Economics and Politics: Gas Prices OBAMA RIGHT, CLINTON PANDERS

April 30, 2008

Gas prices are up for several reasons, the primary one being that the oil companies are squeezing every last penny of profit out before the inaugeration of the new, presumably Democratic President and a congress that is heavily weighted Democratic. 

  • THERE IS NO CLINTON PLAN OR PROPOSAL: Any Gas Tax “proposal” submitted by a Presidential candidate is straight pandering. Clinton is not President, there is no strong Democratic congress, and she has not neither the existing executive power nor any proposed bill on the floor of the Senate to reduce Gas Prices or Gas Taxes. 
  • Her suggestion that the plan would go into effect this summer is a blatant lie. 
  • Her suggestion that she would pay for it with a windfall profits tax on oil companies is also made to the voters of Indiana but not to the Senate where it could be considered. Of course it won’t pass as long as oil money continues to flow into the DC lobbyists and the Senators and Congressman they own. 
  • Obama’s answer is reality — no recourse without reforming Washington. Clinton’s view is that Indiana voters are more interested in sound bites than good sense. I hope she is wrong.
  • OBAMA SAYS IT IS NOT PRUDENT TO EVEN MENTION IT AND ALL ECONOMISTS AGREE WITH HIM: Even if Clinton’s Plan was eventually adopted, it would not take effect until over one year from now. It can’t take effect this summer because she isn’t President and she has proposed the tax holiday to the people but not to Congress where it could happen. 
  • What would happen is that one year from now, when Gas prices are $6 per gallon, and it costs $90 to fill your tank some ten times over the summer ($900!!), you might save $30 over the summer. AND that $30 would be taken out of the infrastructure money for repairing roads, bridges and tunnels, reducing employment. 
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Mortgage Meltdown: Cries for Help

April 30, 2008

Dear Sir/Madam,
 
I need an attorney who will fight for me, would you watch my short documentary video on the predatory lending that I fell victim to. If you can assist me in any area of the subject matter, I would greatly appreciate it time is very short for me.  
 
http://www.youtube.com/watch?v=NCsRr61qZJQ
 
Thanks in advance,
Ernie Paul Young
5573 Burr Hill Rd 
Rhoadesville, Va 22542
Cell 540-308-5894

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Mortgage Meltdown: New Regulation?

April 30, 2008

It is startling to see how little anyone knows about the mess we are in. First they don’t understand how bad this is going to get. Second they don’t understand how it happened because they don’t understand the financial system. And third, they have no clue how to prevent this from happening again. They don’t even realize that it has happened before several times right here in this country. 

The Country, the States and even the Counties and cities are more or less organized around the concept of bicameral legislatures, with checks and balances from the executive and judicial branches of government.

In all of those governmental entities there is not one person who has the knowledge or the authority or the accountability for the Mortgage Meltdown. It is impossible to imagine any smart regulation coming out of our current approach, so the inevitable conclusion is that the Mortgage Meltdown, the dot com meltdown, etc., will all happen again. The players will change but the game is the same.

So the first thing is to throw out all the proposals for future regulations or simply accept the fact that they won”t perform the basic purpose of government: to preserve society and protect the citizens from harm. 

Let’s get specific about the mortgage meltdown: it happenned because the private sector was able to create the equivalent of money using investor cash under false pretenses. It also happened because the participants were able to do it without perceiving any risks or negative consequences to themselves.

While you might say that the mortgage meltdown has had plenty of negative consequences to the financail institutions and intermediaries who participated in this fraud, the fact is that very few of the decision-makers have suffered any negative outcome. They walked away with bonuses and golden parachutes. People who worked for them suffered loss of jobs and themselves are in difficult financial straits, but not the real decision-makers (the movers and shakers).

If you want this scenario to stop (yes it is still happening) then three things must be true:

1. Full disclosure to government must be filed with a governmental agency on any program that involves a loan. Visa and MasterCard require every card issuance program to be individually approved. If they understand this simple concept, certainly government can learn something from the private sector. No lender should be able to act as a pure conduit for a loan without losing their status as a financial institution. If that is what they want to do, they are a broker not a lender. Every lender should have risk or they should not get paid a dime and the borrower should be told that the lender has no interest in the loan other than getting the borrower’s signature so that the lender can make a profit. If the fair market value of the house is stated incorrectly then all parties who had knowledge, despite plausible deniability, should be accountable for the difference.

2. The risk of imperfect disclosure and failure to perform in accordance with the fiduciary duties of a lender should be substantial and obvious and should be felt by the decision-makers. The same holds true for the seller of securitized products to investors. The simple test is this: if the borrower or investor knew what the lender or securities seller knew, would they have done the deal? If not, the full loss should fall on the companies and individuals who created these flawed programs.

3. Securitization of loans is not a good thing unless the investor fully understands the security he or she is buying. Allowing plausible deniability through reliance on rating agencies and insurers will always leave the investors holding an empty bag. The sellers, the rating agencies and the insurers should be required to file in the public record everything they know about the security and what they did to assure themselves that the facts were true. Later, if the deal falls apart, investors have defendants who are in clear violation of their duties and government has a clear case for prosecution.

 

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Mortgage Meltdown COntinues, Getting Worse

April 26, 2008


  • Somehow, the housing trouble has to at least flatten out. As long as that is going on, I think the pressure on the credit system is going to persist. It is kind of the leading indicator. It is where the trouble started. We have to underpin the consumer. That is why this is different. That is why this is like nothing we have had before.

Here is a man who has “seen it all” and who doesn’t like what he sees. Echoing our continuous please for creating an atmosphere of safety or “amnesty”, Bernstein sees a long haul without much lift unless we address the etnire spectrum of risk-taking. Confidence levels are so low that it hard to imagine, each month, that they could go lower. But they they keep sinking. Bernstein’s vision is one of reality, encouraging us to “snap out of it” and hope, if we get our act together without tripping over ideological differences. 

[Peter Bernstein]

One Guy Who Has Seen It All 
Doesn’t Like What He Sees Now

By E.S. BROWNING

April 26, 2008; Page B1

Peter Bernstein has witnessed just about every financial crisis of the past century.

As a boy, he watched his father, a money manager, navigate the Depression. As a financial manager, consultant and financial historian, he personally dealt with the recession of 1958, the bear markets of the 1970s, the 1987 crash, the savings-and-loan crisis of the late 1980s and the 2000-2002 bear market that followed the tech-stock bubble.

 

One of Peter Bernstein’s worries: ‘If China goes into a recession, God knows.’

Today’s trouble, the 89-year-old Mr. Bernstein says, is worse than he has seen since the Depression and threatens to roil markets into 2009 and beyond — longer than many people expect.

Mr. Bernstein, whose books include “Against the Gods: The Remarkable Story of Risk,” sees two culprits. One is the abuse of securitization — the trend for banks to hold fewer loans on their books and instead turn them into securities that were sold to other investors. The other is simply years of overborrowing by financial institutions and consumers alike.

Mr. Bernstein is hopeful that Federal Reserve intervention will prevent deflation and depression, but he says there is no guarantee.

Excerpts of a recent interview:

WSJ: Aside from securitization, what were the main causes of the problem?

Mr. Bernstein: You don’t get into a mess without too much borrowing. It was sparked primarily by the hedge funds, which were both unregulated by government and in many ways unregulated by their owners, who gave their managers a very broad set of marching orders. It was a real delusion. It was like [former New York Gov. Eliot] Spitzer: “I am doing something dangerous, but because of who I am, and how smart I am, it is not going to come back to haunt me.”

When you think about how all of this will work out in the long run, we are going to have an extremely risk-averse economy for a long time. The lesson has painfully been learned. That’s part of the problem going forward. You don’t have a high-growth exit from this, as you’ve had from other kinds of crises. We won’t have a powerful start, where the business cycle looks like a V. Here, the shape of the business cycle is like an L, where it goes down and doesn’t turn up. Or like a U, a flat U. The reason for that is that people aren’t going to get caught in this bind again. They will tell themselves, “I’m too smart to do that again.” And everyone else is going to be saying the same thing. It is, in fact, going to be a wonderful environment in which to take risk, because there aren’t going to be any excesses.

I’m a child of the Depression, and I am thinking about what the early years were like after World War II. It took a very long time to get the memory of the Depression out of business decisions, and certainly banking decisions. I think this is going to be the same. The Fed, too, is going to be less decisive and is going to feel that what it should do is less clear. One of the things that gave people a sense that they could afford to take risks was the sense that the central bankers more or less know what they are doing. But I don’t think we are going to feel that way going forward.

WSJ: You said that it could turn out that the smart thing to do is to take more risk, because everyone will be so risk-averse. What kinds of investments do you see as the big winners coming out of this?

Mr. Bernstein: You could say: the things that have been beaten down the most, which would be real estate. But I think real estate is going to be under a cloud for so long, and you can’t buy real estate with cash, it is too much money. I think you should go with the stock market. If things are better, the stock market will go up, and if things are awful, the stock market is going to be way down. But it is a place where, if you want to take risks, you’ve got a wide range of choices. This is why I own stocks [in addition to other investments], because I don’t know where the bottom is going to come, and I want to be exposed to every kind of possibility I can think of. And, at least, if you pick the stock market and you are wrong, you can change your mind. There is some liquidity there. Stocks never became cheap, but they didn’t become crazy, the way other assets were.

WSJ: How long do you think this whole process will take, before we get back to normal?

Mr. Bernstein: Longer than people think. The people who think we will have turned in 2009 are wrong. There has to be a respite along the way. Nothing goes in one direction forever. But it will take longer than people think. If that weren’t the case, I would be talking entirely differently. I would be saying, “What an opportunity we have got.” And I just can’t believe that the opportunity is here yet. There is too much to unwind.

WSJ: Can you explain the reason you think it will take a long time?

Mr. Bernstein: We have to go back to a moment when people have the courage to borrow and lenders have the courage to lend. Until credit is going up instead of down, you can’t have growth. Housing has got to be a very important part of that; it always has been. You have to reach a point where somebody says, “This house is cheap, I am going to buy it,” or where some businessman says, “This is a great opportunity for us to expand our business. Everything is available to us.”

If China goes into a recession, God knows. The Iraq war and the whole situation with terrorism, we really don’t know where that is going to come out. There are so many things that have got to get buttoned down before you say that the future looks good enough to take a risk.

WSJ: What kind of indications are you looking for as signs that the economy is about to get better and that the stock market and the investment world are about to turn the corner?

Mr. Bernstein: Somehow, the housing trouble has to at least flatten out. As long as that is going on, I think the pressure on the credit system is going to persist. It is kind of the leading indicator. It is where the trouble started. We have to underpin the consumer. That is why this is different. That is why this is like nothing we have had before.

Before, it was investment that made the V at the bottom of the business cycle. I don’t see real investment turning enough without some sign from the consumer side. Maybe the foreign countries will do it for us. That is a substitute for consumption here. Maybe. But I think that they won’t do enough for us, and maybe will be too infected by us to do it. But maybe growth in Asia will help us. The Asian thing is tremendously exciting.

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Posted in Consumer, civil procedure, currency, economics, economy, evictions, faith, foreclosures, movement, obama | 1 Comment »
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New Politics for Moral Constipation

April 23, 2008

I would give credit for the term “moral constipation” but I can’t remember where I heard it. I invite all who read this to give me the creator’s name so I can correct this blog and give him the attribution he deserves. 

It appears that we can all agree on one thing regardless of which candidate, party or ideology we subscribe to — The United States of America is on a path of moral bankruptcy, where ethical concerns and choices between right and wrong have been shoved off the table and instead convenience and self-aggrandizement is accepted by “we the people” with far more tolerance than is acceptable to me.

There is practically nothing so dear to me as my own opinion of my own intelligence. And yet I am dumfounded by the lack of outrage as corporate America and Government join hands in our pockets, in our lives, in our families, and in our minds. Protests erupt about the Olympic flame — but where is the outrage, the “I’m mad as hell and I won’t take it anymore” about the following:

  1. Diesel fuel is $4 per gallon here but across the border in Mexico it is $2. Anyone care?
  2. Real inflation for the Average American is in excess of 15% and climbing. Anyone interested?
  3. Exxon made $11 billion last quarter. The rest of us made less at the end of the month because the money went to Exxon. Is there any connection between that fact and the Presence of an Oil man in the White House/ How about a vice President that headed up the very company that profited the most from the Iraq war? Is this so boring that MSM should be ignoring it just because nobody seems to want to anything about it?
  4. By 2009, 1 person in 10 will be on food stamps in the United States. Shouldn’t that be interesting to both sides of the “Aisle?”
  5. The average person in the United States is in debt on credit cards and other consumer and real estate loans in an amount that they can never repay, whereas no other modern country has that problem. Why?
  6. Interest on debt accounts for more expenditure by government and individuals than anything else in the United States. Trillions of dollars of transfered wealth from those who now can’t eat to those who don’t know what to do with the money. What is being done about interests rates that guarantee non-payment and assure financial enslavement? (By the way medical care is second is now touted to be the “employer of last resort”).
  7. Houses were appraised at $500,000 and within days were revealed to have values of less than 70% of that. People were prompted, tricked and coerced into signing mortgage documents they didn’t understand, in violation of law (not that anyone has been prosecuted), and now the borrowers are blamed for a scheme they still don’t understand. Now millions of American citizens are or will be broke, homeless and jobless. We know who did it and how it happened but MSM doesn’t care about that.
  8. All of MSM (Main Street Media) is now controlled by a handful of people who let us hear only the things they want us to hear and only in the ways they want us to hear it. If you want news, go to the Internet, if you want infotainment watch TV or listen to radio. 
  9. How many flag draped coffins can be hidden from view to keep the Iraq war “sanitary” and keep the public distanced from the gruesome reality of war, death, disfigurement, famine, disease and moral decrepitude? And why is MSM going along with  the ban on pictures of coffins? Isn’t the death of young loved members of families who made the ultimate sacrifice worth reporting?
  10. How many veterans need to be homeless and wandering through the streets with head injuries before we think to ourselves “you know, there is something not quite right about this.”
  11. We have outsourced the most sensitive manufacturing of top secret defense components to China which just happens to be the only real military threat to our national security. And we have financed their military expansion by encouraging their economic growth to the point where they now have a  stranglehold on our country — they own most of our debt, they manufacture most of our goods, they process most of our food, and they are the most prolific source of spying in the United States. Thus whatever they don’t get legally, they get illegally. 
  12. MSM (main Street Media) has virtually eliminated their staff of reporters, because they get everything off the newswires and they make up the rest. Most of the time spent on “news” channels consists of opinions about gossip. Interesting, perhaps, but useless for those of us who would like to evaluate our options on voting on issues and candidates.
  13. It is illegal to counterfeit money unless you are a foreign country (North Korea for example) or you are a Wall Street investment banking firm that creates money supply by calling them “derivatives, collateralized debt obligations” and such. Between North Korea’s supernote and and the $500 trillion (yes with a “T”) in derivatives, credit swaps etc. out there it can be no surprise that no government can control the effects on world monetary supply —- that has been outsourced to the private sector as well. 
  14. MSM (Main Street Media) now presents us with pretty faces, some nice looking legs, a tempting bust line, and a teleprompter written by people who have not researched the validity of the reports in 10 years.
  15. Prescription medications are “so dangerous” that you can’t get them without seeing a doctor, but they are advertised directly to consumers. Is this what we want our children to hear and see? You can get a Bud Lite or a Absolute martini without a doctor’s prescription and drink all you want. It’s only when you kill or main people with your driving or other physical abuse that you are held accountable. 
  16. MSM (Main Stream Media) provides us with pundits and moderators who are undereducated, and inculcated with the sole core value of saying something that will increase the ratings and thus revenues of the media in which their comments appear. 
  17. Prescription medications cost $20 per pill here and as little as $0.50 in other countries easily accessible from the U.S.
  18. The total expenditures for medical care, drugs, products and associated services is around 2-3 times the amount spent by any other country or group of countries. The average U.S. Citizen is in constant danger of dying for lack of medical care because he/she is probably not covered entirely for the medical event, because he/she was never given a preventative regimen that is regularly followed in other countries, or because they are simply barred from access to medical system. 
  19. Despite the amount we spend per person, we get less care, and suffer from shorter longevity, higher infant mortality, shorter height, than at least a dozen other countries and sometimes as high as 40 other countries depending upon which metric you are interested in. To say we lost our “lead” is not the point. 
  20. The average person educated in the U.S. has slipped from 1st in world ranking to around 20th. Does that bother anyone?
  21. Bullying has spread through every school, public and private and is spreading into the marketplace. Hello? Anyone there?
  22. We have lost our way. We worship money in all its forms more than we worship God. Every day we perform acts that involve our worship, use and belief in money. Most of us spend at best one day per week for a couple hours worshipping God.
  23. MSM (Main Street Media) thrives on conflict over minutia (bullets in Bosnia, a flag pin probably made with lead in China, and statements of “associates” that are made into controversial “positions”) rather than actual issues and characteristics about the candidates themselves. We allow this by talking about that the pundits tell us to talk about. And what we talk about causes us to vote against our own interests.  
  24. When we tried importing from China and India the prescription drugs at a fraction of the cost that the drug companies were charging us, the government stepped in and said it was unsafe and  could result in tainted drugs. Now the drug companies have eliminated American jobs and outsourced the manufacture of the drugs to where? — India and China — and we have what — tainted, deadly drugs of dubious value to begin with and with side effects that include anal leakage and death. 
  25. How many times do we need to hear that pharmaceutical companies spend $5,000 on every man or woman doctor in the U.S. to push their stuff before we make THAT an issue?
  26. The war on drugs is making a fortune for people on both sides of the law, including the privatization of prisons and huge profits from private ownership of prisons, 75% of the inmates of which are there because of minor drug charges. There is no war on drug use and there is no war on drug supply. That is why we have drugs in America.
  27. How many times do we need to be disappointed in a politician, whom we knew was taking money from the medical- pharma complex, insurance companies, oil companies and credit card companies? What makes us vote for these people?
  28. Where is MSM “keeping them honest” by reporting discrepancies between promises and action?
  29. How many dogs need to die before we accept that they are the canary in the mine shaft and that the rest of us are just as much at risk because the tainted, poisoned food is all coming from the same place now?

I could go on, but I invite you to add your own comments to the list. And while you are at it, why not answer this question: What specifically are you going to say to your friends and family about these issues and how will you vote?

Posted in Bankruptcy, Clinton, Consumer, SEC, Securities Act of 1933, TAXATION, TILA, civil procedure, currency, economics, economy, evictions, faith, foreclosures, merchants, movement, obama, regulation | 2 Comments »
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Mortgage Meltdown: Central Bankers Miss Reality

April 21, 2008

 

EDITOR’S NOTE: As long as Central banks focus on the currency instead of the cause, these measures will at best delay an inevitable collapse. At the core of the problem is that unless people are kept in their homes, trillions of dollars of assets will fail. This is NOT an inevitable consequence. Plans abound to keep people in their homes, provide a foundation for recovery of these assets, and stabilize currency and the credit markets. It is much simpler than what they are making it. The only inevitable consequence is that if central bankers maintain their current course, the ripples will spread to doubt about the more than $500 trillion in Global derivative securities, many of which are solid.

 

CURRENCIES

Dollar under pressure after Bank of America misses

Pound pressured as Bank of England details swap plan

By William L. Watts, MarketWatch

Last update: 11:19 a.m. EDT April 21, 2008

SAN FRANCISCO (MarketWatch) — The dollar extended losses against most major counterparts Monday, after Bank of America Corp.’s earnings shortfall reminded investors that the U.S. financial sector is not out of the woods yet.

Bank of America Corp.’s first-quarter profit fell 77% as credit-loss provisions jumped $4.78 billion, driven by weakness in home-equity loans as well as credit extended to small businesses and home builders. See full story.

Hawkish comments from European Central Bank Governing Council member Axel Weber also supported the euro. Weber reportedly said inflation is likely to remain elevated and suggested the ECB might have to hike rates.

“Hawkish ECB rhetoric has underpinned the euro of late, though with the pairing so far unable to post new record highs, and the market seen as a bit overextended on the long side of the ledger currently, downside potential may be on the rise in the near term,” wrote currency analysts at Action Economics.

The dollar bought 103.25 yen, down from 103.47 yen in London earlier Monday, and the euro was at $1.5915, up from $1.5864. See real-time currency prices.

The dollar index, which tracks the greenback against a basket of six major currencies, was at 71.650, down 0.5%.

But the British pound sterling was under pressure itself, after the Bank of England announced details of a plan to let commercial banks use mortgage-backed securities as collateral for loans in an effort to thaw frozen credit markets. The pound was last trading at $1.9808, down from $1.9825 in London earlier Monday.

The pound fell prey to profit-taking, after the Bank of England announced details of a plan to let commercial banks use mortgage-backed securities as collateral for loans in an effort to thaw frozen credit markets.

If the effort manages to unclog credit markets it would presumably remove some of the impetus for aggressive cuts in response to tightening credit conditions, said Trevor Williams, chief economist at Lloyds TSB.

Commercial banks can tap the Bank of England over the next six months for around 50 billion pounds ($99.85 billion) in Treasury bills by swapping AAA-rated mortgage-backed securities. The swaps are set to last a year and can be renewed for up to three years. See full story.

Strategists said profit-taking pressures in the wake of the BOE announcement contributed to sterling’s softer tone.

The currency was buoyed late last week in anticipation of the program, briefly re-touching the $2 level against the greenback while sending the euro back below 80 pence after the single currency notched new all-time highs above that level.

Meanwhile, another house price index showed further weakness in the U.K. housing market. Rightmove said annual house price inflation, without seasonal adjustments, slowed to 1.3% in April from 5%, the slowest pace since July 2005.

The dollar was also buoyed late last week as equity markets gained ground after massive first-quarter losses by U.S. banking giants Citibank and Merrill Lynch weren’t any worse than expected, strategists said.

Still, the euro found support against the dollar after slipping into the low $1.57 area Friday, noted economists at KBC Bank. And the hawkish tone maintained by European Central Bank officials in the face of surging inflation pressures is likely to continue to make traders reluctant to press the dollar lower, they said, while a break above $1.60 will be difficult to achieve without help from weak economic data or another round of bad news from the credit markets. 

William L. Watts is a reporter for MarketWatch in London.


 

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HUD Top Ten Tips for Avoiding Foreclosure

April 21, 2008

HUD RELEASES TIPS FOR AVOIDING FORECLOSURE
Information aimed at helping more homeowners stay in their home

WASHINGTON - Today, the U.S. Department of Housing and Urban Development (HUD) released its top 10 tips for homeowners who are facing foreclosure.

“These guidelines will assist homeowners who are struggling to pay their mortgage and could be threatened with foreclosure,” said HUD Secretary Alphonso Jackson. “We want to encourage homeowners to take action and use every resource available so that they can get control of their finances and stay in their home.”

If you are unable to make your mortgage payment:

1. Don’t ignore the problem.

The further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your house.

2. Contact your lender as soon as you realize that you have a problem.

Lenders do not want your house. They have options to help borrowers through difficult financial times.

3. Open and respond to all mail from your lender.

The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notice of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court.

4. Know your mortgage rights.

Find your loan documents and read them so you know what your lender may do if you can’t make your payments. Learn about the foreclosure laws and timeframes in your state (as every state is different) by contacting the State Government Housing Office.

5. Understand foreclosure prevention options.

Valuable information about foreclosure prevention (also called loss mitigation) options can be found on the internet at www.fha.gov.

6. Contact a non-profit housing counselor.

The U.S. Department of Housing and Urban Development funds free or very low cost housing counseling nationwide. Housing counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender if you need this assistance.

7. Prioritize your spending.

After healthcare, keeping your house should be your first priority. Review your finances and see where you can cut spending in order to make your mortgage payment. Look for optional expenses-cable TV, memberships, entertainment-that you can eliminate. Delay payments on credit cards and other “unsecured” debt until you have paid your mortgage.

8. Use your assets.

Do you have assets-a second car, jewelry, a whole life insurance policy-that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income? Even if these efforts don’t significantly increase your available cash or your income, they demonstrate to your lender that you are willing to make sacrifices to keep your home.

9. Avoid foreclosure prevention companies.

Many for-profit companies will contact you promising to negotiate a loan work out with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three month’s mortgage payment) for information and services your lender or a HUD approved housing counselor will provide for free if you contact them. You don’t need to pay fees for foreclosure prevention help-use that money to pay the mortgage instead.

10. Don’t lose your house to foreclosure recovery scams!

If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a HUD approved housing counselor or trusted real estate professional.

To find out more about HUD-approved housing counseling agencies and their services, please visit www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm or call toll free (800) 569-4287 on weekdays between 9:00 a.m. and 5:00 p.m. Eastern Standard Time (6:00 a.m. to 2:00 p.m. Pacific Time). The same number can give you an automated referral to the three housing counseling agencies located closest to you.

-###-

HUD is the nation’s housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development, and enforces the nation’s fair housing laws. More information about HUD and its programs is available on the Internet at www.hud.gov and espanol.hud.gov.

 

 

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Mortgage Meltdown: Foreclosure Option — JINGLE MAIL (Send the keys back to lender)

April 21, 2008

 

Mortgage Meltdown: Foreclosure Option — JINGLE MAIL (Send the keys back to lender)

  • The issue is the stability of our economy, and our ability to recover the value of our homes, salvage the lifestyle of our neighborhoods and deal with the blame issues later through appropriate regulations.
  • Mortgage Lenders, with full authority from the investment bankers, mortgage aggregators, and investors, MUST take the lead and become proactive, even aggressive in heading off this disaster without regard to who is to blame. 

The plain fact is that if they don’t act NOW the losses will mount for everyone, more jobs will be lost (including at the top of these mortgage enterprises), more houses will go into inventory, more downward pressure on housing prices, more vacant, abandoned, vandalized houses. 

*****************************************************************************************************************************************

  • It is an obvious option that costs virtually nothing and with the number of people losing their homes skyrocketing, the stigma is virtually gone. You have a $3,000 per month mortgage payment on a house that is currently worth, at best, $200,000 less than the first mortgage and home equity line you used to buy it. The likelihood of full recovery of the price is far outweighed by the interest you’ll pay waiting for prices to recover. 
  • So you stop paying the mortgage and with a little finesse on the system, you get to stay, payment-free for 6-12 months. If you use the strategies in this blog site you might stay for as much as 12-24 months without payments except utilities. 
  • When your options run out, you mail the keys (Jingle Mail) to the mortgage lender, take the hit on your credit score, and pocket the unpaid payments by as much as $72,000. 
  • Whether you could afford to keep making payments or not, the option is there and it is looking more and more attractive to you.
  • The outlook for neighborhoods where zero down financing, low down payment financing, negative amortization, ARMs etc., are headed for ghost town status. Surrounding houses, neighborhoods and cities are already suffering from declining tax revenues while costs are rising, pulling down the their credit ratings and the attractiveness of living in a particular County, City or development. The effect on States’ economies is thus far incalculable although we know it is negative. 
  • The mortgage lenders are looking to stop you from doing this using punitive measures like not allowing you to apply to government-backed agencies for mortgages for five years. 
  • The real answer is, as we have repeatedly stated in these posts, amnesty for everyone. As McCain’s economic adviser has assertively stated, the object here is simple — keep people in their homes at all costs. 
  • People in homes who have played by the rules will suffer as much or more than everyone else. The “fairness” of helping people who “should have known better” is not at issue here. 

 

More homeowners mailing keys to lenders instead of payments

Owing more than home is worth, recent buyers walk away

Catherine Reagor
The Arizona Republic
Apr. 21, 2008 12:00 AM

Instead of mailing in their monthly mortgage payment, a growing number of homeowners are sending lenders their keys.

 

As housing prices fall and rates on some mortgage loans rise, more homeowners are walking away from their homes, according to housing-market watchers.

 

These typically are people who can afford their mortgage but don’t want to pay on a loan that is more than their house is worth. They’ll live with the stigma or credit ding from a foreclosure just to get out from under their loan.

 

The growing trend, called “jingle mail,” is pushing up foreclosures and alarming market watchers, particularly in metropolitan Phoenix, where home prices have dropped 18 percent in the past year.

 

Foreclosures across metropolitan Phoenix climbed to a record 2,365 in March, according to the real-estate data firm Information Market. That is more than quadruple the number from a year ago.

 

Joan Shaffer is turning in the keys of the north Phoenix Tatum Ranch home she bought with her daughter in late 2005. They put nothing down on the home, took out a loan that let them pay less than they owed each month and now their loan is $200,000 more than the house is worth.

 

“We paid $585,000. It was the peak of the market, but no one told us,” said Shaffer, a real-estate agent from Colorado. “We would probably have to spend the next 20 years trying to get right on the mortgage. That’s crazy.”

 

Assessing trend

The mortgage industry is struggling to estimate how many homes are going into foreclosure because of people who don’t want to pay, rather than because of people who can’t afford to pay. 

 

Industry estimates and anecdotes suggest the figure is climbing in the Valley because so many people who bought during the peak are now upside down in their mortgages.

 

Real-estate agents are hearing it more often from people who can’t sell. Mortgage lenders are reporting getting more jingle mail, and now there are businesses advising homeowners how to walk away. 


“Even if someone put 5 to 10 percent down but bought in the Valley during ‘05 or ‘06, they are likely upside down now,” said Brett Barry of the north Phoenix office of Realty Executives. “I don’t advise people to walk away, but how do you convince someone to keep paying when they owe so much more than their home is worth? They can’t sell, and their lender isn’t going to forgive $100,000 in principal. It’s not good.” 

 

Investors started the walk-away trend, but it has spread to the typical homeowner. 

 

Housing analyst RL Brown said he is hearing about young families who bought during the peak and are now walking away from houses as the interest rates on their loans reset and payments increase. 

 

“Instead of calling it a foreclosure, these couples are saying, ‘We’re giving it back to the bank,’ and then moving a couple of blocks away and renting a home for half their mortgage payment,” he said. “These people are finding it easier to walk away.”

 

Businesses are popping up that guide homeowners on the best way to walk away from their mortgage. One firm, Youwalkaway.com, tells unhappy homeowners to ask themselves these questions: Are you stressed out about your mortgage payments? Do you have little or no equity in your home? What if you could live payment-free for up to eight months and walk away without owing a penny?

 

Avoiding bankruptcy

For the first time, homeowners seem to be more willing to let their houses go into foreclosure to stave off bankruptcy.

 

In the past, homeowners would file for bankruptcy to keep their houses. Now, mortgage delinquencies have climbed faster and higher than late payments on credit-card and car loans. Economists say that is a sign people are more concerned about their credit than their home.

 

“Homes have gone from being a place to live to a disposable investment for some,” said Jay Butler, director of realty studies at Arizona State University’s Polytechnic campus. “It used to be that paying the mortgage was the top priority. Now, it’s keeping the credit cards.”

 

He said one reason is some homeowners think that with all the foreclosures, there will be programs to help them when they buy again. 

 

It usually takes three years of perfect credit payments after a bankruptcy before someone’s credit score is high enough to buy a home. Recently, people could buy a home again two years after a foreclosure.

 

Also, the Mortgage Forgiveness Debt Relief Act of 2007 took some of the penalty away from a homeowner filing for foreclosure. Before the act, if a bank sold a foreclosed home for less than the mortgage and forgave the rest of the debt, the borrower had to pay tax on the difference. Now, the Internal Revenue Service is forgiving the difference.

 

Lenders push back

 

But now as the number of people walking away is climbing, lenders are working on ways to punish those homeowners.

 

Earlier this week, mortgage giant Fannie Mae said homeowners who stop making payments and then send their keys back to lenders months later will not be able to get another mortgage through that firm for five years. Freddie Mac also is going after walk-away borrowers, mortgage lenders say.

 

Neighbors of the people who walk way are already being punished by lower home values due to the foreclosure. 

 

“People should hang in there as long as they can, ask for help and try to work with their lender,” said Margie O’Campo De Castillo of Arizona Dream Realty. “Foreclosures are dragging down our housing market, and unnecessary foreclosures are selfish and unfair to the homeowners struggling to pay.”

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LEGAL STANDING IN FORECLOSURE DEFENSE: A POWERFUL WEAPON FOR THE BORROWER

April 20, 2008

TRANSFERS OF “OWNERSHIP” OF DEBT OBLIGATIONS GIVES RISE TO THE LEGAL ISSUE OF STANDING IN STATE COURT, BANKRUPTCY COURT IN FORECLOSURES AND EVICTIONS AND OTHER ACTIONS RELATING TO THE MORTGAGE MELTDOWN.

This is where the shell game played by lenders starts being used in your favor.

Nail them with their own behavior.

More and more Federal, Bankruptcy, and state courts are adopting this view for both legal reasons and practical reasons — the system can’t absorb this number of foreclosures and bankruptcies, and the communities can’t afford to enforce use restrictions where houses are abandoned.

 

  • As to pursuing the foreclosure defense and counterclaim market, it demonstrates the confusion created by the scheme of the lenders, the intentional obfuscation of the real parties and the very real possibility that they simply don’t have or won’t be able to find the paperwork to back up their claims as to who is in fact the real party in interest. 
  • The volume was so huge that it is doubtful that these predators all crossed their t’s. This leads to the very real possibility that is arising in courts across the land (Federal and State) that their failure to come up with the real holder of the note and mortgage, once the litigation has commenced, might lead a dismissal with prejudice or a dismissal without prejudice. 
  • In either case, it is a finding that the party to whom the borrower was directing their payments is not the proper party.
  • This leads to the possibility that the borrower could, with or without filing a lawsuit, either stop paying mortgage payments altogether (but not stop insurance or tax payments) or can put the money in some interest bearing escrow account, waiting an appropriate period of time for the lender to either show up or not. 
  • And the amount put in escrow can be in accordance with the allegations of the borrower:
  1.  that they were defrauded and 
  2. that the mortgage, note, payments should be reduced to reflect 
  • a reduction in the total mortgage obligation due to the artificially and fraudulently inflated appearance of fair market value (benefit of the bargain), 
  • the down payment and points and closing fees and interest paid to date, 
  • costs of closing, and 
  • money invested in a house that is not worth what the borrower thought who relied upon his fiduciaries — the lender, the underwriter, the auditor for the lender, the appraiser, the title agent, the mortgage broker, etc. 

 

 

The Real Party in Interest and Motions for Relief From the Automatic Stay

By Brett Weiss, Maryland Bankruptcy Attorney on Apr 20, 2008 in Lawyer to Lawyer, Chapter 12 Bankruptcy, Chapter 11 Bankruptcy, Maryland, Foreclosure Issues, Chapter 13 Bankruptcy,Automatic Stay, Bankruptcy Cases of Interest, Chapter 7 Bankruptcy

A recent bench decision by Maryland Bankruptcy Court Judge Thomas J. Catliota was an important ruling regarding the real party in interest requirement of FRBP 7017.

Americredit Financial Services, Inc., an auto loan servicer, filed a MLS in its own name. Its name appears on the car title as the sole lienholder, it represented that it “has a validly perfected, first priority purchase money security interest in the Collateral…” and it was listed as a secured creditor in both the Schedules and the Chapter 13 Plan.

A response was filed to the MLS arguing that the car loan had been sold to a securitized trust, and that Americredit was therefore not the real party in interest. Americredit responded by agreeing that the note had been transferred to the securitized trust, but argued that the debtor’s failure to object to the POC waived this issue, and that its servicing agreement with the trust allowed it to file the MLS in its own name.

Judge Catliota ruled that since the loan was not owned by Americredit, it needed to file the MLS in the name of the actual noteholder, and denied the MLS (but allowed Americredit to amend to reflect the true owner of the loan).

With the vast majority of loans (home, car, computer, etc.) being securitized, this is an important defense to MLSs, particularly since in a number of these cases, the securitized trust is simply unable to produce the original note or demonstrate that the title records appropriately reflect that it is the proper secured party.

Posted in Consumer, civil procedure, currency, economics, economy, evictions, faith, foreclosures, movement, obama | 1 Comment »
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Capital Gains TAX MYTH

April 20, 2008

Anyone who saw the debate heard the question from Charlie Gibson: If revenue goes up when capital gains taxes are reduced, why would you want to increase it? The answer is that tax revenues don’t go up when the government lowers taxes, as any child with an allowance could tell you. Charlie needs to get his facts straight. Anyone who thinks like that is comparing taxes to a red light sale at K-Mart. Tax revenues don’t go up because taxes are reduced. Tax Revenues go down when tax rates are reduced.

The increase or decrease in taxes is related not to the rate of the tax, but rather the rate of activity that is being taxed. You could lower the capital gains taxes to 1% and there would be zero revenue if the market was down or very few people were trading securities.

And business’ demand for capital from the capital markets does not exist when the economy is in the toilet and there is nothing to produce because there is nobody to buy anything. The cost of capital investment only begins with the purchase; then there is maintenance, insurance, training, increased labor costs all without producing one dime of revenue.

But here is why Charlie thought there was a correlation.

  • Capital gains revenues go up when the market moves higher and volume of transactions goes up. When people sell stock at a profit they make money and that is taxed. When they sell stock and lose money, they get to write that off as a deduction and they pay less tax. The tax rate has NOTHING to do with it. If lots of people sell lots of stock at a profit the revenues from capital gains tax will rise. Just like selling more potatoes AND when you are able to increase your prices.
  • When the stock market is going up, stock prices are going up, so when you sell your position in a stock, you realize a capital gain. That capital gain has been variously taxed at 28%, 20% and 15%.
  • When the tax revenue is up, and more people are trading (in an up market everyone thinks they are a genius) it is easier for government to reduce that tax and look good without feeling any pain because even after the reduction, the revenue is still up. It looks good on paper, but a tax cut even here reduces revenue from what it would have been. 
  • If the market is relatively flat, reducing taxes reduces revenues and increasing taxes increases revenues. 
  • If the market is going down, people tend to trade less, and when  they do they are taking losses which results in a capital loss which reduces tax revenues. 
  • When the market is down, taxes on capital gains goes down. Reducing taxes will reduce tax revenue. Increasing taxes will increase revenue.

The two moderators in Philadelphia directing questions to Obama and Clinton, besides demonstrating an abysmal lack of good sense in the questions they asked, had not done their homework.

Lowering taxes on capital gains does not increase capital spending or tax revenues. Taking away money does not magically produce more money.

Tax credits (which directly take the money you would otherwise be paying Uncle Same and apply it to the purchase of capital equipment) does have some effect. But even that does not have price elasticity if the prospective buyer of capital equipment knows in advance they won’t be putting the equipment to work. 

Business buys capital equipment, and funds it out of their own earnings or savings, borrowing from their bank or going to the capital markets. They do it for one reason ONLY, to wit: because they know that they will be filling orders, increasing revenues and making more profits.

Business does NOT incur the cost of capital equipment or expansion of their labor force because of a reduction in taxes, a tax deduction, or a tax credit, UNLESS the tax consequence makes an otherwise good business decision better and perhaps more timely. 

Posted in Consumer, TAXATION, economics, economy, movement, obama | No Comments »
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