The Golden Truth: Here's Why Mortgage Modifications Won't Work

Thursday, August 20, 2009

Here's Why Mortgage Modifications Won't Work

The issue synthesizes down to which party at the table is going to take the financial hit when the individual home mortgage principal balance is reduced and the monthly cash flow generated from the mortgage is reduced in order to try and keep the homeowner from walking away (which is whole issue unto itself as unemployment skyrockets).

As per this court case being tried, the parties at the table are 1) the original bank which underwrote the mortgage and 2) the investors in the mortgage-backed bond trust which purchased the mortgage, ultimately enabling the underwriting bank to fund the mortgage and the homeowner to overpay for the house:

"The current case was brought by two investment funds holding Countrywide mortgages, Greenwich Financial Services Distressed Mortgage Fund 3 LLC and QED LLC. These investors complained they would be harmed if Countrywide shifted the burdens of loan modifications to 374 trusts into which loans had been repackaged and securitized. These investors would rather Countrywide repurchase modified loans for the full unpaid amounts."

Who Takes the Mortgage Mod Hit?

So either these mortgage-backed trusts have to take a big hit - and don't forget the Chinese and Japanese were very large investors in these trusts on the faith that they were triple-A rated quality. Or Bank of America, which now owns Countrywide and other fraudulent mortgage originators, has to pony up the cash to keep the investors whole. And we KNOW what it means it BAC has to fund the mortgage losses in the modifications...

...How 'bout it America? Feel like using more of your tax money to pay for mortgage modifications on mortgages that should have never been underwritten in first place? Your money is already being funnelled into all of the Fannie Mae/Freddie Mac mortgage mods being done. Oh, and by the way, studies show that over 50% of all modified mortgages go delinquent again within the first 12 months...

3 comments:

Harvey GeeThursday, 20 August, 2009
Until jobs are plentiful don't expect anything the gov't is doing to help.

They might as well redo the loans with 0% interest for 5 years like car dealerships did...perhaps that's the only way some can afford it.
ReplyDelete
Replies
Dave in DenverThursday, 20 August, 2009
Problem is, it messes up the existing MBS Trusts if they were to turn the underlying collateral into 0% mortgages. Either the originating bank, the Trust investors or the Government will have to take the hit.
ReplyDelete
Replies
JRThursday, 20 August, 2009
Hi Dave,

Great blog.

I did a search for hyperinflation and came up zeros.

Are you a gold fan because you believe a hyperinflationary collapse will come (i.e. a soveriegn default as US economic activity collapses or a mass monetization of debt to pay back creditors)?

Or are you more a gold fan because you see a slower, steadier dollar debasement?

Or something else?

Thanks.
ReplyDelete
Replies

Add comment

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.