Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Gold Price Trend Forcast to End September 2019 - Video - 25th June 19
Today’s Pets.com and NINJA Loan Economy - 25th June 19
Testing the Fed’s Narrative with the Fed’s Data: QT Edition - 25th June 19
What "Pro Traders" use to Find Profitable Trades - eBook - 25th June 19
GDX Gold Stocks ETF - 25th June 19
What Does Facebook’s LIBRA New Crytocurrency Really Offer? - 25th June 19
Why Bond Investors MUST Be Paying Attention to Puerto Rico - 25th June 19
The Next Great Depression in the Making - 25th June 19
The Bad News About Record-Low Unemployment - 24th June 19
Stock Market New High, but…! - 24th June 19
Formula for when the Great Stock Market Rally Ends - 24th June 19
How To Time Market Tops and Bottoms - 24th June 19
5 basic tips to help mitigate the vulnerability inherent in email communications - 24th June 19
Will Google AI Kill Us? Man vs Machine Intelligence - 24th June 19
Why are Central Banks Buying Gold and Dumping Dollars? - 23rd June 19
Financial Sector Paints A Clear Picture For Stock Market Trading Profits - 23rd June 19
What You Should Look While Choosing Online Casino - 23rd June 19
INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - 22nd June 19
Here’s Why You Should Drive a Piece of Crap Car - 22nd June 19
How Do Stock Prices React to Fed Interest Rate Cuts? - 22nd June 19
Gold Bull Market Breaking Out! - 21st June 19
Post-FOMC Commentary: Delusions of Grandeur - 21st June 19
Gold Scores Gains as Draghi and Powel Grow Concerned - 21st June 19
Potential Upside Targets for Gold Stocks - 21st June 19
Gold Price Trend Forcast to End September 2019 - 21st June 19
The Gold (and Silver) Volcano Is Ready to Erupt - 21st June 19
Fed Leaves Rates Unchanged – Gold & Stocks Rally/Dollar Falls - 21st June 19
Silver Medium-Term Trend Analysis - 20th June 19
Gold Mining Stocks Waiting on This Chart - 20th June 19
A Key Gold Bull Market Signal - 20th June 19
Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - 20th June 19
Investing in APPLE (AAPL) to Profit From AI Machine Learning Stocks - 20th June 19
Small Cap Stocks May Lead A Market Rally - 20th June 19 -
Interest Rates Square Minus Zero - 20th June 19
Advice for Financing a Luxury Vehicle - 20th June 19
Stock Market Final Blow Off Top Just Hit… Next Week Comes the FIREWORKS - 20th June 19
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19
S&P 500 Stuck at 2,900, Still No Clear Direction - 17th June 19
Is Boris set to be the next Conservation leader? - 17th June 19
Clock’s Ticking on Your Chance to Profit from the Yield Curve Inversion - 17th June 19
Stock Market Rally Faltering? - 17th June 19
Johnson Vs Gove Tory Leadership Contest Grudge Match Betfair Betting - 17th June 19
Nasdaq Stock Index Prediction System Is Telling Us A Very Different Story - 17th June 19
King Dollar Rides Higher Creating Pressures On Foreign Economies - 17th June 19
Land Rover Discovery Sport Tailgate Not Working Problems Fix (70) - 17th June 19
Stock Market Outlook: is the S&P today just like 2007 or 2016? - 17th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

HOPE For the US Housing Subprime Mortgage Credit Crunch Victims

Housing-Market / US Housing Dec 05, 2007 - 08:34 PM GMT

By: Adrian_Ash

Housing-Market

"...What a difference lies between .org and .com on a website address..."

HOPE NOW is a British-based charity, founded in 1985 to spread the good news of Jesus Christ, working primarily in the former Soviet state of Ukraine .


Its recent good deeds include buying new boots for inmates at Stari Babbani Prison to wear when they're breaking granite.

At least those prisoners might hope for parole. But from Oct. '07, Hope Now is also the name of "an alliance between counselors, servicers, investors, and other mortgage market participants" founded to prolong the United States' current housing-led slump forever and ever, Amen.

Hope Now exists "to spread the word that hope is but a phone call away," according to US Treasury secretary Henry Paulson. And to date, the good deeds of Hank's evangelical mission amount to the dopiest government project since British taxpayers spent $800 million on "cost controls" for the 2012 Olympics in London – initially forecast to cost $4.1 billion; now set to cost $18.7bn at the very least.

The Hope Now Alliance is urging US mortgage lenders to contact borrowers 120 days before their adjustable-rate loans reset. "Reach them early, before their mortgage problem becomes overwhelming," says Hank Paulson, pretending that a couple of letters and a toll-free phone call are all it will take to forgive the sins of lazy and greedy lenders – as well as greedy and stupid home-buyers – between 2002 and 2007.

Next comes Paulson's "teaser freeze", extending the initial interest rate for another two, three or maybe even seven years if Hillary Clinton gets her way...prolonging the Bush administration's idiotic, tax-funded meddling well into her second term (God help you, America !).

And to help cover the interest due on all the mortgage-backed bonds sold against these ARMs – interest that will evaporate if the home-buyers' rates don't reset – Hope Now wants Congress to give tax-exempt status to municipal bonds underwriting subprime refinancings, rather than just first-time buyers and purchases in distressed areas.

A neat and tidy Washington scheme, in short – the perfect partner for savage rate-cuts from the Federal Reserve – and just what "Bail 'em out" Bush promised from the Rose Garden in August:

  • The Federal Housing Administration will guarantee loans for delinquent US borrowers – up to half-a-million on Paulson's math – through its new FHA Secure program;
  • "Homeowners who finally find relief [by either foreclosing or reducing their mortgage] shouldn't get put back in financial straits because of the tax code," says Paulson, repeating another of Bush's key pledges of August . Congressional approval is still pending;
  • The Treasury and Housing & Urban Development department (HUD) will identify home-buyers at risk of defaulting between now and 2009 (or even 2014 it seems), creating "more favorable" loans by working with private lenders and insurers to reduce rates in the market.

Bibbidy-bobbidy-boo! You shall stay in your home, Cinderella. Never mind that the Dollars in your pay-check will turn to dust at midnight .

Forget too that "a bailout is nothing less than a wealth transfer to those who made ill-advised credit decisions from creditworthy, fiscally responsible taxpayers," as Steve Berger – an investment manager in Boston – noted for Mises.org way back in the spring, "postponing hard choices into the future and props up faulty credit."

And also forget that "foreclosure holidays are equally flawed," as Berger went on, since "such laws in one fell swoop eviscerate contractual agreements and contravene the impairment of contracts clause of our Constitution."

This is about hope. Hope now.

But the trouble with hope – as with all faith in the future, including "credit" itself ( from the Latin: belief, trust) – is that it keeps needing a fresh lick of paint on the lintels if it's going to keep finding new buyers.

Tomorrow can only improve on today if yesterday's problems get fixed-up first. And yesterday's troubles – in this case, the mountain of idiot loans made to home buyers who just couldn't afford to buy – sit a long way from Hope Now's tax-funded solutions.

"It's a big misconception to think that [mortgage] resets are responsible for the delinquencies," according to Andy Laperriere, managing director of ISI Group in Washington . "What's driving the delinquencies is that people can't afford the initial payments," he told Caroline Baum at Bloomberg on Tuesday.

That's why one-in-four subprime loans made in 2006 but not due to reset until '08 is already delinquent. The best Eric Rosengren, president of the Boston Fed, could say about his data this week is that 55% of borrowers with subprime ARMs – around 1.2 million home-owners – have yet to miss a payment this year.

Locking higher-risk buyers into new, longer-term teasers will also bring wider social costs, too. "The effect of propping up sub-prime borrowers, so they can stay living in homes they couldn't afford when they bought them," as David Nason notes for The Australian newspaper, "is to keep property prices artificially high."

But that's assuming success – and "what little data there is," says the Lex column in the Financial Times , "suggests 35% or more of such modified loans default within two years anyway."

So why bother? Well, "this is the most serious housing downturn since the Great Depression," as Mark Zandi of Economy.com told the Office of Thrift Supervision's National Housing Forum on Monday. And residential investment accounted for 5% of gross domestic product between 1996 and last year, adds the Mortgage Bankers Association. Which is why the Hope Now Alliance is also busy explaining to the lenders themselves that foreclosing on non-paying debtors can prove costly, and thus self-defeating.

But rather than leaving the lenders' self interest to address the two million resets looming between now and 2009 (or beyond...!) Hank Paulson thinks they need a little charitable help, too.

"While increased industry funding is very important, we also need to do our part to support non-profit mortgage counseling organizations," Paulson told the same conference that Zandi addressed on Monday. "For this public outreach campaign to be successful there must be enough trained mortgage counselors to answer the phone when homeowners call.

"[So] the Administration requested funding for NeighborWorks America and other non-profit mortgage counseling operations in its budget. But the appropriations bill has yet to be finalized; Congress needs to get it done quickly."

Why the rush? Because hiring extra staff to review, advise and decide on changes to outstanding mortgages won't come cheap. Not now the profits made by lending money to home-buyers with no hope of repayment have dried up entirely. Not now that 196 major lenders have gone kaput on ML-Implode 's count since Merit Financial blew up in May 2006. Not until asset-price deflation in US housing slips into wage-price deflation for home-loan call center staff.

A clutch of tax-funded call centers in the meantime might just help support the lenders. And without solvent lenders, joined at the hip to the solvency of their debtors...who are also to be supported by tax-payers' dollars, freshly printed municipal bonds and more savage cuts to Federal Reserve interest rates...how can US home-buyers keep buying?

Perhaps that's why the Federal Home Loan banks stepped up their loans to Countrywide, the nation's biggest mortgage lender, to the point where – by Sept. 30th – it had borrowed one-third of all outstanding advances from the FHL's Atlanta division according to SEC filings.

At $51.1 billion, the Atlanta FHL's loan to Countrywide is almost as great as Northern Rock's debt to the Bank of England here in London . But Northern Rock is a global laughing-stock, the first British bank to suffer a run in 130 years. It also stands on the verge of nationalization by a desperate and panicking government – and that could never happen in the free-market United States , right?

Still, let's not harp on about the costs, absurdities or risks of governments meddling in real-estate bubbles when they burst. This is about hope. Hope now.

Let's worry about tomorrow some other time.

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2007

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

nicole jeanlouis
25 Dec 07, 09:34
mortgage fraud

A broker from xxx xxx home morgage add fake pay stub fake bank stement to take my $19000 now she told me to move out as deal after one year I cant afford the payment she send me to forclosure I need justice


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules