pkarnig’s posthaven

The Outcomes

According to the report, under idyllic circumstances, lenders would be able to continue foreclosure activity as the invalid information in the papers will be replaced with proper documents after a certain point of time. Also, the foreclosure mess could be an exaggerated problem. Anyhow, paperwork flaws related to the foreclosure will be ironed out in the long run with the employees’ experience of properly reviewing the documents.

On the other extreme, the lenders may face legal challenges related to the validity of mortgage loans. Lenders might also be unable to prove their ownership of mortgage loans that they claim to own, incurring unexpectedly huge losses as a result. Also, the moratorium will impede the sale of foreclosed properties, leading to a high chance of reduction in housing activity.

In other words, the banks have not followed the letter of the law in processing all the paperwork to create the now famed Mortgage Backed Securities.

 

At last week’s world economic summit meeting in South Korea, finance ministers and central bankers chewed over the perennial problem of “imbalances.” America consumes much more than it produces (and has done so over 25 consecutive years). Asia produces more than it consumes. Merchandise moves east across the Pacific; dollars fly west in payment. For Americans, the system could hardly be improved on, because the dollars do not remain in Asia. They rather obligingly fly eastward again in the shape of investments in United States government securities. It’s as if the money never left the 50 states.

So it is under the paper-dollar system that we Americans enjoy “deficits without tears,” in the words of the French economist Jacques Rueff. We could not have done so under the classical gold standard. Deficits then were ultimately settled in gold. We could not have printed it, but would have had to dig for it, or adjusted our economy to make ourselves more internationally competitive. Adjustments under the gold standard took place continuously and smoothly — not, like today, wrenchingly and at great intervals.

Gold is a metal made for monetary service. It is scarce (just 0.004 parts per million in the earth’s crust), pliable and easy on the eye. It has tended to hold its purchasing power over the years and centuries. You don’t consume it, as you do tin or copper. Somewhere, probably, in some coin or ingot, is the gold that adorned Cleopatra.

And because it is indestructible, no one year’s new production is of any great consequence in comparison with the store of above-ground metal. From 1900 to 2009, at much lower nominal gold prices than those prevailing today, the worldwide stock of gold grew at 1.5 percent a year, according to the United States Geological Survey and the World Gold Council.

This is likely to become a very HOT topic in the months to come. If the "Quantitative Easing" doesn't do the trick (as many believe it won't), do we move back to the Gold Standard? Check out this video - http://www.youtube.com/watch?v=PTUY16CkS-k

“The mortgage interest deduction is one of the pillars of our national housing policy,” said Michael D. Berman, chairman of the Mortgage Bankers Association. “Limiting its use will have negative repercussions for consumers and home values up and down the housing chain.”

But tax policy experts say that for all its popularity, the value of the deduction in public policy is debatable. It was intended to encourage homeownership, but housing economists point out that countries like Canada and Australia, which do not allow mortgage interest deductions, have homeownership rates similar to those of the United States.

“What the subsidy is doing is driving up prices by encouraging well-off people to take out bigger loans, to buy bigger houses,” said Roberton Williams, a fellow at the Tax Policy Center. “So I think there’s a question about whether that is something the government should be doing with tax money.”

This article in the NY Times points out that, while many "middle class" tax payers believe that the Mortgage Interest Tax Deduction helps them, the reality is that it helps the wealthy even more because they buy bigger more expensive homes. And, this also motivates the market to "Bubble-ize". And, THIS benefits the big banks disproportionately as well. Time to re-think pros and cons of home ownership.

Why would the fraudulent nonprime lenders and brokers rely on financially unsophisticated borrowers to not only lie -- but lie astutely? Why would working class borrowers know the amount of income they would have to falsely claim so that the loan would appear to meet the magic debt-to-income ratios that would get the loan approved and allow it to be sold at a premium? Why would the borrowers know that they could rely on the brokers and lenders to not verify income and to wink at claims that hairdressers made $100,000 annually? It strains all credulity to think that millions of working class Americans managed to defraud financially sophisticated lenders.

It is even more absurd to believe that honest lenders, finding themselves the victims of an epidemic of mortgage fraud by these clever working class Americans, responded by (1) massively expanding the number of liar's loans they made, (2) spreading them to subprime borrowers with severe credit defects, (3) made defaults on the loans, and the loss upon default, far greater by layering risk and inflating appraisals, and (4) slashed their allowances for losses (ALLL) to trivial levels to ensure that the inevitable fraud losses would cause catastrophic losses.

Americans deserve to see these high paid thugs held accountable for all the trouble that they have rained down on unsuspecting consumers. Prosecute the bank managers at the big banks that we the people bailed out in 2008.