Quote:
Originally Posted by sebastian_dangerfield
The chain of title scandals are side shows, and side shows the servicers would love to have us believe are the real problem with curing the housing market's ills (or at least a much bigger part of it than they actually are).
The real problem is even if fcs could slide through with no paper problems, nobody wants to buy the fucking shit. It's an inventory problem. The 800 lb gorilla no one discusses is the investors in the shit securities tied to a lot of these properties are going to take 40-70% losses on most of this shit. Nobody wants the mass realization of loss everyone knows is out there to hit in a wave. The thinking at the outset was, "Lets fc as we need to, and hopefully the housing market will rebound, the economy will rebound, and this problem will work itself out. Refis and buyers looking to grab discounts will swoop in. Why not? Rates are crazy low!"
Too bad the banks (who own the servicers) won't lend on this shit. Too bad nobody who could afford the monthly payment has 20% to put down.
Now the servicers are stuck with a scenario where the more they fc, the more they debase their own inventories. There is no rebound, there is no wave of buyers. There's everybody who might be a buyer/speculator waiting, because we all know, there's a monster loss out there the servicers are trying to ease through the system slowly over time, and that prices are not going to stabilize for still many more years.*
Shiller's wrong. The problem isn't too many people believing there'll be a better deal tomorrow. The problem is too many people rightly believing there will be a better deal tomorrow, and too much quick information proving anyone taking a contrary view is a clueless cheerleader.
We need a mass workout. Fuck moral hazard. Call it "Mortgage Court." Put the borrowers in a room with representatives of the servicers with actual authority and force the parties to work it out.
*Geographically, they will in certain areas, and at certain price points. But we're talking macro, so I'm going wide.
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Yep.
There are people trying to figure out an effective, enforceable way to split the existing notes, lien stripping the 1A down to the current value of the house and holding 1B as a balloon-type mortgage, due on sale for an amount greater than the 1A loan amount (basically betting on inflation), with some split to the HO. The intent would be to buy a portfolio of non-performing loans for, say 40 cents, and get them back to performing on the first 45-50 cents (which is about what the collateral is worth). Problem is, you need to *know* that you have no enforcement risk, minimal bankruptcy risk, and you can't deal with 50 jurisdictions-->you need a federal law that messes with a genuine state law issue. But, if that could get working, we'd clear a lot of the f/c backlog.
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