Skip to main content

View Diary: Can a Small California City Take on Wall Street - And Survive? (298 comments)

Comment Preferences

  •  Comments (0+ / 0-)

    The banks usually don't do the servicing either; that's contracted out to third parties.

    The issue here isn't the servicing fees (I'm sure that factors in) but how a lot of this stuff is still kept on the books of the funds that hold them.

    If the mortgage is "performing" (e.g., it's being paid), they can carry it at a higher value, even if the asset securing it is worth a lot less.  However, if the homeowner can't make the payments, its accounting treatment (and this is about accounting treatment, not market value) becomes more difficult.  In post-deregulation America, the solution is to conveniently fail to write the value down.  The "mortgage" is sliced and diced and repackaged so it's relatively hard to find out whatever happened to the original mortgage.  It's all through private equity funds and other deregulated entities, so there's nobody who has an asset with a value (the mortgage) and liabilities (the stuff they sliced the mortgage into, let alone an understanding of exactly what the resulting derivative is a claim on).

    If this were a normal banking scenario, either the bank or the company that securitized the loan would have the mortgage on their books; if it's nonperforming, they'd be glad to get it off their books at 50 or 60 cents on the dollar.  THe holders of the securitized mortgages, in this ideal world, wouldn't care, except to note that, over time, an issuer who did this well had a better return on their securities.

    But we're all just a bunch of left wing, radical...ummm....capitalist (DFH?  Liberal? Secular humanist?  I'm not sure these days exactly what the different right wing epithets mean) who believe that efficient, well run financial markets will price things efficiently.  This is at odds with the ideology of the elite in this country, where the concept of a "market price" is anathema, especially on a level playing field.  The goal isn't to reach a deal that takes care of both sides, but to make a moral statement about homeowners in Richmond.

Subscribe or Donate to support Daily Kos.

  • Recommended (160)
  • Community (83)
  • Baltimore (80)
  • Freddie Gray (59)
  • Bernie Sanders (58)
  • Civil Rights (51)
  • Elections (40)
  • Culture (36)
  • Hillary Clinton (33)
  • Media (33)
  • 2016 (29)
  • Racism (29)
  • Law (29)
  • Education (25)
  • Labor (25)
  • Environment (24)
  • Politics (23)
  • Republicans (23)
  • Barack Obama (21)
  • Police (19)
  • Click here for the mobile view of the site