October 17, 2010
The Foreclosure Situation
Given the recent development on the foreclosure front here’s my 2 cents and a possible solution.
How can a trust with tens of thousands of individual loans in it dispute each one of those defaulted loans one by one in court? This isn’t going to happen. And it’s not because it’s too long and too costly – there are ways around that, but because trusts can’t prove that they own those mortgages, they don’t have the paperwork needed. To go forward with foreclosure en masse would mean some abrogation of the sacred contract. Also, if the house has several liens on it, as happens in most cases, the potential buyer, who’s hunting for a cheap foreclosed home can’t be 100% sure what exactly he’s buying. It can turn out that he’s going to be second in line, after the primary mortgage holder claims to own the property as these two unfortunate guys found out. I mean what reliable source or a database do you check to know what it is that you’re buying with a foreclosed home? I think foreclosure has a risk of becoming a four-letter word.
What it can mean is foreclosure market will be dead for a long time, because bargain hunters will be spooked by the legal uncertainty. In reality it would look like the whole country will be plagued by haunted houses that no one can sell, buy, move into, bulldoze to the ground and not even touch with a ten foot pole. Wouldn’t that signal that the new construction will be hot again? People have to live somewhere. Just a speculation on my part.
That’s just one of many problems. The other one is sloppy record keeping.
Even before the mortgage meltdown, the servicing industry “was plagued with problems,” such as servicers charging unauthorized or excessive fees and making false or unsubstantiated statements about how much borrowers owed, says David Vladeck, head of the bureau of consumer protection at the Federal Trade Commission, which has brought several recent cases against servicers.
I read a few articles in the past few days and to my horror I found out that no one is really insured from being foreclosed upon in this unceremonious manner, even if you’re current on your mortgage! That is because most of those small lenders that originated your loans are non-existent right now, those loans are long gone from their balance sheets into the trust without proper documentation being transferred into the hands of a new owner or lost altogether. In this case how do you prove that you paid all your mortgage bills on time? You have your records, sure, but they have theirs! Prove that your records are correct! These robo-signers are a sort of indiscriminate roulette that can pull your own mortgage out of some system purely by mistake and make you in default. “Because it says so on the computer screen” – you will be hearing when, puzzled, you call your mortgage servicer trying to clear the little misunderstanding. You will be speaking with some clueless person who will be immune to your logic and calls to reason, because I suspect they all are being trained to not understand questions for which there are no standard answers from the manual. What recourse do you really have in situation like this other than going to court?
The solution. With such clusterfuck in the foreclosure process and a high unemployment rate the solution begs for itself. Just like in early 2000s a bunch of no name lending companies popped up here and there I can see a huge market for foreclosure specialists. The business model would look like this: A small company gets a list of the prospective foreclosures from the trust or from the sponsoring bank and hires high-school drop outs for $10 an hour to phone the properties on the list. If somebody still lives there and pays mortgage or at least is working out a payment plan – those get dropped from the FC process. If no one answers the phone, the bank is given the green light to proceed with the FC. I mean this is a rough idea, perhaps those employees have to do visits to the property and follow some guidelines, etc. but you get the idea. Then they send the updated list back to the bank, which, in turn, proceeds with the wholesale robo-signed foreclosures. It’s a sort of quid pro quo: if banks want to speed up the process and bypass the paperwork requirement they have to pay to make sure that no current homeowners end up on the list. Isn’t that a reasonable requirement? This way we kill many birds with one stone: the FC proceeds at a reasonable speed (not as fast as it is right now, but not as slow as it would under the judicial review); a bunch of unemployed people get jobs (and maybe, as a positive side effect, even pay their own mortgages); politicians can move on something else, like fighting socialism – everybody’s happy. I think even Republicans can support something like this – after all it’s good for business.
September 15, 2010
Republican Primaries
So the nutjobs advanced in the Republican primaries in Delaware, Alaska, Nevada, Utah, Florida and Kentucky. Way to go, guys!
The Tea Party, the former pet of the Republican Party, that was never house broken and was purposely let loose around the house so as to bring about the disillusioned spectators who were looking for something new and exciting, has now become the master of the house. The GOP establishment was hoping to channel that massive energy that the unruly pet has generated into the wins by mainstream Republicans, but they got so carried away with their hatred of everything Democrat that instead of installing checks and strict discipline on the petulant and implacable beast they stoked and encouraged the clownish tricks. No denouncement or disapproval came from the establishment when the Tea Party candidates, running as Republicans, came up with such nonsense that in any other setting would be suitable for a crude comedy material. For example, Christine O’Donnell a winner of Delaware Republican primary yesterday believes that masturbation is the same as adultery. She also believes that her political opponents are stalking her and hiding in the bushes around her house at night. Sharron Angle, the GOP primary winner in Nevada believes that pregnant teenage girls can turn a “lemon into a lemonade” by staying pregnant, because, you see, this is “God’s plan” that we can’t interfere with. And I haven’t even gotten into Obama is a Kenyan-born Muslim Socialist line of thought.
I do think that some in the GOP establishment, those who respect facts and common sense (unfortunately I can’t even think of anyone other than a handful of conservative columnists with a conscience) do not really believe that Obama is a Muslim Socialist. But because it was convenient to let those insinuations spread for political reasons, they stood aside and quietly rubbed their hands as the nuts were doing the dirty job for them. The questionable, unsupported by facts message is being sent to the angry electorate by the useful idiots and they (the GOP establishment) get to keep their hands clean.
I just wonder if those conservatives who came of age in the Reagan era, reasonable fiscal conservatives, Wall Street guys who just want their tax cuts, AIPAC members, libertarians – are they really happy that this is what Republican Party has become? Can they honestly say that they’re proud to be associated with the know-nothings?
Just a thought.
August 29, 2010
Don’t be a sucker
“When fascism comes to America it will be wrapped in a flag and carrying a cross.”
Sinclair Lewis
I’ve known this quote for quite a while but I always resisted using it in my blog, because I’d like to avoid using loaded words. But since the Right has bend the rules of the game so much that they have no shame comparing Obama to a Nazi – I had to come down from my high horse and get into dirty combat. I’m a small time crook. My profits are modest, my aspirations – laughable. Every day I have to coexist with a number of suckers and sometimes on a bad day when my guard is down I become a sucker myself. My poker winnings are in direct proportion to the number of fish at the table. My trading profits depend on the herd mentality of other players. I used to be upset when someone makes a stupid play and beat me with one-outer at the poker table or when everyone is buying when in my opinion they should be selling, but I got over it. Instead I learned to embrace it. Now I congratulate and cheer and encourage stupid behavior among my fellow players. I make sure to say ‘Nice hand’ or ‘Well done’ to a sucker to promote incorrect play. Why fight it if you can take advantage of it?
July 29, 2010
Republicans Are Anti-Business
Karl Rove, Bush’s consigliere, has employed some rather brilliant (until the hubris and The Math took him down) strategies over the years, one of those being Attack Your Opponent Strengths strategy. Just look at what happened to John Kerry’s war record in 2004 – they turned a war hero into a coward, and what was left was just a flip-flopping blue blooded privileged New Englander – just the kind of opponent Republicans wanted.
Whenever I hear Republicans calling Democrats unpatriotic it has the same rovian flavor to it. Republicans own patriotism, Jesus and the flag. They also own pro-business image. For now.
Like this:
Trickle Down Economics
Here’s a gem from Stephen Colbert. This is how trickle down economics works.
July 19, 2010
Some predictions for the near and not so near future
When you pay premiums for your insurance and if and when the time comes for you to get the benefits, imagine how pissed off you would be if, instead of getting the benefits, you would receive a lecture from your insurance company on the evil of handouts, generously peppered with folksy “American entrepreneurial spirit/pull yourself by your shoelaces” stories. That policyholder is the American unemployed and that insurance company is nowadays Republicans. Nowadays, because Republicans had no problem approving unemployment insurance for those lazy bastards when Bush was in office.
The public, notoriously attentive to details and known for their long attention span, will be able to see through the spin, of course, and reward Obama at the expense of the GOP. But not the way you think. Here’s how. This year, the Republicans will take the House, yes, that is my prediction. They will do so because Obama is in office and things are still pretty bad economically. Of course, when the GOP takes over the House they’ll show us, Commies, how things need to be done! Frankly, I can’t wait. Market loves gridlock in Congress, because this way no harm is coming the Wall Street way (apart from the freshly passed Financial Regulation Bill that has already been priced in). In anticipation of Republican takeover this fall the market will rally (that is my second prediction). For the next 2 years the GOP will demonstrate their problem solving skills with breakthrough and revolutionary ideas of tax cuts and less regulation. We will hear a lot of talking heads and read a lot of editorials about a repeat of 1994 GOP takeover of Congress with no mention of what happened in 1996. Which leads me to believe that Obama actually wants GOP to win this fall, so as to win against them in 2012. It’s a win-win situation for him. In 2 years, even if there’s no gridlock in Congress, the recession will be over through a natural cycle and what would stop him from claiming a well-deserved credit?
Oh, here’s Obama with balls. I’m considering it as one of my new blog avatars.
June 14, 2010
Republicans for Regulation
It turns out Republicans don’t favor free markets at all. Only they could come up with a legislation like this one.
On Strategic Default
Basically, they are trying to punish borrowers who, while being deeply underwater, are defaulting strategically – that is stop paying mortgage while staying in the house and spend money on other things. Things like going out to the restaurants, shopping, investing money in their small businesses, etc. You know, the normal things that help the economy rebound and keep the Republicans happy. I must also add and this is important – that while doing it, home borrowers are not actually breaking any contractual obligations. Default is an option. It’s the ultimate free market at work, just like the founding fathers have prescribed. But Republicans are not happy.
Frankly, it’s hard for me to guess why they are upset, because here we have people making rational economic decisions, which leaves me with only one option – they are upset with immoral behavior. Which they in turn seek to legislate. I can not put it better that this University of Arizona law professor.
I wonder if Congress might consider a similar measure mandating that any corporation or bank that strategically defaults on a contractual obligation is not entitled to any tax breaks or other government assistance, including any future financial bailout. The point is, of course, that business and banks strategically default all the time when it is in their economic interest to do so.
Why no similar move by the House to punish strategic default by banks and corporations? It is interesting that House Republicans are generally opposed to most regulation of corporate activities—preferring to leave the market to self-regulate—but have acted with House Democrats to regulate the economic activities of average Americans. This is yet another example of the double standard in America—one set of rules for Wall Street and another for Main Street—but this time the House is actually codifying this double standard.
Unfortunately, this kind of moralistic grandstanding by the House does nothing to help the millions of struggling underwater homeowners who have seen their retirement security disappear. Instead, it worsens the impact of the best bad choice they have to save themselves from financial ruin, which is to strategically default and let the banks have their homes—which, by the way, is a perfectly legitimate option under the terms of the mortgage contract.
The Left customarily criticizes conservatives for being too beholden to raw capitalism to the detriment of society as a whole. They are approaching it from the wrong end. They should criticize the self-proclaimed “capitalists” for not being capitalist enough. Because, (and it’s becoming a tired adage) it’s socialism for corporations and capitalism for the little guy.
However, it feels like Republicans didn’t just do it on their own accord. It does feel like it has an imprint of an invisible hand of Wall Street. The whole situation has a flavor of a strong player at the poker table losing a big pot to some schmuck who doesn’t know how to play and instead of saying ‘nice hand’ and moving on, he’s calling for a floor manager. Think about it – the big wigs on Wall Street got beaten in their own game and by who! To put it simply the scammers were being scammed, and they didn’t like it. The other team played dirty for once and won. But I thought it was understood among the players that it’s part of the business, a so-called leakage. That’s why I am very surprised to find moralists on Wall Street – out of all places, for Christ sake! Now I’m truly expecting the next logical move by Republicans – putting equal penalties for default on corporations.
May 12, 2010
British Conservatives
I wanted to comment on David Cameron, but then I thought to put it in context to write about British conservatives in general. If only our conservatives were like British conservatives. You need a playbook to come back to power? Drop the silly act and become grown-ups.
April 18, 2010
Conservatives and tax cuts (a long rant)
I don’t even know where to begin, given the abundance of articles on taxes in the past week. But one article with the header Taxes On The Rich Are The Poor Man\’s Burden by John Tamny of Forbes especially caught my attention with the first thought that came to my mind “Is he fucking serious?” I also thought that with such a bombastic statement he’s going to tell something I haven’t heard before. Let’s see what his main points are. He starts his article by saying that 47% of US households don’t pay taxes and links to the source article that confirms this notion. Nearly half of US households escape fed income tax
So far so good, I thought, what’s to complain about – isn’t that a conservative dream? I thought that conservatives love tax cuts, and the fact that 47% of the households don’t pay taxes would show that we’re on the right track. Let’s first see how those households end up not paying taxes. If a family of four made $50,000 they claimed a standard deduction of $11,400 and additional $3,650 a piece for four personal exemptions. That would bring their taxable income to $24,000. The federal income tax on $24,000 is $2,769.With two children younger than 17, the family qualified for two $1,000 child tax credits. Its Making Work Pay credit was $800 because the parents were married filing jointly. The $2,800 in credits exceeds the $2,769 in taxes, so the family makes a $31 profit from the federal income tax.
I don’t see what would stop the higher income earners from claiming the same exemptions. If you make $1mln a year you too can claim the same deduction for yourself and for your children. But since that doesn’t cover the tax bill, what do you suggest we do to placate those earners? Make exemptions in proportion to their incomes? Because them and their children are what? Smarter, prettier, attending a private school? Should we have a kid from a poor family receive $1000 tax credit and a kid from a family making $1mln receive $20,000 credit? So that all is fair? Since when the word “fairness” has entered the vocabulary of the top 1%?
No, no! I hear conservatives screaming: forget credits – we want more tax cuts! But I thought you were already quite upset that almost half don’t pay any taxes at all. If we cut more taxes then that figure would increase to what – 60, 70, 80%? Damn you, guys, just say what you really want – cut taxes on just the top 1%. Let’s be honest already. But I digress.
March 26, 2010
A Cause for Concern
Republicans purging their intellectuals is a cause for concern for all of us not just the Right. Read the rest of this entry »
