U.S., Banks Near A Plan to Freeze Subprime Rates

[Sapiens]

http://online.wsj.com/article/SB1196...googlenews_wsj

U.S., Banks Near
A Plan to Freeze
Subprime Rates
By DEBORAH SOLOMON and MICHAEL M. PHILLIPS
November 30, 2007; Page A1

WASHINGTON -- The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled subprime home loans, according to people familiar with the negotiations.

They are trying to buy time, unfortunately it will just make it worse!

[GRG55]

Re: U.S., Banks Near A Plan to Freeze Subprime Rates

http://online.wsj.com/article/SB1196...googlenews_wsj



They are trying to buy time, unfortunately it will just make it worse!

It's not clear to me if this is strictly subprime ARMS or any ARM. Either way you have to love this. One way or another the US is going to end up with a lot of modern housing stock and not pay much to those foreign holders of CDOs for it. Amazing...

[Sapiens]

Re: U.S., Banks Near A Plan to Freeze Subprime Rates

It's not clear to me if this is strictly subprime ARMS or any ARM. Either way you have to love this. One way or another the US is going to end up with a lot of modern housing stock and not pay much to those foreign holders of CDOs for it. Amazing...

I wonder if they have taken the speculators into consideration? LOL

[GRG55]

Re: U.S., Banks Near A Plan to Freeze Subprime Rates

I wonder if they have taken the speculators into consideration? LOL

LOL! Wouldn't it be easier to try to identify the ones the AREN'T speculators? (Are there any of those?)

This looks like yet another move to revive the all essential speculation in housing. After all, if you can't make your higher future payment, the govt just changes the rules at the expense of the (mostly foreign) lenders.

There's no votes, and no benefit, to tossing Amercan's on the street, for the benefit of those CDO holding dumb German state banks (to paraphrase Cramer) instead.

[bill]

Re: U.S., Banks Near A Plan to Freeze Subprime Rates

I wonder if they have taken the speculators into consideration? LOL

The speculators will not be helped. This is cattle separation time only the ones that have the highest percentage of payment survival will be saved the rest are hamburger.

[Sapiens]

Re: U.S., Banks Near A Plan to Freeze Subprime Rates

LOL! Wouldn't it be easier to try to identify the ones the AREN'T speculators? (Are there any of those?)

This looks like yet another move to revive the all essential speculation in housing. After all, if you can't make your higher future payment, the govt just changes the rules at the expense of the (mostly foreign) lenders.

There's no votes, and no benefit, to tossing Amercan's on the street, for the benefit of those CDO holding dumb German state banks (to paraphrase Cramer) instead.

That is the delicate balance, since debt creation is the u.s. #1 export; they need to be careful with the Golden Goose! The moment the World decides to quit sending goods and services to the u.s. in exchange of promises, the goose is cooked.

[Sapiens]

Re: U.S., Banks Near A Plan to Freeze Subprime Rates

The speculators will not be helped. This is cattle separation time only the ones that have the highest percentage of payment survival will be saved the rest are hamburger.

bill, I have the grill ready. Except, I don't seem to have an appetite worthy of the size of the whole World. oh, chucks

[hugh_lawson]

Re: U.S., Banks Near A Plan to Freeze Subprime Rates

At first glimpse, this looked like just a bail-out for the big banks who are staring bankruptcy in the face when they marked their loans to market. But the agreement is being made by "lenders, investors, and servicers" according to the article. So instead of just applying to the loans still on the books of the banks, it could apply to a whole lot more loans that have since been sold.

As I recall though, the teaser rates granted on lots of these loans were extremely low. That begs the question--Is a loan about to reset to 8% and be defaulted on worth less than a frozen teaser loan the lender is guaranteed to lose money on? Probably so, and I guess I'd take a 20% loss over a 75% loss any day.

The government seems to be confirming their willingness to re-inflate at all costs. My guess is the details of this agreement may show a grant from our government's (our) wallet. And Bernanke's speech last night seemed to confirm the other fed official's hints of a day or two ago that another rate cut is coming.

I am amazed and impressed at the concerted effort the government is putting into manipulating the markets to avert disaster. I'm also still convinced by everything EJ and lots of others have written that the world's economy is in for a world of hurt, regardless.

Anybody know where I can get a copy of Bernanke's dissertation? I wonder what he is going to come up with next. Maybe there are still some undiscovered clues in that paper.

[FRED]

Re: U.S., Banks Near A Plan to Freeze Subprime Rates

At first glimpse, this looked like just a bail-out for the big banks who are staring bankruptcy in the face when they marked their loans to market. But the agreement is being made by "lenders, investors, and servicers" according to the article. So instead of just applying to the loans still on the books of the banks, it could apply to a whole lot more loans that have since been sold.

As I recall though, the teaser rates granted on lots of these loans were extremely low. That begs the question--Is a loan about to reset to 8% and be defaulted on worth less than a frozen teaser loan the lender is guaranteed to lose money on? Probably so, and I guess I'd take a 20% loss over a 75% loss any day.

The government seems to be confirming their willingness to re-inflate at all costs. My guess is the details of this agreement may show a grant from our government's (our) wallet. And Bernanke's speech last night seemed to confirm the other fed official's hints of a day or two ago that another rate cut is coming.

I am amazed and impressed at the concerted effort the government is putting into manipulating the markets to avert disaster. I'm also still convinced by everything EJ and lots of others have written that the world's economy is in for a world of hurt, regardless.

Anybody know where I can get a copy of Bernanke's dissertation? I wonder what he is going to come up with next. Maybe there are still some undiscovered clues in that paper.

Speech
Chairman Ben S. Bernanke
National and regional economic overview
At the presentation of the Citizen of the Carolinas Award, Charlotte Chamber of Commerce, Charlotte, North Carolina
November 29, 2007

[Tulpen]

Re: U.S., Banks Near A Plan to Freeze Subprime Rates

This is very bad for the free market economy. A deal is a deal, if you hold a CDO you have a contract with rights. What is happening here is that the government makes a law that will shortchange the CDO holder.

How many new CDO's do you think this holder will buy in his lifetime?

[Sapiens]

Re: U.S., Banks Near A Plan to Freeze Subprime Rates

This is very bad for the free market economy. A deal is a deal, if you hold a CDO you have a contract with rights. What is happening here is that the government makes a law that will shortchange the CDO holder.

How many new CDO's do you think this holder will buy in his lifetime?

Tulpen, most of our alter egos are corps... you know, pretty much eternal. I will collect, even from the dead.

Or like my son says: "Not even Satan can help them now, so help me, I will own this rock." Ah, youthful greed, he reminds me of me as a young fool.

[jk]

Re: U.S., Banks Near A Plan to Freeze Subprime Rates

my guess is that any rate freeze will turn the loan into a neg-am, with the unpaid amounts added on to the capital. that delays the day of judgement on both sides, especially if the fiction can be maintained that the loan is still good with its ever increasing principle. the additions to principle, as with all neg-am's, can be booked as [phantom] income. the problem is that the collateral's value has diminished in the real world, and that will come to the fore if the home has to be sold. but again, the delay is desirable for all involved.

[bill]

Re: U.S., Banks Near A Plan to Freeze Subprime Rates

These securitized pool agreements have to state and appoint beneficiary powers to a designative representative (banks) representing the pool investors. I’m sure the banks hold such powers as trustee and have used them in the past but this time the court will not recognize it. The Banks hold Trustee powers in a foreclosure procedure that are granted from the beneficiary. The banks will need to return to the beneficiary of the notes and have them execute and grant powers to the trustee then proceed to foreclosure. This is a stall (freeze) tactic by our courts to not allow as in the past trustee foreclosure procedures.

http://www.financialsense.com/editor...2007/1124.html

by F. William EngdahlNovember 24, 2007

Deutsche Bank got a hard shock a few days ago when a judge in the state of Ohio in the USA made a ruling that the bank had no legal right to foreclose on 14 homes whose owners had failed to keep current in their monthly mortgage payments. Now this might sound like small beer for Deutsche Bank, one of the world’s largest banks with over €1.1 trillion (Billionen) in assets worldwide. As Hilmar Kopper used to say, “peanuts.” It’s not at all peanuts, however, for the Anglo-Saxon banking world and its European allies like Deutsche Bank, BNP Paribas, Barclays Bank, HSBC or others. Why?
A US Federal Judge, C.A. Boyko in Federal District Court in Cleveland, Ohio ruled to dismiss a claim by Deutsche Bank National Trust Company. DB’s US subsidiary was seeking to take possession of 14 homes from Cleveland residents living in them, in order to claim the assets.
Here comes the hair in the soup. The Judge asked DB to show documents proving legal title to the 14 homes. DB could not. All DB attorneys could show was a document showing only an “intent to convey the rights in the mortgages.” They could not produce the actual mortgage, the heart of Western property rights since the Magna Charta of not longer.
Again why could Deutsche Bank not show the 14 mortgages on the 14 homes? Because they live in the exotic new world of “global securitization”, where banks like DB or Citigroup buy tens of thousands of mortgages from small local lending banks, “bundle” them into Jumbo new securities which then are rated by Moody’s or Standard & Poors or Fitch, and sell them as bonds to pension funds or other banks or private investors who naively believed they were buying bonds rated AAA, the highest, and never realized that their “bundle” of say 1,000 different home mortgages, contained maybe 20% or 200 mortgages rated “sub-prime,” i.e. of dubious credit quality.
Indeed the profits being earned in the past seven years by the world’s largest financial players from Goldman Sachs to Morgan Stanley to HSBC, Chase, and yes, Deutsche Bank, were so staggering, few bothered to open the risk models used by the professionals who bundled the mortgages. Certainly not the Big Three rating companies who had a criminal conflict of interest in giving top debt ratings. That changed abruptly last August and since then the major banks have issued one after another report of disastrous “sub-prime” losses.
A new unexpected factor
The Ohio ruling that dismissed DB’s claim to foreclose and take back the 14 homes for non-payment, is far more than bad luck for the bank of Josef Ackermann. It is an earth-shaking precedent for all banks holding what they had thought were collateral in form of real estate property.
How this? Because of the complex structure of asset-backed securities and the widely dispersed ownership of mortgage securities (not actual mortgages but the securities based on same) no one is yet able to identify who precisely holds the physical mortgage document. Oops! A tiny legal detail our Wall Street Rocket Scientist derivatives experts ignored when they were bundling and issuing hundreds of billions of dollars worth of CMO’s in the past six or seven years. As of January 2007 some $6.5 trillion of securitized mortgage debt was outstanding in the United States. That’s a lot by any measure!
In the Ohio case Deutsche Bank is acting as “Trustee” for “securitization pools” or groups of disparate investors who may reside anywhere. But the Trustee never got the legal document known as the mortgage. Judge Boyko ordered DB to prove they were the owners of the mortgages or notes and they could not. DB could only argue that the banks had foreclosed on such cases for years without challenge. The Judge then declared that the banks “seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test,” the Judge concluded, “their weak legal arguments compel the court to stop them at the gate.” Deutsche Bank has refused comment.

[jk]

Re: U.S., Banks Near A Plan to Freeze Subprime Rates

These securitized pool agreements have to state and appoint beneficiary powers to a designative representative (banks) representing the pool investors. I’m sure the banks hold such powers as trustee and have used them in the past but this time the court will not recognize it. The Banks hold Trustee powers in a foreclosure procedure that are granted from the beneficiary. The banks will need to return to the beneficiary of the notes and have them execute and grant powers to the trustee then proceed to foreclosure. This is a stall (freeze) tactic by our courts to not allow as in the past trustee foreclosure procedures.

http://www.financialsense.com/editor...2007/1124.html

by F. William EngdahlNovember 24, 2007

it's not JUST a stall tactic. some time ago i posted an article on a similar situation in florida, where the paperwork had not been done properly and it wasn't clear who owned the mortgage or who had the right to foreclose.

[bill]

Re: U.S., Banks Near A Plan to Freeze Subprime Rates

it's not JUST a stall tactic. some time ago i posted an article on a similar situation in florida, where the paperwork had not been done properly and it wasn't clear who owned the mortgage or who had the right to foreclose.

The powers of foreclosure are in the hands of the beneficiary of the note. I think what happened these notes had beneficiary assignments recorded and that transferred the powers to a new beneficiary voiding the trustee powers of the banks(trustee). The note may have been assigned to a new beneficiary many times and the trustee will have to go back and have the current beneficiary grant foreclosure powers. What a note flipping mess.