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Obama Pushes ‘Mortgage Forgiveness’

From the Wall Street Journal:

U.S. Pushes Mortgage Deal

Obama Proposal Seeks Multibillion-Dollar Settlement of Loan-Servicing Cases

FEBRUARY 24, 2011

The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns that could force America’s largest banks to pay for reductions in loan principal worth billions of dollars.

Terms of the administration’s proposal include a commitment from mortgage servicers to reduce the loan balances of troubled borrowers who owe more than their homes are worth, people familiar with the matter said…

If a unified settlement can be reached, some state attorneys general and federal agencies are pushing for banks to pay more than $20 billion in civil fines or to fund a comparable amount of loan modifications for distressed borrowers, these people said…

A settlement could help lift a cloud of uncertainty that has stalled the foreclosure process since last fall

We’re not so sure that the biggest problem in the housing market has been "uncertainty." The main problem now is that nobody is buying houses. And making mortgage companies take such a gigantic financial hit won’t make it any easier for people to get mortgages to buy new houses.

The deal wouldn’t create any new government programs to reduce principal. Instead, it would allow banks to devise their own modifications or use existing government programs, people familiar with the matter said. Banks would also have to reduce second-lien mortgages when first mortgages are modified

At issue now is a debate over who has been harmed by improper foreclosure practices, and how much

Under the administration’s proposed settlement, banks would have to bear the cost of all write-downs rather than passing them on to other investors. The settlement proposal focuses on pushing servicers who mishandled foreclosure procedures to eat losses, by writing down loans that they service on behalf of clients

Exactly who mishandled what? And who will decide which banks mishandled what?

Bank executives say principal cuts don’t necessarily improve payment patterns, and have told other parties involved in the talks that principal reductions could raise new complications. First, it will be difficult to determine who gets reductions and who doesn’t. And even if banks agree to a $20 billion penalty, the number of mortgages that can be cured with that number is limited, one of these people said

Any settlement could be one of the largest to hit the mortgage industry

No kidding. And it is exactly what the economy needed – if we want a double dip recession.

This article was posted by Steve on Thursday, February 24th, 2011. Comments are currently closed.

10 Responses to “Obama Pushes ‘Mortgage Forgiveness’”

  1. TerryAnne says:

    I want to see the look on the Zero homeowners – those who believe that we’re one economic movement away from unicorns and rainbow poop – when this passes and the housing bubble explodes. Especially when they end up owing three times as much as they do now or are trying to have remitted. There are going to be some seriously crazy people running around this country in a very short time.

  2. mr_bill says:

    If the banks have to reduce the loan principal when the home’s value decreases, does this mean that nerobama would support the banks being able to raise the loan principal when the home’s value increases?

    If something has not been done properly in the foreclosure process, the law provides for a remedy, we don’t need to throw out centuries of contract law just because some folks lied to their lenders or lived like kings on their credit cards and now have to suffer the consequences.

  3. untrainable says:

    Here we go again. This is just a sign that the Oblamer election season is open. The agitator-n-chief is getting on the campaign trail. He’s got to appear make an effort to keep all those empty promises that he made during the 2008 election cycle. He has to shore up his hold on the people who expected their savior to pay for their homes and cars and gas and life. It’s more about optics than substance.

    Just wait until gas hits $5/gal. The “gimme from your stash” crowd will be screaming about their right to drive. Oblamer will probably start subsidizing fuel for the poor. Joke’s on him though. We’ll ALL BE POOR.

  4. Rusty Shackleford says:

    “There he goes again.”

  5. tranquil.night says:

    “Bank executives say principal cuts don’t necessarily improve payment patterns, and have told other parties involved in the talks that principal reductions could raise new complications.”

    What could go wrong?

    It’s not like we’re gonna wake up one day to the news that we’re 24 hours away from a global financial collapse. Erhm.

  6. proreason says:

    Here is the problem with the economy. Forget all the bullshit lies and statistics:

    People have completely lost trust in the U.S. government and Wall Street. We were bankrupted or nearly bankrupted in 2008, with no warning from any significant national figure. The public instantly concluded that we are governed by criminals and thieves, Republicans as well as Democrats. Most don’t know who the specific culprits are and don’t think we will ever know, but we know the government was up to their asses in it as well as Wall Street.

    The only way to protect ourselves is to spend less and manage our personal debt down.

    We now know that everything the government says about the economy is a lie.

    It will take a generation for the economy to get back to where it was in the spring of 2008. We aren’t going to be tricked again for a long time. We aren’t going to spend freely; we aren’t going to accumulate debt like we used to; and we aren’t going to put our money in markets that are clearly manipulated by criminal bastards. All of that translates into an economy that isn’t going to grow, and there is nothing the government can do about it.

    It’s going to take a generation.

    • JohnMG says:

      I had a similar conversation just this week, Pro.

      As you know, I’m in the construction business, albeit now on a smaller level. I’m also well into my 65th year. When the topic of recovery in our industry came up with one of my suppliers, his assertion was that there are small improvements in construction scattered around the country, but in his (our) considered opinion, the industry as a whole is five to seven years from rebounding to 2008 levels, if even then. I told him that even if I could manage to hold on that long in what has proven to be the most cut-throat economy in my 40-plus year career, how likely am I to be willing to wage the fight as a septuagenarian.

      For all intents and purposes, I’m finished. All I’m doing now is shielding what little I’ve squirreled away for retirement from govertnment confiscation. But I’ve been tapping into that for two years now and it’s dwindling fast. I can’t afford to fuel the economic mess this idiot has created and hope for better days.

    • proreason says:

      John, yes. My circustances are similar. I simply am no longer in a position where I can take chances with what I have.

      And I know many others in similar circumstances. People with small businesses they have had to shut down. People with jobs who have an opportunity to move elsewhere but don’t because they feel safer with an employer they have been with for years. People who have pulled out of markets entirely and view 0% interest as a much better deal than the risk of -50% interest.

      Something I learned many years ago that took many years before that to learn: if I’m thinking something…I’m almost never alone in those thoughts.

      We simply don’t trust these Mofo’s any longer, and we aren’t going to take any risks that we aren’t forced into.

      And the government can’t change that because they are the Mofo’s we don’t trust.

  7. BigOil says:

    Yet another wealth redistribution scheme.

    Force banks teetering on insolvency to eat a big chunk of the principal on loans in order to benefit people that made bad decisions. Banks then fail and are subsequently taken over by the Feds. FDIC puts on the finishing touches by covering the losses with our tax dollars.

    Mission accomplished. Shaft the people who were responsible with their money.

  8. jrmcdonald says:

    Shaking down companies – Eva Perón would have been proud!

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