This WSJ article on deficiency lawsuits leaves me curiously unsympathetic.

I mean, the basic concept behind the practice is worrisome enough: banks foreclose on a property when it goes into default, discover that the foreclosure sale doesn’t recoup their losses, so they get a ‘deficiency judgment’ to try to get the rest from the original borrower.  So far, such is life – but where it gets worrisome is where they resell the judgments to third parties.

The increase in deficiency judgments has sparked a growing secondary market. Sophisticated investors are “ravenous for this debt and ramping up their purchases,” says Jeffrey Shachat, a managing director at Arca Capital Partners LLC, a Palo Alto, Calif., firm that finances distressed-debt deals. He says deficiency judgments will eventually be bundled into packages that resemble mortgage-backed securities.

Yes.  Indeed.  That particular practice is what got us into this mess in the first place.  Thanks, Barney Frank! Continue reading This WSJ article on deficiency lawsuits leaves me curiously unsympathetic.

28.4% of mortgages underwater.

Note that this article doesn’t quite get the original report right, sort-of kind-of thank goodness; it confuses mortgage holders with homeowners when reporting the percentage of underwater mortgages (mortgages where the holders owe more on a piece of real estate than the real estate is actually worth).  In other words, 28.4% of homeowners with mortgages have underwater ones, not 28.4% of all homes.

This should be only mildly comforting, given that being told that over 28% of mortgage holders might be better off just abandoning their loans* is not exactly good news.  It is, in fact, fairly frightening and disastrous news.  It means that a key feature of many Americans’ retirement strategies – the accumulation of real estate equity for later use – has been effectively gut-shot, and is now messily expiring in a ditch.  It means that our economic recovery is going to continue to be hobbled by a housing market that has not yet hit bottom.  It means that growing consumer confidence will still be constrained by what is a generally rotten and widespread structural problem.

But it’s not the absolute Armageddon promised by the Bloomberg headline.



Moe Lane (crosspost) Continue reading 28.4% of mortgages underwater.

White House to bailout underwater mortgages?

You know, sometimes Paul doesn’t want to be paid, if it means robbing Peter.

Today’s hot rumor comes from James Pethokoukis: essentially, the White House (which is becoming increasingly frantic about the way that their Super Magical Unicorn Genius economic plans  aren’t working) is scheming to partially bail out people with underwater mortgages.  I know, I know: the government was not supposed to acquire Fannie/Freddie just to completely rewrite their balance sheets, but the existing scheme to let the mortgage industry gradually repair itself was apparently… a Super Magical Unicorn Genius economic plan.  This new plan won’t do a thing for F/F’s value as companies, but then this wouldn’t be an economic strategy.  It’s pretty blatantly a political one.

The mortgage Hail Mary would be a last-gasp effort to prevent this from happening and to save the Obama agenda. The political calculation is that the number of grateful Americans would be greater than those offended that they — and their children and their grandchildren — would be paying for someone else’s mortgage woes.

You know, I happen to have an underwater mortgage: we bought our house at exactly the wrong moment in time. Do you know what we’re doing about it? WE’RE MAKING OUR MORTGAGE PAYMENTS, that’s what we’re doing about it. Because we sat down and worked out how much we could afford to spend beforehand, then we stuck to that number like glue.  In other words, I don’t need a handout to pay my bills, and I really don’t need to spend another insanely large sum of money (Hot Air thinks that it could reach 100 billion, which is a large sum of money, even today) that my kids are just going to have to repay later, after the President retires to the global cocktail circuit.  And I know that people are going to argue that the majority of Americans can be short-termed bribed in this fashion, but you know something?  I don’t think it’ll work.  Particularly when it comes to people who have kids.   Continue reading White House to bailout underwater mortgages?

Hi, federal government. Pay my mortgage, please.

Hey, is this not Freddie Mac’s strategy?

Freddie Mac is asking for $10.6 billion in additional federal aid after posting a big loss in the first three months of the year. It’s another sign that the taxpayer bill for stabilizing the housing market will keep mounting.

Asking the government to keep you afloat as an alternative to actually operate under sound fiscal principles, that is. Of course, I neither:

  • Hemorrhage money from every fiscal pore; nor
  • Own my very own Congressman (Hi, Barney Frank!)

…so I suspect that my request is going to go precisely nowhere. But that’s OK: this situation is an excellent motivator.

Moe Lane

Crossposted to RedState.