Does the Jobs Bill Do Enough to Ease Mortgage Debt?

[xchrom]

http://www.theatlanticwire.com/politics/2011/09/does-jobs-bill-do-enough-ease-mortgage-debt/42325/

Another day removed from President Barack Obama's address to Congress on job creation and the economy, some reporters and commentators are narrowing in on an omission they see in his plan: What's he going to do about all those mortgages?

Mortgage debt continues to hold down consumer spending and imperil the financial security of American households. Short-term stimulus, like Obama's calls for an extended payroll tax cut and new spending on infrastructure, will not make that debt burden go away, economists tell The Washington Post:



Americans, millions of whom owe more on their mortgages than their homes are worth, are still paying off that debt. Without a plan to reduce that debt, these economists warn, all stimulus can provide is temporary relief.

“Once stimulus fades away, households are back on the street,” said Atif R. Mian, an economist at the University of California at Berkeley. But he added, “Once you have removed the debt burden from households, you’ve taken care of the problem.”

[Robb]

1. If family-wage jobs are created, mortgages get paid every month.

... Even when folks are underwater. Turns out most people that have them just want to live in their homes.

Three things will help this and every other economic issue in this country: jobs, jobs, and jobs.

[mopinko]

7. wages, wages, wages- raise the damned minimum wage

even renters can't afford their homes any more.

[InkAddict]

14. To everything, churn, churn, churn...There is a season -

churn, churn, churn...and a time for every (evil) purpose...well, you know what's UNDER Heaven.

[Cool Logic]

2. What the housing market needs is less meddling from the bureaucrats

who created the housing market problem in the first place.

For it is clear that lending institutions are more qualified than fedgov bureaucrats with respect to determining the merits of a borrower's qualifications.

[glowing]

3. Yeah, just like they were before the crash... Super responsible with their lending practices.

[Cool Logic]

6. Lending practices that were set by incompetent bureaucrats endeavoring...

to "help" unqualified borrowers.

[glowing]

8. Govt responds to what corporations want... They wanted this

bubble spinning gold mind. it collapsed, and now we blame the bought off politicians who we know respond to Wall St; not regular Joe citizen.

The collapse was due to a sick partnership between wealthy bankers/ wall st/ special interest/ lobbyists/ and the politicians.

[Cool Logic]

13. "sick partnership between bankers/ wall st/ special interest/ lobbyists/ and the politicians..."

Indeed, rather than a housing market be governed my supply and demand and judged by logic and reason, bureaucrats forced lenders to abandon their own lending regulations and institute "regulations" to benefit special interests. That is why the housing market needs less meddling from the bureaucrats.

[glowing]

27. Oh sure, if you think Govt was arm twisting the banks to act like

casinos... then go ahead and believe what you must. Bush was pushing the "ownership"/ "go shopping" meme. He was a corporate puppet. These too big to fail banks knew they were handing out shitty loans, chopping them up, giving them AAA ratings on the premise that homes were only going up in value. Then they insure against the derivatives. Economic WMD. Politicians did not regulate; they repealed Glass-Steagall, and the banisters and Wall St. brought it all down... It was all a house of cards... Fake value on the assumption that homes would always increase in value.

[JoePhilly]

11. No, to help unscrupulous financial institutions HIDE bad loans by

breaking them into tiny pieces, and repackaging them into a "unique investment opportunity".

This was done by REMOVING financial regulations that had prevented such nonsense previously.

Once the financial institutions had the ability to give out huge loans that were bad risks, and then repackage that risk and sell it as an different investment, they ALL started to do it to each other. Passing around the toxic debt.

And this was not done to "help unqualified borrowers", it was done to ALLOW financial institutions to make bad loans and then pass on the risks they took to others.

Back in 2001, I bought my current home. I used a mortgage broker who I'd known for over 20 years. When she ran our numbers, she informed us that her bank was willing to loan us 3 times what we needed for the house we intended to purchase. She said that her company was recommending that mortgage brokers try to get people .. ALL PEOPLE ... to borrow as much as they possibly could. Encourage them to buy a bigger house.

And she said that the mortgage brokers were receiving bonuses for how much they were able to lend. She never received such a bonus. Because she was unwilling to tell people to borrow amounts that were far more than they could ever really afford. But she said that many of her collegues didn't care about that. She left the mortgage industry about a year later.

People who thought they were getting good advice from their financial institutions were actually being lied to. All to allow these firms to loan as much as possible, cut it up, and repackage it.

All thanks to the REMOVAL of financial regulations ... the bill is known as the Gramm-Leach-Bliley Act of 1999.

[Cool Logic]

16. "All thanks to the REMOVAL of financial regulations..."

Actually, it was the implementation of financial regulations written by K-Street lobbyists and applied by fedgov bureaucrats.

It is not in a lending institution's best interests to make loans to unqualified borrowers. However, bureaucrats do not bother themselves with the trivial notions of "qualifications."

[jpgray]

18. Oh yes it is, you poor misguided darling

Let's talk greedy, dumb, short-term thinkers (financial institutions, many investors). Because such people in the financial industry could never buy up enough mortgages to securitize, such people in the mortgage biz went for the highest volume of loans possible, ignoring or falsifying their quality. Because such people in the ratings industry care not about reputation but rather fees and pleasing large clients, securities filled with garbage got AAA ratings, and so such people that were investors bought them up as fast as they were created. Such people in the insurance industry saw a high volume opportunity for default swaps, and took the bad side of such swaps to the tune of many billions.

None of it was required of them, but all of it was allowed. Where there were federal demands for minority or impoverished borrowers (Fannie and Freddie), you'll find the foreclosure rate is much closer to the average than it was in the private sector ARMs. Fannie and Freddie -wanted- to get in on the most irresponsible crap, but were actually precluded by... regulations.

Research is your friend, Mr. Logic.

[Cool Logic]

21. More specifically, researching the money trail is your friend...

Now that the federal government has bailed out Fannie Mae and Freddie Mac from their impending financial doom, Congress has an even greater interest in seeing the giant mortgage buyers succeed--some lawmakers perhaps more than others. According to the Center for Responsive Politics, 28 lawmakers had between $598,100 and $1.7 million of their own money invested in the two companies last year.

http://www.opensecrets.org/news/2008/09/congressmen-may-have-lost-17-m.html

[jpgray]

24. How does that prove Fannie and Freddie caused the mortgage crisis?

They were directly prevented by regulation from engaging in the worst shit. Cast your ignorant eyes on this:

[Cool Logic]

25. Fannie Mae and Freddie Mac did not, by themselves, cause the subprime mortgage crisis.

However, Fannie and Freddie str government sponsored entities (GSEs). This meant that they had to be competitive, like a private company, and maintain their stock price. On the other hand, the value of the mortgages they re-sold on the secondary market was implicitly guaranteed by the government. This caused them to hold less capital to support their mortgages in case of loss. As a result, Fannie and Freddie were pressured to take on risk to be profitable but knew they wouldn't suffer the consequences if things turned south.

The government set them up this way to allow them to buy qualified mortgages, insure them and resell them to investors, thus freeing up funds for banks to make new mortgages. In this way, they were traditionally involved in at least half of all new mortgages made each year. By December 2007, when banks began to constrict their lending, Fannie and Freddie were really the only lender still operating, responsible for 90% of all mortgages.

Between 2005-2007, few of the mortgages acquired were conventional,fixed-interest loans with 20% down. Fannie Mae's loan acquisitions were:

62% negative amortization
84% interest only
58% subprime
62% required less than 10% downpayment.
Freddie Mac's loans were even more risky, consisting of:
72% negative amortization
97% interest only
67% subprime
68% required less than 10% downpayment.

It was the preponderance of exotic loans in addition to subprime borrowers that made Fannie and Freddie's loan acquisitions so toxic.

[jpgray]

26. Yes but the bubble was not built starting in December 2007

In fact the bubble was near its peak in 2007. It would be difficult to hold Fannie and Freddie accountable for creating a mess it took years to build when they only got involved in the awful crap mere months before the crash, no?

[Cool Logic]

28. That is true; however, what you fail to recognize is that government "regulatory" agencies

both under and over regulated the mortgage industry. The SEC allowed depository banks to move assets and liabilities into off-balance sheet entities and this enabled them to essentially bypass existing regulations regarding minimum capital ratios. Sound familiar...? How about Enron...or the manner in which Congress accounts for the SSTF?

The fedgov was also responsible for the Alternative Mortgage Transactions Parity Act, which led to the creation of ARMs, which in turn, facilitated the exploitation of borrowers by lenders. And then there was the Community Reinvestment Act, which allowed borrowers to exploit lenders.

Surely, no one predicted the scale of speculation, predatory lending, predatory borrowing, inaccurate credit ratings, questionable securitization practices and bundling of toxic assets that occurred. However, this is the kind of stuff that can happen when an assemblage of elected officials, most of whom are attorneys, pretend to be experts in all vocations.

[JoePhilly]

29. You mention the "money trail" ... let's follow it ...

After Phil Gramm got the G-L-B act of 1999 passed, he quickly left Congress.

Where did Phil go?

He joined the board of directors at UBS, one of the largest financial institutions on the planet.

Phil was paid MILLIONs for his services at UBS.

That is the money trail to follow.

[Kingofalldems]

31. Oops.

+1

[Cool Logic]

32. Ah yes, the former Senator from the great State of Texas...Senator (the other) Gramm...

Although not quite as successful as the former Senators Breaux and Lott, the banking business has been "very, very good" for Senator Gramm.

Whatever happened to that other fellow...? You know, the one that had to sign it after everyone else in order for it to become law? Why, I almost forgot... things have gone fairly well for that ol' boy too.

A Majority of Ds in the House and Senate also Supported Gramm-Leach-Bliley

[InkAddict]

12. You know, some of us put our best foot forward on the apps and had the

appropriate angst while they deliberated; we trusted in their feigned stamps of approval, our educational degrees, our proven experience, our sacrifices to countless Federal, State, and Local projects of "betterment" paid for in taxes; afterall, there were those less fortunate, less healthy, less educated, less "free."

Who could have imagined... that one TBTF investment/credit department would be "sticking" it to the other with the blessings of the WS global corporate con men or were they indeed colluding even then? Ah yes, we could all participate too. Worse yet, their plan could be aided and abetted by their weak and owned political designers, fixers, and mafia-like cleaners. Why, no one could have forseen that we never had a chance...Indeed, they tested our hope in the future; they tested our belief in our energy, ; they tested our unity, they tested our conformity, but best and most effective of all - they tested our fear; they tested what liberties we'd give up to be "safe." How indeed could it all go wrong?

For want of the stable employment; for their orchestrated failure to execute their own good faith, and for all the wasted effort and the hubris, the false pride in passing their sly tests of responsibleness, for meeting and exceeding their expectations in making their team of sociopaths still richer, indeed, in the end, TBTF; for all their untapped markets of foreign exploitation, greed, and war...we look forward, never backward, to a new system of usurped justice and a new lesser, enslaved American dream.

[unblock]

9. i presume you forgot the :sarcasm: tag....

[xchrom]

10. ...

:rofl:

[NutmegYankee]

17. Do you really believe the ridiculous shit you spout?

Serious question.

[Cool Logic]

19. Indeed, I am not afraid to see what it is that I see, when I follow the money...

In the first quarter of this year, Fannie Mae spent $1.4 million on lobbying, while Freddie Mac spent $2.2 million. Last year the two spent $5.6 million and $8.5 million, respectively.

The companies have also poured money into lobbying efforts, often hiring family members and friends of lawmakers, according to the New York Times: "In Washington, Fannie and Freddie's sprawling lobbying machine hired family and friends of politicians in their efforts to quickly sideline any regulations that might slow their growth or invite greater oversight of their business practices. Indeed, their rapid expansion was, at least in part, the result of such artful lobbying over the years."

http://www.opensecrets.org/news/2008/07/help-is-on-the-way-for-embattl.html

[jpgray]

20. Which mortgages had a higher foreclosure rate

Fannie and Freddie's, or the ARM and NINJA loans of the private sector? Which regulations precluded Fannie and Freddie from the most irresponsible lending (in which they surely wanted to take part)?

If you don't know the answer to either of these, it's clear you can't follow the money.

[JoePhilly]

30. What did UBS spend?

Again, Phil Gramm was rewarded by UBS ... that is the money trial to follow.

[Shagbark Hickory]

23. I think you left out the sarcasm icon. At least I hope you did. n/t

[HereSince1628]

4. This is called kicking the can down the street

Considering the conservative sentiment in DC, Obama's got nothing else he can do.

This is an administration with hope, and everyone in it is hoping the mortgagees can hold it together until housing values rise to match mortgage debt. That day appears to be a decade or more in the future, clearly long after Obama would be gone from this term.

So kicking the can toward the end of this term, is about as good as it can be.

[YellowRubberDuckie]

5. No.

There are people who have mortgages they never could have afforded to begin with. The people who wrote them, approved them and closed them should write them off. They knew they were committing fraud. It's not like they won't be able to recoup the money through the tax returns they get because God knows they DO NOT PAY TAXES. The IRS pays THEM.

[inna]

15. damn f*cking banksters; the atrocity and the impunity of the entire thing just boggles the mind

[Shagbark Hickory]

22. The jobs bill doesn't do anything for jobs let alone mortgage debt.