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