February 25, 2010

Lenders (And The Market) About To Be HAMPstrung?

"The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program."

Obama May Prohibit Home-Loan Foreclosures Without HAMP Review [Bloomberg]
Insight Into The Inevitable Once Again? [SocketSite]

First Published: February 25, 2010 12:20 PM

Comments from "Plugged In" Readers

This could serve two purposes :

1. use HAMP allow troubled homeowners to recover
2. throttle the foreclosure rate by limiting the rate that the HAMP reviews can be completed.

The second purpose could create a bottleneck that prevents a huge wave of foreclosures. Perhaps that is the real purpose here. Even if every foreclosure is not approved for HAMP, this order would limit the number of foreclosures appearing on the market to whatever the throughput of the HAMP office can handle.

Posted by: The Milkshake of Despair at February 25, 2010 12:39 PM

This was all mention in the WSJ earlier in the week in a story titled "U.S. Weighs Changes to Mortgage-Relief Program":

http://online.wsj.com/article/SB10001424052748704454304575081841444972582.html

Some of the ideas are to allow a 30 day appeal period, among other things.

I'm with Milkshake on this one. This just slows down the process (which is all that HAMP was really meant to do anyway as far as I can tell). The WSJ article mentions the bottleneck that HAMP review causes.

It'll be interesting to see the Feb numbers on HAMP when people are being forcefully booted from the program for being delinquent.

Posted by: sfrenegade at February 25, 2010 12:53 PM

This seems like a bad idea to me. It's not a solution to anything, just a delaying tactic.

Posted by: lyqwyd at February 25, 2010 1:00 PM

I think this is a good idea. After all the largess they received the banksters are doing everything except what the administration wants them to do. And they are thumbing their noses at requests for rationality by showering themslves in bonus dollars.

This mandates a little much needed sunshine into the foreclosure process. Plus, it's a nice poke in the eye to the banks from Obama.

Posted by: OneEyedMan at February 25, 2010 1:14 PM

it *is* a delaying tactic, and that is a very smart way to manage the issue here. A rate limiter is an effect tool to manage an aspect of a complex system. Remember, that the market is like a complex dynamic non-linear system. Its constantly changing, and thus a delay does not just "put off the inevitable" but rather you are fundamentally altering the dynamic process. That changes how the system evolves. In this case I think it is a good way to further stabilize the system by keeping the rate of foreclosures hitting the market low, so that we continue to gain further momentum on the recovery -- which will eventually become self fulfilling. Also, as the market recovers, some of these delayed foreclosures may start paying mortgages again, or start becoming "less underwater" and regain hope in keeping their homes....

steering a large complex non-liner system is always a funny looking process. Direct linear controls don't work (i.e the simple and "obvious" things to do are almost always dead wrong), which is why the public is so often confused....

Posted by: Big V at February 25, 2010 1:37 PM

Oh, my, God.

Obama is not poking the banks in the eyes . . . he's fellating them.

Obama is selling false hope to keep the suckers trapped in their home while the servicers get their fees and the government and banks don't have to realize their losses.ies out.

Posted by: SFHawkguy at February 25, 2010 1:43 PM

Who is this Obama fellow? Is he important?

Posted by: dub dub at February 25, 2010 1:56 PM

Talk is cheap.

In general I've learned not to listen to much of what Obama SAYS. Instead I look at what he does. He TALKS about a lot, and then most of it dwindles/dies as he has endless debate and compromise with his colleagues and adversaries.

The only way that this will ever happen is if the big money center banks want it to happen... delaying the foreclosures would allow them to continue keeping the impaired assets on their books with mark-to-fantasy valuations of being worth 100 cents on the dollar.

what is Obama going to do? Call another conference and be snubbed again when the bank CEOs don't even bother to show up?

My guess is that he is using his favorite polling method: floating an idea to Bloomberg/NY Times and see how the public reacts. If they react favorably, continue. If not, kill it.

Posted by: ex SF-er at February 25, 2010 2:40 PM

Pretty good assessment ex SF-er. One must look to Obama's actions and not his sweet talk.

But where I differ from you is that I don't think Obama is testing the waters in order to decide which decision to make. No, if he did he would be enacting much different policies--populist policies.

The real explanation is that Obama is actively deceiving people. He's lying. He's pursuing the same neoliberal policies that got us into this mess in the first place and he's simply the new hip packaging to sell it. http://www.guardian.co.uk/books/2010/jan/16/naomi-klein-branding-obama-america

In fact, Obama's a miracle to the bankers and the true owners of America--the top 1%. It was looking a little hairy there for a while but Obama managed to snatch victory from the jaws of defeat. He's getting exactly what he wanted: bailouts for the elite banksters while the middle class gets to pay the bills and a slow grind down. Obama's job is to obscure the beat down (kind of like buying a house but not knowing the true cost of ownership is). Hence, we get the bullshit and flim flam that Obama is obviously peddling. It's an act (Glenn Greewald shows how Obama and the Dems did this with health care: http://www.salon.com/news/opinion/glenn_greenwald/2010/02/23/democrats/index.html ).

At every opportunity Obama undercuts the arguments for real change. He hijacks the forces of change by adopting their language and their arguments. Then he screws them--all with a smile and sweet words, and the whole time insisting up is down and down is up and that he's trying as hard as he can and his heart is pure.

Talk to someone who got suckered into the Obama loan mod program. Obama made it seem like he was helping these people and going to get tough with the bankers when he had no such intention. He was simply leading the sheep to the slaughter. He suckered people into thinking the government was going to help. Instead the got the runaround from the servicers. It's like Obama was the set-up man. He approached the vic and made small talk and promises meanwhile his partner in crime was robbing the vic while he was distracted.

Look what Obama does. Not what he says. He's owned by the bankers.

Posted by: SFHawkguy at February 25, 2010 3:17 PM

Didn't some nutjob on here once predict that our benevolent central planners would try to ban foreclosures outright? And this on the remaining sliver of mortgages that they don't already control directly through the GSEs.

lyqwyd wrote, "It's not a solution to anything, just a delaying tactic."

What are you referring to, lyqwyd? This proposal, or the way we're generally running our economy?

Posted by: Legacy Dude at February 25, 2010 3:17 PM

"Didn't some nutjob on here once predict that our benevolent central planners would try to ban foreclosures outright?"

Yep, I remember Satchel making such a prediction Legacy Dude.

And he also predicted that the government would use the $8K tax credit as a carrot that was always just out of reach. It will always be just about to expire so you better hurry up and buy! Same with interest rates! The government is going to stop its support and rates are about to go up so you better buy!

This is terrible policy because America is better off having lower home prices. Especially when those prices are based on historical fundamentals. That's what lyqwy was referring too, imo. By trying to keep the bubble inflated we are delaying the correction and therefore everyone is paying a little bit more than they should while the bubble slowly deflates under the artful hand of our central planners.

We're probably better off ripping the band-aid off. A few people will really feel the sting but the majority are better off in the long run. Extending the pain only helps a very few who don't want the Band-Aid ripped off.

Posted by: SFHawkguy at February 25, 2010 3:37 PM

Foreclosure are the solution, not the problem.

Allowing the banks to not foreclose means that we'll be stuck with thousands of zombie banks for a decade or more while this housing debacle unwinds.

Meanwhile, we've had NO meaningful regulation to keep this from happening all over again. To the contrary, this seems to suggest that Obama wants to keep the bubble going for another decade.

Just sad.

Posted by: embarcadero at February 25, 2010 4:12 PM

embarcadero, not that I agree with what looks to be the policy goal here, but I don't think that they are trying to keep the bubble going. The bubble has already popped and they are trying to slow down the rate of deflation of the popped bubble.

And even though I disagree with the policy goal, having a moratorium on foreclosures is definitely a way to forestall price discovery. In fact, barring Nixon-style price controls I can't think of any other more effective method of doing so.

Frankly, the banks were doing a pretty good job of throttling the flow of foreclosures to the market to a slow and steady pace anyway, because they didn't want to recognize losses. So I can't get too upset about this program, because all it's going to do is formalize what was already taking place in an ad hoc manner.

Posted by: Brahma (incensed renter) at February 25, 2010 8:03 PM

According to the January HAMP report that anonn linked to last week there are 5.2 million delinquent loans and 70% of them don't even qualify for a trial modification. If that counts as their screening then that is plenty of inventory.

HAMP will have exhausted their mod candidates by summer at the present rate. The next program, HAFA, is a facilitated short sale program, not a loan mod program so I think this will turn out to be a nothingburger. Most likely just meaningless posturing by the administration.

Posted by: diemos at February 25, 2010 10:49 PM

"In general I've learned not to listen to much of what Obama SAYS."

You mean he's actually a LIAR?

Well, some of us had already figured that out before November 2008.

Posted by: Toady at February 26, 2010 7:17 AM

Politicians lying to us, huh? You really were ahead of the game if you figured that out in 2008, Toady ;)

Posted by: ljl10029 at February 26, 2010 7:50 AM

Stepping back for the moment from the political comments, I notice that we have strong opinions that 1) this move is a poke in the eye to bankers, and 2) this move is a sop to the bankers. It can't be both, can it?

Actually my gut feeling is #2. The administration may be helping the banks by preventing them from engaging in a race to the bottom. Clearing out their delinquent inventory might be good for any one bank but bad for the system if all the banks do it. And simultaneously it lets the politicians appear like they're helping the little guy. Double win!

Posted by: Po Hill Jeff at February 26, 2010 9:03 AM

Hmm...while I currently have no intention to default, if it turns out that this goes into effect and we end up with a 12+ month backlog of HAMP cases to be reviewed before foreclosures can be completed that certainly might lead me to change my mind. If I can get at least a year and a half of basically rent free living once I stop paying the bank I could pretty much recoup the 5% downpayment I have lost. This proposal has some merit.

Posted by: Rillion at February 26, 2010 9:20 AM

I'm not quite sure how this hurts the banksters, Po Hill Jeff. Delaying things just helps them continue to pretend to be solvent. I'm with embarcadero here -- foreclosures are the solution, and we need better banking regulation.

Posted by: sfrenegade at February 26, 2010 9:53 AM

Po Hill Jeff:

What you're saying makes sense and seems to match up well with Geithner's stated belief that a major part of the problem has been the panic selling and that a lot of the loans still have substantial value. And even if it is bad for the new buyers in the long wrong, it would look good. But who knows.

Posted by: ljl10029 at February 26, 2010 11:05 AM

Obama wants to reduce the number of people kicked out of homes between now and the November mid term elections. He will get support from the GOP incumbants since they don't want a lot of voters kicked to the curb either...

Posted by: FormerAptBroker at February 26, 2010 12:01 PM

And then the idiots wonder why banks are not lending any more...

Posted by: Geo at February 26, 2010 2:03 PM

I hear there is also a proposal being considered that would require selling realtors of REO properties to take a minimum of 4 photos for the MLS and attend a minimum of 1 open house in person.

Posted by: OneEyedMan at February 26, 2010 2:20 PM

If the government feels it absolutely has to mess with something I wish it would at least focus exclusively on job creation. People can cope with foreclosures if they still have their jobs.

Posted by: sid at February 26, 2010 8:25 PM

"This mandates a little much needed sunshine into the foreclosure process. Plus, it's a nice poke in the eye to the banks from Obama."

Ha Ha Ha. There is a sucker born every minute. The idea that Obama wants to poke the banksters in the eye is laughable.

Repeat after me, "Obama is not your friend". He doesn't care about you. He's lying to you. Any little crumb he deigns to give to the little guy you can bet your bottom dollar it actually helps the banksters out. The banksters are his friends. You are a sucker home debtor that he wants to fool.

Obama's loan modification scam is not much different than his campaign strategy; string suckers along with the promise of "hope" while the banksters ashake them down as much as they can.

Posted by: SFHawkguy at June 2, 2010 9:04 AM

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