dagblog - Comments for "More banks walking away from homes, adding to housing crisis"

Too funny, Atheist! Of course

SleepinJeezus — Mon, 17 Jan 2011 23:30:45 +0000

In reply to It's a business decision that

Too funny, Atheist! Of course you are right!

I guess what I am proposing is that we all adopt the appropriate MBA response, and in this case it would involve the middle finger, no?

Brilliant insight and comment! Thanks for the laugh.

It's a business decision that

Atheist — Mon, 17 Jan 2011 23:26:07 +0000

In reply to You can't define irony any

It's a business decision that any MBA would understand. That Paulson and his ilk would attempt to gain advantage in these negotiations by introducing some kind of "moral obligation" to continue pouring money down their rathole is simply ludicrous.

In an attempt to play devil's advocate (almost literally), isn't that also a business decision that any MBA would understand?

You can't define irony any

SleepinJeezus — Mon, 17 Jan 2011 22:54:11 +0000

In reply to What gets me, SJ, truly gets

You can't define irony any better than this.

Receiving "business morality lessons" from the likes of the Mortgage Banker's Assn or the former CEO of Goldman Sachs is not unlike being lectured on our civic responsibilities by Pol Pot.

I know many people who are faced with the incredibly difficult situation of owing more on their home mortgage than they can ever reasonably expect to realize in the sale of that home. It's an untenable circumstance to be in, and one that no business would sustain. Instead, they would quite wisely (and with head held high) walk away from it - undoubtedly writing off the loss on their taxes.

I have counseled these many friends (and even one daughter) to honor their contract, just as I would expect any mortgage banker or CEO of GS to do. First, they should make a legitimate attempt to renegotiate the contract. In this, both sides should receive a haircut. The homeowner is reissued a mortgage contract that reflects their obligation to repay all or most of actual value of the property. In this, the homeowner loses whatever "equity" he previously had in the home, but is no longer compelled to throw good money after bad in a losing proposition. For his part, the banker receives every bit of value from the asset that he can expect to receive post-foreclosure (even more value, given the savings in carrying costs and realty/legal fees and other costs of foreclosure.)

If such a reasonable renegotiation is not accomplished, then under terms of the present mortgage contract I encourage these people to stop payment and await the foreclosure action from the bank. Meanwhile, they should prepare for their move and bank their savings from their withheld mortgage payments to finance the move and the other costs of reestablishing living quarters elsewhere.

It's a business decision that any MBA would understand. That Paulson and his ilk would attempt to gain advantage in these negotiations by introducing some kind of "moral obligation" to continue pouring money down their rathole is simply ludicrous.

What gets me, SJ, truly gets

seashell — Mon, 17 Jan 2011 21:35:25 +0000

In reply to I admit I am wholly

What gets me, SJ, truly gets me, is the Mortgage Industry's message to homeowners:

John Courson, president and C.E.O. of the Mortgage Bankers Association, recently told The Wall Street Journal that homeowners who default on their mortgages should think about the “message” they will send to “their family and their kids and their friends.” Courson was implying that homeowners — record numbers of whom continue to default — have a responsibility to make good. He wasn’t referring to the people who have no choice, who can’t afford their payments. He was speaking about the rising number of folks who are voluntarily choosing not to pay.

Or Hank Paulson's message:

“any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator — and one who is not honoring his obligation.”

But as this article shows, More Banks Walking Away From Homes, Adding To Housing Crisis, morality on Wall Street is apparently one way - their way.

I admit I am wholly

SleepinJeezus — Mon, 17 Jan 2011 19:22:19 +0000

In reply to More banks walking away from homes, adding to housing crisis

I admit I am wholly unsophisticated when it comes to any understanding of the banking industry and its ways and means.

That said, when this banking crisis broke, there was a lot of talk about "toxic assets." And I understood that the fundamental "toxic asset" at the base of this crisis were the home mortgages that had just imploded. We were experiencing the collapse of the "Housing Bubble." Widely distributed financial assets (homes) were suddenly valued at a fraction of their recorded valuation. And this problem was compounded by the way this asset had been leveraged in support of debt assumption by the "homeowner" and, additionally, by the way these mortgages were sliced and diced into "innovative" financial instruments.

The solution to the crisis was therefore quite straightforward to me, albeit daunting and quite expensive. Do what it takes to deal with these fundamental "toxic assets," and in so doing we would introduce some stability and needed correction in the "post-Housing-Bubble" market.

Hundreds of billions of dollars later, I see very little that has been done to address the fundamental crisis. Instead, we have allowed the banksters to plunder the Treasury for their profit and gain without insisting that they actually use these funds to target the fundamental problem of the "toxic assets" they carry on their books.

This article explains just how totally screwed we all are as a result of pouring monies into the banks with no strings attached. I have little doubt that the banks will do quite well in surviving this mess. After all, these TBTF institutions have been granted massive infusions of cash to offset their losses. They have been held harmless of any consequences of the crisis by dint of increasing their "earnings" (via our tax dollars and no-interest loans from the Fed) to offset the losses on their balance sheets.

But there is little that has been offered in any of this that provides any relief to either the home mortgage holder or our communities that continue to suffer the consequences of the collapse of the housing bubble. We are now collectively hundreds of billions of tax dollars "poorer" as we continue confronting the same crisis - unchanged - that sparked the collapse in the first place.

It's horrifying, really. Truly horrifying. We're drowning and the lifeboats are unavailable, having all been used to transport the captain and crew to their next excellent adventure.