October, Monday 24, 2011

DOW + 104 = 11913
SPX + 15 = 1254
NAS + 61 = 2699
10 YR YLD +=2.23%
OIL +.32 = 91.58
GOLD + 11.30 = 1654.30
SILV + .34 = 31.84
PLAT + 34.00 = 1545.00

Five years ago, the real estate bubble started to leak. Three years ago, the global financial economy nearly collapsed. Today, we got a plan to save all the embattled, underwater homeowners of America. Hallelujah and pass the potato salad.
Now you realize that 23% of all existing mortgages are underwater; plus banks are sitting on home equity loans and second mortgages at the original values, not market values.
If you marked to market all the negative equity – then all of the big banks in America would be insolvent. The big banks are living on life support tossed their way by the government and the Federal Reserve; this is a situation that seems destined to result in another crisis.
And so today, the Obama administration announced plans to help troubled homeowners. Actually, homeowners who benefit would just be coincidental – understand that this plan is really designed to help the banks.
The Home Affordable Refinance Program, or HARP, was started in 2009. It lets homeowners refinance their mortgages at lower rates. But few people have signed up. Many “underwater” borrowers — those who owe more than their homes are worth — couldn’t qualify under the program. Roughly 22.5 percent of U.S. homeowners, about 11 million, are underwater, according to CoreLogic, a real estate data firm. As of Aug. 31, fewer than 900,000 homeowners, and just 72,000 underwater homeowners, have refinanced through the administration’s program. The administration had estimated that the program would help 4 million to 5 million homeowners. Part of the problem is that the loan modifications offered by the banks are usually really rotten deals. They might result in lower monthly payments but they do that by extending the term of the loan, tacking on extra years of payments or tacking on balloon payments, plus closing costs and appraisal fees. And if a homeowner was more than 25% underwater – the banks just gave up. A no mod loan mod would just result in default anyway.
The new program promises to cut some of the fees, and increase eligibility for deeply underwater homeowners, and it would not require all that pesky documentation. Under the plan, the risk would fall to Fannie Mae and Freddie Mac. Where have we heard this story before?
I doubt this will have much effect. HARP has been an abysmal failure; 72,000 out of 11-million; and out of that 72-thousand most of the loan mods were so heavily slanted in favor of the banks that more than half will default anyway. The new program might help 20-thousand, maybe 50-thousand – and that’s good but it’s just a blip – it does nothing to solve the problem. So, what is the motivation here?
The Big banks have been bargaining for immunity, but they’ll settle for Clear Chain of Title.
The big banks have been facing a the wrath of attorneys general from across the country, and by wrath I mean the banks bought and paid for a whole bunch of attorneys general and they were on the verge of getting a sweetheart settlement – when ooops, they forgot to bribe the California AG, and the whole $20 billion dollar settlement – a mere slap on the wrist – the settlement is about to fall apart. Not only was a potential $20 billion dollar settlement a mere slap on the wrist, it would have purchased immunity from future prosecution. And that was the grand bargain!
The bankers’ crimes during the mortgage crisis have included perjury, forgery, and investor fraud. These accusations are well-documented in the “consent orders” that the banks signed with the Treasury Department.
The crimes described in the document include: lying in affidavits that were filed state and Federal courts; the filing of court documents which hadn’t been notarized, but which the banks falsely asserted had been; foreclosing on homes when the bank didn’t have proof that it even owned the note; and “failing to sufficiently oversee outside counsel and other third-party providers handling foreclosure-related services.” Well, the Big Settlement with the state Attorneys General is falling apart. So, the bankers aren’t going to get immunity now – but there is still a real big problem with Chain of Title.
At the heart of the mortgage crisis you’ll find MERS, the artificial corporation and electronic database that served as the engine of the banks’ mortgage scheme. They used MERS to circumvent local taxes, and to avoid meeting their legal obligations to provide a clear chain of title for ownership of a mortgage. They also used it to buy, bundle, and sell mortgages at light speed.
The new mortgage plan would include the idea that any refi or loan mod would provide a cleared Chain of Title.  In other words, it would clean up the mess created by the banks, without holding them accountable for their crimes. The Chain of Title problem hasn’t gone away and it hangs like the sword of Damoclese over the entire prospect of recovery – and make no mistake – there will be no recovery until the negative equity problem is resolved. The Chain of Title problem must be cleaned up and that means the banks must pay the price to clean it up.
We bailed out the banks because they are too big to fail, but that doesn’t mean that they shouldn’t have to pay now. This isn’t and shouldn’t be just about robosigning. Robosigning was symptomatic of reckless and often illegal lending; from MERS to securitization paper work, to no-doc loans to predatory loans.  All of this was done to maximize profits and to enable a housing bubble that was hugely profitable to a limited number of financial institutions and with extraordinary collateral damage.  We need some accountability for blowing up the economy.
When you look at BoA and see that it’s market cap is $65 billion against a book value of $220 billion, it shows that the market recognizes that BoA’s assets aren’t worth what BoA claims, or that BoA’s has huge unrecognized liabilities – or both. Writing down negative equity would start to make book and market values converge, which is where they should be.
Instead of creating silly mortgage plans that will help almost no one, the government should stop playing games and deal with the real problem. Today, the Obama administration tried to float an idea to clear Chain of title and wipe out a little negative equity – it won’t work. The Federal Reserve is sitting in the wings ready to launch QE3, which would focus firepower on buying mortgage backed securities to boost home purchases and refinancing – it won’t work.
If we continue to see the government try to clean up the mess for the bankers – it won’t work.
Who holds more power, the government or the corporations? For the past couple of years governments have been trying to shut down wikileaks – the website run by Julian Assange. He was arrested on charges completely unrelated to the website – and that case is working its way slowly through the Swedish and British legal system. Meanwhile, Wikileaks continued to publish sensitive information that tweaked the establishment. I’ve heard many criticisms of Wikileaks, but never that the information they publish is inaccurate.  And despite the legal problems, Wikileaks published. For the past year, Julian Assange has been warning that he would dump sensitive information about big banks – the dirty low down that might even result in the collapse of one or more big banks.
Wikileaks has run out of money. The big banks have shut down the spigot – a financial blockade. Wikileaks is broke and it is temporarily suspending operations. This was the announcement today from Julian Assange.
If you want to know how to donate, you can go to wikileaks.org and click on the donate tab. There are still ways to get money to Wikileaks, and I think we haven’t seen the end just yet – what we have seen is that censorship has been privatized. If you ever wonder why you don’t get the whole truth via corporate run nightly newscasts and websites – now you know.
I can’t wait to see the dump on the big banks
Previous post

October, Friday 21, 2011

Next post

October, Tuesday 25, 2011

No Comment

Leave a reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.