Comments on: Obama Socialized Housing Policy: If At First You Don’t Succeed . . . Try, Try, Again

By: fiscalliberal

fiscalliberal — Tue, 01 Dec 2009 04:45:32 +0000

I guess that I was hoping that we go back to the model that worked in in our prime years in that local banks hold the mortgages. I wonder why we think we need a unsustainable bubble shadow market to make the system work. On so many levels it is unsustainable and subject to corruption.

Some how the corruption on a local bank basis is minimized and is not a financial systemic risk.

By: TeakWoodKite

TeakWoodKite — Tue, 01 Dec 2009 03:33:47 +0000

LD, I hope your Thanksgiving was enjoyable.
Great read.
This can be viewed in the exact same light as the what BO Rezko and friends did in Chicago. The recent “ruling” by the DOJ regarding ACORN and BO’s history with them is telling, in the current context. There is evidence to support your position. Plenty of zoom there.

By: Larry Doyle

Larry Doyle — Tue, 01 Dec 2009 01:53:17 +0000

Thanks for the link. No doubt once people start talking and thinking about these possibilities, they will happen at an ever increasing rate.

By: Larry Doyle

Larry Doyle — Tue, 01 Dec 2009 01:51:22 +0000

If in fact the government resorts to principal reduction via mortgage cramdown, the thought that a mortgage securities market will ever truly function again is a misnomer.

Why would an investor ever purchase that product? If and when a judge can unilaterally make that decision, the investor will take his capital elsewhere. The ultimate cost of the program will be higher mortgage rates.

That said, mortgage cramdowns may very well occur and they will be just another step toward socialized housing.

By: fiscalliberal

fiscalliberal — Tue, 01 Dec 2009 00:59:27 +0000

I find your view regarding shame and banks very interesting. I agree – next thing will be people just walking away from the loans/houses. I think personal real estate has the quirk that the bank can only claim the house and not go after other assets. So if that is going to happen eventually, why not do it now. Move in with the folks or kids as appropriate.

Articles are starting to show up talking about pro’s and con’s of just walking away. See http://www.cnbc.com/id/34207654 for example. Once these things start being talked about it will happen more.

If the unemployment continues, people will migrate to cash only and in that mode, you really do not need a credit score.

Now maybe these are extreme measures, but it helps to define the boundries of the problme.

By: fiscalliberal

fiscalliberal — Tue, 01 Dec 2009 00:31:04 +0000

Interesting thought – judicial cramdowns might be the fastest way back to mark to market. I am evolving to the view that unless some thing like that is done, we are into a 5 to 10 year flushing of the bad assets.

I think the RTC took 10 years to flush out. At least the judicial cram downs keeps the losses in the financial markets and not government dole. It really comes down to buyer beware when dealing with financial offerings from the banks.