Posted on 04/16/2012 12:09:28 PM PDT by whitedog57
The never-ending tale of the Administration and Congress pressuring FHFA Ed DeMarco to write down principal on residential mortgages is reminiscent of the Marx Brothers zany, non-nonsensical films like “Duck Soup,” “A Day at the Races,” and “A Night at the Opera.” Even worse, DeMarco seems to be wilting like a month-old celery stalk in the frig.
Vicki Needham at The Hill has a nice review of the latest Marx Brothers zany comedy.
Frank Keating, president and chief executive of the American Bankers Association: “Principal reductions create an incentive for a huge group of borrowers who have continued making their payments, despite lower home prices, to stop paying in hopes of principal forgiveness. A broad principal reduction program would result in fewer investors who are willing to lend for housing finance, increased borrowing costs and tighter credit availability.”
I agree with Mr. Keating completely. Principal reductions create enormous moral hazard and perverse incentives. And will dry up future mortgage funding (who wants to invest in the U.S. housing market when politicians can violate contract law and intervene in private markets when politically expedient?).
The FHFA estimates of the Treasury plan show that about 691,000 eligible homeowners would receive, on average, about $51,000 in loan forgiveness. Using a principal reduction program would save $9.9 billion, compared with $8.2 billion under the current version of HAMP. The costs to taxpayers of Treasury’s incentives programs would be about $3.8 billion, according to the FHFA analysis.
As I have stated before (at DeMarco’s talk at the Brookings Institute), there is NO EMPIRICAL EVIDENCE THAT THIS WILL WORK! We have NOT been through a loan modification cycle of 4 years with principal reductions to understand if the benefits outweigh the costs. They might was well being using a Ouija Board to make predictions about borrower behavior.
My favorite comment in Vicki’s article is from House Government Reform and Oversight Committee ranking member Elijah Cummings (Md.): “I have been saying for many months that we need to focus on data rather than ideological or political opposition to principal reductions,”
Focus on WHAT data? There ISN’T ANY!!!
“Although I am encouraged that Mr. DeMarco has now begun to move in this direction, we continue to await the documents and analyses we requested months ago, and the jury is still out on whether he will act to serve both homeowner and taxpayer best interests.”
So, Rep. Cummings is waiting for DeMarco to perform more Ouija Board experiments.
Sadly, the Federal government is teetering on another disastrous intrusion into the housing and housing finance markets. And based on the National Homeowership Strategy under Clinton, this will be disastrous as well.
I guess the new Marx Brothers are Baracko, Benno, Timmo and Shauno
Love the NEW Marx Brothers!!!!
On second thought, I'd dance with the cows until Michelle came home.
From Duck Soup? Whatever their for I’m against it.
I will happily stop making my payment in order to get a $50k reduction. What an excellent idea! </s>
Just print more money. Weeeeeeeee
Its from Horsefeathers...funny stuff because its never been more true!
http://www.youtube.com/watch?v=Pq4eeyVr_Hs
“Whatever their for I’m against it.”
“I wouldn’t join any club that would have me as a member.”
Duck Soup?
Just did a VA Streamline refinance....loan amount was $147,000. During the process I got a letter from the tax man saying my property is worth $117,000. Means my taxes go down and that’s good. I’d still like to lower the principle by $30,000.
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