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Replies (9)
- Tug of War
- Contributions:1948
(A little more)
"Goodman found that investors lose as much as 70% when the homes underlying their subprime MBS are foreclosed upon. Lenders that tried to rehabilitate delinquent borrowers by reducing the principal (or total amount owed) by an average of 26% were far less likely to have to foreclose, and they actually provided MBS investors higher returns. "If you save a borrower, you save an investor," Goodman says.
To avoid the "moral hazard" of rewarding foolish borrowers, Goodman recommends that lenders swap immediate principal reductions for shares of any gains on the mortgaged house when it is sold."
"Many servicers refuse to consider them because their fees are tied to the amount of principal rather than to the ultimate payback to investors. And banks often hold second mortgages for the loans that they service. Principal reductions typically require them to take total losses on those notes.
In short, banks "are ridden with conflicts of interest" that pit them against the interests of borrowers and investors, Goodman says. "Many of the rules in place now are extremely large-bank-friendly, but borrower- and investor-unfriendly.""
- Caveat Emptor
- Contributions:500
dumbest article ever
- Pasadenan
- Contributions:21455
Well, Laurie Goodman is welcome to use her personal money to reduce the principal for any home owners she wishes. So are the investors of the Mortgage Backed Securities that may be concerned about losing 70% if the underlying mortgages foreclose.
It is not the bank's responsibility to give money to people that can't manage it, nor is it the Government's responsibility. So, if she is so concerned about it, she can form a corporation to take money from MBS investors that are worried about their MBS portfolio, and pay down the principal of any of the loans she thinks it will help.
But it won't help, because if people aren't making their payments, they are still not going to be making their payments; and if they are over spending, they will still be over spending.
And really, even if she does that, and takes a "share" of the ownership for the "investors", what difference does it make? It still ends up that the borrowers will not accept the "gift" either. And what about the title incomburance with the clause of 25% of any increase in equity upon sale goes to the "investors"? Doesn't that make it much more difficult to get a clean title upon sale?
It is not the bank's responsibility to give money to people that can't manage it, nor is it the Government's responsibility. So, if she is so concerned about it, she can form a corporation to take money from MBS investors that are worried about their MBS portfolio, and pay down the principal of any of the loans she thinks it will help.
But it won't help, because if people aren't making their payments, they are still not going to be making their payments; and if they are over spending, they will still be over spending.
And really, even if she does that, and takes a "share" of the ownership for the "investors", what difference does it make? It still ends up that the borrowers will not accept the "gift" either. And what about the title incomburance with the clause of 25% of any increase in equity upon sale goes to the "investors"? Doesn't that make it much more difficult to get a clean title upon sale?
- Tug of War
- Contributions:1948
Thank you for sharing your Opinions
- Pasadenan
- Contributions:21455
It appears that NTETS changed his post since I previously read it. I liked what I thought I read earlier better... something to the effect, the underwater borrowers are already getting a bail out in the non-recourse states, as when the property is foreclosed, they no longer have any debt. The negative equity is essentially "forgiven".
(And it appears that most of the lenders have mortgage insurance for that loss too).
(And it appears that most of the lenders have mortgage insurance for that loss too).
- Tug of War
- Contributions:1948
"It appears that NTETS changed his post since I previously read it"
It appears that NTETS felt "dumbest article ever" was a better way to express his opinion
It appears that NTETS felt "dumbest article ever" was a better way to express his opinion
- Pasadenan
- Contributions:21455
I have read some pretty "dumb" articles in the past, so I'm sort of thinking the word "ever" was hyperbole?
- CrystalsSecondHome
- Contributions:88
If all states were non-recourse and if it is as you described, that would result in a housing boom since there would be no "bag-holders" on the consumer side or the lender side and the insurer would be forced to pay. Unfortunately, it doesn't work that way since the goverment is forced to insure. Private industry has always refused to step up to the plate when it comes to make any country's society work for almost all -- the citizens and the capitalistic. That's why you hear screeches of "socialist" all the time instead of "all boats float" demands by the wealthy newsers and their minions.
- Cheryl Talbot Real Estate, "Virginia Beach Homes"
- Contributions:674
I just love these open platforms and discussions....
Housing: The one bailout America could really use
"Laurie Goodman is an apolitical number cruncher who has spent most of her 28-year career out of the public view, studying the minutiae of mortgage-backed securities (MBS) for big investment banks. She's long been a star among Wall Street insiders, however. She holds the record for the most top rankings for fixed-in-come research from the trade bible Institutional Investor."
"On top of the 2.5 million homes that have already fallen to foreclosure since the bubble burst, another 4.5 million mortgage holders have given up paying and are likely to lose their homes, she calculates.
Millions more are underwater-- owing more than their home is worth -- and may give up if things don't improve soon. All told, Goodman warns that more than 10 million of the nation's 55 million mortgage holders could default by 2018. If home prices fall much more than the 6% or so she's projecting over the next 12 to 18 months, the picture worsens, as more foreclosures drive prices down further, in turn causing more sheriffs' sales.
Goodman's research into who defaults shows that many governmental and private efforts at saving borrowers -- and reducing investors' losses -- by modifying mortgages weren't helping because they only extended payments or reduced interest rates. They didn't fix the fundamental problem of unsupportable debt loads.
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