Subscribe: RSS Feed | Twitter | Facebook | Email
Home | Contact Us

Posts Tagged ‘property rights’

Weekend Reading: The Property Illusion

Posted by Larry Doyle on April 13th, 2013 6:23 AM |

I have no doubt that given the need for sources of revenue by Uncle Sam and other sovereign governments, the topic of “the protection of property rights” will be increasingly brought front and center in the public arena.

We saw this play out in Cyprus just a few weeks back, and we witness another example of this topic just the other day in a WSJ article, Now He’s After Your 401(K).

What some ideologues might view as “equitable redistribution,” other individuals who have worked long and hard for property would view as expropriation without proper compensation.

Do you think that this topic might be reason, if not partial motivation, for the steady stream of firearm sales? (more…)

David Skeel: Respect For The Rule of Law

Posted by Larry Doyle on August 22nd, 2012 8:32 AM |

If we do not have the courage to enact laws and then mandate that they are upheld, what type of future will we have? Not the future that we could have and should have. I have tried to address this topic regularly here at Sense on Cents.

A few months back, I highlighted a clip from Barron’s that I found quite chilling:

When countries improve rule of law, property rights, and investor protections, and when regulation becomes more transparent and corruption reduced, there are major payoffs. The World Justice Project says the U.S. has been deteriorating for close to 10 years by all these measures, which contrasts with improvements in some emerging markets, like Hong Kong.  (more…)

Niall Ferguson’s Keys To Economic Growth Recommended

Posted by Larry Doyle on April 29th, 2012 12:41 PM |

I truly love gaining global insights and perspectives from highly intelligent people. I had just such a treat this morning in reading a Barron’s interview with the economic and financial historian Niall Ferguson.

What did this Harvard professor have to say on a topic which should be a MAJOR point of debate for our 2012 Presidential election? A lot. Let’s navigate.

Barron’s: There are once again concerns about U.S. growth. What factors are keeping the economy from reaching what you call “escape velocity”?  (more…)

Sense on Cents Reflections: What Really Happened…?

Posted by Larry Doyle on November 28th, 2010 11:15 AM |

What Really Happened…?

The financial and economic turmoil of the last three plus years has brought us stories and developments which are almost unfathomable. In fact, in my opinion there is no doubt that Wall Street and Washington would like to keep certain of these stories and developments buried forever.

Will America ever learn where some of these bones are buried? Will America ever learn of these skeletons in the closet? Will the media charged with pursuing the truth dare dig into these stories?

We are living through a time warp currently. The twists and turns on our economic landscape come at us so quickly. In the process, are we able to recall those turns–that is, certain stories and developments–which were never fully explored and exposed?
What Really Happened….? (more…)

Senate Approves Safe Harbor Mortgage Modification; Property Rights? What’s That?

Posted by Larry Doyle on May 6th, 2009 3:55 PM |

The assault on property rights continues as the Senate just passed the Safe Harbor Mortgage Modification legislation. Recall how I wrote the other day in Mortgage Magic or Mortgage Mayhem that this legislation would protect mortgage servicers from suit by mortgage investors.

Why would investors sue servicers? Servicers are charged with processing monthly principal and interest payments of mortgages and distributing the cash flow to investors. If they do not perform, then to this point they would and should be sued. Investors have the right to those payments for which they committed their funds.

The Safe Harbor Mortgage Modification legislation will protect servicers from lawsuits in the cases where mortgages have been modified and investors’ interests supposedly remain protected. One would think that covers all the bases. As I highlighted, however, the legislation may very well promote self-dealing amongst a number of the larger banks which both service mortgages and hold second mortgages.

From Bloomberg’s article, Senate Defeats TARP Measures To Move Safe-Harbor Bill:

The Mortgage Bankers Association and consumer advocates have endorsed the safe-harbor provision to protect mortgage servicing companies from being sued by mortgage-bond investors if they modify loans in accordance with President Barack Obama’s Making Home Affordable anti-foreclosure program.

“Safe harbor is something that you want as a servicer,” said Ajay Rajadhyaksha, the head of fixed-income strategy at Barclays Capital in New York. “Without the safe harbor, you’re far more skittish about doing anything.”

Corker said in a speech on the floor that the measure is a boon to larger servicers including JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and Bank of America Corp. An amendment Corker sponsored that would have required borrowers to seek other forms of aid before their loans could be modified failed.

Mortgage bond buyers including Clayton DeGiacinto of Tower Research Capital in New York said allowing the safe harbor provisions removes any accountability servicers have to minimize investor losses and may make the process more susceptible to political pressure and more costly for borrowers.

“It ultimately makes bond investors skeptical and adds an additional layer of risk that will need to be priced into the securities,” said DeGiacinto, who manages a distressed mortgage fund. 

I am all for credible and equitable legislation which promotes decreasing foreclosures. In the process, however, the legislation should be airtight in making sure there is no self-dealing and conflicts of interest. That question regarding this legislation remains outstanding.

While this legislation may help limit foreclosures in the near term, the real cost may be borne in the years ahead in the form of higher mortgage rates. Why might that happen? If banks which service mortgages are influenced and incentivized not to protect the investors’ property rights and thus don’t, the investors will sell their holdings, and take their bat and ball to another field.

LD

Mortgage Magic or Mortgage Mayhem?

Posted by Larry Doyle on May 5th, 2009 7:02 AM |

Are the largest banks in the land ready to defy the rule of law and self-deal with Uncle Sam’s blessing in the name of providing mortgage relief to homeowners currently strapped by first and second mortgages? The WSJ reports How Big Banks Want To Game The Mortgage Mess

Is this another game of chance in which Uncle Sam wants to prime the pump in hopes of luring private capital into the economy? No, anything but. In fact, this is no game at all. Uncle Sam is proposing legislation which would protect mortgage servicers from being sued for not performing their duty to protect the property rights of mortgage investors (including pension funds, mutual funds, insurance companies). What does all this mean?

Investors in mortgage securities backed by first mortgages are entitled and expect protection of their capital by the performance of mortgage servicers handling the monthly payment of mortgage principal and interest. In fact, if the mortgage servicers do not perform the investors will and should sue. 

The investors or holders of second mortgages will only receive a return if and when the first mortgage is current on its payment.

Will Congress pass legislation which would unintentionally incentivize large banks, which also happen to be large mortgage servicers, to game the mortgage modification process for their own benefit but at the expense of investors holding the first mortgages? The WSJ highlights:

Given the current housing crisis, there is wide support for measures to make it easier for homeowners to modify their mortgages. That is understandable. Nobody likes seeing the wave of foreclosures. Plus, mortgage modifications may help stabilize home values.

But in the rush to do something, Congress is showing a regrettable willingness to adopt constitutionally suspect legislation that runs roughshod over the Fifth Amendment of the Constitution, which prohibits the taking of private property without just compensation. (more…)






Recent Posts


ECONOMIC ALL-STARS


Archives