Misblog

Originally Published March 13, 2008; Last Updated August 11, 2010; Last Republished August 11, 2010:

Bush senate Republicans in Congress have stall legislation1 aimed at helping those caught in the mortgage crisis retain their homes—Homeless Los Angelinos and others are building tent cities. These same senators while stalling legislation aimed at helping Americans stay in their home continue sending trillions of dollars to Iraq!

Perhaps Senator Mitch McConnell, and other Bush Republicans will explain how it is that Americans are homeless while they send trillions of dollars to Iraq?

Blog:

• UPDATED 08/11/2010 ProPublica, New York Jumps Ahead of Feds With Law Holding Mortgage Companies Accountable on Mods.

  In between shutting down the standard four or five bad-banks per month our Federal Reserve should make mortgage modification, including principle write-down mandatory, too.

  Our Federal Reserve is likely trying to manage the rate of real-estate rationalization—it remains to be determined if such a "managed approach" has any impact on the depth of trough trajectory⁴?

  Unfortunately, if you're a primary resident mortgage holder needing immediate restructure and principle write-down a "managed approach" isn’t much help.

Web:

• UPDATED 07/09/2009 USA Today, Homelessness in suburbs, rural areas increases .

  • UPDATED 07/11/2009 NYT, Homeless Families Increasing, U.S. Finds. The Washington Post also has an informative related article. The link has not been provided because WP requires their readers to login.

• UPDATED 07/04/2009 NYT, Joblessness Hits 9.5%, Deflating Recovery Hopes.

  "The losses for June lifted net jobs shed since the beginning of the recession to 6.5 million — equal to the net job gain over the previous nine years."--NYT--

  It would appear the entire King Bush the Idiot administration realm was one gigantic scam?

  Delivering three plus trillion of debt, two wars, negative job growth, and who knows how much more will be required for the toxic (inflated price) asset clean-up and the rebuilding of America.

  Our surviving banks are still holding the inflated assets (their own plus those of the FDIC merged failed banks) on their books hoping for some mystical market magic—continuing to behave like gamblers, double or nothing.

  On this July 4, 2009 instead of celebrating we must reflect, deconstruct, and understand how it is that we elected (twice) such pathetic leadership, which has bankrupted our nation.

• UPDATED 06/22/2009 RealtyTrac, May 2009 foreclosures decrease 6 percent from previous month. May 2009 foreclosures are up 18 percent over May 2008.
• UPDATED 06/16/2009 Reuters, Florida tent city offers hope to homeless.

• UPDATED 04/15/2009 WP, Foreclosure Filings Climbed in March. In March the economy continued shedding jobs -663,000—unemployment increased in March by 694,000—total unemployed 13.2 million of which 5.3 million occurred within the prior 12 months.

  Our Vice-President reporting sensible pre-tax 2008 income of $269,256—while the bankers and and their patron politicians continue touting and lamenting the lose of multi-million dollar incomes incentives.

  How else, they rhetorically ask, will they attract the "talent" required to continue: distorting and destabilizing markets; creating Trojan horse mortgages; fraudulent demand; non-transparent, over-leveraged, and bankrupt hedge funds; and non-transparent and fraudulent financial Ponzi schemes.

  Then abandoning the capital markets saying they're just too distorted and destabilized without taxpayer bailouts (direct dollar and guarantees) to mitigate the risk and assure the returns needed to pay the multi-million dollar incomes incentives to attract the "talent" to...[repeat boldly and brazenly until your big brass bailout balls are bankrupt or blow-torched, whichever occurs first]!

  • US News&World, Foreclosures Hit New Record
• UPDATED 04/06/2009 Reuters, U.S. warns mortgage fraudsters are eyeing rescue. No surprise that fraudsters are circling like vultures—refreshingly so are regulators and law enforcement.
• UPDATED 03/31/2009 Reuters, Record drop in home prices keeps U.S. consumers glum.
• UPDATED 03/23/2009 Reuters, U.S. existing home sales rose in February.
• UPDATED 03/19/2009 Reuters, Owners skulking away from "underwater" U.S. homes.
• UPDATED 03/13/2009 Reuters , Housing bankruptcy bill stalls in US Senate -aides.
• UPDATED 03/13/2009 Reuters Video, Tent City [California's Capitol]: The recession's new face
  • CNN YouTube Video, EDAR a mobile tent used by LA homeless. (see www.edar.org</a>)
• UPDATED 03/12/2009 Reuters, U.S. foreclosure filings rise in February.
  • RealtyTrac, February Foreclosures increase 6% from January 2009. February 2009 Up 30 Percent From February 2008 Despite Foreclosure Moratoria
• UPDATED 03/05/2009 Reuters, House approves mortgage bankruptcy overhaul. Better late than never, hopefully?
• UPDATED 03/11/2009 Reuters, CORRECTED-Protesters target U.S. foreclosed-homes auctioneer.
• UPDATED 03/05/2009 Reuters, House approves mortgage bankruptcy overhaul. Better late than never, hopefully?
• UPDATED 03/04/2009 Reuters, U.S. launches mortgage plan as homeowners struggle.
  • WRAPUP 1-U.S. launches mortgage plan as homeowners struggle

• UPDATED 02/26/2009 Reuters, House likely to delay mortgage aid vote: sources. It does not make sense to treat mortgages different than any other secure asset—either we're going to give the exhausted Middle Class a "fresh start" or we're not?

  Bankruptcy also has the added benefit of enabling the homeowners to determine whether to rationalize the market and how fast instead of the Federal Reserve.

  Bankruptcy is also a better locus for determining feasibility and fraud than the Federal Reserve—lenders, homeowners, the United States Trustee, and all interested parties can assert fraud. It is routine for bankruptcy judges to make such determinations—they do so almost daily!

  Bankruptcy is more systematic and transparent (helping researchers who will be trying to figure out the disaster for years to come) than some back room deal at the Federal Reserve.

  If the Federal Reserve et al. think their plan can sooner rationalize, and stabilize the housing market at higher prices than enabling bankruptcy adjustments let's see the data—surely all prefer such a plan, if feasible, to bankruptcy adjustment—but let’s not withhold relief or slow walk relief hoping such a plan exists.

  It's risible that opponents to bankruptcy adjustment cite those who have struggled under distorted markets to make what in some cases amount to extortion payments as justification for not enabling bankruptcy courts to adjust mortgages—these homeowners can and should get the same relief, if they so choose!

  In this regard it is useful to note that lenders, investors, and bond guarantors are in a much better position to know if they are selling or guaranteeing into a distorted market(s) than a typical borrower. Although after this disastrous debacle borrowers may demand more transparency to enable them to determine if they are buying in a distorted market or in case of bankruptcy mortgages can be written down, just like all secure assets, to current market prices.

• UPDATED 02/20/2009 Chicago Tribune, Bailout backlash: Some denounce homeowner rescue as unfair, while others see little choice
• UPDATED 02/18/2009 Reuters, INSTANT VIEW: U.S. housing plan to aid up to 9 million families

• UPDATED 02/12/2009 RealtyTrac, Foreclosure activity decreases 10 percent in January The decrease likely reflect moratoriums on foreclosures to provide policymakers time to figure out how to slow and reverse the alarming foreclosure rate.

  The overall nationwide foreclosure rate for January 2009 was still a whopping 18%. (Higher in Nevada, California, Arizona...the west.)

• UPDATED 02/10/2009 UPI, Homeless woman asks Obama for help.
  

  • UPDATED 03/11/2009 National Center on Family Homelessness, Report on Homelessness of Americas Children

    "...more than 1.5 million of our nation’s children go to sleep without a home each year...It is unacceptable for one child in the United States to be homeless for even one day."--Report on America’s Youngest Outcasts--

    By what logic is this permitted to exist...survival of the fittest—the fittest do not use such logic.

  • White House Blog, On the front lines of the foreclosure crisis

    "At times like these -- and we know times are hard right now -- there's so many families who've lost their homes, and millions are struggling to keep up with their mortgages,"--First Lady Michelle Obama--

    We must ensure every city has an effective center(s) where homeless individuals and families can go to immediately receive basic habitable, safe, and secure shelter, health care, and nutritious food security (and school/retraining for those requiring it).

    A homeless family requesting President Obama for help during his public appearance is a very strong indicator that we have failed to act quick enough—we must act immediately (HUD may be awaiting passage of the The American Recovery and Reinvestment Act of 2009).

    An American family (or individual) must be able to move immediately and seamlessly from a foreclosure (assuming foreclosure cannot or has not been prevented) into basic habitable, safe, and secure shelter, including basic health care and nutritious food security (and school/retraining for those requiring it).

    Recovery and rebuilding will require restructuring lives many years after the job and credit markets are stabilized and begin functioning again!

• UPDATED 01/31/2009 AP, Economy shrinks at 3.8 percent pace in 4Q.

• UPDATED 01/28/2009 AP, Fed moves to help distressed homeowners. The "help" must be accompanied by mortgage restructure, including lower interest rate and principle write-down.

  Otherwise, it's little more than government participation in the non-rationalized housing market for the purpose of perpetuating and prolonging the previous scandal.

  It's complicated when a government is forced to intervene to adjust prices in what was previously supposed as "free market" prices—it does not know what the "free market" price should be, only what it isn't!

  When you factor in multiple governments across multiple international markets and heterogeneous economic systems it becomes mind boggling complex—the good news, it's a novel challenge requiring international cooperation to solve.

• UPDATED 01/27/2009 NYT, Layoffs Spread to More Sectors of the Economy
• UPDATED 01/23/2009 NPR Audio, Jobs, Housing Battered; Microsoft Sets Layoffs
  
  • FHFA, U.S. Monthly House Price Index Estimates 1.8 Percent Price Decline From October to November (300K pdf). Federal Housing Finance Agency (FHFA) housing index for October - November 2008 shows continuing decline.

• UPDATED 01/13/2009 Reuters, Bernanke suggests U.S. buy toxic assets from banks. In addition to removing currently undervalued assets (euphemistically referred to as toxic) from banks' balance sheets bankruptcy legislation must enable consumers to remove debt from their balance sheet by writing down their mortgage and writing off their credit card debt.

  Doing both simultaneously will free up money to lend AND borrowers to borrow—bankruptcy judges in cooperation with trustees and interested parties can work to ensure the process is orderly, balanced, and transparent.

  We can argue and assign responsibility later to: those irresponsibly and in many cases fraudulently pushing the limits of the credit system or those irresponsibly and in many cases fraudulently pushing the limits of the debt system.³

• UPDATED 01/09/2009 Reuters, Bank industry slams lawmaker-Citi mortgage deal.

• UPDATED 01/08/2009 BBC, US President-elect Barack Obama has called for "drastic action" to prevent the US economic situation worsening.

  "In a concrete sign that Wall Street is now prepared to help such families, it emerged that some leading bankers have withdrawn their opposition to allowing bankruptcy judges to modify the terms of mortgages in arrears in order to prevent foreclosures.

  According to a report in the Wall Street Journal newspaper, the huge US bank Citigroup is now negotiating with key Congressional committees on a deal which would give judges unprecedented powers, something long opposed by the financial services industry."--BBC--

  It's not so much that Citigroup wants to "help Americans" as prevent Congress from going open loop, without lobbyist's input—write-downs are coming and the bank lobby wants to ensure they receive the most favorable terms. See the shocking and alarming foreclosure graph, at right. The dates when foreclosures started increasing above a nominal 1% and then skyrocket are interesting. After they finish with mortgage write-downs they can take up the write-off (not down) of consumer credit card debt too.

  U.S. Foreclosures

  The President-elect is being very generous in referring to the looting of America as "irresponsible"—changes to our bankruptcy laws must ensure that all loot from the looting can be traced and recovered, to the extent possible, regardless of a fraudulent transaction’s disguise.

• UPDATED 12/30/2008 BBC, US housing index in record slump.

  "House prices in 20 US cities fell by a record annual rate of 18.04% in October, according to a closely-watched home price survey."--BBC--

• UPDATED 12/28/2008 Reuters, How one family's mortgage is linked to meltdown
  
  It's important for the Goldricks and others to write their representatives—not to give up.

  While current tax and bankruptcy laws/regulation impede modification of certain "securitized" investments these laws are easily modified. The problem is everyone is praying (including Congress) that housing prices will somehow magically increase as more homeowners continue cascading into a decade of disaster (losing your home is just the beginning)!

  Goldrick Family

• UPDATED 12/23/2008 NYT, Home Sales in November Fell at Faster Pace Than Expected.

  "The median price of a home fell 13 percent in November, to $181,300 from $208,000 a year ago."--NYT--

  It seems preferable to ensure home prices at all times reflect their actual economic value. As opposed to economic shocks caused by war, fraud, unregulated and unsustainable economic growth, unregulated and unsupervised lending practices, and incompetence etc.

  It does not seem at all complex or sophisticated to enable a relatively few gamblers (hedge funds) and warmongers to overheat an economy, and then exit when it becomes unsustainable.

  Leaving others to clean up the shit pile while denying responsibility for the shit pile to anybody who will listen!

• UPDATED 12/21/2008 NYT, The Wrecking Reckoning: White House Philosophy Stoked Mortgage Bonfire.
• UPDATED 12/09/2008 BBC, US faces deep problems, OECD says
• UPDATED 12/04/2008 NYT, Washington’s New Tack: Helping Homeowners
• UPDATED 12/04/2008 WP, Fed Chair Calls for Additional Steps to Stem Foreclosures
• UPDATED 11/24/2008 AP, More housing aid sought as prices sink further
• UPDATED 11/23/2008 BBC, Citigroup seeks 'emergency cash'

• UPDATED 11/11/2008 AP, Gov't to announce new loan aid effort. This is mostly meaningless tinkering around the edges—Congress must simply enable primary residence homeowners to restructure and write-down their mortgage in bankruptcy.

  The bankruptcy process can objectively and smoothly handle the many millions of mortgages requiring restructuring, including determinations of feasibility, lender notification, and interested party participation (guarantee those "hard to reach lenders" we keep hearing about will suddenly be very reachable).

  Congress must make clear that bankruptcies filed for the sole purpose of mortgage restructure and write-down cannot be used for purposes of judging credit worthiness.

  Additionally, Congress must make clear that any and all gains related to any fraudulent mortgage lending practice can be trace and recovered, notwithstanding corporate structure or commingling of funds.

• UPDATED 10/23/2008 AP, US foreclosure filings up 71 percent in 3Q

  "RealtyTrac monitors default notices, auction sale notices and bank repossessions. More than 250,000 properties were repossessed by lenders nationwide in the third quarter, 81,000 of which were taken back last month"--AP--

  Dislocation and other collateral costs related to a foreclosure can ripple through the economy, sometimes for decades.

  Amending the bankruptcy laws to enable primary home owners to write down and restructure their mortgage can minimize some of these costs.

• UPDATED 10/07/2008 Google->AP, Bank of America settles lawsuit over bad mortgages.
  This multi-billion dollar settlement responds to lawsuits filed by California's Attorney General among others. Only Countrywide borrowers' mortgages will be adjusted (not necessarily written down to current market value), leaving other borrowers to fend for themselves.

  Congress must modify bankruptcy law to enable all homeowners to "write down" the mortgage on their primary residence.

• UPDATED 09/24/2008 White House, Text of President's Address to the Nation, Bailout
• UPDATED 09/21/2008 AFP, Paulson calls on US Congress to move quickly on rescue
  
  • UPDATED 09/21/2008 NYT, Democrats Begin to Set Own Bailout Terms

  • UPDATED 09/21/2008 WP, Obama Says Bailout Must Also Assist Homeowners

    "in return for their support, the American people must be assured that the deal reflects the basic principles of transparency and fairness and reform."--Barack Obama--

• UPDATED 09/05/2008 NYT, U.S. Rescue Seen at Hand for 2 Mortgage Giants. NYT is reporting the United States is getting ready to de-privatize (i.e. nationalize) Fannie Mae and Freddie Mac, with your tax dollars.

  The bail-outs looting just gets bolder, bigger, and more brazened—the looters calling those they're looting, whiners!

  Neo-capitalism: Privatize on the upside; nationalize on the downside.

  It is worth noting that a simple amendment to the Title 11 (United States Bankruptcy Code) enabling primary residence home owners to "write-down" their mortgages to current fair market value would immediately stop this looting.²

• UPDATED 09/05/2008 Reuters, Home foreclosures reach record high
• UPDATED 08/27/2008 UPI, Official seeks foreclosure moratorium San Diego's city attorney seeks relief from the county's 213 percent increase in mortgage foreclosures.
• UPDATE 03/13/2008 Forbes, Paulson's New Anti-Crisis Playbook."Poor judgment and poor market practices led to mistakes by all participants.”—Oh, you mean like the 1998 collapse of Long Term Capital Management or today's collapse of Carlyle Capital.
• BBC Video Clip, The new homeless in the United States
• Senate Democrats Discuss Republicans' Refusal To Help Americans At Risk Of Losing Their Homes

-----notes-----

1. Foreclosure Prevention Act of 2008, (S.2636)

2. The amendment would also make it less likely that these mortgage scam losses will be shifted to the taxpayers (and primary residence home owner) in the future.

Of course lenders worldwide will not appreciate shifting the loss on their "the sky's the limit" scams—but how is that a negative? Careful before you respond it will tighten the capital markets!

3. Unfortunately, we Americans are taught from early childhood that our very worth and identity is directly linked to a balance sheet—adjusting that balance sheet requires adjusting our identity—how do our leaders recommend this or how would we implement it should they have the courage to recommend it?

It's easier, but ultimately a disaster, to recommend we keep shopping or look the other way (or actually encourage) when mortgage applicants over state their income by a factor of six.

It's worth pointing out that when one individual or investor does this it harms others who unknowingly purchase over inflated assets and yields—it's like causing a pile-up on the Santa Monica freeway, all those after you are harmed.

Of course those whose identity is connected to their balance sheet may be unable to perceive this or perceive it as an asset—after all their balance sheet/identity relative to those stuck in the pile-up has improved!

4. The Fed is currently buying, instead of selling treasury bonds because consumers’ spending is weaker than expected. The market sees this as an inflation-causing event, which can require the Fed to make repeated Treasury bond purchases.

The market may wonder to what extent the consumers' "hoped for spending" is being diverted to banks holding market-distorted mortgages. Mortgages that the banks are dependent on to avoid landing on the Feds four-five bank shutdown per month list.

This can create a perverse cycle that's in nobody's interest! It’s a delicate and difficult balancing act; do you rationalize quickly so markets stabilize and recover quickly but risk a deeper and more painful trough; or rationalize slowly prolonging market uncertainty but gaining a shallower and less painful trough.

Some might say it doesn’t matter if you take the path with a thousand switchbacks or jump, in both cases you end up at the same bottom! Maybe, jumping with a parachute describes the Fed's "hoped for" balancing act?