Finance Types - Why are Bush/Paulson opposing the FDIC plan to renegotiate mortgages?

[OregonBlue]

It seems that spending 40Bln or whatever they estimate of the TARP funds to rescue these homeowners is actually cheap and would boost the economy. I don't understand. Is it because the mortgage holders would not receive as much money in the long run or it would take longer or is it because they actually want those houses back? That would not make any sense for the economy.

I just don't buy the argument that it would be spending as opposed to investment. If it saves peoples homes and returns optimism to the economy it seems cheap.

What's really behind their opposition?

[acmavm]

1. Whatever it is, it's for the benefit of the crooks that are stealing us blind

as we speak.

[OregonBlue]

2. I agree but how can they justify their opposition. So far their arguments seem pretty weak.

[acmavm]

6. Because they want to cover all the debt caused by their gambling on

non-existing mortgages. That is the cause of the real debt. And it will eat every damn dollar.

Can't gamble in this country except in certain states. If you get caught, or if your bookie gets caught, jail time for you.

But not if you gample with the nation's security and wealth. Not if you're of the class that earns 18.5 million dollars for six month's work.

[depakid]

3. Fact is that it's very difficult to deal with securitized mortgages

because there are often dozens of contract holders and counter-parties involved, any one of whom can file suit if the underlying terms and conditions are changed.

Doesn't mean it can't or shouldn't be done- just that its a Byazantine mess.

See for yourself:

http://www.law.georgetown.edu/faculty/levitin/documents/MBSModificationIssues_000.pdf

As always, there's a bit more to it than the usual "they're a bunch of thieves" posters care to consider.

[OregonBlue]

8. Thank you. I have a hard time understanding it all but yes, it is extemely complicated!!

So according to this, even if the bankruptcy laws are changed, it still would be extremely difficult to renegotiate these mortgages?

[depakid]

10. In many cases, you'd need agreements as to waivers and modifications,

from a LOT of different parties- who you'd have to identify and deal with- as well as immunity provisions from Congress- and/or incentives or disincentives from the Treasury or the Fed.

I disagree with the author to the extent that he implies it can't be done (with or without changes to the bankruptcy code)- but damn- it's a Herculean task.

Once upon a time, I was involved in a complex mess like this- the Big Rock Mesa landslide litigation. Took a decade to (mostly) sort the liabilities out and get the appropriate (geological) mitigations in place. Obviously with respect to mortgages and foreclosure relief, we have months, not years to tackle the problems.

Which is why we can't get Obama's team of competent professionals into the transition and into office fast enough....

[OregonBlue]

11. Yes, we need competent people who are working for our interests ASAP. What a bloody mess.

I am one of those that believes the Bush Admin saw this coming and that it was not an oversight but their solution to "drowning the government in the bathtub" but I may be wrong. I'm just a skeptic when it comes to anything that involves this administration.

[depakid]

12. "I'm just a skeptic when it comes to anything that involves this administration."

You got that right.

On the other hand, there's a saying about attributing things to malice that can just as easily be explained by incompetence.

Rachel gives just about THE finest example of that here:

http://www.youtube.com/watch?v=rNeXExh-_NE

:rofl:

[Atman]

4. Because people will realize there are no mortgages to renegotiate

It's all credit default swaps. The same mortgage sold ten times over...there is no there there. This is all a big fucking scam. It's as if you or I lost our life savings on the craps table and then asked the casino owner to give it back because it was all a mistake. Except for that these guys didn't ask. They extorted.

.

[TexasObserver]

5. They're only worried about saving favored businesses, not consumers.

[Waiting For Everyman]

7. The investors say they aren't the problem

http://www.portfolio.com/news-markets/national-news/ap/2008/11/12/investors-deny-hindering-foreclosure-relief

Maybe it's this...

http://www.dailykos.com/story/2008/11/13/201226/64/403/660641

The banks have a little quandary. If they go into bankruptcy, or judges are allowed to do modifications when homeowners go into bankruptcy, this fact in the link above might be found out and they might get prosecuted for it.

So they're sort of over-a-barrel. They'll pretty much have to allow in-house modifications in a big way (in other words do it themselves) or they'll get found out.

But they don't want to. And it still doesn't cover their "losses" on their fantasy loans... they're trying to get that from us FIRST by refusing to lend. So far, that's working for them. But I think some in Congress are onto the scam now. So it should get interesting.

If bankruptcy reform for homeowners passes in this lameduck session of Congress (which seems likely), I predict that they'll suddenly get onboard with doing lots of modifications all of a sudden.

From our pov, the key thing to watch is homeowners being arbitrarily excluded from the program. For instance, the new Fannie & Freddie "streamlined standard" requires no LESS than a 90% LTV (loan to value). Why??? Having more equity is somehow BAD??? Some provisions exlude mortgages prior to a few years ago. Why??? Such things are nonsensical. The praised new HUD program disqualifies those in default and is a high interest rate. Non-solution solutions.

[OregonBlue]

9. Depakid posted an article that explains how complicated it would be to try to alter those mortgages

http://www.law.georgetown.edu/faculty/levitin/documents/MBSModificationIssues_000.pdf