I am not a fan of the mortgage mods and abatements or principle write-downs, but this is an interesting viewpoint:

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Sept. 14 (Bloomberg) — Philip Angelides, chairman of the Financial Crisis Inquiry Commission, talks about the outlook for solving the housing crisis in the U.S. He also discusses mortgage modifications for underwater homeowners and credit availability for home buyers. Angelides speaks with Lisa Murphy on Bloomberg Television’s “Fast Forward.”


Source: Bloomberg

Category: Bailouts, Credit, Real Estate, Video

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

11 Responses to “Philip Angelides, FCIC Chair: Mortgage Mods, Looser HomeBuyer Credit”

  1. Joe says:

    Given that he is right. Which I can, in theory… As a practical matter, How do you get past the majority of people who are either doing fine with their current mortgage or are not doing so bad that there isn’t hope for the future? Free money for the banks, and now free money (principle write downs) for underwater mortgage holders. As a philosophical and practical matter, what do you tell constituents?

    Do principle write downs delay clearing the market and the ultimate recovery or is it an alternative path to the same place?

  2. Syd says:

    I think Angelides is exactly right: the government should allow cramdowns, i.e., give bankruptcy court judges the power to force principle write-downs of residential mortgage debt. That mortgage debt is not dischargeable in bankruptcy court exemplifies how banks use their political power to get laws that favor themselves and their investors.

    Bankruptcy court judges would be able to evaluate each borrower’s situation one by one, and rule for or against write-downs on a case-by-case basis, to help minimize moral hazard. The most harmful status quo moral hazard is that the people who run the big banks (the upper management and BOD) get to make boat loads of bad loans with little risk to themselves – and in fact they make vast fortunes doing it. Along with them, the people who invest in these banks, the shareholders and bondholders, also get shielded from the huge real losses that their bad investments earned. It’s a corrupt, perverse, twisted sham of capitalism.

    I also think that some type of conversion of mortgages to leases has merit, along with John Hussman’s idea of principle write-downs in conjunction with Property Appreciation Rights, coordinated by the US Treasury (http://www.hussmanfunds.com/wmc/wmc110606.htm).

  3. overanout says:

    The dollar number is in the trillions! MBS holders and banks would be wiped out, maybe not a bad idea but California homeowners alone might cause a banking meltdown.

  4. duaneteddy says:

    Although I haven’t been a fan of Angelides in the past, in this case I agree with him completely. We need principle write-downs to get this economy moving. The banks are only entitled to the value of their collateral, the house. They can be given the Property Appreciation Rights that Hussman described,in the link above to compensate them for the principal write-down. I would allow it also to be done outside of bankruptcy to get more participants.
    The only reason cramdowns aren’t in the residental bankruptcies is because of lobbying by banks. Maybe the way to start this process is to get banks to mark their mortgage loans to market, instead of the fantasy values they use now.

  5. sangfroid says:

    Here we go again, more off-the-hook bail-out for the irresponsible and the greedy; first for the large banks and now for the deadbeat home owners. Whatever happened to letting the banks, home owners, regulators, and society learn a lesson about responsibility and prudent decision making?

  6. ilsm says:

    “Whatever happened to letting the banks, home owners, regulators, and society learn a lesson about responsibility and prudent decision making?”

    Consequences do not matter when the moral hazard players own the president and congress.

  7. Michael Olenick says:

    “Whatever happened to letting the banks, home owners, regulators, and society learn a lesson about responsibility and prudent decision making?”

    What happened? We bailed out the banks, which threw the homeowners under the bus because the loans would have been purchased by vultures for a few cents on the dollar more than willing to renegotiate to make payments flow. So, for example, a $500K sub-prime loan could have been purchased for $25K, refi’d for $75K, and everybody except the investors who funded it end up happy (and that’s why they’re called investors .. albeit stupid one’s).

    These were private contracts with two parties; we can’t bail out one without also bailing out the other. Even if it’s legal, and that’s questionable (look at the contract clause in the Constitution), it’s immoral, unethical, and awful for the markets.

  8. kevind767 says:

    Is there any way that those of us who acces your blog site by iPad can have a way to play these videos?
    I am unable to view this one

    Thanks

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    BR: I am adding mobile iPad functionality ij one of the next upgrades
    (Dont know when it will be done)

  9. MayorQuimby says:

    Any write downs must come with equivalent checks for the same nominal amount to everyone else or forget it.

  10. Mike Dillon says:

    Michael Olenick nails it. I’m watching pools being purchased for less than 20 cents on the dollar. The big Q that needs a more PUBLIC answer is “WHY are investors more willing to sell pools at such a steep discount as opposed to writing down the notes directly for the borrower which essentially puts MORE money in the investor’s pocket than they would get by selling off altogether?”

    20 cents on a $100k note is $20k and no more. 50% principle reduction on a $100k note is $50k and an interest stream for the remaining however many years the loan exists. Investor gets more money. Borrower gets a reduced payment. The economy wins.

    AIG, PMI and the rest of the insurers/re-insurers are rapidly exsanguinating. Maybe the reason for investors to sell at discount hides within that relationship somewhere…

  11. KevinTren says:

    In digesting Hussman’s PAR program, one reads, “While one can imagine linking the PAR to the property itself rather than to the homeowner, nobody would buy those homes except at a discount to their open market value, and in most cases, at a discount to the remaining mortgage balance, which would require the original homeowner to make up the difference with cash that is probably not available.” “Cash that is probably not available” brings an interesting point out.
    When a note holder returns less than the full monthly payment from the borrower and months and months go by with no payments tendered to the note holder, unless the borrower’s cash flow has significantly changed (e.g., loss of job and/or medical issues), the homeowner is putting those would-be mortgage payments (along with property taxes and homeowner’s insurance) in ‘”Hip National Bank: (i.e., the homeowner’s largest monthly expenditure is now in savings). So where is all this money? With the very banks (think systemic now my fine feathered bankers) who are not being repaid on their notes! Monies are shifted from one side of the bank (Investments) to the other (Liabilities)? The difference in cash received (a.k.a. ability to pay or Debt To Income) is where solution resides. Any solution based on property values is viable only if we take into consideration an individual’s ability to remit monthly mortgage payments. This is the only equitable solution for all parties and addresses strategic defaulters.
    Whether we bring PAR in to play or what I proposed over 2.5 years ago (http://kevintren.posterous.com/?tag=leasepurchase) make the homeowner remit the amount stockpiled as good faith. (Strategic defaulters again revealed.)