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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (232416)	12/9/2009 10:33:16 AM
From: Les H	Read Replies (2) \| Respond to of 306849

Anatomy of a Failed Foreclosure Prevention Program Just how badly is President Obama's $75 billion foreclosure program working out? Consider these newly-released numbers: Out of every 100 homeowners who came to JPMorgan Chase for help under the program, just 15 have or will likely receive a permanent payment reduction. What happened to the other 85? For every 100 trial plans initiated from April through September 2009 under the Home Affordable Modification Program: 29 borrowers did not make all required payments under their trial plan; 20 borrowers did not submit all documents required for underwriting; 31 borrowers submitted all required documents but the documents did not meet HAMP underwriting standards, due to such things as missing signatures or nonstandard formats; 4 borrowers were or are likely to be rejected for undisclosed reasons; 1 borrower will not or is not likely to get their payment lowered. The data comes from the prepared remarks bank officials plan to make Tuesday before the House Financial Services Committee. The testimony was posted Monday on the committee's website. It adds up to a brutal illustration of just how the HAMP program, which is supposed to reduce troubled homeowners' monthly payments to 31 percent of their income, is failing. In October testimony before the Elizabeth Warren-led Congressional Oversight Panel, Herbert M. Allison Jr., the Treasury Department's assistant secretary for financial stability, reluctantly admitted that Treasury had internally forecast that "up to 75 percent" of trial modifications would achieve permanent status. The watchdog panel had expressed early doubts about the program's ultimate success, noting that as of Sept. 1, only 1,711 homeowners had received a permanent modification, less than two percent of those eligible at the time. The administration set a three-year goal of offering 3 to 4 million homeowners lower mortgage payments through a modification. But, looking at JPMorgan Chase, with 85 percent of those who actually apply for the modifications being denied, that's just not going to happen. Meanwhile, foreclosures continue to mount. The number of delinquent borrowers continues to set record highs. Wall Street, however, expects to receive bonuses not seen since the height of the credit bubble. huffingtonpost.com

To: Les H who wrote (232416)	12/9/2009 12:22:52 PM
From: Pogeu Mahone	Respond to of 306849

Meltdown’s causes are still in place By Frank B. Porter Jr. \| December 9, 2009 WHILE EVERYTHING was falling to pieces in September 2008, James Stewart tells us in The New Yorker, a perplexed President Bush said to Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson, “Someday you guys are going to need to tell me how we ended up with a system like this.’’ If they ever told him, he never told us. But we’ve got some clues. It appears to have been an equal opportunity meltdown with both sides of the political aisle being ably represented. From the left came earnest but misguided social engineering which, under the banner of affordable housing, pressured the money lenders to provide credit to the uncreditworthy. On the right was flagrant pandering to Wall Street’s big dogs, which allowed them to create the obscenely over-leveraged capital structures that ultimately brought them down and should have been unthinkable from the get-go to anyone with an MBA. However we ended up with this system, it is becoming clear that little is going to change. Community groups are trying to reinflate the housing bubble, the Dow is rising, bankers are smirking again, and Wall Street lobbyists, perhaps with inside assistance, are drilling bigger and better loopholes in the administration’s flaccid efforts at regulatory reform. We certainly can’t expect changes in the bankers’ hard-wired behavior. The only financial animals who can survive in dead water are the investment advisers. They extract their fees whether the tide’s ebbing or flooding. For the rest of the sharks, inactivity spells death. Like troops caught in the open, they’ve been trained to “do something, even if it’s wrong’’ or has no purpose other than generating fees and commissions. This is highly rational behavior, because, by the time any particular toxic mess explodes, its purveyors will have moved on. We can expect the customary dance to continue. Go public. Go private. Stir. Serve. And repeat. Acquire. Divest. Leverage. Flip. Borrow. Hedge the borrowing. Refinance the borrowing. And do it again. Write “fairness’’ opinions. Price public stock offerings artificially low so favored insiders will benefit when the market recognizes the issuer’s real value and the share price jumps. Much of this wouldn’t have happened without the complicity of those sleeping sentinels, the ultimate enablers, the rating agencies. Having been paid by the issuers of the securities they were analyzing, the rating agencies assigned them the magnas and summas that made even the most rotten tranches eligible for purchase by regulated financial institutions. OK then, what’s to be done? Answer: plenty, but how about starting with this - have the federal government take over the rating of securities. Give this function to the SEC or create a new agency, but, in either case, make certain the new entity’s funding is not subject to legislative meddling and that it is staffed by persons talented enough to cut through complexity, spot mutton dressed up as lamb, and not be threatened or penalized for making that call. Strip Moody’s, Standard & Poor’s, and Fitch of their power to determine whether a security is a permissible investment for regulated purchasers and, by rule or statute, transfer this function to the new federally chartered entity. Thank the rating agencies for their diligence, then hire their ablest analysts. Without something like this, we can expect another debacle in less than a decade as we keep disassembling the few remaining Depression-era protections. Future products will have different names, but their sale will, as always, be predicated on the “greater fool’’ theory and they will, of course, be old wine in new wineskins. When will we learn that outsized returns are always accompanied by comparable risks? Who might lead this brave new entity? Why not someone who’d be eager to tackle grade inflation and not be expecting a job on Wall Street when he completed his tour of duty? How about David Swensen, Yale’s respected chief investment officer, a man who, inexplicably, is not entirely focused on maximizing his personal bottom line? Whoever is chosen must pass the Bernie Madoff test. Owning more than three Rolexes is an automatic bar. So is direct or indirect support from the bankers. Frank B. Porter Jr. is a freelance writer.