Foreclosure Defense Florida

The Attorney General Bank Bailout / Private Property Seizure Is Apalling


Attorneys General from all across the country have been under intense pressure by the Obama Administration to accept the terms of the Very Bad Bank Bailout by tomorrow, February 6, 2012.

Word on the street is that there was a conference call scheduled this weekend between all of them to hammer out the details, twist arms, make promises, blackmail and extort.

It is also confirmed that the Obama Administration’s key man i the deal Shawn Donovan, aka Napolean Dynamite had a conference call with activist groups where he explained that the money to pay for the bank bailout bill would come not from the banks but from the investors in the mortgages, which means the 401ks, retirement and investment accounts of little folks like me and you.

HUH? Come again?

Wait just a cotton pickin’ minute here. How can ReTHUGliCON attorney generals like Florida’s Pam Bondi be screaming at other attorney generals like California’s Kamela Harris a Democrat to take a deal that amounts to nothing more than a federal taking of private property with no compensation?

Huh?   Come again?

I checked my “Being a Republican For Dummies” book and being opposed to things like that were covered in the first chapter.   Well, go ahead and read along here folks, cause this is really, really ugly….

In case you had any doubts about what the mortgage settlement was really about and why banks that were so keenly opposed to it are now willing to go ahead, the news of the last two days should settle any doubts.

As we had indicated earlier, one of the many leaks about the settlement showed that there had been a major shift its parameters. Of the $25 billion that has been bandied about as a settlement total for the biggest banks, comparatively little (less than $5 billion) is in cash. The rest comes in the form of credits for principal modifications of mortgages.

Originally, that was originally to come only from mortgages held by banks, meaning they would bear the costs. The fact that this meant that whether a homeowner might benefit would be random (were you one of the lucky ones whose mortgage had not been securitized?) was apparently used as an excuse to morph the deal into a huge win for them: allowing the banks to get credit for modifying mortgages that they don’t own.

The first rule of finance (well, maybe second, ” fees are not negotiable” might be number one) is always use other people’s money before your own. So giving the banks permission to modify loans they don’t own guarantees that that is where the overwhelming majority of mortgage modifications will take place, ex those the banks would have done anyhow on their own loans. And the design of the program, that securitized loans will be given only half the credit towards the total, versus 100% for loans the banks own, merely assures that even more damage will be done to investors to pay for the servicers’ misdeeds.

Let me stress: this is a huge bailout for the banks. The settlement amounts to a transfer from retirement accounts (pension funds, 401 (k)s) and insurers to the banks. And without this subsidy, the biggest banks would be in serious trouble

Why? As leading mortgage analyst Laurie Goodman pointed out in a late 2010 presentation, just over half of the private label (non Fannie/Freddie) securitizations have second liens behind them (overwhelmingly home equity lines of credit). Moreover, homes with first liens only have far lower delinquency rates than homes with both first and second liens. Separately, various studies have found that defaults are also correlated with how far underwater a borrower is. If a borrower is too far in negative equity territory, it makes less sense for them to struggle to stay current, no matter how much they love their home.


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