you can now see what the unholy alliance between citi (and every other lender) and acorn has wrought way back in 2004:
from the q&a session of the AIE panel discussion posted today:
Bert Ely: Thank you, Bert Ely, a banking consultant here in town. I want to pick up on something that Tom mentioned. That there were probably several million homes that were sold to people who had no business buying a home, they should’ve continued as renters. If that is the case, why does it make sense to say that well, now that they are an owner of that home, we ought to modify their mortgage so that they can stay in it? And kind of another way to put this question is, to what extent are we nearly postponing a recognition of the problem with a lot of these financially marginal homeowners and might we, as a country, and for the housing market be better off if we just go through the foreclosure process, get it behind us and let the markets clear.
I remember saying from the 1980’s about the S&L’s, “A rolling loan gathers no loss,” which was why the justification for a lot of loan modifications back in the ‘80s. And it’s not clear to me that that phenomenon has really changed, that the recovery in the housing markets may actually be delayed in many markets if we merely roll forward problem loans to marginal lenders. And so I –- and I know this is politically incorrect to ask this question but are we possibly, potentially going to go overboard on this mortgage modification business specifically with borrowers who lied about their loans or speculators and really had no business buying the house in the first place?
Alex J. Pollock: Who would like to take that? John.
John Makin: Well you haven’t said anything yet and one of the points I would’ve suggested is we have now reached the stage of bad policy initiatives which will start when Congress comes back to town in a few weeks. And I’m guessing what we will see as a very serious and possible proposal that we were discussing at lunch that is let’s have a national moratorium on foreclosures because that’s an emotionally appealing notion -- hey we’ve got a problem, foreclosures, poor folks, got to help them out, let’s pass a law that you can’t foreclose. Now talk about prolonging the crisis, that’s where we’re going. But if I were thinking in positive rather than normative terms, I would plan on some such nonsense very likely to occur to prolong the crisis.
Alex J. Pollock: Chris?
R. Christopher Whalen: Just a couple of quick points. Let’s remember why we’re here. We’re here because of the partnership for affordable housing so it’s perfectly logical for the Democrats to greet [sounds like] this six, seven percent of all homeowners as new, compliant, submissive constituents who they will take care of for the rest of their lives. It’s pretty clear from the historical evidence that modification does not slow default and frankly, I think, for most of these homeowners who were part of that group from the 65 percent up to 70 percent homeowner, they ought to walk away if they had independent, really objective advice, they would simply walk away because there’s no point in them paying rent. That’s exactly what they’re doing.
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the impulse to 'keep these people in their homes' is going to be overwhelming politically, and basically we're simply deferring until a later date, in some cases mere months before these borrowers re-default and a new wave of millions of homes hits the market |
