With one in six homeowners underwater, nothing will really make a difference short of reducing debt principal. Cram-downs are coming. A cram-down is a court-ordered reduction of the secured balance due on a home mortgage loan, granted to a homeowner who has filed for personal bankruptcy.
Loan modifications for homeowners in trouble aren’t enough, because too many people bought their homes at wildly inflated prices. Continuing the “underwater” motif, loan modifications for these people are like rearranging the deck chairs on the Titanic. If your liabilities are far greater than your assets, it doesn’t matter a whole lot how you finance your liabilities. Proof is that more than 50 percent of loans modified this year were delinquent again within six months.
More and more people are saying that reducing debt principal is necessary to keep people in their homes. One of those people, apparently, is Barack Obama.
Read more about cram-downs at http://blog.jimgogek.com.
jgogek
of CA
@
Jan 02, 2009 22:21:53 PM
FDIC Chairman Sheila Bair
For the good of the country, support retention of FDIC Chairman Sheila Bair in the Obama administration !
supportchairmanbair
of DC
@
Dec 20, 2008 10:02:16 AM
sheila Bair
I would be interested to know what this latter day consumer crusader has been doing for the last several years when the FDIC insurance maximum coverage languished at $100,000, an unrealistic level in the late financial boom years? Was it part of the Bush administration effort to discourage savings in favor of other financial instruments in return for the 2004 election contributions made to his campaign by the financial industry? Was she not the head of the FDIC? Perhaps another case of a government official asleep at the wheel?
If we do not let home prices find their own level in a declining economy,as painful as that may be, as we do with all other forms of investment and commodities, will the government bail out all bad investments for the last seven years - there isn't enough ink in the country to print the money - perhaps we should just print larger denominations, like Zimbabwe!
Would Ms. Bair's face appear on the $1,000,000 U. S. note to take to the market to buy a loaf of bread?
For many years it has been a complaint that the American dream of home ownership was increasingly becoming out of the reach of more of the working class, and particularly young people, and families, in this country. If home prices were allowed to determine their own level, in a time of continuing lower income expectations, more people would be able to own their own home! This combined with the current low interest rates and sensible, honestly negotiated mortgages would start to re-build the housing industry and the whole economy - appliances, new cars, building materials etc, etc. The historic foundation of U. S. economic growth! We must not support current home prices at artificial levels!
If the current homeowners, who purchased houses at inflated prices with questionable mortgage terms, are permitted to re-negotiate their loans in order to barely hold onto them there will still be insufficient funds remaining to purchase the aforementioned goods that will re-start the economic engine.
What part of NO MORE BAILOUTS don't our elected officials understand?
kenneth
of CA
@
Dec 20, 2008 01:27:08 AM
From the horses mouth
There is more general confirmation of intent and direction here than there are specifics about loan mods, but interesting anyway. Love, dad
Dad
of TN
@
Dec 19, 2008 23:19:13 PM
FDIC chair has the best approach
Why is this getting so much resistance for Treasury? Maybe because Paulson does not effectively look past Wall St. to the folks who actually make things for a living. Doesn't it make sense that if people are able to make their payments then there will be more money to lend, and thus loosen up the whole market a bit?
jgogek of CA @ Jan 02, 2009 22:21:53 PM
supportchairmanbair of DC @ Dec 20, 2008 10:02:16 AM
kenneth of CA @ Dec 20, 2008 01:27:08 AM
Dad of TN @ Dec 19, 2008 23:19:13 PM
L. Schaub of CO @ Dec 19, 2008 14:03:28 PM
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