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Friday, January 09, 2009
Mortgage Cramdowns coming soon?
The bailouts show the toxic and corrupting impact of private business accepting public funds. A bank that would never support the idea of mortgage cramdowns suddenly does an about face and supports the proposed legislation, which suggests that this was a condition of accepting the public dollars.
Mortgage cramdowns, if passed, would allow bankruptcy judges to reduce the outstanding value of a mortgage owing down to the value of the mortgage house or property. The problem with such legislation is that while it does offer relief for existing mortgage holders, it penalizes future potential homeowners who will have to pay higher mortgage rates to account for the possibility of the mortgage being "crammed down." Hence, the result will be less home ownership, and the vicious cycle will continue.
Needless to say, the American Bankers Association opposes such proposed legislation. So why did the big bank do an about face and support a bill that clearly is detrimental to the banks and also to borrowers? Because the state is dangling the carrot of cash and at that point, everyone forgets their principles even if it sacrifices their long term interest.
I feel like I am living in Atlas Shrugged.
Posted by Moin A Yahya on January 9, 2009 in Economic freedom | Permalink
Comments
It's those damned democrats again. Another Community Reinvestment Act type of financial catastrophe in the offing. Maybe we all will get an extra percentage interest rate on a secure investment from this when it's packaged like another ABCP (Asset Backed Commercial Paper). I can hardly wait. WHAT A BUNCH OF IDIOTS! AND THEY CONTROL BOTH HOUSES AND THE PRESIDENCY!
Posted by: Agha Ali Arkahn | 2009-01-09 9:09:01 PM
Why would any American pay his mortgage? It now makes more sense to be forced into bankrupcy and then have a judge reduce your mortgage by 20, 30 or even 40%.
Why not let prices drop so new, low income buyers can get into the market? Or is renting un-American?
Posted by: Matthew Johnston | 2009-01-09 11:16:11 PM
Ali and Matthew -
Don't you get it yet?
This is deliberate. The goal seems to be crash the economy, look like hero's by providing a new currency, and in the end to have control of absolutely everything.
No point getting mad, just get "ready".
Posted by: JC | 2009-01-10 7:58:38 AM
Don't we call this simply socialism - meaning you and I have to pay for the mistakes, and totally loaded Audi, of somebody else.
Posted by: Faramir | 2009-01-10 11:30:21 PM
:it penalizes future potential homeowners :
It also penalizes the current homeowners who have struggled to make their payments and are not in default.
Posted by: peterj | 2009-01-11 10:51:03 AM
This morning, Dick Cheney was on Final Edition with Wolf Blitzer on CNN.
Interesting points I heard pertaining to this topic, but either did not hear before or it slipped my mind:
• In 2004, on of Bush's campaign themes was the ownership society, as in ownership of houses.
• The Bush administration attempted reforms which would have placed more regulatory restrictions on Fanny Mae and Freddy Mac were blocked by congress ie they did not get the required 60% vote.
• Both major political parties have, since the depression, done what they could to get as many Americans into their own houses.
• The real reasons for how America got into this jackpot will come out eventually.
History lesson:
Fanny Mae and Freddy Mac were set up by FDR to be government backstops in the long-term idealistic goal of more home ownership for the American public.
It was FDR who promised ‘a chicken in every pot.' Now, it appears the chickens are coming home to roost, at least as far as housing goes.
This is not something Jimmy Carter started, even though Carter was an obvious fan of the FDR state interventionist model.
As Cheney said, the real reasons will eventually come out.
But, since we've been told it's a ‘credit crunch,' let's just say it was a case of too much debt and leveraged debt instruments.
Therefore, what caused the credit crunch was too much debt.
That would be the problem.
Now, take a look at the solution as promised by the incoming Obama regime.
$1.3 trillion of debt this year, more than a trillion for the next four years.
So, to review. Nobody can get credit because there's too much money tied up in dubious debt.
Therefore, the consumer and business cannot get financing unless they're in the most creditworthy of categories.
And, Obama proposes the solution to the problem is to spend even more money ... and saddle the US taxpayer with the bill.
Makes no sense to me.
Posted by: set you free | 2009-01-11 11:13:58 AM
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