Washington’s recipe for more mortgage defaults
If it’s Monday, it’s time for fresh news of more coming bailouts and more government meddling to subsidize failure and play kick the can.
Two items for you:
1) Mortgage defaults continue to rise. Yeah, duh, go figure. Washington keeps intervening on behalf of bad home loan risks and their lenders, so people keep walking away.
Gee, Wally, why can’t I climb out of this deep hole?
I dunno, Beav, here’s a shovel. Maybe you’ll find a way out. Just keep digging.
Mortgage delinquencies continue to rise, and re-defaults of modified mortgages are high, and getting worse, according to a report by regulators who oversee banks and thrifts.
The report, which was released Friday, covers the fourth quarter of 2008. It showed that fewer than 90 percent of mortgages were being paid on time, a three-percentage-point drop from a year earlier.
The Office of the Comptroller of the Currency and the Office of Thrift Supervision report covers mortgages serviced by nine large banks and four thrifts — two-thirds of all outstanding mortgages.
Subprime mortgages, which were issued to people with checkered payment histories, have the highest level of delinquency, but the delinquency rate among prime borrowers is growing fastest. From March 31, 2008 to Dec. 31, 2008, the percentage of prime borrowers who were at least 90 days late on their mortgages more than doubled, to 2.4 percent.
There are now more than 550,000 prime mortgages more than 90 days overdue, and for the first time, that number surpassed the subprime tally. The subprime loans are failing at much higher rates, however — more than 16 percent are seriously delinquent.
Servicers are trying to do workouts with borrowers who have missed payments or who know they cannot pay once an adjustable rate takes effect. But a significant minority of those modifications fail. For modifications done in the first quarter, 41 percent of borrowers defaulted again within eight months, and for those in the offered during the second quarter, 46 percent defaulted again.
Third-quarter modifications, which only had five months of history at the time of the report, had already shown 43 percent re-default rate.
In all those cases, borrowers had missed at least two months of payments in that time.
Last month, you’ll recall, the Obama administration went ahead with a doomed $75 billion mortgage mod plan — a bad idea that Republicans had pimped as well.
Reminder of what I said in February about these fraud-riddled programs:
Banks have been engaged in these “mo mod” programs over the past year. The Democrats want to accelerate the pace and use the power of government to essentially provide a blanket amnesty for borrowers and lenders who made bad financial decisions. Yes, there are many responsible borrowers out there having trouble negotiating loan modifications. But this $50 billion giveaway to the banks — on top of the upwards of $2 trillion more from the Treasury Department, on top of the $700 billion in original “TARP” funding — is throwing more bad money after bad.
This massive expansion of government meddling in the housing market — yet another attempt to get federal bureaucrats in the business of rewriting loan contracts and reducing principal — will just delay the inevitable. A report released by the Comptroller of the Currency in December showed that more than half of loans modified in the first quarter of 2008 fell 30 days delinquent within six months. And after six months, 35% of people were 60 or more days behind on their payments.
Where’s the fairness in forcing prudent homeowners and renters to subsidize people who bought overpriced houses and rescue the banks who lent to them?
Tellingly, Obama chose Ft. Myers to drum up support for his wealth redistributionism. The area has been one of the hardest hit by foreclosures, as the president was quick to point out. But many of those homes are second or third homes and investment properties. And low housing prices are not a catastrophe for everyone. They’ve created opportunities for Americans who haven’t been able to buy in an artificially inflated market. The median sales price of a home in the Ft. Myers area fell 50 percent to $106,900, from $215,200 in December 2007. Bargain-priced home sales are up 146 percent from a year ago.
It’s sacrilegious to say it in the Age of Obama, but it needs to be said: Home ownership is not an entitlement. Credit is not a civil right. Your property-value preservation is not my problem. Can I get an “Amen!?”
2) Naturally, the FHA is now seeking a taxpayer bailout. Naturally, Congress will give it to them and stick us and our kids and grandkids with the bill:
Rising mortgage defaults could force the Federal Housing Administration to seek a taxpayer bailout for the first time in its 75-year history, housing officials and lawmakers said during a Senate hearing Thursday.
If defaults drain the FHA’s insurance fund, the Obama administration will have to decide whether to ask Congress for taxpayer money or raise the premiums it charges to borrowers. That decision will be spelled out in President Barack Obama’s 2010 budget, Housing and Urban Development Secretary Shaun Donovan told lawmakers.
“We are looking very closely at that issue — at the premiums that we charge, at the losses that we have,” Mr. Donovan said.
The New Deal-era agency has become the main source of financing for buyers who can’t make a big down payment or who want to refinance but have little equity. Most lenders have sharply curtailed credit to those borrowers unless their loans can get backing from a government agency. The FHA’s market share jumped to nearly a third of all mortgages in the fourth quarter of 2008 from about 2% in early 2006, according to Inside Mortgage Finance, a trade publication.
Borrowers who make at least a 3.5% down payment can qualify for a 30-year fixed-rate loan backed by the FHA, which insures lenders against defaults on mortgages.
Rising defaults are now eating through the FHA’s cushion of reserves. Roughly 7.5% of FHA loans were seriously delinquent at the end of February, up from 6.2% a year earlier. The FHA’s reserve fund fell to about 3% of its mortgage portfolio in the 2008 fiscal year, down from 6.4% in the previous year. By law, it must remain above 2%.
Hey, Washington — and especially you, John McCain, Mitch McConnell, and big government Republicans — read our lips and read our signs: No new housing entitlement bailouts.
***
Another take on the mortgage mod defaults here.
See what others have said
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Barney Frank and Christopher Dodd should be taken to the woodshed.
You’re being a little rough on the beaver.
The corruption is just beginning to make the msm.
Full transcript here.
Great read…
There are subprime borrowers and there are ‘all’ borrowers. What is the percentage of late borrowers of all borrowers? Certainly it has to be less than 2.4% mentioned in the BLOG.
And here’s is the gnawing question -
This number of late payers is contributing to the collapse of our housing industry? There simply must be more going on that meets the eye.
Even with the ten percent of late mortgages, it is difficult to believe that the margins are that close for this to be a factor for the collapse of the mortgage industry.
I wonder if the banks who packaged and sold the mortgages are passing the payments through to the actual holders of the mortgages. And, if there is a third, or fourth, holder of the mortgage is recieving the pass through payments from the homeowner.
***********
Flyoverman,
Do recall the title of the BLOG where we were discussing the missile defense system?
Z
No housing bailouts. As the saying goes, YOUR mortgage is not MY problem.
Hey Congress,
Stop rewarding failure.
AJ, AJ, AJ….
This is a family column! And there you go, using the first porn reference ever used on broadcast TV, as June said to Ward: “…..You’re being a little rough on the beaver.”
BWAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!
Teh One is just beyond words. I would like to think that once he finally screws things up so badly that even his ego won’t let him go on that he will pull out his REAL LEGAL birth certificate and say “Well, look what I just found….and I guess I can’t really be the Pee-Resident unless I change the constitution. And of course, as Teh One, I can make that happen with a wave of the hand and stroke of the pen.”
KP
Now Craig….we don’t wan’t to play into their fantasies and dreams. Nothing like a little B&D/S&M to make some cretins (with apologies to the better cretins)smile.
I sure do wish the 2010 mid-term elections would hurry up!
And Geithner was duh man to lead our Treasury, eh?
Go figure!
“I dunno, Beav, here’s a shovel. Maybe you’ll find a way out. Just keep digging.”
HAAAAAA!!! Dig to China, Beav!!
Don’t worry, the “We’ll help refinance your mortgage” will morph into “what mortgage, you don’t need no stinking mortgage – we’ll pay it off for you”.
We’re the suckers who will “redistribute” the payments from them to us.
He was too busy trying to figure out turbotax.
iamsaved, at the rate they are going, it would have been cheaper just to pay off all the mortgages.
yeah so does ACORN and the millions of new illegals who will be voting…
#3 – Not sure after reading that whether I should be more angry (is it possible?) or more scared. Ugh!
Everyone needs to read this
Did they really expect prime borrowers to remain current on their payments while everyone around them was being bailed out? The doubling in delinquency rates is proof that prime borrowers are neither blind nor stupid.
AAArrrrrrrrrrrrgggggghhhhh…. This can’t end well. I’m starting understand how our forebears felt in the pits of their stomachs. We can talk (like the UN) all day, but sooner or later, we’re going to have to take action to get this thing turned around. Action usually means sacrifices of the highest order. Forget 2010…. April 15th isn’t going to get here soon enough…
On April 6th, 2009 at 8:09 am, 30 pcs of silver said: #10
Thanx, I missed the response.
zyzzyg,
I saw you ask about the missile defense blog late yesterday and responded, but I am sure it was too late. Sorry.
The thread was entitled Comrade and the first entry was a post you made @3:51 p.m. I hope that helps.
Most defaults are the result of someone losing a job. Is Obama responsible for the high unemployment caused by the Bush recession/depression?
That’s like blaming the guy building a dike because it leaks. Time for those big butt Republicans to get off the sofa and do something for America.
30pieces,
Just noticed you helped out with the Comrade blog. Thanks.
I could be mistaken, but I heard it was more like this?
What you are saying is that if someone asked for and was given the responsibility to manage a hotel that we were stockholders in, we have no right to criticize him for deciding to burn the hotel to the ground because the prior manager allowed the hotel to be infested with termites.
Obama wanted to be President. He got it. His monkey. And yes, LGM, Obama’s responsibility.
Yes – as our elected leader, it’s his economy now!
That’s pretty much descriptive of how trial lawyers have broken the backs of nearly every industry in the nation, wouldn’t you say?
What’s your source on that?
gee lgm; are you ever planning on having this president be responsible for his actions and the consequences thereof? so 9/11 was clinton’s fault, with the help of that gore crybaby taking up months of bush’s cabinet building time, right? the nasdaq collapse and the stock market drop of 2001 and the SOUND, PROVEN economic policies of bush brought us out of that in how long? while the communist central planning policies of the obama admin still have unemployment going up, confidence going down, the world seeking to pillary the u.s., and our president winning praise from chavez and achmadinejad. but didn’t shaka toots look great in europe?
From what I hear out and about – noone will help a homeowner unless or until they are three months behind on their mortgage payments. That would include credit counseling services and mortgage companies. hmmm….wonder where that “rule” originated?
Someone said most defaults are due to someone losing a job… BULL FEATHERS!!! How about using your house as a CASH COW, and re-fi @ 125%??? How about buying more house than you could AFFORD, figuring the value would go up when the ARM kicked in??? Or how about buying a house, when you had no BUSINESS buying a house to begin with??? No offense to the great LIB minds out there, but nowhere is it written, anywhere, that you have a RIGHT to own a HOME… Now as soon as the BRAIN SURGEONS in DC figure out if they just GET THE HELL OUT OF THE WAY, this “PROBLEM” will sort itself out in 12-18 months… It will not even start until they GET OUT OF THE WAY!!!
Has CRA been repealed or even modified?
Is there one regulation in place to ward off the exact same economy crashing mortgages for slackers programs that killed our prosperity and has given liberals the opportunity to create a giant Hugo Chavez socialist preserve that shall be called the USSA?
Yes, I’m with you on all of that. Plus these companies like AIG that insured the AAA ratings for the lousy loans and the investment firms that bought the lousy B loans packaged as securities and the mortgage companies and banks that gave the lousy loans and then packaged them up and sold them should all have to fail along with the execs who lead them into this.
A lot of the smoke and mirrors lately is to try and obscure the fact that nothing is being done or will be done to stop them from giving the same lousy loans in the future. Notice they are not reining in Fanny or Freddy but are continuing to bail them out with almost no press coverage. All regulations will be to try and stop firms from profiting from giving lousy loans while at the same time still arm twisting to keep the lousy loans coming.
Our goverment at work in The Twilight Zone.
Speakup …
CRA originated under Carter and was vastly expanded under Clinton where it included not so veiled threats to the banks that they either lend more to those that couldn’t afford it or be brought under intense scrutiny from the IRS and all the congressional committees and such for failing to make enough of those types of loans …
Any efforts to address the problems with Fannie and Freddie during the Bush years was met with opposition from the likes of Barney and Chris and their Clinton retirement package cohorts (Raines and friends) that were running those pseudo-private yet government-supported agencies …
I’ve been in a hole with a shovel. It is obvious that Congress doesn’t know how to carve steps.
http://youhavetobethistalltogoonthisride.blogspot.com/2009/04/imus-guest-frank-rich-americanstorqued.html
Imus guest this morning, Frank Rich of the New York Times. They discuss Frank’s take on Wall Street vs Detroit Bail Outs, the double standard. There is a romance that surrounds Americans love of their cars however Americans view of Wall Street not so sentimental.
Plus Obama’s trip abroad. Frank brings up the status of the NYTS but doesn’t dwell on it…Imus refers to the Times mortgage being held by Cheech & Chong
I’d love to know how many Obama voters are letting mortgage payments lapse because they truly believe The One will pay their mortgage, pay their car payment, pay their bills… ugh.