NYTimes notices Obama Housing Plan an abject failure, but which way are they spinning for Team O…
I am so sick of both the banks and the Administration playing HEAD GAMES with homeowners on these modifications, That is what it is. Just tell us what your intentions are and we will make decisions based on that reality. Jeebus it isn’t that hard people. Our many posts on housing, HOLC, HAMP FAN FRED etc here
Read the outcome for a woman who entered into a trial mod with Chase and did everything right at the end of this post before you judge homeowners too harshly. The vast majority of the loans now in trouble are people who have lost income NOT people who bought a McMansion. Allowing the 5-6 million currently delinquent loans to enter foreclosure in 2010 will mean an EXTENDED recession for the ENTIRE economy.
So here is the question. Is the NYT spinning for Obama premptively, heh, to show how hopeless, lol, it would be to continue to try and help homeowners? OR are they spinning to show readers why we must embark on principal writedowns since allowing the banks to modify ‘voluntarily’ without them has done absolutely nothing?…You read it and judge for yourself.
…But behind the scenes, Treasury officials appear to have concluded that growing numbers of delinquent borrowers simply lack enough income to afford their homes and must be eased out.
In late November, with scant public disclosure, the Treasury Department started the Foreclosure Alternatives Program, through which it will encourage arrangements that result in distressed borrowers surrendering their homes. The program will pay incentives to mortgage companies that allow homeowners to sell properties for less than they owe on their mortgages — short sales, in real estate parlance. The government will also pay incentives to mortgage companies that allow delinquent borrowers to hand over their deeds in lieu of foreclosing.
Ms. Reilly, the Treasury spokeswoman, said the foreclosure alternatives program did not represent a new policy. “We have said from the start that modifications will not be the solution for all homeowners and will not solve the housing crisis alone,” Ms. Reilly said by e-mail. “This has always been a multi-pronged effort.”…
(The article can be viewed both as portraying the ‘best thing for all’ to be giving up the ghost on Making HomeAffordable, the ghost being the idea they ever intended to give meaningful help to the homeOWNERS in the first place) (and letting approx. 5-6 million homes enter foreclosure in 2010 alone)
…Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes
…Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.
Now it is ‘cleansing’ like a colonic, lol. This must be like FUNemployment!
“The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis,” said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. “We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.”…
Now the NYT is turning to HEDGE FUND Managers for their views of what is RIGHT for the economy? Big change there. I thought capitalist investors were Teh Evil? Pivot readers! Pivot like the wind!!
The NYT is talking out of both sides of its mouth in this piece. Since they are never loathe to take a stand (usually against capitalism and investors), it seems they are voting PRESENT. Hard to carry water for your overlord when he doesn’t know which direction he is going in eh journOlists?
And/or this piece could also be used as advance work for actually doing something USEFUL with the unlimited BAILOUT the WH just gave FANNIE/FREDDIE/FHA. Something like, oh I dunno, THE DAMNED HOLC!!!!!!
Good news for homeowners is that Nancy Pelosi’s favorite economist Mark Zandi, is on board with principal writedowns and after bailing out the banks and playing the class warfare card, this ‘pivot’ to letting the banks foreclose on millions of Americans might be hard to make stick..
..Mr. Zandi argues that the administration needs a new initiative that attacks a primary source of foreclosures: the roughly 15 million American homeowners who are underwater, meaning they owe the bank more than their home is worth.
..Mr. Zandi proposes that the Treasury Department push banks to write down some loan balances by reimbursing the companies for their losses. He pointedly rejects the notion that government ought to get out of the way and let foreclosures work their way through the market, saying that course risks a surge of foreclosures and declining house prices that could pull the economy back into recession.
“We want to overwhelm this problem,” he said. “If we do go back into recession, it will be very difficult to get out.”..
Look I finally agree with Mark Zandi! The double dip we have been forecasting will be positively Japan-like in its duration if Team Obama lets these foreclosures happen, believe it.
Memo to Timmeh: YOU HAD A YEAR AND YOUR WAY SUCKETH. DO HOLC!
Continues after the break:
…Whatever the merits of its plans, the administration has clearly failed to reverse the foreclosure crisis.
In 2008, more than 1.7 million homes were “lost” through foreclosures, short sales or deeds in lieu of foreclosure, according to Moody’s Economy.com. Last year, more than two million homes were lost, and Economy.com expects that this year’s number will swell to 2.4 million….
Look, I am loathe to trust Team Obama on this since they have made it ABUNDANTLY clear the goal is to assist the big banks, be it by embarking on a program that was CLEARLY INSUFFICIENT (by design IMO) for the problem, thus giving the big banks a way ON PAPER to avoid TAKING WRITEDOWNS. Or by changing FASB to allow banks to avoid writedowns thus eliminating their motivation to voluntarily modify, and/or changing TARP to avoid purchasing the damned MBS’ to begin with.
Because, yes, IMO that is all HAMP and TARP did, served as a vehicle for banks to avoid taking losses, and acknowledging the shadow inventory in REO.
…Mr. Katari contends that banks have been using temporary loan modifications under the Obama plan as justification to avoid an honest accounting of the mortgage losses still on their books. Only after banks are forced to acknowledge losses and the real estate market absorbs a now pent-up surge of foreclosed properties will housing prices drop to levels at which enough Americans can afford to buy, he argues….
Now Treasury has the means (in the uncapping of FAN FRED lines of credit) to allow FAN FRED to buy the individual mortgages out of the MBS, REIMBURSING THE BIG BANKS AT PAR, yes 100%, and STILL MANAGING to avoid helping the actual homeowner, leaving the property in new investor hands, keeping values artificially high but all without helping a single family and creating ANOTHER bubble in the process.
This is not a free market correcting people. Bernanke is doing just what Greenspan did that created the first bubble. Rates are ZERO. ‘Investors’ are borrowing cash at zero and making bubbles in the stock market and housing as they seek a better return than o.012% on savings. (repeating what Greenspan did in the tech bubble of 99), all the ‘free’ money has nowhere to go, it is back in housing now, prices are moving UP when they should not be.
I mean if THAT is the goal, helping big banks and encouraging homeowners to JINGLE MAIL and WALK away (thereby freeing up their income for retail sales and such) well then, well done. Frakkers.
…“This is a conscious choice we made, not to start with principal reduction,” Mr. Geithner told the Congressional Oversight Panel. “We thought it would be dramatically more expensive for the American taxpayer, harder to justify, create much greater risk of unfairness.”
Dramatically MORE EXPENSIVE then the UNLIMITED BAILOUTS Timmeh just gave FAN FRED? What is more than infinity Tim? A ‘greater risk of unfairness’ than helping bail out the banks who made the loans that collapsed my housing market here in Phoenix, thereby leaving me underwater in a home I owned on a nice safe 30 yr fixed loan for the past 15 years Tim? More unfair than that? What planet are these people from and can they please go back?
Mr. Geithner’s explanation did not satisfy the panel’s chairwoman, Elizabeth Warren.
“Are we creating a program in which we’re talking about potentially spending $75 billion to try to modify people into mortgages that will reduce the number of foreclosures in the short term, but just kick the can down the road?” she asked, raising the prospect “that we’ll be looking at an economy with elevated mortgage foreclosures not just for a year or two, but for many years. How do you deal with that problem, Mr. Secretary?”
A good question, Mr. Geithner conceded.
“What to do about it,” he said. “That’s a hard thing.”…
Here is an example from the NYT piece on how the big banks are handling these mods under the voluntary format Geithner deliberately set out on:
…In Lakeland, Fla., Jaimie S. Smith, 29, called her mortgage company, then Washington Mutual, in October 2008, when she realized she would get a smaller bonus from her employer, a furniture company, threatening her ability to continue the $1,250 monthly mortgage payments on her three-bedroom house.
In April, Chase, which had taken over Washington Mutual, lowered her payment to $1,033.62 in a trial that was supposed to last three months.
Ms. Smith made all three payments on time and submitted required documents, Chase confirms. She called the bank almost weekly to inquire about a permanent loan modification. Each time, she says, Chase told her to continue making trial payments and await word on a permanent modification.
Then, in October, a startling legal notice arrived in the mail: Chase had foreclosed on her house and sold it at auction for $100. (The purchaser? Chase.)
“I cried,” she said. “I was hysterical. I bawled my eyes out.”
Later that week came another letter from Chase: “Congratulations on qualifying for a Making Home Affordable loan modification!”
When Ms. Smith frantically called the bank to try to overturn the sale, she was told that the house was no longer hers. Chase would not tell her how long she could remain there, she says. She feared the sheriff would show up at her door with eviction papers, or that she would return home to find her belongings piled on the curb. So Ms. Smith anxiously set about looking for a new place to live.
She had been planning to continue an online graduate school program in supply chain management, and she had about $4,000 in borrowed funds to pay tuition. She scrapped her studies and used the money to pay the security deposit and first month’s rent on an apartment.
Later, she hired a lawyer, who is seeking compensation from Chase. A judge later vacated the sale. Chase is still offering to make her loan modification permanent, but Ms. Smith has already moved out and is conflicted about what to do.
“I could have just walked away,” said Ms. Smith. “If they had said, ‘We can’t work with you,’ I’d have said: ‘What are my options? Short sale?’ None of this would have happened. God knows, I never would have wanted to go through this. I’d still be in grad school. I would not have paid all that money to them. I could have saved that money.”
A Chase spokeswoman, Christine Holevas, confirmed that the bank mistakenly foreclosed on Ms. Smith’s house and sold it at the same time it was extending the loan modification offer.
“There was a systems glitch,” Ms. Holevas said. “We are sorry that an error happened. We’re trying very hard to do what we can to keep folks in their homes. We are dealing with many, many individuals.”…