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Big Banks Rebel Against Push to Help Struggling Homeowners
Some big U.S. banks are pushing back against the idea that they should slash mortgage balances for millions of troubled borrowers.
In written testimony prepared for a hearing in Washington Tuesday of the House Financial Services Committee, some of the nation's top mortgage lenders warned of the risks of relying heavily on forgiving principal as a means of averting foreclosures and argued for concentrating mainly on other methods, such as reducing interest rates.
That may set up a clash with Rep. Barney Frank, chairman of the committee, and other lawmakers eager for more aggressive action to prevent foreclosures. In a letter last month to four big banks, Rep. Frank, a Massachusetts Democrat, argued that "to save homes on a large scale, we must move past temporary modifications in interest rates or terms and focus on permanent principal reductions that result in truly sustainable mortgages."
The Obama administration recently announced plans to put somewhat more emphasis on reducing principal in its foreclosure-prevention program.
In their testimony, executives from Bank of America Corp., Wells Fargo & Co., J.P. Morgan Chase & Co. and Citigroup Inc. said reducing principal makes sense for some borrowers with high risk loans. But some of the executives also stressed the risk that principal reductions for some borrowers would lead many others to demand the same treatment.
More than 11 million households are underwater, owing more on their mortgages than the current value of the home, estimates First American CoreLogic, a data provider.
To write down loans enough to bring those debts down to no more than the home values would cost $700 billion to $900 billion, J.P. Morgan Chase estimated in its testimony. That would include costs of $150 billion to the Federal Housing Administration and government-controlled mortgage investors Fannie Mae and Freddie Mac, the bank said.
J.P. Morgan also said broad-based principal reductions could raise costs for borrowers if mortgage investors demand more interest to compensate for that risk. Borrowers probably would have to increase down payments, and credit standards would tighten further, the bank said.
Wells Fargo said principal forgiveness "is not an across-the-board solution" and "needs to be used in a very careful manner." Bank of America said that it supports principal reductions for some customers whose debts are high in relation to their home values and who face financial hardships but that "solutions must balance the interests of the customer and the (mortgage) investor."
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30 Comments so far
Show AllIf you have not already done so, please take your money (if you have any) out of big banks and give it to local banks. Of course check them out first and see it they are stable and have a history of giving home loans and car loans to local people. Check out some leads at moveyourmoney.info website.
Joe
DO IT TODAY!!!!!!
Funny, Mr. W. Fargo, the relief for your bankster buddies was exactly "across the board", and noone moralized about the importance of balancing conflicting interests.
Bankster: "(S)olutions must balance the interests of the customer and the (mortgage) investor."
Ummmm....have these morons already forgotten the billions that We the Taxpayers have given them during the past two or three years. And what about the onerous bankruptcy reform bill that our so-called representatives caved into a few years back?
The bankster sons of bitches have a lot of nerve. Revolution NOW!
"....have these morons already forgotten the billions that We the Taxpayers have given them during the past two or three years. (sic)"
The banksters don't see it that way. To their way of thinking, they simply used their political clout to take the money. Was that wrong? Tough shit.
q
"To write down loans enough to bring those debts down to no more than the home values would cost $700 billion to $900 billion". Waah waah waah. And how much did we give the banks already? And what have we gotten back? And how much profit will they continue to make. And how are their officers suffering in the salary and bonus departments?
If they would work with mortgagees, the banks would recoup most of their money from the 11 million underwater mortgage holders and allow millions of families to occupy and continue to pay for their homes. Communities would be spared the crime and ugliness that goes with abandoned housing. Homelessness would be mitigated along with the sadness, school problems and family problems that accompany it.
Shouldn't the banks have to do something to atone for their reckless and greedy decisions that have brought world finance to its knees? Or is responsibility only for the little guys who may have been foolish in taking out mortages that were more than they could comfortably afford?
Joe
A very small handful of people is causing enormous pain and suffering for millions. They cannot be voted out of office. There is one obvious solution but it is illegal, and I for one, am not yet ready to participate in illegal solutions. When hyperinflation hits, some time in the next year or two, I will most likely be uable to pay my skyrocketing property taxes. At that point I will refuse to leave my modest little (900 sq. ft.) townhouse that I now "own". I may have to defend my property with illegal means at my disposal at that time. We shall see.
Best wishes. You are certainly not alone.
Joe
Ditto - "they" don't even have an appreciation of what WAR is. But,they will when this comes to pass.
"Borrowers probably would have to increase down payments, and credit standards would tighten further, the bank said."
Good. The lenders used lax standards and too-easy borrowing to create the mortgage-backed securities crisis. Why would we want to allow them to do so again?
q
This is insane. The ratings agencies, investment banks, committed massive fraud, and now victims homes need to be emptied in a criminal attempt to restore credibility to organized crime.
We have regulators who appear either indifferent, or to be complicit in these crimes: Treasury Secretary Timothy Geithner, Office of Thrift Supervision chief John Bowman, Fed chief regulator Patrick Parkinson, Office of the Comptroller of the Currency Chief John Dugan, and Director of the White House's National Economic Council Larry Summers.
Obama won't do a go#amn thing - except spit in the faces of people who are going to lose their homes, and continue to finance his wars on the backs of an already disgruntled US base.
Listen to what Cockburn says about chief crook Emanuel:
"Word from the White House is that Rahm Emanuel is still fishing around for a lucrative berth in the financial industry (“money first, then the deal” he reportedly barked at a recent industry caller discussing business possibilities in the private sector) so we needn’t hold our breath too hard waiting for the administration to bring law enforcement, or even its emasculated sibling “regulation reform,” to Wall Street anytime soon."
Obama was a transparent shill of the financial industry before the election. A quick look at open secret.org would have shown he was the biggest recipient of campaign funds from wall street and the financial industry.
But, people were over joyed with the prospect of having the first black president and progressive to replace the disaster of Bush.
Obama was hope and change we can believe in. The reality is that he is a crook, liar, and shill of the financial ruling elite.
Distressed borrowers have few options these days. HAMP is largely a failure. The broker has no liability for the loan, no matter how wild, unethical, and predatory their behavior. The borrowers mortgages have been spliced into hundreds of pieces. The Holder in Due Course doctrine makes it nearly impossible to persue legal action. The investors share in the blame, yet are untouchable! Since the bubble, and the lure of "making a killing" resulted in fraudulent appraisals, creative financing that was unprecedented in ignoring risk, and hapless borrowers who were being told by everyone from Suze Orman to Alan Greenspan to buy now - many homeowners were stolen from, immediately after they signed into what was all designed to be crippling usury. In other words, the investment banks and ratings agencies are completely protected from lenders and brokers who acted illegally. But the goons knew what was going on, while making money hand over fist, and you had fans on "mainstreet." Make no mistake about it, a homeowner who is surrounded by properties that are "magically" going up in price 100-400% is less likely to ask "Hey, what's going on here?"
Perhaps today, when many of their newer neighbors homes are in foreclosure and prices are expected to fall another 15-20% in some areas, these folks may have a capacity for empathy or to ask their Government why they allowed something so massively destructive to happen to so many people. This administration still doesn't get it.
When the hierarchy's power elite crooks get caught taking way more than their share of the pie which others primarily created, this is always the response from these crooks. They take no responsibility for their actions and hide behind excuses. It's time they face justice they have so systematically denied others.
AD
The behavior of a perfect sociopath. Always everyone else's fault.
I was almost one of the people that got pushed into taking out a loan I could not afford. I was told by a mortgage finance company that they had approved me for a $160,000 loan and they would not finance a home that did not come near that price. I found the house I wanted at slightly over 1/4th of that amt and they tried to force me to look for a more pricey home. I played hard-ball and won, they finaced the home I wanted. If it were not for my determination I would be in the "underwater" or not able to pay my mortgage catagory today. So when the banks/mortgage companies try to blame only the home buyer don't buy into it. They had something that they could make money on a foreclosed home.
damd - Same thing happened to my brother last year. He needed a small 2 bedroom place for retirement. The real estate broker repeatedly told him he could afford "a lot more house" than he wanted or needed or felt he could afford. Over and over the broker used the hard sell, trying to shame him and bully him into buying a bigger and more expensive place. Luckily, in my family we all have lots of experience making do, and we are a stubborn lot, so he just said no. Now he can retire with some assurance of security.
Joe
My mortgage has been sold a total of 3 times in less then 5 years. Chase Home Finance holds the mortgage now and they get their payment the day before late fees are imposed. When they ask why I tell them the same thing "Your fat cat CEO's can wait for their bonus checks until my unemployment check is in the bank". Now they are trying to sell me a credit card. Good luck with that one.
Good choice.
Now if the other 5 million buyers who are under water and in foreclosure would have had the same common sense we would not be in the position where the rest of the country has to pay for their bad decisions.
The Banks knew they were peddling soon to fail mortgages thats why they took insurance out on their loans and their "competitors" loans.
When the loans failed AIG failed because it could not pay off all the insurance claims.
If you are being foreclosed on ask to see the mortgage paperwork, most banks can not find it because it has been bundled off to who knows where.
Without the proper documents the Banks cannot foreclose and you need not make payments.
And the paperwork must be the signed original, not a copy.
The government can impress me if the banks are required to mark to market.
If I apply for a loan and using the banks method of legacy accounting marking my jewelry to what it may be worth in one hundred years would get me arrested for fraud.
The big banks are insolvent. They should be taken over by the government like the Resolution Trust did in the late 80's.
How long can this fraud continue?
deleted by author
WaMu Execs Blame Regulators for Its Demise
"Former Washington Mutual Chief Executive Kerry Killinger on Tuesday said regulators unfairly seized the Seattle-based thrift in September 2008 and sold it to JPMorgan Chase for a bargain price of $1.9 billion."
http://www.cnbc.com/id/36461579
The banksters continue to blame everyone but themselves.
All insolvent banks should be seized. The accounting is a fraud.
I am pissed off because I have been obeying the rules and trying to be a good citizen.
Yet, those bastards in congress allow the banksters to steal, cheat, lie and pretend like they are "too big to fail."
this confrontation is the core of the coming conflict...
we watch, now, as the initial whispery-winds wrestle and rustle the branches of tall, thick, towering trees...
the roots, however, lay concealed in their shallowness, their vulnerability...
a weak, yet ominous, beginning to the hurricane on the horizon...
of course, chemicals...
if we all defended one another from these landlords on the same day, and voided their purpose, what?
say, on September 22, 2012...cessation of industry, electricity and private property...local acoustic, agrarian living...individual engagement in sustenance, governance and defense...freed of the money-treadmill, we could, hopefully, focus on cleaning the place up...
no matter what, we're gonna need food...let's get those gardens growing!
Great comments people! Someone who was born yesterday--and could somehow read--or just arrived from another planet--and could speak English--could find out what's really been happening from the tone of your comments!
Who needs all the details? Commondreams.org readers know all the answers already, so the reader can fill in the facts as they get them, once they understand the banksters' scheme.
Of course the political process packages all the mortgage renegotiation programs as viable, but we know Wall Street and the White House are in bed together. What are we to them? We're nothing more than the serfs who are expected to build the ruling elites' mansions, clean their houses, and landscape their lawns (not that those things are bad because any work these days is good work.)
Look at history. The Great Depression specifically. You'll see at the end of that crisis that the rich ended up owning more. The same will be true after the current crisis ends. Unregulated hypercapitalism is a system that exploits the working classes just like Marx says. Of course we don't call it socialism-for-the-rich though our legal and political systems are constructed to help the rich get richer. But you knew that already...
These banksters are not human beings, they are monsters devoid of any humanity. "When people show you who they are believe them." These banksters are monstrous criminals, they have already shown us that.
Let's make this as simple as possible, Barney Frank told the banks "Guys you need to try harder to help homeowners stay in their houses", the Banks replied "Go to hell Barney, we are large and in charge, and we ain't doing a damn thing".
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