Under the proposal eligible borrowers must be severely underwater, with a loan to value ratio of 125 percent or higher and must be current with their payment. These borrowers would be given current market interest rates, replacing the 6 percent rates they’ve been unable to refinance out of (because they don’t have any equity in the home) and giving them a lower overall monthly payment. The Treasury Department, probably with leftover TARP funds, would pay investors the difference between the old interest rate and the new for five years.But the American Securitization Forum, which represents investors in residential mortgage backed securities, is balking at the idea, arguing that while underwater borrowers are at greater risk for default it’s not clear reducing their monthly payment will change that. It figures $120 billion worth of loan principal would qualify. Taxpayers would kick in $11.5 billion to make up for the reduced interest payments for the first five years and investors would subsequently lose $9.7 billion for the following years.
“The key question from the policy side for both investors and taxpayers is would providing this reduction in monthly interest payments provide any benefit either to the investors or to the public at large by reducing foreclosures? Our answer is we don’t think it will appreciably reduce people walking away from their homes,” said Tom Deutsch, executive director of ASF.
From its record, it seems unlikely that the Obama Administration would heed investors’ concerns. On a side note: taxpayers would be on the hook for almost $12 billion over the next five years. But, who would benefit? Not the investors but the government which is why investors are miffed at this proposal.
Robert Pollin: The Fed breaks ground with unemployment target but pushing more money into banks without requiring more lending won’t solve the problem.
Paul Jay of the Real News Network interviews Robert Pollin, Professor of Economics at the University of Massachusetts in Amherst and founding co-Director of the Political Economy Research Institute (PERI).
This paragraph caught my eye:
OLLIN: The corporations are sitting on somewhere on the order of $2 trillion in cash and other liquid assets because they don’t want to invest. There is an issue here which also gets back to another question of financial regulation, which is, people who are hoarding cash who don’t see any opportunities also think that around the corner there may be another financial bubble, and they want to be primed to take part in the bubble, that is, when asset prices go up very, very quickly, for example, prices of oil or prices of food, or a stock market bubble. That’s where they think they’re going to make their big killing. They don’t want to put money into these investments that mean small expansions of business, you know, normal returns. And so they think that the financial system is still capable of generating another bubble. That’s because we haven’t established strong enough regulations to prevent bubbles from happening that then lead to another round of crashes.
More at The Real News
JP Morgan Chase Bank illegally sells customers “payment protection” insurance, though it knows they may not be eligible for benefits, a class action claims in Superior Court.
Source: Courthouse News
SARASOTA – A circuit court judge found one of the largest banks in the country in contempt of court on Friday over a foreclosure case that has dragged through the system for several years.
Attorneys for Dimitri Jansen, a local schoolteacher whose former home in North Port is in foreclosure, said such the contempt order against Minneapolis-based U.S. Bank, is “unprecedented.”
Jansen says his mother’s name was mistakenly added to the mortgage he obtained in 2006, that the bank has ignored requests to remove her name from the foreclosure documents and thus wrecked her credit history, and that the bank held up a pending short sale.
Another Sarasota judge, apparently frustrated with U.S. Bank, had ordered the bank’s president to be present in court on Friday. The bank instead sent a senior representative, who declined to comment.
Sarasota Circuit Court Judge Charles Williams found the bank in indirect civil contempt. It is unclear what, if any, sanctions the bank will face at the next court hearing in February 2013.