Patterico's Pontifications

2/12/2009

Is This Where We’re Headed?

Filed under: General — Patterico @ 8:12 pm



From the “rewarding the less responsible” file:

Bank of America, as owner of Countrywide Financial, agreed to pay $7.46 million to an estimated 3,200 Texans who lost their homes to foreclosure because of subprime mortgages, Attorney General Greg Abbott’s office said Wednesday. It works out to about $2,330 per affected household.

To be eligible, a borrower must have made six or fewer payments over the life of the loan, occupy the property and have either experienced a foreclosure sale or were 120 days or more delinquent as of Oct. 6, 2008.

And if you made seven payments? Or, God help you, all your payments?

You’ll get nothing and like it!

I suspect this will be a model for future bailouts. Start defaulting now!

33 Responses to “Is This Where We’re Headed?”

  1. Obamanomics.

    The more you give away to unworthy folks via the Gov.t tax system — the more you tax the harder working folks to pay for it.

    Obamanomics in Banking

    Stop paying the mortgage. Cry alot. Get money.

    Obama über alles!!!!! (48dd5e)

  2. It’s perverse and logical at the same time. The money compensates those who were taken advantage of by being sold mortgages they couldn’t handle… and what better way to identify them than to look for people who haven’t made their payments? By definition, making enough of your payments means you can handle the payments which means you weren’t taken advantage of which means there’s no need to compensate you.

    Unlike Yossarian, this gives people the ability to get themselves classified as mentally deficient and thus qualify for relief.

    steve sturm (3811cf)

  3. This is fucking unbelievable. How much you want to bet that this has Baracky and Barney Frank’s fingerprints all over it?

    JD (c6800b)

  4. Yossarian is a good model. If you can afford the house you buy, you are unworthy of concern.

    Mike K (2cf494)

  5. Yossarian is a good model. If you can afford the house you buy, you are unworthy of concern.

    Mike K (2cf494)

  6. sigh…. 119 payments too many
    Whachya eatin Verne?
    Mmmmm I loves me some bailout samwiches!

    voiceofreason2 (69d8f0)

  7. Sigh… I inherited a house that needs more money to fix up than its current value (and that’s not too difficult in this 19th century tract home in a flood zone neighborhood).

    John Hitchcock (fb941d)

  8. To all of you taxpayers, and mortgage payers … this one’s for you.

    JD (c6800b)

  9. Six or fewer payments – pretty shitty job underwriting the loan.

    daleyrocks (5d22c0)

  10. I’ve seen refi-frauds where lenders have gotten taken with borrowers making fewer than seven payments, but fail to see what’s in it for a lender deliberately underwriting loans for a borrower not to be able to make that many payments.

    daleyrocks (5d22c0)

  11. This just seems like such an incredibly brain-jarringly stupid way to use these funds. Nobody held a gun to their heads for these mortgages. Hell, if they made less than 6 payments, they were not even in the place long enough for the ARM to come due. Why in the hell are we using taxpayer dollars, mortgage payer dollars, to payoff people that made a bad personal economic decision? Why are we rewarding the exact opposite of who should be being rewarded, the people that make their payments on time, pay their taxes, etc … This is all assbackwards.

    JD (c6800b)

  12. And Fannie Mae is now loosening credit requirements for refi’s again. What could go wrong??

    Bailout or no, I would take my money out of any bank that’s questionable, like B of A and Wamu. Punish the idiots. The bailout is bound to fail. I went to a bank today that *gasp* manages its own loans and never securitized any of them! They have the best default record in the business, no surprise.

    Patricia (89cb84)

  13. Michael “Mish” Shedlock speaks the truth the Obama Administration and the Fed are afraid to speak:

    When it comes to lending, it is imperative for Congress and the US public to understand that it was irresponsible lending that created this mess so irresponsible lending cannot possibly be the cure. That is a heart to heart talk Obama needs to make. Sadly, neither Obama nor Geithner, nor most in Congress understands basic economics.

    What I fear most is a nationalization of banks with Barney Frank, Nancy Pelosi and the other clowns in Congress planning to force more those banks into continued policies of irresponsible lending just to get “credit unfrozen”. Credit is frozen for a reason: It makes little sense to lend.

    The only cure is time and price. Home prices need to fall to affordability levels that make sense, and a writeoff of the malinvestments of the last 10 years needs to happen before there can be a sustained recovery.

    Bradley J. Fikes, C. O.R., who wants DRJ back! (0ea407)

  14. Bradley – The good news is that if you click on the link Patterico provided and then click through to the Countrywide site and follow it to the homeowner assistance part on the right, you’ll see that they are partnered up with folks like ACORN, NACA and other thugs nationwide to actively work our way out of these troubled times. It’s interesting reading, especially if you go to the partner links.

    daleyrocks (5d22c0)

  15. daleyrocks,
    Your “good news” almost made me barf my Charles Shaw white zin!

    Speaking of which, have you heard of one wag’s suggestion to rename TARP?: Bad Assets Relief Fund.

    Bradley J. Fikes, C. O.R., who wants DRJ back! (0ea407)

  16. This is nuts, it should be the other way around.

    Joe (17aeff)

  17. WTF.

    I mean, really.

    Didn’t we already have a revolution once over taxation issues that didn’t even address egregiously stupid crap like this?

    EW1(SG) (e27928)

  18. See what happens when you close debtor’s prisons!

    /snark

    Rob Crawford (04f50f)

  19. #9, Daley, lots of folks took the Mortgage as an investment and when the property value went down they simply returned the keys.

    Poor underwriting, yes, but not necessarily that they can’t pay but that the Mortgage process was used for speculation. Neither the bank nor the borrower cared a with.

    In that sense, I blame originating banks totally for this mess.

    Obama über alles!!!!! (48dd5e)

  20. #13, Bradley when credit gets frozen the baby gets thrown out with the bath water. Credit folks in banks are basically told stop and stick to a series of policies which lending themselves to only lending to people who don’t need the money.

    I can’t get a refi done because a Subordinated Lender simply wants his money back IN SPITE OF THE FACT the refi would benefit the Subordinated Lender via lower payments and faster 1st Lein Debt Amortization. Simply stupid on their part.

    I also tried to consolidate some unsecured lines with AMEX in order to get a LOWER CREDIT exposure and they refused saying the LOWER CREDIT limits where too high in spite of the businesses pristine credit history and my 800+ fico.

    As dumb as banks where lending money to those who can’t repay for speculation they are equally stupid not lending to folks who can pay for practical reasons.

    And bottom line is if a bank is not lending, it is essentially liquidating itself.

    Obama über alles!!!!! (48dd5e)

  21. But it is all Bush’s fault…

    “A Republican party that added more than $30 trillion to the future debt in a time of boom has no credible answer but raw partisanship for opposing $800 billion in the swiftest downturn in employment since the Great Depression. That’s the bottom line.”

    Andrew “The Conservative Soul” Sullivan.

    What 30 Trillion dollars is Sullivan talking about? Where did he pull that number from? Id did not care for increases of spendging under Bush and agree the GOP should have done more, but I must have missed the 30 trillion in future debt.

    Joe (17aeff)

  22. I’ve seen refi-frauds where lenders have gotten taken with borrowers making fewer than seven payments, but fail to see what’s in it for a lender deliberately underwriting loans for a borrower not to be able to make that many payments.

    Comment by daleyrocks

    The entire mortgage industry the past decade has been mis-identified. Peter Drucker used to ask his consulting client, “What business are you in ?” Sometimes the answer was often not immediately obvious, even to the client. For one small example, auto dealers often made more money from warranty work than from selling cars. They had to realize that their service department was the income source, not sales.

    The banks and mortgage brokers who were writing these loans were making their money from loan origination fees. They got paid at close of escrow and the loan went, like a hot potato, to a series of downstream customers who took a fee and passed it on. The schmuck who ended up with the paper wasn’t a bank, or shouldn’t have been. The people who bought this paper were gamblers.

    Bank of America did not realize how bad the situation was. They bought Countrywide for the retail network they had. They thought the lending business would come back quickly. Bad idea.

    Mike K (2cf494)

  23. OT: Listening to Barack wax poetically about the marvels of the New Deal’s partnership with the Private Sector would be like Merkel marveling at the genius of invading Russia in WWII.

    I am beginning to think this man suffers from a delusional pathology as well as narcissism.

    Obama über alles!!!!! (48dd5e)

  24. It’s called compassion for the afflicted. You should try some of that.

    Emperor7 (0c8c2c)

  25. OuA – Low down payment loans on vacation homes and investment properties were some of the first loans to head south when the market turned. I agree. When the borrower doesn’t have any skin in the game and it’s not a primary residence, there’s not much as much ability to persuade them to hang in there.

    daleyrocks (5d22c0)

  26. Mike – The problem with underwriting loans you may not expect to make past six months is there may not have enough time to get them into pools and securitize them or get them off your books. You’re also practically asking the parties involved to rescind whatever the transaction is with respect to that loan when it finally closes and the loan defaults, whether it’s insurers, a pool servicer, Fannie, etc.

    daleyrocks (5d22c0)

  27. Comment by JD — 2/12/2009 @ 9:04 pm
    Welcome to “1984”!

    Comment by EW1(SG) — 2/12/2009 @ 10:59 pm
    Talk of revolution or rebellion (or even political demonstrations complete with appropriate, or not, props)
    is not on our host’s favored list of subjects.

    AD (1b89c0)

  28. It’s called compassion for the afflicted. You should try some of that.

    I have. I feel horribly for the lenders who only received six of the payments on the money they loaned out. Unless, of course, they expected that result. In which case they got what they deserved.

    Or are you saying we should feel compassion towards the people who took out a loan and couldn’t even make half a dozen payments on it? That’s a harder case to make.

    Especially since repaying $7.5 million will be passed along to either the shareholders in Bank of America, people with money deposited at Bank of America, employees of Bank of America, or increased costs for other borrowers.

    Rob Crawford (04f50f)

  29. Mike – The problem with underwriting loans you may not expect to make past six months is there may not have enough time to get them into pools and securitize them or get them off your books. You’re also practically asking the parties involved to rescind whatever the transaction is with respect to that loan when it finally closes and the loan defaults, whether it’s insurers, a pool servicer, Fannie, etc.

    These loans were sold less than 30 days after settlement. There were already committed to a pool before settlement based upon the type of loan. Generally the only out was a Early Payment Default where the lender had to buy the loan back if the homeowner didn’t make the first 3 mos of payments. So if 3 months were paid the loan stayed in the pool. The lenders stayed on top of these loans, calling homeowners daily to make sure 1st 3 mos were paid then the originating lender was done with the loan and made all their money.

    Beth (abd920)

  30. Mike – The problem with underwriting loans you may not expect to make past six months is there may not have enough time to get them into pools and securitize them or get them off your books. You’re also practically asking the parties involved to rescind whatever the transaction is with respect to that loan when it finally closes and the loan defaults, whether it’s insurers, a pool servicer, Fannie, etc.

    Comment by daleyrocks

    Beth nailed it. These people were playing games. The days of the bank lending you their money were over by 1995. I did a couple of blog posts on the whole thing a couple of months ago.

    I think we are headed to a lost decade like Japan and the left doesn’t see it. Look on the left wing blogs like Washington Monthly. They are still giggling about how they are going to crush the GOP. I suspect most of them don’t have any assets.

    Mike K (f89cb3)

  31. I suspect that in a few years they will find that they not only don’t have a pot to piss in, they also lack the requisite window to throw it out of also.

    AD (509427)

  32. Mike and Beth – If the customary EPD period is three months, that’s fine. I was under the impression that some of the larger lenders did not want to much around with purchasing individual or smaller lots of loans from brokers and wanted them to aggregate some volume before upstreaming them, which meant some seasoning. I also saw pool deals that weren’t filled unril well after the terms were set so I’m not on board 100%. I did, however, get to see the phenomenon Beth talked about of lenders staying on top of risky borrowers in those first few months. Shit, I saw many instances of the lender (who also happened to own the underlying property and was getting taken out at an inflated appraisal) actually funding those payments through borrowers in order to make sure he got taken out.

    daleyrocks (5d22c0)

  33. You know, Mike K., I was shocked when I was in Union Bank the other day and the investor guy told me that they never securitized their loans and t/4 had the lowest default rate around.

    Patricia (89cb84)


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