StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between



Mortgages

Posted by Stan Collender

I've previously posted on my dislike of the notion that it's acceptable for homeowners who can afford to make their monthly payments but refuse to do so to walk away from their homes simply because they feel like it.  They made a bad decision (or decisions if they took out home equity loans based on the assumption that the value of their homes would never fall) and should have to bear a major part of the total costs involved.  Walking away from the obligation will increase the costs that I and others who are not in this situation have to pay the next time we try to buy a home.  I want that externality captured in a significant way to make it less likely that it will happen.

Posted by Stan Collender

An interesting article opinion piece in today's New York Times Magazine says that it's okay for a homeowner to walk away from a mortgage if his or her home is underwater.  His reasoning is that it's okay for homeowners to walk away from their financial obligations because financial institutions routinely walk away from theirs.

Putting aside the obviously infantile excuse that it's okay to do something because everyone else is doing it, I have some real problems with the idea that a mortgage is a disposable legal and financial obligation that ceases to exist whenever a homeowner deems it to be in their personal interest to leave it behind.

Posted by Stan Collender

Here's what Pete's strong post on mortgage modification didn't say: it may not make as much sense for a servicer to modify a mortgage as policymakers...and the rest of us...want to believe.

For the uninitiated among us, a mortgage servicer is the institution that collects your monthly mortgage payments and handles all of the day-to-day administrative needs.  A mortgage investor is the person or institution that actually owns the loan.  They may be the same, as when a lender makes loan and holds it in its portfolio rather than selling it to someone else.  But in an era of securitization and mortgage-backed securities, mortgages are increasingly owned by someone other than the institution or company (remember all those subprime mortgage companies located in Southern California?) that made the loan.  The investor may not have the capacity or the desire to service the loan themselves, so they contract with another institution -- the servicer -- to do it.

Here are several things to consider:

 

Posted by Stan Collender

By his own admission, Ed Andrews is not a sympathetic character in his book, Busted.  Life Inside The Great Mortgage Meltdown. In fact, he says right up front in the introduction that he was not a victim (page xii, the fifth page of the Introduction) of anything that happened to him and, at least as far as I can tell, doesn't ask for forgiveness from anyone but his wife.

That's a good thing because as the chief economics correspondent for the New York Times and a reporter that many, many people read on a daily basis, he should have known how deep the financial hole he was digging for himself and his family.

In addition, as almost anyone in the economic blogsphere knows (Megan McArdle over the The Atlantic lead the charge), Andrews has been heavily criticized for not including the fact that his wife had declared bankruptcy twice before.  That he now admits that was a mistake doesn't make it any less important an omission.

Posted by Pete Davis

Tense negotiations on allowing bankruptcy judges to modify home mortgages are underway in the Senate.  The outcome will determine whether hundreds of thousands of homeowners can keep their homes.

President Obama supports allowing home mortgages to be modified in bankruptcy, as do most, but not all, Democrats.  Most Republicans and mortgage bankers oppose it.  The arguments pit political necessity, reducing an estimated 8 million foreclosures by up to 800,000, against economic reality, mortgage rates will go up for everyone to pay for mortgage bankruptcy relief for those few.

On March 5, the House passed H.R.1106 by 234-191.  Seven Republicans supported the measure, and 24 Democrats opposed it.



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