The Wall Street Journal is reporting the Obama administration is planning on levying $20 billion in civil fines on mortgage services for foreclosure fraud in order to force the Banks to reduce principle on mortgage modifications by a similar total amount. In other words, we're gonna fine you by a big whopping sum if you don't actually help homeowners, reduce mortgage principal and take the loss. Of course absurd mortgage backed securities and investors remain unscathed.
The Obama administration is trying to push through a settlement over mortgage-servicing breakdowns that could force America's largest banks to pay for reductions in loan principal worth billions of dollars.
Terms of the administration's proposal include a commitment from mortgage servicers to reduce the loan balances of troubled borrowers who owe more than their homes are worth, people familiar with the matter said. The cost of those writedowns won't be borne by investors who purchased mortgage-backed securities, these people said.
If a unified settlement can be reached, some state attorneys general and federal agencies are pushing for banks to pay more than $20 billion in civil fines or to fund a comparable amount of loan modifications for distressed borrowers, these people said.
But forging a comprehensive settlement may be difficult. A deal would have to win approval from federal regulators and state attorneys general, as well as some of the nation's largest mortgage servicers, including Bank of America Corp., Wells Fargo & Co, and J.P. Morgan Chase & Co. Those banks declined to comment.
The success of this is immediately doubtful. Notice how banks must approve individual mortgage modifications when it is a $20 billion dollar loss for them and that is an evaluation of homeowners by their terms? Then, of course the threat, the either/or of these fines imply a promise and lord knows when mortgage servicers (Banks) are not required to keep that promise to reduce principle, odds on they will not.
From the Wall Street Journal:
The deal wouldn't create any new government programs to reduce principal. Instead, it would allow banks to devise their own modifications or use existing government programs, people familiar with the matter said. Banks would also have to reduce second-lien mortgages when first mortgages are modified.
There is one tidbit that is hidden in the midst of the article. If homeowners are not significantly helped:
some economists warn that rising numbers of underwater borrowers will drag on housing markets and the economy for years unless more is done to help them.
For years....
What sense does it make to
What sense does it make to help the struggling or distressed homeowner? The assistance and focus of relief should go to the homeowners who are not struggling and who are able to pay the current mortgage! These people are the stabilizing force in the market. If no assistance is provided for this segment then the defaults will only increase.
Artificial Help
You're correct. Those home owners already in financial stress can't be helped except by creating a means by which they can earn a living wage in order to pay their bills and mortgages. How many current and past homeowners would be in financial stress had they had a good living wage job? Extremely high unemployment produces financial stress which leads to such problems as home foreclosure and bankruptcy. Also, the mortage industry was allowed to charge outrageous and immoral unethical interest rates on such loans as ARM's. Many factors have contributed to the real estate crisis, but none more profound and shameful as the economically devastating unemployment crisis.
The backbone to our economy, as it is with any economy, is adequate employment opportunities that cover all education and skill levels. Home foreclosures and bankruptcies can be directly connected to more workers than jobs available, lower over-all wages, and in some cases, by immoral and unethical predatory lending practices by financial institutions and mortgage companies.
Basically, the focus should be on living wage jobs, and most other economic problems would take care of themselves. The solution to the real estate and foreclosure crisis is simply one of "putting America back to work, producing what America uses and consumes". Our import dependency, along with job out-sourcing to cheap foreign labor markets, is economically devastating. In order to create an adequate number of living wage opportunities to satisfy the needs of our rapidly growing workforce, we must demand fair, equal, and balanced foreign trade. In addition, we must severely penalize job out-sourcing to cheap foreign labor markets.
Home foreclosures and bankruptcies are by-products of a jobless workforce trying to survive in an expensive economic environment. Add to that the immoral and unethical practices of lenders, and you have exactly what we're seeing all across this nation. Any action by the government to stabilize and assist homeowners will be inadequate and artificial without first creating living wage opportunities.
I agree that defaults will increase, and that future home ownership will be limited to those able and fortunate enough to survive in an economy gone completely awry. What will the future hold for homebuilders? Will home values come back to their highs? How long will it take those foreclosed on, to re-establish their credit in order to re-enter the home buying market? Will mortgage interest rates soar, and thereby minimizing the number that can actually buy a home?
What real help can anyone offer, aside from allowing homeowners the opportunity to pay their own way via living wage employment?
Because you can do wrong, and get away with it, doesn't make it right
Outsourcing vs Automation
Outsourcing is probably not even half of the reason jobs are leaving the us. I am an automation engineer. I worked at an assembly plant in the US that built residential water meters. They had an antiquated production line that required 7 people. We redesigned with pneumatics and PLCs( Programmable Logic Controllers) and other sensors and such. And just like that, what took 7 low skilled people now only takes 3. Sorry, but I gotta eat too.
give me a break, PLCs, plzzz
Firstly you're probably a EET if you're programming PLCs. Secondly, PLCs have been around for over 20 years, the fact you found a place not using them is rare. Sorry but while technological advances account for some of this, it is certainly not all and I doubt even half. Whatever you're feeling guilty about, get over it, not only did you not cause 4 people to lose their jobs, odds on you will be replaced with a H-1B.
Exceptions
Yes, there are instances where automation, technology, and modernization have replaced workers. But, those cases are the exception rather than the rule. Do you honestly believe that automation, technology, and modernization has replaced 27 million workers that are presently unemployed? In reality, the bulk of our unemployed are idle, due primarily to our import dependency and out-sourcing jobs to cheap labor markets abroad.
Jobs are leaving this country because our standard of living does not allow us to compete with cheap foreign labor. Companies move outside of our borders in order to take advantage of cheap labor pools and less restrictions. Companies out-source jobs to foreign labor markets because American workers, in America, are way more expensive to employ. Microsoft out-sources programming, and not because of automation.
Even your president, Mr. Obama, has recognized the damage job out-sourcing has caused. He has publicly asked businesses to keep jobs in America.
Automation hasn't replaced customer service, medical billing, legal research, payroll, bookkeeping and accounting, and other task out-sourced to foreign labor markets.
Technically, we out-source textile product production, steel production, electronic assembly, furniture manufacturing, toy manufacturing, appliance manufacturing, automotive manufacturing, hardware manufacturing, farm equipment manufacturing, industrial machinery manufacturing, tool manufacturing, food processing, farming, housewares manufacturing, and many sporting goods are made out-side of our borders.
In reality, we import most of what we use and consume. In addition, our service sector out-sources millions of jobs to India and Southeast Asia. We also import most of the oil that we use, while American oil wells remain capped and unproductive.
Automation certainly can't be blamed for recent college and high school grads being unemployed. Automation certainly can't be blamed for closed plants and factories. And, automation certainly can't be blamed for the millions of full-time jobs that have been filled with part-time help. Exceptions? Yes. But not to the extent that it accounts for the economically devastating unemployment numbers we're seeing.
Because you can do wrong, and get away with it, doesn't make it right
I just tried to get help. We
I just tried to get help. We are > 150K under water but are current. We need to move for a new job but Wells Fargo basically stated not going to help. I can short sell or foreclose.
Really disappointed - I even offered to split the loss with them and they said no. Doesn't pay to be a good consumer.
You are correct - they are relying upon us to keep things afloat - but I will be walking away from this anchor and then myself contributing to the poor housing prices.
In reply to what sense does it make?
I hope your neighborhoods home value falls through the floor. ( TO what prices were worth 20 years ago, no fault of yours, just the economy and the people that have been foreclosed on that got NO help and then make the market fall ) and then lose your job. "These people are stabilizing the work force"... Hahaha so the ones that got laid off from no fault of their own and that have paid their mortgage for 16 years are"unstabilizing"it? Yeah, it's not the companies out there, or the bad economy, or wars, stocks,.... Help the ones who haven't taken a hit... (Like you??) PUT YOUR foot in someone elses shoe before you ignorantly type.
mortgages
home values will not return to their valued highs of 2006. More sensible appreciation is predicted if this economy ever gets over the doldrums. The ones who stand to win could be those who have purchased dirt cheap property recently and of course those who have substantial equity in their homes already. Those who bought in 2004 to 2006, well, what can I say?
I was Offered an $80k Mortgage Reduction by NY NY Banking Folks
Hello One and All,
Some sales people from NY NY offered me this mortgage principal reduction program when I returned from Afghanistan last fall. At the time, another mortgage company had bought my mortgage and did not automatically take the mortgage out of my checking account and sent the papers to the house which was being rented out. So, my credit rating suffered, and these people thought that I was a great candidate for this Obama House Mortgage Principal Reduction Program, which I had never heard about, nor could find it plausible that the banks would like it. They told me that the U.S. banks wanted to reduce their questionable loans on their balance sheets, and it was good now that I was current on my bank mortgage payments. I still find it hard to believe that the banks would give away money, even if it is problematic that the loan will be paid. More important, the NY NY proponents of my buying into this program wanted me to put up $1,500 to $2,000 first and see if it worked out for me. So, I hesitated, and went to work overseas again, but would love to buy down my mortgage principal if I could do it with a reputable group that would stand up to the light of some due diligence and checking out their operations about their being legitimate.
Regards