Today, the Wall Street Journal elucidated a point I have made repeatedly in many venues. Heading off a potential foreclosure tied to the STRUCTURE of a mortgage is a lot easier than avoiding a foreclosure related to broader ECONOMIC trends (falling house prices, rising unemployment, etc.). This is one reason the foreclosure problem cannot be easily fixed, despite all the PR about modifications coming from the administration and the industry.
“Rising unemployment is complicating the Obama administration’s effort to reduce foreclosures and stabilize the housing market.
“The first wave of mortgage delinquencies was sparked by borrowers who took out subprime mortgages and other risky loans that became unaffordable, causing them to fall behind on their monthly payments. But the current wave is increasingly driven by unemployment or underemployment, economists and housing counselors say.
“The Obama foreclosure-prevention plan was “built around the subprime crisis model, not the unemployment crisis model,” said Michael van Zalingen, director of homeownership services for the nonprofit Neighborhood Housing Services of Chicago.
“The Obama program provides financial incentives to mortgage-servicing companies and investors to reduce mortgage-related payments to 31% of monthly income.
“But many borrowers don’t have sufficient income to qualify for a loan modification under the plan. Mr. van Zalingen said roughly 45% of the more than 900 borrowers who sought help at two recent counseling events would fall into that category even if their interest rate were dropped to 2% and their loan term were extended to 40 years.”
Related posts:
- MBA Q4 delinquency and foreclosure rates rise to fresh records The Mortgage Bankers Association released data on fourth quarter mortgage delinquencies and foreclosures. This is what the numbers showed:...
- Mortgage mods not keeping up with expectations I said back when the Obama administration’s mortgage modification programs were being rolled out that they would likely NOT meet...
- MBA: Q2 delinquency and foreclosure rates rise again The Mortgage Bankers Association released data on second quarter mortgage delinquencies and foreclosures this morning. Here’s what we learned: *...
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Mike,
I’ve read your issues on M&M for about a year now and have from the very beginning been very impressed with your knowledge and wisdom for such a young man. But in regards to your “More Power For The Feds?” article, I have to disagree with one of your premises when you say that the Fed is here to help us.
The Fed was set up by and for the banks! It is a private, for profit corporation, run for the benefit of its owners. It is NOT INCOMPETENT…..when you understand the reality of the Fed you have to admire how diabolically clever it really is. The Fed is *very effective* at its job! Another private cartel like DeBeers diamonds is a rank amateur compared with the criminal masterminds of the Fed!
I am wondering why you are not fully educating your subscribers to the truth about the Federal Reserve, who they are and what they are. As I see it, there can only be 2 possibilities…1) You are aware and for some reason are unwilling to share the truth with your sibscribers, or 2) you have not fully done your own research. If #2 is the reason, I would highly recommend that you read “The Creature From Jekyll Island” by G. Edward Griffin as just one place to start.
You newsletter is packaged as a source of information designed to educate your readers. As I see it, and i realize you may have an opposing opinion, you have accepted a responsibility to educate your readers. That is why they choose to subscribe. I hope that you will fully embrace this responsibility and do it properly.
I would love to receive a reply from you. Perhaps we can both learn a little here.
This posted is related to the auctioning of T-bonds and the reporting of Indirect Bidding. Written by Susanne Walkers on 6/27 in Bloomberg. If they change the rules how does one know how much China (or other foreign countries) is buying?
‘Changing the Rules’
The Treasury’s auctions of two-, five- and seven year notes drew higher demand from indirect bidders, a class of investors that includes foreign central banks, than in the previous auctions of those maturities in May.
Indirect bidders bought 67.2 percent of the seven-year offering, compared to 33 percent at the previous sale; 62.8 percent of the five-year notes, after purchasing 44.2 percent at the prior auction; and 68.7 percent of the two-year notes, versus 54.4 percent at the sale in May.
The levels of indirect bidders may have been affected by a rule change that eliminated a provision allowing some customer awards to be classified as dealer bids.
“By changing the rules, it forced central banks to come through the indirect area,” Andrew Brenner, co-head of structured products and emerging markets in New York at MF Global Inc., the world’s largest broker of exchange-traded futures, said yesterday. “It clearly shows how much demand central banks have for U.S. Treasuries. Treasuries still offer the best liquidity and respectable rates relative to other rates in the world.”
Inverse ETF’s on financials are SKF (2x) and FAZ (3x). Maybe it is time to buy them.
Mike: … what makes Mr. Big Banker believe that honest hard working Americans are going to spend their lives paying back the debt secured by worhthess assets … and I’m not only referring to deflated home prices … what about our questionable educations funded by student loans … educations that in many cases now don’t even secure an interview? There is much more to come, my friend in the way of consumer debt default.
… and the banks that we rescued are gouging us with fees to report earnings? … long term business model? … not in this world.