Bank Chief Rejects Idea of Reducing Home Loans

[Big Don]

March 8, 2011
Bank Chief Rejects Idea of Reducing Home Loans

By NELSON D. SCHWARTZ The New York Times EXCERPT:


Showing resistance for the first time against government pressure to write off tens of billions worth of mortgage debt, Bank of America executives said on Tuesday that the idea was unworkable and warned that it would be unfair to borrowers who had managed to stay current on their loans.
“There’s a core problem that if you start to help certain people and don’t help other people, it’s going to be very hard to explain the difference,” said Brian T. Moynihan, the chief executive of Bank of America. “Our duty is to have a fair modification process.”
All 50 state attorneys general, as well as a host of federal agencies, are pushing for a settlement over investigations into foreclosure abuses by major mortgage servicers that could cost the industry $20 billion or more. Much of that money would be earmarked to reduce principal owed by homeowners facing foreclosure.
But picking just who to help is among the thorniest questions facing government regulators, as well as the banks themselves. Even the most outspoken attorney general on the issue, Tom Miller of Iowa, acknowledged on Monday that too generous a program might encourage homeowners to walk away from properties where the value of the loan exceeded how much the underlying property was worth.
Indeed, industry experts estimate that nearly a trillion dollars worth of mortgage debt is “underwater,” a result of house prices having fallen since the original loans were made. Federal officials hope a settlement with the servicers will help individual borrowers and provide a cushion for the weak housing market.
Officials of Bank of America, the nation’s biggest mortgage servicer, argue that any effort to help troubled borrowers should not penalize borrowers who are underwater but have managed to make their monthly payments.
“There may be as much as $1 trillion worth of mortgages that are underwater,” said Terry Laughlin, the Bank of America executive whose unit, Legacy Asset Servicing, handles mortgages that are delinquent or in default. “What do you do for those borrowers that have a job but have negative equity and have paid on time and honored their obligations?”
END EXCERPT
Should the local grocery store let people take all they can pack into a cart home for free too?
Make that legal and I'll od on lobster...

 

[bushidomartialarts]

It's not quite that simple.

Predatory loan sales and some outright criminal activity surrounding foreclosures are partly responsible for the mess. So are people buying houses they couldn't frikkin' afford. The trouble is figuring out which is which.

Less like letting people steal from the store because they're broke. More like giving food to people who had their fridge emptied by burglars....

with a lot of asshats sneaking into the line asking for handouts, too.

 

[Big Don]

Then there were the NINJA loans. No Job No Income or Assets, I wish I had been crooked enough to take advantage, Look a FREE HOUSE. That just isn't right. Giving a whole bunch of deadbeats free homes solves nothing and only screws the next person trying to get a mortgage from the bank.

 

[Bruno@MT]

Then there were the NINJA loans. No Job No Income or Assets, I wish I had been crooked enough to take advantage, Look a FREE HOUSE. That just isn't right. Giving a whole bunch of deadbeats free homes solves nothing and only screws the next person trying to get a mortgage from the bank.

Otoh, making them homeless is not going to help the economy either.

 

[Empty Hands]

It's not quite that simple.

Predatory loan sales and some outright criminal activity surrounding foreclosures are partly responsible for the mess. So are people buying houses they couldn't frikkin' afford. The trouble is figuring out which is which.

Less like letting people steal from the store because they're broke. More like giving food to people who had their fridge emptied by burglars....

with a lot of asshats sneaking into the line asking for handouts, too.

The banks couldn't even be bothered to properly document their sales, and their foreclosures. How quickly we forget. Then they relied on ginned up courts run in places like Florida using retired judges to pass default judgments based on shoddy paperwork. Can't be bothered to do your due diligence? **** you.

 

[bushidomartialarts]

Otoh, making them homeless is not going to help the economy either.

I'm not so sure about that. A lot of families are stuck in a house with a payment that's eating up more than half their monthly income. Getting out of the mortgage and into a rental at 1/3 to 1/2 that price would sure help out that family - and get some more money in general circulation.

The real damage would be what happens to the banks when the absorb the losses related with so many foreclosures. I think the banks deserve what they get, but failing banks don't do much for our financial stability.

 

[Big Don]

I'm not so sure about that. A lot of families are stuck in a house with a payment that's eating up more than half their monthly income. Getting out of the mortgage and into a rental at 1/3 to 1/2 that price would sure help out that family - and get some more money in general circulation.

The real damage would be what happens to the banks when the absorb the losses related with so many foreclosures. I think the banks deserve what they get, but failing banks don't do much for our financial stability.

Shouldn't the government bear some responsibility?Many of the changes made to mortgage related laws were the result of wanting more home ownership...

 

[bushidomartialarts]

In an ideal world, yes. But (kind of like physics) in macroeconomics, when the picture gets big enough, the logical rules no longer apply.

It appeals to my sense of justice to let the banks fail and fire everybody responsible for the mess. But it wouldn't actually fix the situation. In all likelihood, it would make things worse.

 

[LuckyKBoxer]

I have no sympathy for any of the idiots who took bad risks because they thought they were going to "Cash in"
screw all of them.
I have a couple friends who are going through foreclosure and I told them when they bought the house they were stupid, when the market changed that they were stupid, and when they stopped paying the mortgage that they were stupid, and now that they are being forclosed on that they were stupid.
of course a couple of them have lived for almsot a year and a half "rent free" paying no mortgage and have up to 6 months or more left before they have to actually go find a place to live, and have since been socking away money like crazy.... so who knows if they truely are stupid, or just lucky.
So many people are taking advantage of the situation it makes me ashamed of what it says about our society..
Nobody wants to take responsibility for their own actions, they want to blaim everyone else and everything else, they want to be forgiven for their ignorance and stupdity, and we have so many people who tend to want to side with them.
BTW very few will become homeless thats a dumb thing to say, the vast majority are making more hten enough money to move into an apartment or a rental, the problem is paying for bloated overpriced houses due to their egos, pride, or greed, and abuse of the system, or all of the above.

Oh and yes Big Don, the Democrats who had control bullied and pushed the banks into making massive changes that directly led to these crappy loans, and bloated housing prices to happen in the first place... of course even with tons of video showing the Dems pushing in hearings for this, and those on the right and middle saying it wont be good, the loudmouth squeeling pigs who are constantly blaming Bush for everything bad to happen in the last 100 years will still blame the republicans, the conservative, the right, the middle, anything that doesnt Jive with their little world views.

 

[bushidomartialarts]

Agreed, there were idiots who cashed in, and there are jackholes who are taking advantage of the potential bailouts now.

However, there were also many mortgage brokers who led people into loans (especially interest-only introductory loans and variable interest loans) they couldn't afford. Those people trusted individuals with licenses and a fiduciary responsibility, and were lied to. They're not entirely at fault.

Also, you're a bit confused about the deregulation of mortgage and real estate. Although the main bill (Gramm-Leach-Billey Act) was passed during Clinton's presidency, the three representatives who sponsored and pushed the bill - Phil Gramm of Texas, Jim Leach of Iowa, and Thomas J. Bliley, Jr. of Virginia, were all Republicans. At the time it passed, both houses of Congress were under a Republican majority. So saying the Democrats bullied the changes into place is totally untrue.

On the other hand, Bush isn't responsible for it, either. I'm not a big fan of Bush, but lots of the economic trouble during his administration came from mistakes made before his watch started - just as some of the economic success during Clinton's term of office can be attributed to decisions made by Reagan and Bush the First.