By Anthony M. Freed
“Paulson announces coordinated effort to reduce mortgage foreclosures” read the headline way back on October 10, 2007, when Treasury Secretary Hank Paulson unveiled his first – and much less costly – plan to save the world by “suggesting” to lenders that they follow a series of provisions that would prevent the tsunami of foreclosures that had began in earnest in 2006.
The official name of the program was Hope Now. What? You have never heard of it before? Well that is because the program was introduced with a complete absence of alacrity, especially in light of this weeks bombshell announcement that we are on the hook for from anywhere between $700 Billion (Fed’s guess) and $6 Trillion (outside estimates with many more factors).
The program is ridiculously simple to adhere to, and one would expect that if we were truly facing a global economic meltdown of a magnitude that we have never before imagined in the history of human kind, a few things about the program would have to be true:
One, that the program would be mandated and enforced with the kind of veracity that Paulson seems to want to display in his proposed execution of the Wall Street Bailout; Two, that the program would be fully funded regardless of cost; and Three, that every qualified homeowner (no flippers or investors) would have the opportunity to participate without fear of eviction or credit damage.
Sadly, but not surprisingly, HOPE NOW has none of those elements.
Now, based on the overly-simplified explanation that President Bush uneasily recited last night, laying out the timeline and the oncology of this crisis, it is clear that everyone involved was well aware of the domino effect already in play long before Paulson’s October announcement. From the Horses Mouth:
Bush: First, how did our economy reach this point? Well, most economists agree that the problems we’re witnessing today developed over a long period of time. For more than a decade, a massive amount of money flowed into the United States from investors abroad because our country is an attractive and secure place to do business.
My Translation: The benefits of a strong economy had well articulated risks postulated by the nation’s leading economic thinkers.
Bush: This large influx of money to U.S. banks and financial institutions, along with low interest rates, made it easier for Americans to get credit. These developments allowed more families to borrow money for cars, and homes, and college tuition, some for the first time. They allowed more entrepreneurs to get loans to start new businesses and create jobs.
My Translation: There was so much money, and Greenspan made it so inexpensive to access, that lenders focus shifted to the fees they could collect on the loan transactions instead of long-term loan quality for their portfolios. This shift to sales led lenders to adopt the role of salespeople with quotas and bonus incentives instead of their being the traditional fiduciary agents with a moral and legal responsibility to protect and advise their clients that Americans had come to expect, and they persuaded people to max out everything. We did.
Bush: Unfortunately, there were also some serious negative consequences, particularly in the housing market. Easy credit, combined with the faulty assumption that home values would continue to rise, led to excesses and bad decisions.
My Translation: I don’t remember ever thinking that the insane double-digit increases in the value of my home every Quarter would last forever. I do remember the press extolling all the virtues of investing in a second home or investment property. I remember Home Depot and Lowes exploding, and hours of television programming being dedicated to home improvement, real estate investing and ultra-risky property flipping.
And I especially remember my Wells Fargo loan officer here in town spending an inordinate amount of time explaining why I should not put that 20% down payment on our new house, but instead should invest it through Wells. He set me up with a PMI account that gave me .25% off of my mortgage rate. He showed me, in great detail using multiple company-produced marketing materials, how I could take my $50K and invest it with Wells and I would receive even more of a discount on my rate.
If I had done so, like so many did, I would never have been able to refinance my mortgage from the ARM I was in, and I would have lost a lot of money in the stock market.
Bush: Many mortgage lenders approved loans for borrowers without carefully examining their ability to pay. Many borrowers took out loans larger than they could afford, assuming that they could sell or refinance their homes at a higher price later on.
My Translation: It was complete and ultimately the fault of Lenders and their Government Regulators. How would Joe and Sally Homebuyer know how much they can afford when it’s the Lender producing the numbers for them to review? Where would they get the idea that ARM loans could always be refinanced later on to Fixed Rates, home values would always go up? Even the so-called Prime Loans are Defaulting at record rates, so it sure as heck is not our faults.
Bush said it all right there. So why do we get punished again? A whole host of economists have come out against the plan, as well as Banking Industry Experts who maintain that the bailout is not necessary, and that it may in fact be quite harmful to the economy.
Maintaining the President’s simplified line of thinking, I can not escape the conclusion that we have been set up to take a massive fall in what will soon be the biggest hustle ever perpetrated by a Government against it’s People. Think about this:
The crisis was caused by mortgage defaults and foreclosures; a Limp-Wrested Program to prevent to massive failure Paulson and Bush are now telling us is immanent introduced in plenty of time to save us all, but there was no real profit in it for the lenders.
Even if every loan was modified and no one ever defaulted on a single mortgage, the banks would all still be facing steep losses because they themselves leveraged their assets to 100% or more, obviously following their own lame advice.
They built Houses and Condo’s like there was no tomorrow, and they bought way too many high priced Commercial Properties at the peak of the market. There is no possible way for them to ever recoup their investments – which have nothing to do with your or me whatsoever – and now they have figured out a way to Pass the Proverbial Buck on to us poor, hardworking taxpayers.
Now they are using the treat of an economic meltdown to cram this turkey down our throats, and it seems we are powerless to do anything about it. Who will save us? Barney? Dodd? Pelosi?
Trust me, they won’t. You need to save yourself.
(I received some complaints that my posts are long. I am a researcher by nature, so I thought five pages was short. These issues are too important not to be thorough, so if you are inclined to think my post is already long enough, this is a good place to stop. For those of you who want some more proof that we have been Grifted to Nth Degree, please read on. I have produced a summarized comparison between what was “asked” of the lenders in October 2007 as far as their own efforts to both help distressed borrowers and avert the Next Great Depression, and what Paulson and Bush are now “requiring” every American to do. Notice how well one plan would have worked out for taxpayers, and how badly the other will damage our economy, our Sovereignty, and our Constitution.)
American Home Mortgage Servicing (Insolvent)
Aurora Loan Services (Major Subprime)
Bank Of America (Now CW and Merrill)
Countrywide Home Loans (Bad Loan King)
Merrill Lynch / Wilshire Credit Corp. (Insolvent)
Citi Mortgage/Citi Residential (Subprime Unit)
EMC Mortgage / Bear Stearns (Both Insolvent)
First Horizon Home Loans (Nearly Insolvent)
GMAC / Homecomings (Nearly Insolvent)
gmacmortgage.com (Nearly Insolvent)
Home Loan Services, Inc. (First Franklin Loan Services)
HSBC Consumer (Major Writedowns)
HSBC Mortgage Services (Major Writedowns)
HSBC Mortgage Corporation (Major Writedowns)
IndyMac Federal Bank (Insolvent)
JP Morgan Chase Prime Loans (Major Writedowns)
JP Morgan Chase Non (Insolvent)
JP Morgan Chase Home Equity (Major Writedowns)
National City Mortgage (Major Writedowns)
Nationstar Mortgage (Major Subprime)
Saxon Mortgage / Morgan Stanley (Major Subprime)
SunTrust Mortgage (Major Writedowns Coming)
Washington Mutual (Nearly Insolvent)
Wells Fargo Home Mortgage (Major Writedowns)
Wells Fargo Financial 800-275-9254 (Major Subprime)
HOPE NOW “Guidelines”
1. Communication / Outreach Lenders are “asked” to contact borrowers at risk of default or foreclosure, Borrowers with subprime and ARM mortgages 120 days prior to reset. They are “asked” to set up hotlines, websites and conduct community outreach.
2. Reporting Lenders agree to track and report on performance.
The aforementioned guidelines are designed to attempt to ensure that no Homeowner loses the opportunity to keep his or her home, when the homeowner experiences financial hardship; the homeowner has applied for and submitted information necessary to be considered and potentially approved for a loss mitigation option; and the homeowner has the basic financial ability to afford his or her home.
These loss mitigation options offer balanced mortgage solutions that are affordable payment alternatives and in the best interest of the homeowner and the investor.
LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY TO PURCHASE MORTGAGE-RELATED ASSETS (the Paulson-Bush Blackmail Requirements for us)
Purchases of Mortgage-Related Assets: (a)The Secretary is authorized to purchase…on such terms and conditions as determined by the Secretary, (any kind of) assets from any financial. (b) Necessary Actions.–The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities…without limitation: (1) appointing such employees (2) entering into contracts (3) designating financial institutions as financial agents of the Government (4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and (5) issuing such …as may be needed…to define terms or carry out …this Act.