The following editorial appeared in the Los Angeles Times:
Home prices plunged by almost a third in major U.S. cities after the housing bubble burst, and the glut of foreclosures has kept the market from rebounding. The seemingly relentless pace of foreclosures also is dampening the demand for new homes, which is one reason construction industry unemployment remains significantly higher than the rate for the rest of the economy.
State and federal officials have tried to delay or avert foreclosures, with limited success. Their most recent, and promising, effort is a settlement that requires the nation’s five leading banks to forgive some of the debt of borrowers in hardship, provided that the write-downs would cut the banks’ losses over the long haul. But the two biggest players in mortgage finance, Fannie Mae and Freddie Mac, have refused to follow suit. It’s a shortsighted position that could lead to billions more dollars in losses from unnecessary foreclosures.
Fannie and Freddie have more influence over the housing market than any other financial institutions because they own or guarantee more than half the mortgages in the United States. They’ve rejected write-downs — also known as “principal forgiveness” — at the insistence of regulator Edward J. DeMarco, acting director of the Federal Housing Finance Agency. DeMarco told a Senate panel Tuesday that he prefers giving troubled borrowers a temporary reprieve from paying interest on a portion of their loans — also known as “principal forbearance” — because it would be less costly for Fannie, Freddie and the taxpayers who are bailing them out.
At least, that’s what the agency’s number crunchers say about some types of write-downs. They concede, though, that other types of forgiveness result in smaller losses than forbearance, and that Fannie and Freddie could prevent more foreclosures if they were willing to reduce some borrowers’ debt. Research on actual mortgage modifications shows that the most effective ones by far, both in terms of homeowners rescued and losses avoided, have been those that forgave some of the borrower’s principal. Considering that repossessing and reselling a property can wipe out half or more of a loan’s value, a lender can write off a fair amount of a borrower’s debt and still come out ahead if the modified loan averts foreclosure.
It’s not hard to understand why. Plummeting property values have trapped many borrowers in homes they can’t sell or refinance, and when hardship strikes, a loan that once was affordable becomes crushing. Only by shedding some of their debt can they regain the ability to obtain a more affordable loan or move to find a new job.
Last week, California Attorney General Kamala Harris asked DeMarco to suspend foreclosures in this state until he analyzes the results of the five top banks’ new approach to principal forgiveness. DeMarco refused on Monday, but he should reconsider. His own data show that Fannie and Freddie aren’t moving boldly enough to modify mortgages and avert unnecessary foreclosures. That hurts borrowers, their neighbors and the taxpayers who are stuck with Fannie and Freddie’s tab.
Comments (17)
Add commentReally?
Fanie? Freedie? Really?
5th Grader?
Could someone please loan the Juneau Empire a 5th grader to proofread the newspaper?
Hahaha!!
Just like yesterday's use of "succes"..... C'mon now - how hard would it have been to just look at the correct spelling in the article and copy it?? These spelling errors are elementary words. Enough.
@mikeytoo - aside from
@mikeytoo - aside from spelling errors, tell us your opinion, since you're in the business. Educate us...
Just last week Freddie and Fannie asked for another $4.6B of taxpayer money to cover loses. Total now is near $150B.
Raines, Johnson, Gorelick, Frank, Dodd - just some of the "players" that should be in prison.
Propping up these government entities is nothing more than income redistribution or as BO would say, "spread the wealth around". Why the heLL should I pay for these "homeowners" poor decisions and the political shenanigans?
As I write, Obama is out blathering about these "poor homeowners that have had their dreams taken away". Where does it end...
Please. Screw them.
Please. Screw them. Calypso, irresponsible homeowners notwithstanding, the banking industry got all of us (because we are all paying for it, whether we like it or not) into this mess with their unarguably criminal actions. They have purchased politicians, regulators, and judges, gambled with our money, become richer than snot (which I don't have a problem with, it's the way it's been done - through rigging the game, not through hard work) and have been repeatedly rescued instead of being allowed to blow up. What a deal!
In my opinion, the only way this incestuous relationship has a chance of ending is by abolishing the Federal Reserve, firing the academics that determine the fate of the world on a daily basis, and letting the market itself determine the true cost of money, assets, and resources.
Of course, that also would mean scrapping generations of Ivy League taught economists as their art, pardon "science", is exposed to be the flawed and erroneous travesty that has led the world to its current situation, whose next outcome could easily be global war. Just like that last time.
In the meantime, our currency is continuously devalued, personal, private, and public sector debt is rampant, inflation and unemployment are much higher than what the Bull[filtered word], Lies, and Statistics (BLS) reports, and most of us don't "own" much of anything, let alone property. We are essentially slaves, in one form or another.
@14er - spoken like a true
@14er - spoken like a true Paulbot!! He's good on the Fed but his foreign policy stuff is just kooky.
He can't win the nomination so why waste your vote and give one to Obama? Pick another GOP candidate, and they all have faults, but pick one and let's beat BO.
You think it's ugly now...what's 4+ years hence gonna look like?
Well, what do you expect with
Well, what do you expect with everything going on? Sorry, I don't buy "kooky" foreign policy argument anymore. The fact that he has received more donations from members of the military than Obama and all the other GOP candidates combined speaks volumes to me.
It's called establishing relationships with other countries based on trade and then leaving them the hell alone, while still having a very strong military and national defense.
Of course, that's really hard to do when, among other things, you're inflating your money (the money that is the world's reserve currency - which other influential countries are actively working to change by the way) and forcing it and your democracy down their throats.
In the end though, it's not about Ron Paul, it's about stepping back and observing everything that's happening in this country and around the world without the traditional left/right political filters in place to blind you.
And no, I'm not wasting my vote. I'm not playing that game anymore either. A vote for Gingrich, Romney, or Santorum is the same as a vote for Obama, in my mind. There are some distinct differences, yes, but in the end it's essentially the same product and the same results.
@14er - you write "In the end
@14er - you write "In the end though, it's not about Ron Paul, it's about stepping back and observing everything that's happening in this country and around the world without the traditional left/right political "filters" in place to blind you."
Or in other words, you're voting for Obama? How can you say you're going to look at things without a filter when it's so obvious that the left in this country is dead-set on taking all your personal liberties away, piece by piece? Don't be fooled by the language.
You're talking a little like a teapartier but I'm guessing you've got some choice words for them, right? We have two choices this election - pick a side and try to make it better. (Like we need to get rid of that John McCain for starters!)
As far as Paul's military donations - questionable. Just because he says so?
How do you explain his truther comments and his racist articles in the newsletters "that he knew nothing about"? I believe that he's highly anti-semitic too.
He has a dismal congressional record and he's too old. I'm even beginning to look a little cross-eyed at his tea party son Rand, for some of the comments he has made. The apple may not have fallen too far from the tree.
Colorado, I'd push the like
Colorado, I'd push the like button 5 million times if it would let me!
Thanks kpawsuh! Calypso, huh?
Thanks kpawsuh!
Calypso, huh? I see that the left AND the right have taken our personal liberties away, piece by piece, and continue to do so. When I was younger, I was never fooled by the left. Now that I'm older, I'm not fooled by the right either. I don't care which "side" you're on, if you feed me bs, I will see it for being bs.
I do have some choice words for the Tea Party. They have been co-opted by establishment Republicans, period. Besides, who is the father of the Tea Party? It certainly wasn't the Koch Brothers or Sarah freakin' Palin.
Regarding Paul's military donations, look it up. I can't post links anyway.
And sorry, I'm not going to address the newsletters issue, that's been debated and argued to death and is beating a dead horse. We're getting way off subject anyway.
Free-thinker
Great comments Colorado14er, as usual. I truly appreciate people who vote their conscious, mainly because it seems so rare. It takes courage to vote for someone the establishment has marginalized to the point of a caricature as well as to vote for a candidate rather than against whatever fear-mongering SuperPACs are railing about. Thanks for your thoughtful comments. I hope Alaska stays true to its independent roots and we give our electoral college vote to Paul.
The Tea Party certainly has
The Tea Party certainly has NOT been co-opted by The Establishment - it's just the opposite. The Establishment wants nothing to do with them.
And you just lost me with your derogatory Palin snipe.
Go on and pretend to be ticked with both sides and then vote for Obama.
You're part of the problem with no solution.
Derogatory? Hardly.
Derogatory? Hardly. Besides, on this subject, I reserve my harsh comments for the banksters and corporate masters who enslave people and the politicians, regulators, and judges that serve, enable, and profit from them and their system.
I'm ticked with all of them. I don't care what party or political ideology they adhere to. And solutions? How about actually adhering to and enforcing the rule of law? Or not blatantly rigging the game and stealing from people while you distract them with useless political games and straw man arguments? You know, actual freedom and liberty type stuff (sorry, couldn't resist a little sarcasm) like the Founding Fathers intended, not the crony capitalist/socialist/whateverist hybrid system we have now.
Again, although I think he is currently the only one that would actually change any of the above (and I'm basing that on his consistent statements and track record) this is not about Ron Paul himself. You only brought him up because I mentioned on another article that I would be voting for him in today's primary. But since you did, I responded. All I will say further is that he is the only one deserving of my vote, period.
Oh and thank you, spiff. I cannot in good conscience vote for anyone who perpetuates theft, consistenly ignoring the rule of law, crony captitalism, socialism, continued reduction of our liberties, and constant war-mongering. Sadly, the list of politicians who fit this bill is virtually non-existent. It certainly doesn't include President Obama or any of the current GOP candidates except for Ron Paul.
bailouts just create more irresponsible people
Forcing banks (and thus all homeowners) to take the loss for stupid, arrogant people who bought homes they can not afford is dead wrong.
why not allow a restructuring of the loan and extend it to 40 years to give idiots a place to live that isn't at the expense of responsible Americans?
I'm sick of the new American entitlement where taxpayers are forced to pay for everything from food to housing to cell phones and cable tv.
Shame needs to come back into society in a big way. Americans are more proud of freeloading than working and paying their own bills. It's got to change.
@dotherightthing -
@dotherightthing - Amen...
@14er - ok, so stay home on election day and have your tantrum. Then we can all suffer for 4 more years (+??) under Obama. Thank you very much...
Do the Right Thing, I would
Do the Right Thing, I would agree on your 2nd and 3rd paragraphs. However, many people bought perfectly affordable homes and for various reasons (like losing their jobs) cannot afford them anymore. My parents are a good example. They bought a house that was well within their budget. Now, the home's value has plummeted and they are underwater on the mortgage. Plus, my Dad's once successful business is about to go under because the economy is complete crap. They have been busting their butts trying to earn extra money, but can no longer afford the home. So, does that mean they are stupid and ignorant?
Even for the "stupid and ignorant" ones, where is the responsibility of the lender? The answer is there wasn't any. Some lenders were forced to make risky loans. Most of them were not. They knowingly made risky loans, and lots of them. Then they broke them up into "securities" and created things like credit default swaps (CDS) and sold them off. The ratings agencies rated them AAA, even though they were junk. The assests were toxic from the beginning.
Regarding CDS, it's like you having a bunch of rich neighbors that buy fire insurance on YOUR house. When a bunch of smart rich people buy fire insurance on your house, what do you think is going to happen to your house? This same scenario is playing out around the world, including Greece.
So, not only were they gambling with our money, they were at the same time betting against us. That's twisted.
Also, during the breaking up of these mortgages, the chain of title on many of the mortgage notes was broken. The banks made up for this by, surprise, forging documents and signatures. That's right, pure fraud. There is black & white evidence of this, if you care to look. Some of the original loan documents were even forged. As a result, many people have unknowingly made payments on a mortgage to an entity that never had clear or legal title to the property in the first place. Many others have had their property foreclosed on through outright fraud.
Which, by the way, makes the recent fraudclosure settlment a joke. It amounts to roughly $2000 per person for people who were illegally foreclosed on, to be paid out over three years. Not only that, the banks get to use some of the TARP funds to help make the payments. What a deal! Huh, I wonder how do these guys keep getting such sweet deals? I wanna be a banker!
So, after all this, are you going to tell me that it's all the fault of "stupid and ignorant" people buying houses they couldn't afford? I would hope not, because that would be stupid and ignorant.
Oh and Calypso, I suspect the only tantrums occurrring on election day will be from those who mistakenly thought that O'Romney could beat Obama. If I'm wrong, I will eat my words. Fair enough?
Ron Paul has integrity (for
Ron Paul has integrity (for the most part, though I was very sad to hear him join the chorus of GOP idiots who don't believe in evolution, something he, as a medical doctor, has seen in action), and his stance on not starting stupid wars is great, but nearly all of his domestic policies are either completely unviable or simply shift the burden of taking away our liberties to state and local governments (and in some cases advocate for it--the Civil Rights Act amounts to the federal government forcing the states to play nice, but Ron Paul is against it).
Given how he and Romney have been playing nice with each other lately, I think Paul is going to be his running mate.