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President Obama is set to announce a new mortgage plan where homeowners home values far below their mortgage principal balance will be allowed to re-finance at lower rates.

The GOOPERs, the media, the Wall Street Welfare Queens will rail against 'socialism'. Rick Santelli will scream that George Washington never would have tolerated such an action and will wax nostalgic about how Ronald Reagan never bailed anyone out.

The reality is this -- the plan is a nothing more than a backdoor bailout of Bank of America. Right now, BAC faces massive losses from mortgage 'put backs' -- Fannie/Freddie can demand payment from fraudulently  issued mortgages by Countrywide. That number totals in the tens of billions. Any mortgage that is re-financed now will have its 'put back' extinguished. And the new mortgage has no 'put back' provision.

This is yet another massive transfer of wealth from the taxpayer to the banks.

For the life of me, I can't understand why President Obama would sign off yet another bailout of the banks and get hit by the right.

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Comment Preferences

  •  what the fuck are you talking about? (5+ / 0-)

    people want to keep their houses and the President wants to help. What am I missing here?

  •  dont understand your point (8+ / 0-)

    This is more of a bailout of people than it is a bailout of the banks.   Quite frankly, I think the President has been on a little bit of a roll in terms thnking and acting a little more progressively...

    •  It's not that hard (5+ / 0-)

      1) Countrywide made a bunch of bad loans to people who couldn't afford them.

      2) Countrywide sold those loans to Fannie Mae/Freddie Mac

      3) Under the law the law, if some  i isn't dotted or some t not crossed on that sale agreement, Fannie Mae/Freddie Mac can return the mortgage back to Countrywide and ask Countrywide (now Bank of America) for their money back -- 100% no questions asked

      4) BAC then has enormous incentive to go the homeowner and try to negotiate the principal, not just the rate, lower.

      5) The number on (3) has been estimated anywhere from $20 billion to $300 billion that can be put back to Bank of America.

      6) The Obama plan extinguishes (destroys) any right that Fannie/Freddie have to put the mortgage back

      7) Bank of America dodges another bullet.

      •  here's your flaw:"BAC then has enormous incentive" (4+ / 0-)

        There is no such incentive--then, now, or in the future.

        When this is left in the bank's hands (even with incentives) as it was with HARM,  they obfusciate, delay, misinform, let deadlines pass and do what they can to screw the mortgage holder--all in the effort of not actually  refinancing these properties.

        They do not want to do it, and they will not do it.

        Let's see how this works.

        "We can have democracy in this country or we can have great concentrated wealth in the hands of a few, but we cannot have both." Justice Louis Brandeis

        by livjack on Mon Oct 24, 2011 at 06:50:41 AM PDT

        [ Parent ]

      •  You need to add this to the body of (1+ / 0-)
        Recommended by:
        triv33

        your diary.

         It helps explain it to the layman, and then you won't get insulting and ridiculus comments like this one:    

        what the fuck are you talking about?
        people want to keep their houses and the President wants to help. What am I missing here?

        If I answered the latter part of her missive the way I'd like to, I would probably get a time-out.

      •  B of A doesn't care. (3+ / 0-)
        Recommended by:
        Deep Texan, oneshot, Adam AZ

        They don't even have a small incentive let alone an enormous one and even then they just don't care.

        My house was worth more than when I bought it and they still didn't care.

        They cheated, lied, and did everything they could to take my house away. And they have done and are doing the same to many others.

        The only thing that gave them incentive was my getting lawyers and my congressman involved and playing the cancer card.

        I think President Obama is doing the right thing to help as many people as he can stay in their houses.

        Tracy B Ann - technically that is my signature.

        by ZenTrainer on Mon Oct 24, 2011 at 08:12:58 AM PDT

        [ Parent ]

  •  i'm inclined to side with barry s (2+ / 0-)
    Recommended by:
    ohmyheck, willie2011

    and i admit, i don't know all the facts or the law.

    what i do know? exactly how bad it's gotten for ordinary americans. and every EVERY thing since 2008 bailouts has undermined the 99%.

    not dismissing Ronald Reagan's fuck you to the American people, but these last years have been the result of people in washington making half-baked attempts to straighten out a mess they can't even truly conceptualize.

    because it's worse than you think, worse than they can conjure up... in short, i think they've in effect devalued paper money to just about worthless.

    so all those billions... what do they mean? what do they represent? the ability to produce stuff of value... and what have we ended up with? a world of toxic plastic. they have so weakened the ability of manufacturing by stealing all the profits and very little give back in infrastructure, R&D yadda yadda yadda. Really... right down to the damned dog food, it's all money for nothing but crap.

    i'm getting off track. I don't trust professional Rs or Ds. I don't care that Obama is a Democrat because he hasn't acted, championed policy, or led like one... at least the way we thought about Ds. Where is his voice against police state actions????? where ?????????? off track again.

    time for some other fucking thinking. imo. because the bottom line is we can not count on the boys and girls in washington. period.

  •  Not entirely accurate (2+ / 0-)
    Recommended by:
    Adam AZ, Deep Texan

    The government is dictating the terms of the new mortgages and at the same time telling the banks that they will take the risk of something going wrong with these loans - not exactly a bailout.  Certainly if these particular loans were inappropriate in the first place (which is not obvious as the loans being discussed are only ones where the homeowner is current and has income) then banks will have some liability extinguished - BUT! - if the loan modification allows the homeowner to stay current, then there is no loss for anyone to take.  The best case scenario is that the homeowner is better off and the governments guarantee never needs to be called upon - a big win.  Worst case, the home owner defaults on the new loan and the government is on the hook, which they likely would have been anyway (though as you say, they potentially might have had some recourse depending on the circumstances of that particular loan).

    •  that's the 3 card monte gambit (2+ / 0-)
      Recommended by:
      joanneleon, aliasalias

      they want you to look and pay not attention to the man behind the screen

      1) If the mortgage is put back to BAC, the taxpayer has no worries (other than the FDIC)

      2) If the mortgage can be put back, it should be put back -- the rule of law should be followed

      •  Evidence? (1+ / 0-)
        Recommended by:
        Deep Texan

        What makes you think these particular loans - again, loans that are current and where the borrower has income - can be put back?  It's central to your argument but you haven't established that it's true.

        •  So you walk away (0+ / 0-)

          from a valuable option without even looking at it. Even if the owner is current with a put back should be put back. The future risk is not for the taxpayer to bear.

          All the mortgages being re-financed will have those put backs extinguished -- and the taxpayer gets nothing.

          That is the way of Wall Street.

          •  Still (2+ / 0-)
            Recommended by:
            ZenTrainer, Deep Texan

            Again, you are just speculating.  "Without even looking at it" - where are you getting this from?

            The only facts we can agree on is that the loans are current and the borrower's can prove they have income.  And that this program will be extremely helpful to hundreds of thousands of people who are experiencing severe economic hardship.

            If you can show that these mortgages - which again are current and show no signs that I can see of having been inappropriate - then it would be interesting to debate the value of the putbacks to the country vs. the value to the country of refi'ing these loans.  But given what we know, it seems like a fair deal.  The fact that BAC isn't in pain doesn't mean the country isn't better off.

            •  And so we extinguish a B of A liabilty (1+ / 0-)
              Recommended by:
              aliasalias

              simply because the homeowner is current?  We don't look at each and every document in detail?  We just walk away?

              If we can put the mortgage back, the B of A will do everything in its power to renegotiate

              •  What liability? (0+ / 0-)

                Looks at every document?  So with no evidence at all you want to demand that all refinancing across the country be halted until you are satisfied that every existing loan, including all those that are current, are investigated?  Or is it just these particular mortgages that are suspect?

                Even though the refinancing extinguishes the old liability taxpayers have and instead puts them in the position of guaranteeing a loan that is more affordable?  Even thought the end borrowers are much better off which would have a stimulative effect on the economy?  All for the very slim chance (and I'm being generous - you have not indicated any reason to believe that these loans are in any way problematic) that you could find something to punish BofA for?

                •  If the loan was submitted by Countrywide (0+ / 0-)

                  there is probably means a priori you can assume that there are errors/fraud in the docs.

                  Extinguishing the loan takes the risk off the taxpayer -- risk for which the taxpayer gets nothing.

                  Borrowers would be much better off with principal reductions -- which the bank can grant but not Fannie/Freddie because of the GOOPers

                  Look at the price of B of A stock -- why do you think it so low -- because they aren't charging enough fees on debit cards?

                  •  Apologies if we are going in circles - 1 more try (1+ / 0-)
                    Recommended by:
                    oneshot

                    Principal reductions might be better for homeowners, but that wasn't the point of contention.  I never argued they weren't.  There's some added complexity in forcing that through, but that's a different conversation.

                    My point is simply that your entire argument for being against a program that would be helpful to homeowners is that it might let BofA off the hook on some liability that we have no evidence exists.  In fact, the only evidence we have - that being that the homeowners are current and have income - are indicators that the loans were appropriately made.  You are throwing around some very strong words - calling this a bailout, a massive transfer of wealth, etc.  I would suggest that you at least admit to the lack of evidence (or even evidence to the contrary).

                    I'm very familiar with how BofA's stock trades, and I don't see how the stock price's move backs up your argument.  You're welcome to explain, I'm actually a bit curious.

                    •  We will have to agree to disagree (1+ / 0-)
                      Recommended by:
                      aliasalias

                      1) Fannie/Freddie cannot make principal reductions because of the GOOPERs

                      2) Your view is that being current is evidence that the mortgage docs are in order. I think given the dollars spent by the taxpayer, we should review every doc and look for every possible loophole that will allow us to put the mortgage back -- regardless of the current payment status. One less mortgage on the books of F/F, is one less mortgage the taxpayers have to worry.

                      3) Banks have incentive to do principal modifications and don't care about the idiot GOOPERs and their galtian views.

            •  There are numerous instances of the note (1+ / 0-)
              Recommended by:
              aliasalias

              not being transferred properly to the entities that allegedly own them. These have been discovered in the bankruptcy and foreclosure process. However, it is extremely likely that none or almost none of the notes in the trust were transferred properly meaning even the ones where one is current on payments.

              What the banks are worried about is that underwater homeowners in states where homeowners receive their deed at closing (rather than deed-in-trust states) will strategically default on those notes. If those notes were not transferred properly or became legally separated from the mortgage along the way at best the holder of the note has an unsecured debt. If the homeowner were to file bankruptcy against that debt they could protect the house from the creditors under bankruptcy exemptions and stuff the bank for much of the outstanding debt.

              In all other cases, such as deed-in-trust states and where the notes were really transferred properly the banks are afraid of strategic defaults where the bank ends up with not only a loss that could be as much as 40 cents on the dollar but they also have yet another property to try and sell in the existing horrific real estate market.

              This is what the banks fear and the true purpose of the program is to create a new note and mortgage so as to cover up the prior bad acts (I expect the closing docs would include a quit claim) and prevent the homeowners from using any advantages they have in the process.

              Then there is the issue with non-recourse states. If you refinance a property in those states (or almost all of them) the new loan is full recourse. Whereas prior to the refinance the banks would be legally prohibited from obtaining a deficiency judgment after the refinance they can.

              The government has yet to act in the interests of the people with respect to the mortgage mess. They are still trying to cut a deal with the banks to immunize them from criminal and civil liability (with respect to the government) in the whole non-transfer of notes fiasco which is erroneously lumped in with robo-signing.

              If the government were really helping the people and the banks were taking even one penny in losses via the program they would be screaming about socialism to deadbeats. They aren't. That tells you that the banks are making out on all of these deals.

          •  The homeowners staying in their homes (0+ / 0-)

            are also taxpayers.

            What's more, foreclosures are lose-lose.  Banks have to write down principle, the market falls further (leading to more defaults and foreclosures), and people lose their homes.  

            The trouble with put backs is it cuts off one's face to spite the nose.  Are we better off brokering a deal with all parties and the taxpayer taking on some risk (of current, income-having borrowers -- decent risks), or paying more to bail out the bank when or if it collapses completely and threatens the entire financial system?

            "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

            by Loge on Mon Oct 24, 2011 at 09:19:58 AM PDT

            [ Parent ]

            •  Not sure what you mean (1+ / 0-)
              Recommended by:
              aliasalias

              1) The taxpayer had no risk to these loan until the AWOL drunk added them to the backs of the taxpayer.

              2) Banks, if they have skin in the game, will jump through hoops to avoid foreclosure

              3) they foreclose now because they risks/costs belong to Fannie/Freddie

              •  there might still otherwise have to be (0+ / 0-)

                writedowns, however.

                also, unless you have specific knowledge that Bush was drinking as President, i would like to think people can quit that without having it attached as a millstone for the rest of their lives.

                "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

                by Loge on Mon Oct 24, 2011 at 10:15:08 AM PDT

                [ Parent ]

  •  People need help. (1+ / 0-)
    Recommended by:
    Adam AZ

    Maybe the loans can be put back and maybe not.  But banks are going to fight it and draw it out as long as possible.  Meanwhile people will continue to lose their houses.  The people of this country that are suffering need to come first.  

    I would love to see the banks suffer and face the consequences of their actions.  However I am old enough to realize that in our system, the chances of that happening are virtually nothing.  Somehow they will manage to come out on top  - legal or not.  

    As the repubs have shown us.  Idealism is great for political gain, but non-effective for actually running the government.  This is a case where practicality and the need to help the citizens of this country should take priority over forcing banks to face consequences or their actions.

  •  Homeowners will have hundreds more each month (1+ / 0-)
    Recommended by:
    Adam AZ

    that otherwise would go to the banks. That is good for the economy and jobs.

    Put backs do not benefit the homeowners.

  •  If you think it is only the right that are pissed? (0+ / 0-)
    For the life of me, I can't understand why President Obama would sign off yet another bailout of the banks and get hit by the right.

    Go on down to your local Occupy and ask people from the left, the right and the middle if they are happy paying for welfare to these criminals.

    ePluribus Media
    Collaboration is contagious!

    by m16eib on Mon Oct 24, 2011 at 06:30:59 PM PDT

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