Donna Hanks initially purchased her home (315 South Ellwood, Baltimore, MD 21224) on 7/06/2001 for $87,000. She re-fi’d in 2005 for $270,000, went into bankruptcy in 2006, and this was the 2nd foreclosure. The $300 a month was actually the $340 a month she agreed to re-pay as she was over $10,000 behind in her payments. The house was sold in July 08 and they couldn’t get her out until September 08 after not paying anything for over a year.
Homesteading involves abandoned or never utilized property. This house is obviously owned by at least the bank and a two minute phone call could have revealed it was now sold to a new owner. That house was never hers. It was the banks. It’s unlikely she was even close to having more than 50% of the principle paid.
Groups like ACORN and those who support them helped create this housing bubble by using government to ban so called discrimination in lending, redlining, pushing for the CRA and low interest rates.
That term predatory lending bugs me big time. Why isn’t it predatory borrowing? The government was incentivizing if not forcing banks to lend. No one forced the lendees to borrow. No one forced them to ignore the contract or keep them from having a lawyer look over the mortgage.
If you can’t afford to own, rent. If you want to homestead there is plenty of unutilized land out west.
More than half of mortgages modified in a bid to avoid foreclosure fell delinquent within six months, a top U.S. banking regulator said Monday, casting doubt on a proposal to rewrite home loans en masse.
Comptroller of the Currency John Dugan said it is unclear why so many borrowers ran into trouble again so soon after getting help, and that raises questions about how policymakers should address loan modifications.
“Is it because the modifications did not reduce monthly payments enough to be truly affordable to the borrowers? Is it because consumers replaced lower mortgage payments with increased credit card debt?” Dugan said at a housing conference in Washington organized by the Office of Thrift Supervision.
“Is it because the mortgages were so badly underwritten that the borrowers simply could not afford them, even with reduced monthly payments? Or is it a combination of these and other factors?”
The crumbling housing market is at the heart of the financial crisis that tipped the United States into recession and dragged down the global economy, and regulators are scrambling to find a way to limit foreclosures.
Sheila Bair, chairman of the Federal Deposit Insurance Corp, has been a big proponent of a home loan modification program that would encourage lenders to rework a greater number of mortgages by pledging public money to share the cost of defaults on restructured loans.
However, Dugan’s figures suggested that the cost to taxpayers may be high. He said his data showed that of mortgages that were modified in the first three months of 2008, nearly 36% had re-defaulted after three months, and almost 53% were behind on payments by six months.
These people lived far beyond their means. Dropping the monthly payments isn’t likely to help greatly as the banks are going to be incentivized to keep payments higher otherwise the mortgage would be spread out possibly over several decades. One should not ignore too that those with mortgages are incentivized not to worry much about keeping payments up to date given the bailout mentality currently running rampant. Why bother paying my mortgage when if I default the government will step in and take on the high risk, low return debt and refinance it to something ridiculously low? The system is entirely incentivized to fail… the fact it works at all is a testament to the market and some people’s personal responsibility.
The Constitution of the United States says but one thing about contracts.
Article I, section 10, clause 1:
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, expost facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
As Wikipedia states:
The framers of the Constitution added this clause due to fear that states would continue a practice that had been widespread under the Articles of Confederation—that of granting “private relief.” Legislatures would pass bills relieving particular persons (predictably, influential persons) of their obligation to pay their debts. It was this phenomenon that also prompted the framers to make bankruptcy law the province of the federal government.
Knowing that we do that the US Constitution is a document of enumerated federal powers we look to Article 1, Section 8, Clause 4: The Congress shall have Power
To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;
It would seem to me that “a proposal, popular among many Democrats, to allow judges to modify mortgages in bankruptcy court.” would be unconstitutional as singling out mortgage contracts as judicially modifiable would make bankruptcy law non-uniform. I doubt they are currently but that would not legitimize this additional infraction.
It would seem to me that “uniform Laws” applies to the topic not simply their reach. Otherwise the Congress could create special exceptions for whomever they wished so long as they group things narrow enough.
Regardless of what the Constitution says I’m still not OK with an arbiter single handedly changing a contract without explicit consent by all parties of that contract. In this case it would obviously be used to help the mortgagor over the mortgagee. One could claim that by going to the government court you are giving consent but I doubt that completely private bankruptcy arbitration is something which is generally accepted. So I’m not sure that there is much of a choice in reality.
Economist Joe Stiglitz comments in the Financial Times, criticizing Fannie’s and Freddie’s free lunch, but ultimately takes a middle of the road approach.
The NYTimes claims that the Housing Bill Has Something for Nearly Everyone. (What, the check to pay for this thing? How about renters? If we miss a rent payment, we are liable to be EVICTED. Where is our bailout?)
Bloomberg reports that mortgage writedowns will total $1 trillion. (Article quotes a hair brained scheme where the gov’t buys millions of houses and then blows them up to help brace housing prices. At this point, I’m not sure who’s being sarcastic and who’s not. But seriously, if you wanna to see something really blowup, watch that gross national debt ticker, over on the right, after this bill passes.)
Former Republican House Majority Leader, Dick Armey blasts the Republican party in the Wall Street Journal. He advocates a five year phase out of either GSE should they access credit lines from the Federal Reserve or Treasury.
More to come…
According to the TimesOnline, the US Treasury Secretary is looking into a $15 billion dollar cash injection for crisis-hit mortgage lenders Fannie Mae and Freddie Mac.
The two companies lost almost half their market value last week as rumours of a government bail-out swept the stock markets, hammering share prices around the world.
Together, the two stockholder-owned, government-sponsored companies own or guarantee almost half of America’s $12 trillion home-loan market and are vital to the functioning of the housing market.
The capital-injection plan is said to be high on a list of options being considered by regulators as a means of restoring confidence in the lenders. The move would protect the American housing market, but punish shareholders in both companies.
Under the terms of the proposed move, the US government would receive a new class of shares in exchange for the capital, which would be hugely dilutive to shareholders.
[snip]
David Buik, partner at BGC Partners, said: “These agencies are the backbone of financial society in the US. They simply cannot be allowed to fail, and the government won’t allow them to fail. Whatever the solution is to this problem, I can’t imagine it will be good for shareholders.”
Remind me again why I would want to invest in FNM or FRE when the gov’t may pull shit like this at any time? How can anyone claim that these two entities aren’t indirectly nationalized when they are not “allowed to fail”? Cue that analogy comparing capitalism without failure and religion without hell.
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