Comments on: Extreme Measures IV: Sheila Bair of the FDIC on Subprimes http://www.nakedcapitalism.com/2007/10/extreme-measures-iv-shiela-bair-of-fdic.html Mon, 23 Nov 2009 05:03:06 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Yves Smith http://www.nakedcapitalism.com/2007/10/extreme-measures-iv-shiela-bair-of-fdic.html#comment-26888 Yves Smith Mon, 24 Nov 2008 08:06:00 +0000 http://www.nakedcapitalism.com/2007/10/extreme-measures-iv-sheila-bair-of-the-fdic-on-subprimes/#comment-26888 I beg to differ. <br/><br/>First, the IndyMac mods have been tried on only 3,000-4,000 mortgages. way way too few and way way too early to reach ANY conclusions.<br/><br/>Second, and far more important, the mods the Feds are trying to force on the servicers are too shallow to do any good. You clearly have not read the details of the FDIC plan. Mortgage counselors (and they, unlike servicers, have a good feel for borrowers' ability to pay) have been telling me for 6 months (and recall the housing market is deteriorating all this time) that mods with no principal reduction will fail. And given how far the markets have fallen plus the cost of foreclosure, a principal reduction would be a win-win in theory, but in practice, it would often hit certain layers of a tranched deal worse than others.<br/><br/>The MBS do allow for mortgages to be bought out of the pools....at face value, which solves no borrower problems.<br/><br/>The FDIC is throwing a lot of energy behind a program that will yield very very little. Check back in a year and I guarantee the current Bair approach will have been abandoned for something that allows for more borrower relief. I beg to differ.

First, the IndyMac mods have been tried on only 3,000-4,000 mortgages. way way too few and way way too early to reach ANY conclusions.

Second, and far more important, the mods the Feds are trying to force on the servicers are too shallow to do any good. You clearly have not read the details of the FDIC plan. Mortgage counselors (and they, unlike servicers, have a good feel for borrowers’ ability to pay) have been telling me for 6 months (and recall the housing market is deteriorating all this time) that mods with no principal reduction will fail. And given how far the markets have fallen plus the cost of foreclosure, a principal reduction would be a win-win in theory, but in practice, it would often hit certain layers of a tranched deal worse than others.

The MBS do allow for mortgages to be bought out of the pools….at face value, which solves no borrower problems.

The FDIC is throwing a lot of energy behind a program that will yield very very little. Check back in a year and I guarantee the current Bair approach will have been abandoned for something that allows for more borrower relief.

]]> By: Anonymous http://www.nakedcapitalism.com/2007/10/extreme-measures-iv-shiela-bair-of-fdic.html#comment-26882 Anonymous Mon, 24 Nov 2008 07:21:00 +0000 http://www.nakedcapitalism.com/2007/10/extreme-measures-iv-sheila-bair-of-the-fdic-on-subprimes/#comment-26882 Okay, hindsight is 20/20 and it's not fair to comment on an article more than a year after it's written, but boy time sure did make the writer of this article look like an idiot. Okay, hindsight is 20/20 and it’s not fair to comment on an article more than a year after it’s written, but boy time sure did make the writer of this article look like an idiot.

]]> By: Kathryn http://www.nakedcapitalism.com/2007/10/extreme-measures-iv-shiela-bair-of-fdic.html#comment-23288 Kathryn Sun, 26 Oct 2008 20:59:00 +0000 http://www.nakedcapitalism.com/2007/10/extreme-measures-iv-sheila-bair-of-the-fdic-on-subprimes/#comment-23288 The reason that a Bair style bailout would be in the investors best interest (help the mortgagee stay and pay at a discounted rate) is that the alternative is a foreclosure sale for < 50% of valuation. The choice for the investor is not 100% payments or 100% foreclosure sale!<br/><br/>Just look at the foreclosure sale prices vs outstanding mortgage values. This would not be a government "forced" restatement of loans but an expedient ER triage staunching of bleeding compared to the foreclosure sales process which can take longer than a year. The reason that a Bair style bailout would be in the investors best interest (help the mortgagee stay and pay at a discounted rate) is that the alternative is a foreclosure sale for < 50% of valuation. The choice for the investor is not 100% payments or 100% foreclosure sale!

Just look at the foreclosure sale prices vs outstanding mortgage values. This would not be a government "forced" restatement of loans but an expedient ER triage staunching of bleeding compared to the foreclosure sales process which can take longer than a year.

]]> By: a http://www.nakedcapitalism.com/2007/10/extreme-measures-iv-shiela-bair-of-fdic.html#comment-990 a Fri, 05 Oct 2007 12:31:00 +0000 http://www.nakedcapitalism.com/2007/10/extreme-measures-iv-sheila-bair-of-the-fdic-on-subprimes/#comment-990 Reading over at Calculated Risk, it seems that most people are interpretting this proposal as one where the term stays the same. In other words, the borrower makes off like a bandit. That's pretty clearly a disaster for the lenders; getting 2% for 27 years is a lot different than getting 8%. That's going to make a lot of CDOs - the ones that are supposed to be getting this interest - nigh worthless. <br/><br/>Competence in government does matter; too bad Americans don't know that. Reading over at Calculated Risk, it seems that most people are interpretting this proposal as one where the term stays the same. In other words, the borrower makes off like a bandit. That’s pretty clearly a disaster for the lenders; getting 2% for 27 years is a lot different than getting 8%. That’s going to make a lot of CDOs – the ones that are supposed to be getting this interest – nigh worthless.

Competence in government does matter; too bad Americans don’t know that.

]]> By: Anonymous http://www.nakedcapitalism.com/2007/10/extreme-measures-iv-shiela-bair-of-fdic.html#comment-989 Anonymous Fri, 05 Oct 2007 09:21:00 +0000 http://www.nakedcapitalism.com/2007/10/extreme-measures-iv-sheila-bair-of-the-fdic-on-subprimes/#comment-989 Thanks for this info!<br/><br/><a HREF="http://www.professays.com" REL="nofollow">Mandy </a> Thanks for this info!

Mandy

]]> By: a http://www.nakedcapitalism.com/2007/10/extreme-measures-iv-shiela-bair-of-fdic.html#comment-987 a Fri, 05 Oct 2007 07:57:00 +0000 http://www.nakedcapitalism.com/2007/10/extreme-measures-iv-sheila-bair-of-the-fdic-on-subprimes/#comment-987 Don't understand this proposal either. The term of the loan would presumably explode should the monthly payment stay constant. A 30-year loan becomes a 50-year loan ?? <br/><br/>Let me guess, another Bush appointee... Don’t understand this proposal either. The term of the loan would presumably explode should the monthly payment stay constant. A 30-year loan becomes a 50-year loan ??

Let me guess, another Bush appointee…

]]> By: Anonymous http://www.nakedcapitalism.com/2007/10/extreme-measures-iv-shiela-bair-of-fdic.html#comment-986 Anonymous Fri, 05 Oct 2007 07:52:00 +0000 http://www.nakedcapitalism.com/2007/10/extreme-measures-iv-sheila-bair-of-the-fdic-on-subprimes/#comment-986 Mortgage sevicers are absolutely obliged the lender. A measure like this (even if it could be sorted out legally and ethically) would have a further chilling effect on the MBS/CDO iceberg. Not only would record defaults still be in view, but also subterranean returns going to middle men who can't service the debt they took on to purchase this garbage in the first place. And so on down the line. Ridiculous. Mortgage sevicers are absolutely obliged the lender. A measure like this (even if it could be sorted out legally and ethically) would have a further chilling effect on the MBS/CDO iceberg. Not only would record defaults still be in view, but also subterranean returns going to middle men who can’t service the debt they took on to purchase this garbage in the first place. And so on down the line. Ridiculous.

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