Video: Chris Whalen – more on MBS FraudGate, Pension Fund suits, Securities Law and the markets need to restructure these TBTF banks
The risks are high, and Mr Market is asleep, methinks that Uncle Sam has given the TBTF the all clear, leaving taxpayers holding the bag, again.
Courtesy of Market-Ticker:
“This is cancer – this isn’t a sudden crisis that is going to erupt out of the ground.”
“We’re going to wait until well-into this, and then we’re going to do the right thing – which is restructuring.”
“MBS…. are calling their lawyers. Trustees may or may not have the note.“
“There are a lot of investors out there who don’t know what they own… they may own unsecured loans….. trustees that were supposed to do things under state law (and didn’t)… even Fannie and Freddie have issues with this.”
“…. this is not minutia; this is the letter of the law.“
“The dealer has to deliver to the trustee the notes (under NY State Law)”
h/t PK4 on ZH: Rick-
“we need a new amendment that gives every American a house, a car with or without fins, 4-5 weeks of vacation with every Monday off …since government knows better than any other enterprise …and we have years of documented evidence to prove it (paraphrased from earlier today).He also stated that big funds will tell the government that if you don’t guarantee them (GSE debt) that they will dump’em. Bottom line. “GSE’s will cost more than any other bailout …and they haven’t even slowed down.”
Update 4: Yves at NakedCapitalism sums up this latest plan beautifully:
…How is this supposed to help borrowers? Seriously. This is the government equivalent of a subprime teaser loan. But this is even worse. First, teaser borrowers paid at least a smidge of interest (even 2% is more than zero), which placed a teeny constraint on their ability to take on debt. Second, housing was at least appearing to increase, so it wasn’t entirely nuts (merely sorta nuts) to look to the principal value of the house as security and reason to extend yourself financially….
…This measure, as modest as it is, therefore looks like yet another backdoor transfer to banks, and a way to try to prop up housing prices (note the “stabilize housing markets” comment) and secondarily, funnel some cash to communities (note the loans are intended to be used for property tax payments too)….
And Shaun Donovan at HUD was touting the home buyer tax credit as a success and saying housing STABLIZED! AS IF!What flavor would you like with your double-dip? WSJ has it. Hang on Sloopy!
More on the ‘wonderful’ homebuyer tax credit, it was given to inmates serving LIFE sentences, good grief.
Nearly 1,300 prison inmates wrongly received more than $9 million in tax credits for homebuyers despite being locked up when they claimed they bought a home, a government investigator reported Wednesday
The investigator said 241 of the inmates were serving life sentences….
Housing: FINALLY! Some data on the trial mods! Treasury reports more than 27% of homeowners in trial modification are delinquent…
They were forced to answer the inquiry on status of the 600,000+ trial mods finally, and it ain’t good. Not good at all. What IS good is that we are getting some data. Just last week HUD Treasury was claiming no one was late on these payments. On tv in fact, in an interview with Diana Olick which we posted here.
The real shxtstorm is gonna hit us when FANNIE and FHA run out of money. Their book is over 3 TRILLION at FAN alone now and their delinquency rate is EXPLODING. A month after saying they Absolutely Positively did not need a bailout, the FHA is raising it’s premiums, cuz guess what? They need a frakkin bailout…
When will these fools stop trying everything BUT the damned HOLC!!!?!? AARRRGLE! This Admin is so frakking enamored of everything ELSE FDR did why not this? Oh yeah HRC suggested it in 2007 and 2008, thus Obama won’t do it. Frakkers. Their next ingenius plan will be the HEMAP model so taxpayers can LOAN homeowners their mortgage payments. Again padding servicers pockets and not addressing the underlying issue. Via FAN FRED we OWN THE DAMNED HOUSES ALREADY!! Why not buy them outright under HOLC and cut a deal with the homeowners directly with the government. It would be less ongoing intervention and cost less dammit. This is yet ANOTHER example of an actual CRISIS that Team Obama has FAILED to address successfully, while they focus all their attention on health care, housing is falling off a cliff and it WILL drag the entire economy down with it…again.
More than one-quarter of homeowners receiving help under a U.S. government foreclosure prevention plan are behind on their new mortgage payments, a Treasury Department survey has found. Some 650,000 borrowers are participating in the trial phase of the Obama administration’s Home Affordable Modification Program, a $75 billion taxpayer-financed program launched this year….
…A Treasury Department survey of large mortgage servicers found “over 73 percent of borrowers are current in their trial plan payments,” Assistant Treasury Secretary Herbert Allison told a congressional oversight panel.
That leaves about 27 percent who are delinquent on the payments.
Allison provided written answers to questions raised at an October hearing before the Congressional Oversight Panel, which monitors the government’s foreclosure prevention plan and other financial rescue efforts.
Allison said that “while not all eligible borrowers will convert to permanent modifications, it is too early to estimate a failure rate, diagnose causes and predict future success rates.”
Let me give them a hand. The diagnosis of the underlying cause is UNEMPLOYMENT. The failure rate is TOO LARGE. The future success rate will FALL as UE rises. DO THE DAMNED HOLC! (Read HRC WSJ OPED on the HOLC from September 24, 2008 at link)
Experts say the conversion rate to permanent loans is the key to determining the program’s ultimate success or failure.
The Treasury has not published figures on how many trial loan modifications have been made permanent, but it said it will start doing so this month.
The next monthly report on the program will be released next week, Treasury Department spokeswoman Meg Reilly said.
This week Treasury officials threatened to fine mortgage lenders unless they speed efforts to give hard-pressed homeowners a permanent break on monthly payments….
So how’s that working out for them? It’s not. They are going to tighten standards (which will hurt housing but it has to be done) and they are asking Congress to allow them to raise premiums on current homeowners. In addition they are finally acknowledging that audit that said they would not need a bailout may have been overly optimistic:
“We have to replenish the reserves and we have to be prepared for a market outcome that may not be as favorable” as one that was forecast by the auditor, said David Stevens, the FHA’s commissioner, in an interview Monday. The audit estimated that the agency wouldn’t need any funds from the U.S. Treasury next year.
Imagine that!! what a shock! maroons.
…Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, plans to ask Congress on Wednesday to raise the cap on the annual insurance premium that the FHA can charge borrowers. In testimony before a congressional panel, he will also outline steps the agency is considering to set minimum credit scores, to require home buyers to put more money down, and to make lenders more accountable for loans that the agency insures.
Those measures are designed to begin rebuilding the agency’s depleted capital reserves. An independent audit last month said that the estimated value of those reserves had dropped to $3.6 billion, or about 0.5% of the $685 billion in loans the FHA has insured...
The FHA will also limit the amount of money that sellers can provide for closing costs on home sales to 3% of the home price, from the current level of 6%. The agency is also finalizing plans to set a minimum credit score for borrowers, possibly by requiring those making small down payments to have higher credit scores….
Barn door, closing, horses, cows gone. You know the drill.
The other shoe drops: Fannie Mae reports MASSIVE 3Q loss of $18.9 Billion and asks govt for another 15B bailout; Fannie Mae rolls out ‘Deed for Lease’ program renting foreclosed homes to owners…
Update: The other shoe just dropped. I am guessing FAN didn’t roll out this Deed for Lease program out of the goodness of their hearts, they turned around and announced a MASSIVE 3Q loss and need ANOTHER 15B from Treasury:
The latest particular does of lunacy and economic calamity coming out of the intellectual midgets at Fannie and the FHA should be sufficient to push the market well into 1,100 territory tomorrow. FNM’s loss for Q3 is $18.9 billion, up from $14.8 billion in Q2, a time when the market was up a good 15%: ever wonder who keeps on subsidizing those gain? That’s right – you. Credit-related expenses increased to $22 billion in Q3 from $18.8 billion in Q2. Oh, and Fannie now wants another $15 billion rescue from the Treasury (which is having some troubles with getting that pesky debt ceiling raised to one googol) so it can continue with its plan of keeping shadow inventory away from the market, rent foreclosed houses to their owners at staggeringly low rates, and continue the pretense that bank’s balance sheets are well capitalized. Seriously, is the twilight zone any more palatable if one just drinks the Kool Aid or takes some crazy pill? We are ready and willing for the plunge.From the just released results by bankrupt Fannie Mae:
WASHINGTON, DC – Fannie Mae (FNM/NYSE) reported a net loss of $18.9 billion in the third quarter of 2009, compared with a loss of $14.8 billion in the second quarter of 2009. Including $883 million of dividends on our senior preferred stock held by the U.S. Department of Treasury, the net loss attributable to common stockholders was $19.8 billion, or ($3.47) per diluted share, in the third quarter of 2009, compared with a loss of $15.2 billion, or ($2.67) per diluted share, in the second quarter of 2009. Third-quarter results were largely due to $22.0 billion of credit-related expenses, reflecting the continued build of the company’s combined loss reserves and fair value losses associated with the increasing number of loans that were acquired from mortgage-backed securities trusts in order to pursue loan modifications.
The loss resulted in a net worth deficit of $15.0 billion as of September 30, 2009, taking into account unrealized gains on available-for-sale securities during the third quarter. As a result, on November 4, 2009, the Acting Director of the Federal Housing Finance Agency (FHFA) submitted a request for $15.0 billion from Treasury on the company’s behalf. FHFA has requested that Treasury provide the funds on or prior to December 31, 2009…..
Update on status of Fannie Mae’s HAMP/Making Home Affordable applications (HousingWire) :
(…) Fannie said as of the end of Q309, it had 487,000 trial modifications in progress through the Making Home Affordable Modification Plan (HAMP) and it has met the Treasury Department’s goal of 500,000 modifications in process by November 1.
Total loan workouts for Q309 totaled 49,000, including 28,000 loan modifications, compared with 41,000 workouts, including 17,000 modifications, during Q209.
“Even though the volume of trial modifications that we have initiated on Fannie Mae loans under the Home Affordable Modification Program has been substantial, a low percentage of our trial modifications had converted into completed loan modifications as of September 30, 2009,” Fannie Mae said. “One reason is that activity under the program has been increasing over time, so that many loans have not had enough time to complete the trial modification period prior to September 30, 2009.”
Also on Thursday, Fannie announced a new program that will allow new deed-in-lieu program that allows the borrower to sign a lease to rent their home from Fannie Mae in exchange for the voluntary transfer of the property back to the lender….
Housing Update & Mortgage Modification Plan and Foreclosure Assistance Resources; HEMAP – targeting Treasury’s housing funds to loans for unemployed homeowners, Barney Frank’s proposed bill…
Our previous post on Rep Frank (D-MA) proposal on extending some of the TARP and/or stimulus funds targeted for housing to a program that loans money to unemployed homeonwers to make their mortgage payments here.
A model is emerging in the hearings on the Hill, HEMAP (WSJ):
(…)The proposal to keep out-of-work homeowners in their homes, which was discussed at an oversight panel field hearing last month in Philadelphia, could be based on Pennsylvania’s Homeowners’ Emergency Mortgage Assistance Program.
With HEMAP, which was established in 1984, Pennsylvania state officials provide a two- or three-year loan to a jobless homeowner, depending on the individual’s finances and the economic situation. Using that program, homeowners aren’t responsible for repaying the vast majority of the principle or any of the interest on the loan until he or she finds a job.
Specifically, a struggling homeowner participating in the Pennsylvania program, which has depleted resources, requires jobless homeowners pay a token $25 a month until they get another job and their gross income surpasses 35% of their monthly housing costs, including mortgage and utility payments.
In some cases, when the household has some income, the payments would be made partly by the homeowner and partly by the state…
HUD has been lobbied for the legislation/program and they and Treasury sound positive on its implementation, my problem is the Frank legislation wants to use repaid TARP loans and I think they need to end TARP in December and use stimulus money or some of the 50b sitting in the HAMP fund instead:
…According to people familiar with the Obama administration mortgage modification program, officials from the Housing and Urban Development agency have met with Pennsylvania officials responsible for the development of the HEMAP program to discuss whether the state program could be expanded nationally. The presentation was met with a positive response from the HUD officials, they said. A federal official familiar with the mortgage modification program said the meeting took place and “a range of options are being discussed to expand the mortgage modification program nationally.”
Meanwhile, Neiman said he plans to discuss the HEMAP program with key Treasury officials as well as HUD Secretary Shaun Donovan. “I would propose that Treasury consider using TARP funds to fund existing or future state emergency mortgage assistance programs,” Neiman said.
Treasury spokeswoman Meg Reilly said the department continues to study further ways to help unemployed homeowners. …She pointed out that the Treasury’s $50 billion modification program, known as the Home Affordable Modification Program, or HAMP, is open to the unemployed.
Sadly since Treasury has not agreed to open their NPV test and have the servicers give detailed explanations for denials on HAMP applications (as FDIC did with the IndyMac mods), there is no way to verify that underwriters are in fact properly considering the unemployed. Anecdotally I can say from all interviews I have seen with servicers they say the unemployed cannot be helped, I would not count on them considering these apps until I have seen it.
However, Dodds argues that even though the HAMP program is open to the jobless, it isn’t being used effectively to help them. “It’s real chaos with the mortgage companies trying to get HAMP going,” Dodds said.
He adds that, unlike the HAMP program, a federal loan approach to the jobless could help a large number of people in a short period of time. It also solves the concerns of mortgage servicers who complain they will be sued by mortgage securities investors who argue that these lenders will file lawsuits against them for modifying mortgage payments, he said….
I can attest to the chaos with HAMP applications and servicers I will recuse myself from commenting further on this program, cause there but for the grace of God go I…I will say if the banks arent going to modify loans effectively and Team TOTUS cannot see that tax increases, increased deficit spending and regulation will hamper growth and job creation, well in that scenario which seems more and more likely, we may see extended high unemployment for years (in the economic forecasts of PIMCO for one example the ‘new normal pretty much sucks). Anyway if this is the case we may really want to consider programs like this, if nothing else it is a way to directly stop the housing bleeding as a result of the rolling foreclosures tied to unemployment…
but it burns me to think of taxpayers loaning other taxpayers money to pay the banks that all the taxpayers loaned all our money to to begin with because the banks will not modify the damned loans.
Since fannie and freddie are backing most of these loans, that is ALSO the taxpayers funding the losses! so we are loaning ourselves money to pay banks who we loaned money to service loans and transfer funds to FANNIE FREDDIE whom we own and whom we also are loaning money to keep afloat. What the hell kind of outfit is this government running? How many times do we have to loan ourselves money in and out of many government pockets with banks making transfers? Why cant we just do the damned HOLC like HRC proposed in oh what 2007 now, she first raised it in 2005…we could have bought the houses many times over and stopped the bleeding, but then we couldn’t line many pockets eh? the frakkers.
Making Home Affordable Treasury Program
e.Fannie Mae.com (servicer updates)
HUD- Department of Housing & Urban Devlopment
Fannie Mae mortgage customers call Fannie Mae at 1-800-7FANNIE (1-800-732-6643) or www.fanniemae.com/homeaffordable
Freddie Mac mortgage customers call Freddie Mac at 1-800-FREDDIE (1-800-373-3343) or www.freddiemac.com/avoidforeclosure
VA mortgage customers (thank you for your service) vall VA Financial Counselors at 1-877-827-3702 or www.homeloans.va.gov
Hope Now Alliance (Hank Paulson’s Plan) 1-888-995-4673 or www.hopenow.com