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.

2008 ACS Questionnaire - English  |  Spanish

Persons

1. Name
2. Relation to first person surveyed
3. Sex
4. Age, Birthday
5. Of Hispanic, Latino, or Spanish origin?
6. Race
7. Place of birth?
8. Citizen?
9. Year came to USA?
10. Attended school/college in past 3 months? Grade?
11. Highest level completed?
12. Ethnic origin?
13. Speak a language other than English?
14. Live in home 1 year ago?
15. Covered by health insurance?
16. Deaf?
17. Difficulty remembering/making decisions? Walking, claiming stairs? Dressing or bathing?
18. Because of physical, mental, emotional condition have difficulty doing errands?
19. Marital status?
20. Past year got married, widowed, divorced?
21. Number of times married?
22. Year last married?
23. If female, given birth in past year?
24. Any grandchildren under 18 in home?
25. Been on active duty in military?
26. When?
27. Have a VA service-connected disability rating?
28. Paid for work in past week?
29. Where did they work?
30. How do they get to work?
31. How many people ride to work?
32. What time do they leave for work?
33. How long to get to work?
34. Were they laid off from work last week?
35. Last 4 weeks, looking for work?
36. Last week, could have started if offered?
37. When last worked?
38. Past year, work 50 or more weeks?
39. Past year, how many hours per week?
40. Private employee? Government employee?
41. Employer?
42. Business type?
43. Category?
44. Job work type?
45. Most important duties?
46. Income earned in past year broken down
47. Total income in past year

Housing

1. Building description
2. When was it built
3. When did you move into the building
4. How many acres
5. Sales of agricultural products from property in past year
6. Is there a business on the property?
7. How many separate rooms in the building, bedrooms?
8. Does it have: hot/cold running water, flush toilet, sink with faucet, stove, refrigerator, telephone?
9. How many automobiles?
10. Most used fuel for heating?
11. Cost of electricity,gas last month? water/sewer, heating fuel in past year?
12. In past year did anyone receive food stamps?
13. Building part of a condominium?
14. Is the building owned, rented?
15. Whats the monthly rent?
16. What would it sell for now?
17. Annual real estate taxes?
18. Annual payment for fire, hazard, flood insurance?
19. Have a mortgage, deed of trust, contract to purchase, or other debt on this property? What’s the monthly payment?
20. Do you have a second mortage or home equity lone on this property?
21. Total annual costs for property taxes, rent, fees?

Good news on the AP wire from DC (emphasis added):

WASHINGTON, May 19 (Reuters) - Leaders of the U.S. Senate Banking Committee said on Monday they had reached a deal on legislation to create a multibillion dollar mortgage rescue fund and a new regulator for housing finance companies Fannie Mae and Freddie Mac.

The plan would enable the Federal Housing Administration to guarantee billions of dollars in refinanced mortgages for homeowners whose properties have fallen in value since they took out their loan.

“The bill addresses the root of our current economic problems — the foreclosure crisis — by creating a voluntary initiative at no estimated cost to taxpayers which will help Americans keep their homes,” Democratic Sen. Christopher Dodd, the committee’s chairman, said in a statement…

“This is a victory for the taxpayers. As far as the housing component is concerned, we’re not funding this… with taxpayers’ money,” Alabama Sen. Richard Shelby, the panel’s top Republican, said on CNBC.

A quick google news search brings up another source with even more info on the planned bill.

Read More…

http://www.reuters.com/article/ousiv/idUSN0952458820080511?pageNumber=1&virtualBrandChannel=0

A California man who has defaulted on nine homes and expects banks to foreclose on all of them, forcing him into bankruptcy, says he now considers it a mistake to have invested in the real estate market.

Shawn Forgaard, a 37-year-old software company project manager, bought one home for his family to live in and nine more as investments. He stands to lose all the investment houses in the mortgage meltdown but says he has come away wiser from the experience.

“Everyone stumbles. I’m not going to hide or run or live in denial, or with regrets,” Forgaard told Reuters in an interview. “On the surface it looks like total devastation but it’s just the opposite. I’m confident our lives will be much, much richer as a result.”

Forgaard bought a house in Santa Cruz, about 60 miles (100 km) south of San Francisco, in 2000. Four years later, using $800,000 in stock options, he began snapping up investment properties, putting 10 percent to 40 percent down on negative amortization loans — in which payments do not cover the interest so that a borrower’s balance grows over time.

It was those “neg-am” loans, which include triggers causing payments to balloon if the debt reaches a certain percentage of the original balance, that would come back to haunt him.

“I knew I was sitting on time bombs,” Forgaard said. “I knew the market was going to go soft and I knew that property values would decline. But I figured that I had enough equity to survive the storm and sell or take the loss and refinance.

“I didn’t anticipate a downturn of epic proportions such that home values are 40 percent less than they were,” he said.

That’s because you’re a fucking idiot.

While this type of scenario is very rare… having one or more investment homes was not and just as many primary homes are foreclosed so too are many many of these investment homes. They will all be counted in those numbers you see on TV when they report how many homes are in foreclosure. I’ve never seen them seperate it down into primary and secondary homes.