From an Unlikely Source, a Serious Challenge to Wall St.

joseph brand

Could it work here?

Matt Taibbi, who writes for Rolling Stone:

http://www.rollingstone.com/politics/blogs/taibblog/from-an-unlikely-source-a-serious-challenge-to-wall-street-20120720

Desperate for a way out of a housing collapse that has crippled the region, officials in San Bernardino County … are exploring a drastic option — using eminent domain to buy up mortgages for homes that are underwater.

Then, the idea goes, the county could cut the mortgages to the current value of the homes and resell the mortgages to a private investment firm, which would allow homeowners to lower their monthly payments and hang onto their property.

Here’s how it works: MRP helps raise the capital a town or a county would need to essentially “buy” seized home loans from the banks and the bondholders (remember, to use eminent domain to seize property, governments must give the owners “reasonable compensation,” often interpreted as fair current market value).

Once the town or county seizes the loan, it would then be owned by a legal entity set up by the local government – San Bernardino, for instance, has set up a JPA, or Joint Powers Authority, to manage the loans.

At that point, the JPA is simply the new owner of the loan. It would then approach the homeowner with a choice. If, for some crazy reason, the homeowner likes the current situation, he can simply keep making his same inflated payments to the JPA. Not that this is likely, but the idea here is that nobody would force homeowners to do anything.

On the other hand, the town can also offer to help the homeowner find new financing. In conjunction with companies like MRP (or the copycat firms like it that would inevitably spring up), the counties and towns would arrange for private lenders to enter the picture, and help homeowners essentially buy back his own house, only at a current market price. Just like that, the homeowner is no longer underwater and threatened with foreclosure.

Very interesting idea. Very interesting.

Wacker The Attacker

"private investment firm"

Who?

davet82

I wouldnt want to live underwater though

seantorious

davet82 wrote: »

I wouldnt want to live underwater though

Mermaids...

https://www.youtube.com/watch?v=jgA2xo0HYrE

Hande hoche!

I miss the exile.

starbelgrade

These days it seems that the most novel approach to trying to sort out the problems of loan repayments & negative equity is for those who borrowed the money to actually pay it back.

Wacker The Attacker

starbelgrade wrote: »

These days it seems that the most novel approach to trying to sort out the problems of loan repayments & negative equity is for those who borrowed the money to actually pay it back.

That certainly is a novel perspective. If the property market ever does mount a recovery then I suspect the repossession rate will soar.

Bipolar Joe

I don't get it.

EDIT: Also, no, anything that means less incoming money for rich people will never take off here because we're a greedy nation of assholes, fuckups and criminals.

davet82

Bipolar Joe wrote: »

we're a greedy nation of assholes, fuckups and criminals.

i dont come under any of them headings... maybe i was adopted?

ScumLord

Bipolar Joe wrote: »

I don't get it.

Seize houses off banks like you would seize houses off ordinary people so you could build some public works like a road. The government always pays what it thinks the houses are currently worth not what the people who own the property think it's worth.

I think it's a good idea. I have no time for the banks they'll cry over any little thing like their weak puppies that just need a cuddle while stabbing every one in the back.

I believe this whole recession was simply a power and resources grab by the elite group. The spread of wealth that was there has now been consolidated into the hands of a much smaller group.

Bipolar Joe

davet82 wrote: »

i dont come under any of them headings... maybe i was adopted?

We are all one of the three, just because you don't recognise it in yourself doesn't mean you don't have it.

ScumLord wrote: »

Seize houses off banks like you would seize houses off ordinary people so you could build some public works like a road. The government always pays what it thinks the houses are currently worth not what the people who own the property think it's worth.

I think it's a good idea. I have no time for the banks they'll cry over any little thing like their weak puppies that just need a cuddle while stabbing every one in the back.

I believe this whole recession was simply a power and resources grab by the elite group. The spread of wealth that was there has now been consolidated into the hands of a much smaller group.

That sounds too good for the little guy. There's got to be some unholy catch here, like if you opt for it you get AIDS or something.

davet82

Bipolar Joe wrote: »

We are all one of the three, just because you don't recognise it in yourself doesn't mean you don't have it.

As Tonto would say 'who's we pale face' :cool:

moneymad

Does the tax payer pick up the difference?

joseph brand

starbelgrade wrote: »

These days it seems that the most novel approach to trying to sort out the problems of loan repayments & negative equity is for those who borrowed the money to actually pay it back.

Won't somebody think of the banks. I wonder how they are coping now that the LIBOR scandal is in progress. There will be wrist-slaps all round and then 'back to business'.

I know some people enjoy seeing people like Seanie Fitz get hauled in before a court, but I'm sure you agree with me here, "They're just jealous". :rolleyes:

ScumLord

moneymad wrote: »

Does the tax payer pick up the difference?

Why would they? The government is using a loophole to buy the houses at their current value. Only the banks get screwed.

joseph brand

Bipolar Joe wrote: »

That sounds too good for the little guy. There's got to be some unholy catch here, like if you opt for it you get AIDS or something.

I suppose there will be some money to be made. But you have to see that keeping residents of a town from going under is in the interests of the town, the residents and local businesses.

The problem is, if you bought a house for $300,000 then, it might be worth $200,000 now. When you’re $100,000 in debt, you’re not rushing out to buy washing machines, new cars, new DVD players. As Paul Krugman put it in his column today:

There’s no mystery about the reasons the economic recovery has been so weak. Housing is still depressed in the aftermath of a huge bubble, and consumer demand is being held back by the high levels of household debt that are the legacy of that bubble.

And people still try to blame the home owners for buying in the boom, all the while attributing NO blame on auctioneers, banks and politicians (Experts).

It's like blaming a rape victim. Blame the rapist!

Bipolar Joe

davet82 wrote: »

As Tonto would say 'who's we pale face' :cool:

Me, I'm a fuckup. Pick one and run with it. It's fun having an identity, makes decisions that much easier.

Bipolar Joe

joseph brand wrote: »

I suppose there will be some money to be made. But you have to see that keeping residents of a town from going under is in the interests of the town, the residents and local businesses.

I'd really, really like it to be true and work exactly like that. I think I'm just cynical because of how I see things tending to work out. This seems to be like a magic trick, making debt disappear. Debt is money, they're going to make that go away? Copperfield couldn't really fly, he was just really could at making it look like he could.

CucaFace

ScumLord wrote: »

Seize houses off banks like you would seize houses off ordinary people so you could build some public works like a road. The government always pays what it thinks the houses are currently worth not what the people who own the property think it's worth.

I think it's a good idea. I have no time for the banks they'll cry over any little thing like their weak puppies that just need a cuddle while stabbing every one in the back.

I believe this whole recession was simply a power and resources grab by the elite group. The spread of wealth that was there has now been consolidated into the hands of a much smaller group.

Where would our Govt get this money in the first place to buy these houses at the reduced rate?

Thud

it couldn't work here because most of the banks that gave mortgages here are owned by the government so they'd essentially be giving themselves(as the banks) a bad deal on the houses so banks would need further recapitalisation to stop them going bankrupt which would need to be funded by the taxpayers....

...it's different in this case because the Banks involve in this area are most likely not owned by the government

ScumLord

CucaFace wrote: »

Where would our Govt get this money in the first place to buy these houses at the reduced rate?

Well it's an American article but our government would have this kind of money, seeing as it's essentially an investment as the government would be buying up the houses and selling them on again to 3rd parties. But as Thud says I don't know it would work here with the banking mess we have.

CucaFace

ScumLord wrote: »

Well it's an American article but our government would have this kind of money, seeing as it's essentially an investment as the government would be buying up the houses and selling them on again to 3rd parties. But as Thud says I don't know it would work here with the banking mess we have.

Even if the banks here weren't in a mess, our Govt would have to go and get the funds to buy these houses off the banks.

Yes they would then get paid back this money, over a long period of time from the mortgages, but let’s be honest we don't even have the funds to run the country day to day, never mind go and get more loans and act as a bank.

Not that we would actually be able to go and secure these funds to do this anyway.


Any money our Govt gets that isn't being gobbled up by the IMF should only be used to create jobs.

ScumLord

CucaFace wrote: »

Yes they would then get paid back this money, over a long period of time from the mortgages,

You seem to have missed the selling onto third parties part of my post.

As far as I can see the point of this is to take the houses off the banks at a reasonable price and then sell the house to another company that will continue the mortgage at the houses actual value. The people in the house still pay their mortgage, a bank will still make money off the deal and the state doesn't need to hold onto anything.

They may not even have to spend any of the states money. If they have a lender lined up to take the mortgage over they can just take a finders fee and let the new lender pay the money to the old lender.

Even if this became a serious threat you might see the old lender decide it's better to reduce the mortgage so they can keep the payments coming in.

moneymad

ScumLord wrote: »

You seem to have missed the selling onto third parties part of my post.

As far as I can see the point of this is to take the houses off the banks at a reasonable price and then sell the house to another company that will continue the mortgage at the houses actual value. The people in the house still pay their mortgage, a bank will still make money off the deal and the state doesn't need to hold onto anything.

They may not even have to spend any of the states money. If they have a lender lined up to take the mortgage over they can just take a finders fee and let the new lender pay the money to the old lender.

Even if this became a serious threat you might see the old lender decide it's better to reduce the mortgage so they can keep the payments coming in.

Where is the debtor ie the bank going to come up with the rest of the cash for the mortgage you just cut in half?

CucaFace

ScumLord wrote: »

You seem to have missed the selling onto third parties part of my post.

As far as I can see the point of this is to take the houses off the banks at a reasonable price and then sell the house to another company that will continue the mortgage at the houses actual value. The people in the house still pay their mortgage, a bank will still make money off the deal and the state doesn't need to hold onto anything.

They may not even have to spend any of the states money. If they have a lender lined up to take the mortgage over they can just take a finders fee and let the new lender pay the money to the old lender.

Even if this became a serious threat you might see the old lender decide it's better to reduce the mortgage so they can keep the payments coming in.

What you are really doing here I think is just transferring the negative equity debt onto the bank from the home owners.

They would have purchased the original debt at a higher cost day one from another bank and would still owe this money back to them.

As much as many hate the banks, we need them to be viable in order to start loaning money into the economy to hopefully help create jobs. This would make them more insolvent than they already are.

Unfortunately there is no easy answer to this financial mess, or else I would imagine it would have been thought of already by the many economists worldwide who are all studying this.

ScumLord

CucaFace wrote: »

What you are really doing here I think is just transferring the negative equity debt onto the bank from the home owners.

Yep, the people that caused the problem should pay for their mistakes.

As much as many hate the banks, we need them to be viable in order to start loaning money into the economy to hopefully help create jobs. This would make them more insolvent than they already are.

They need. We don't need. I think the banks are just abusing the system for their own gain and it's not in the benefit of the majority of people. They invent money out of nothing and treat ordinary people as cash cows. I don't like the system, I don't support it and I don't think we should accommodate their money spinning con.

Unfortunately there is no easy answer to this financial mess, or else I would imagine it would have been thought of already by the many economists worldwide who are all studying this.

There are answers the thing is they don't allow banks to make obscene profits off ordinary people.

Am I the only one who thinks this sounds suspiciously like NAMA?

State body buys the trouble loans from banks at a discount (long term value or whatever they want to call it) then either collects the loans, gets them to refinance or forecloses. The only difference is that here we had to shore up the bank's capital after buying the loan at a discount.