Bernanke Urges Banks to Forgive Portion of Mortgages

[Sapiens]

http://www.bloomberg.com/apps/news?p...ZDg&refer=home

March 4 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, battling the worst housing recession in a quarter century, urged lenders to forgive portions of mortgages held by homeowners at risk of defaulting.

``Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping, but more can, and should, be done,'' Bernanke said in a speech to bankers in Orlando, Florida, today. ``Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure.''

Is this a game or what?

Can you say Monopoly?

LOL

[Tulpen]

Re: Bernanke Urges Banks to Forgive Portion of Mortgages

http://www.bloomberg.com/apps/news?p...ZDg&refer=home



Is this a game or what?

Can you say Monopoly?

LOL

What Bernanke says makes total sense.

Until the banks keeps garbage on their books no sane person will commit any capital.

[Sapiens]

Re: Bernanke Urges Banks to Forgive Portion of Mortgages

What Bernanke says makes total sense.

Until the banks keeps garbage on their books no sane person will commit any capital.

You are right, but I still like to keep my marbles. If you are stupid enough to sign the contract, I will hold you to perform on it.

[Jim Nickerson]

Re: Bernanke Urges Banks to Forgive Portion of Mortgages

You are right, but I still like to keep my marbles. If you are stupid enough to sign the contract, I will hold you to perform on it.

But what if your choice is between continuing to get paid something reasonable over the period of the contract vs. having the already depreciated asset that comprises the collateral given back to you in a market where there is no upside, and you have a whole of such contracts?

[Sapiens]

Re: Bernanke Urges Banks to Forgive Portion of Mortgages

But what if your choice is between continuing to get paid something reasonable over the period of the contract vs. having the already depreciated asset that comprises the collateral given back to you in a market where there is no upside, and you have a whole of such contracts?

Foreclosure Jim, lawyers need to eat. There will be other suckers waiting in line to buy the re-priced assets and more profits centers for me.

[SeanO]

Re: Bernanke Urges Banks to Forgive Portion of Mortgages

Foreclosure Jim, lawyers need to eat. There will be other suckers waiting in line to buy the re-priced assets and more profits centers for me.

Not sure that works. The banks simply can't take on that much property and remain solvent.

[blazespinnaker]

Re: Bernanke Urges Banks to Forgive Portion of Mortgages

Yeah, I think Bernanke is just telling banks that they might want to forgive rather than foreclose if it's more expensive to foreclose.

Unfortunately, I can imagine all sorts of bottom feeders trying to abuse this.

[grapejelly]

Re: Bernanke Urges Banks to Forgive Portion of Mortgages

The banks are insisting on short sales even though it might indeed be better if they would do principal reductions. It's more practical and cheaper to simply give someone a lower balance than to make them move and pay huge transaction costs.

That said, there is no escape from moral hazard. That is why the banks haven't done it yet -- once they open the floodgates on principal reductions there will be millions standing in line.

[Sapiens]

Re: Bernanke Urges Banks to Forgive Portion of Mortgages

It is not for the banks to forgive any principal, as a matter of fact, it is not within their power to forgive any principal as the system currently works. The ones that have to be willing to write off any principal are the holders of securitized instruments and they all seemed to have bought “insurance.”

Gentlemen, we are just getting started.

[GRG55]

Re: Bernanke Urges Banks to Forgive Portion of Mortgages

Not sure that works. The banks simply can't take on that much property and remain solvent.

That's why they are waiting for the government to capitulate and agree to buy non-performing loans. And it will capitulate. Soon.

March 5 (Bloomberg) -- ...Bernanke has also indicated a greater willingness to consider using government funds. He told lawmakers last week that it was ``worthwhile'' to consider using public money if the housing contraction worsens. Paulson said the use of taxpayer money was a ``non-starter.''

Paulson has reversed course in the past. Last year, he opposed raising the $417,000 limit on mortgages that Fannie Mae and Freddie Mac are allowed to buy and package into bonds. He agreed to a temporary increase in January, saying he ``got run down by a bipartisan steamroller'' in negotiating with Congress.

``The risks are very high that the steamroller is not going to be stopped,'' said Mark Zandi, chief economist of Moody's Economy.com in West Chester, Pennsylvania. ``The window's going to close very quickly, and they have about six to 12 weeks to figure out what's next.''

Yeah, I think Bernanke is just telling banks that they might want to forgive rather than foreclose if it's more expensive to foreclose...

The banks can figure that out for themselves. What Bernanke is telling (begging) them is that he wants them to take part of the hit. It is more expensive if the banks hold out using a threat to foreclose...more expensive for the taxpayer because they will pay for the inevitable bail out to save the system.

The banks are insisting on short sales even though it might indeed be better if they would do principal reductions. It's more practical and cheaper to simply give someone a lower balance than to make them move and pay huge transaction costs.

That said, there is no escape from moral hazard. That is why the banks haven't done it yet -- once they open the floodgates on principal reductions there will be millions standing in line.

The banks can't spell "moral". The reason they have not done it yet is because, as time passes and the putrid mess (jk's description) grows, they know the taxpayer will be forced to step in. They lose nothing by waiting it out.

Gentlemen, we are just getting started.

Correct...

Agency Mortgage-Backed Bond Spreads Reach Highest Since 1986

By Jody Shenn
March 5 (Bloomberg) -- The extra yield that investors demand to own so-called agency mortgage-backed securities over 10-year U.S. Treasuries rose to the highest since 1986, boosting the cost of loans for homebuyers considered the least likely to default.

The difference in yields on the Bloomberg index for Fannie Mae's current-coupon, 30-year fixed-rate mortgage bonds and 10- year government notes widened about 4 basis points, to 206 basis points, or 72 basis points higher than Jan. 15. The spread helps determine the interest rate homeowners pay on new prime mortgages of $417,000 or less. A basis point is 0.01 percentage point...
http://www.bloomberg.com/apps/news?p...d=aMzQ0u_RSI7Y

Foreclosure Jim, lawyers need to eat. There will be other suckers waiting in line to buy the re-priced assets and more profits centers for me.

Repriced real estate assets still require credit, since few, especially speculators, pay all-cash for a house. Where does that money now come from?

Asset-Backed, Commercial-Mortgage Spreads Met `Ebola'

By Jody Shenn
March 3 (Bloomberg) -- The extra yields investors demand on bonds backed by assets from commercial mortgages to credit cards rose to records last week, as the debt-market slump prompted banks, hedge funds and other investors to shun the securities.

The extra yields, or spreads, over benchmarks have surged since mid-2007 as a weakening U.S. economy erodes confidence in the bonds' credit quality and as losses on debt investments lead to forced sales and reduced demand. The spread widening may herald more losses for the world's largest banks, which have reported more than $180 billion in mortgage-related losses.

``People are calling it financial Ebola,'' Ed Steffelin, a senior managing director at GSC Group in New York, said in a telephone interview last week, referring to the deadly, contagious virus named after the Ebola River Valley in the Democratic Republic of the Congo...
http://www.bloomberg.com/apps/news?p...d=aAujufOcZ0Ps

[bill]

Re: Bernanke Urges Banks to Forgive Portion of Mortgages

Just have the fed open another print window, call it the asset backed security trust. Fed can purchase bad loans and keep the banks solvent. Now that would trigger some massive inflation.

[bill]

Re: Bernanke Urges Banks to Forgive Portion of Mortgages

Just have the fed open another print window, call it the asset backed security trust. Fed can purchase bad loans and keep the banks solvent. Now that would trigger some massive inflation.

New Treasury bills will be separate from their current program. Is this to keep separate amounts printed to the Fed for its new assets acquired, thus when a liquidation company (Asset Backed Security Trust/ RTC) is formed balances of treasury’s can be transferred to liquidation company. What type of “Series of Treasury bills” are these instruments?
http://www.ustreas.gov/press/releases/hp1144.htm

The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve. The program will consist of a series of Treasury bills, apart from Treasury's current borrowing program, which will provide cash for use in the Federal Reserve initiatives.

[GRG55]

Re: Bernanke Urges Banks to Forgive Portion of Mortgages

New Treasury bills will be separate from their current program. Is this to keep separate amounts printed to the Fed for its new assets acquired, thus when a liquidation company (Asset Backed Security Trust/ RTC) is formed balances of treasury’s can be transferred to liquidation company. What type of “Series of Treasury bills” are these instruments?
http://www.ustreas.gov/press/releases/hp1144.htm

Is that the real motive, bill? Or is it because they do not want to price these new Treasuries on the basis of the regular auctions?

If I correctly understand what is going on here, these new Treasuries are to be sold to the Fed [instead of auctioned] which will create new money out of thin air to pay for them? That being the case, do they carry some sort of interest rate preference or other variation from "normal" Treasuries? Or do they carry some sort of restrictions on the banks/brokers/insurance companies that will end up with these Treasuries when the Fed allows them to be exchanged for CDO's, "equity" or stale Cheeze Doodles (all of which apparently qualify as collateral at the Fed window)? Is Paulson trying to increase the amount of Treasuries, "without increasing the amount of Treasuries out there"??