The Golden Truth: Here's Why Mortgage Modification Programs Funded By Taxpayers is BAD Public Policy

Thursday, March 25, 2010

Here's Why Mortgage Modification Programs Funded By Taxpayers is BAD Public Policy

March 25 (Bloomberg) -- More than half of U.S. borrowers who received loan modifications on delinquent mortgages defaulted again after nine months, according to a federal report. Here's the news link: LINK.

As per the article, 51.5% of mortgages modified in the first quarter of 2009 had re-defaulted by the end of the year. Now, we know the banks, at the urging of Obama, put strict foreclosure moratoriums on at in the last month of 2009, so the real number is probably higher. Think about this fact: 51.5% of modified mortgages in 2009 re-defaulted within 9 months. That is just staggering. But it's also consistent with re-default numbers that were made available in 2008. In fact, I don't remember the exact percentage, but in 2008 a large number of modified mortgages went delinquent after the first 30 days.

Obama has committed $50 billion to mortgage mods and one of his foot soldiers stated the other day that the Govt is committed to spending every last dollar of that $50 billion. Just based on early statistics, at a minimum $25 billion of that will be flushed down the toilet. That's Taxpayer money. Who benefits? The banks benefit because that money is used to compensate the banks for most of the amount modified PLUS the banks get a few more mortgage payments before the mortgage lapses back into default.

Mortgage default is always and everywhere a bad lending and unemployment problem. What Obama has done is spread the cost of this problem across the all Taxpayers, transferring the cost from the Big Banks to the Taxpayers and bailing out the banks from a bad lending decision. But, then again, ultimately it will be those financing our debt who will suffer the extreme consequences, because there's no way in hell the Taxpayers will ever be able to repay Treasury debt. Maybe the Chinese and Japanes are the real idiots. Got gold?

11 comments:

EconomicDisconnectThursday, 25 March, 2010
Another recycled TARP play. I knew that TARP money was never, ever going to be retired. Sooner or later the numbers are going to get too big.
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J MacThursday, 25 March, 2010
Thaf number is far greater here in Florida Bro
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Dave in DenverThursday, 25 March, 2010
gyc: TARP will be recycled thru FNM/FRE. With the cap off how much Geithner can run thru those two nuclear waste dumps, expect that the Treasury, via FNM/FRE will be monetizing a few trillion in mortgages by taking them off Big Bank balance sheets and shoving up the Taxpayer's ass.
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Dave in DenverThursday, 25 March, 2010
Yo J Mac. I figure FLA is 75% in the first year of a mod. Take away that foreclosure moratorium in December that 51.5% is prolly 60%.
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EconomicDisconnectThursday, 25 March, 2010
When the pension plans get the 401k's you know its time to get not just gold, but a boat and a small island to escape to.
I think things have been so unreal for so long the escalation of unreal has failed to register.

I hate the term "sheeple" but I can think of no other term so fiting.
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Dave in DenverThursday, 25 March, 2010
gyc: WORD!
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AnonymousFriday, 26 March, 2010
dave,
have you seen this video? http://www.youtube.com/watch?v=wlgM2urPB8Q&feature=player_embedded
as the saying goes, we get the leader we deserve.
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Dave in DenverFriday, 26 March, 2010
I saw the headline on yahoo about that but had not seen the video. That's hilarious, in a poignant way.

To be honest, for as much I hated Clinton, I hated W even more and now I hate Obama even more than W. Makes me yearn for someone like Nixon LOL.
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JoeFriday, 26 March, 2010
I see where Bart Chilton has kicked the can to the end of the year for possible position limits.

I am of the opinion the whole system will be burned down by then. What a total farce!

Joe M.
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Harvey GeeFriday, 26 March, 2010
It's all window dressing to show they're doing something for the "main street".
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Dave in DenverFriday, 26 March, 2010
100% right. BUT it's also transferring wealth from the Treasury/Taxpayer to the BIG BANKS.
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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.