“It’s hard to imagine a less-deserving group of victims: people who gambled during the housing bubble by purchasing homes with borrowed money that they knew or should have known they couldn’t afford, but who are now able to stay in the homes they should have never bought because of what amounts to paperwork errors on the part of the nation’s big banks.”
(TheNicheReport.com) -- That’s how Fox Business reporter, Charles Gasparino opened his column that appeared in the New York Post back on February 10, 2012. Titled, “A Deadbeat Bailout,” he was writing in response to the settlement agreement between 49 state attorneys general and the five largest banks that had just been announced.
“But that’s essentially what went down yesterday, thanks to the Obama administration’s latest re-election gimmick — the nationwide mortgage-foreclosure settlement.”
Now, I’ll bet you think I’m going to tear this guy apart for being such an insensitive idiot, right? Well, you’re wrong. In fact, I’ve decided that Charles is absolutely right on target.
Millions of middle and working class people, and some richer folks too, all decided at the same time that their lives were not exciting enough. They longed for the days when they were losing their retirement savings, investing in dot-com stocks pumped up by analysts paid for their favorable opinions. Good times.
They all got together and decided they would take up gambling in a much bigger way than ever before… they’d literally bet the farm. So, they started gambling with their entire net worth AND the homes in which they lived, and perhaps because they were new to the whole gambling thing… or maybe because they were following the lead of the bankers who also went broke… they lost their shirts and their farms.
Today, there are literally millions of them aimlessly wandering in the desert just like Kwai Chang Caine looking for justice…
Young Caine: Is it good to seek the past, Master? Does it not rob the present?
Master: Only banks may rob the present. You must rob the banks.
Caine: But we are deadbeats, what about a bailout?
Master: For that you must seek the one they call Obama.
Caine: But didn’t Obama bailout the banks?
Master: Yes he did my son… but have you not heard of the election?
Caine: No, Master.
Master: Well, when you can snatch the election from Obama’s hand, then you will receive the bailout.
Okay, Charlie… work with me here… you’re fluttering all over the place like Woodstock, that little yellow bird that hangs out with Snoopy in a Charlie Brown cartoon. And it’s not very becoming for a journalist of your stature.
Let’s start with your initial premise… it’s the “Obama administration’s latest re-election gimmick.” No question about it… you nailed that one. And the whole thing about how the administration “would like us to believe that the nation’s largest banks are finally paying for their bad behavior during the housing bubble and its aftermath, etc. etc.” Bingo… you nailed that part too.
After that, however, you started getting your facts all mixed up. For one thing, the banks haven’t signed any settlement agreement, and you had to know that. For another, the banks aren’t paying out $26 billion to anyone, under any set of circumstances. I think cash out the door is $5 billion, and if it reaches that amount, I’ll pick up a cake and celebrate.
Here’s how it breaks down… $4.25 billion for the states and $750 million balance to the federal government for whatever and who cares. Now, from the $4.25 billion you have to subtract the $1.5 billion that’s going to the deadbeats who lost homes in faulty and fraudulent foreclosures between 2008 through 2011.
And I’m with you on this “robo-signing” nonsense… I mean, the only reason they call it “forgery” is because someone forged someone’s signature… what’s the big deal about that? I mean, if I had a nickel for every time I forged an affidavit… I mean, grow up. And don’t even get me started on the whole ‘standing’ thing. Just because I can’t prove I own a house means I can’t evict the deadbeat living there? That’s just stupid.
Anyway, the deal is supposed to pay out $1,500 - $2,000 per deadbeat, and I realize that you and Dick Bove are concerned because you know these people are deadbeats, but apparently the Obama administration and the AGs do too.
Just consider that right around four million have lost homes to foreclosure during those four years. If each “victim” receives $1500, then that’s only going to cover one million of the four million deadbeats. To cover everyone equally we’ll be paying $375 each, which really isn’t bad for fraudulently foreclosing on a home.
And even if we assume that you’re right and the “fraud” being talked about was insignificant paperwork problems, I think that message is sure to be heard loud and clear whether someone gets $1500 or $375 after losing their house.
I’m not sure how to handle the five percent issue though. You said that, “95 percent of the “victims weren’t victims at all,” but that means five percent were? Well, that’s kind of a bummer. They got tossed out of homes, but really shouldn’t have? That’s hysterical… I hate it when that happens. LMAO. I guess it’s not that big a deal, I mean in 7-10 years they’ll be right back where they were. Hey, stuff happens.
I have no idea how they’ll divide the remaining $2.75 billion among the 49 states, evenly it’s about $56 million each. In California, that covers a little over one-half of one percent of the state’s prison population for one year.
My best guess is the states will end up taking whatever they get and putting it towards their huge budget deficits in 2013 and 2014. One state already said they’d be doing that, and you’ll no doubt be happy to hear that Ohio is going to use their share to demolish foreclosed homes.
I know you’re concerned about what we teach this generation of homeowners, because as you said, “If there are no consequences to risk, why not just roll the dice again and again?” Well, I can’t think of anything that’s more effective at teaching ex-homeowners a valuable lesson… I mean, if you get thrown out of your home, just so someone can tear it down… well, you know you’re a deadbeat for sure after that.
But, either way… whether the money goes to state budget deficits, or pays to tear down homes… or even if they end up sliding a few hundred bucks to an ex-homeowner once or twice, I really don’t think it’s anything to get all worked up over. I mean, yes… technically it’s still a bailout, but as bailouts go, it’s fairly meager.
Most importantly, the people that are being refinanced that are underwater aren’t the “victimized” deadbeats; you got this whole part wrong. The people that are being refinanced are current on their payments… they’re underwater, yes… but they’re current. Refinancing them is the right thing to do… if you’re the bank or maybe the government. For those homeowners, however, it’s pretty much the equivalent of handcuffing them to the bedframe and setting the house ablaze on your way out.
I know, they’re talking about refinancing, but lets see what happens when they’re presented with a refi in the amount of … $400,000… and the place across the street just sold for $178,000. You’d have to get me drunk before I’d sign that loan, and my guess is others won’t rush to sign theirs either.
The rest of the money, roughly $17 billion is supposed to go to foreclosure prevention, including principal reductions, but once again there are no rules or guidelines so I’d say we’re in very little danger of doing anything even remotely beneficial for deadbeats.
Besides, even if the government and the bankers, for the first time ever, actually fell into something in this regard, $17 billion would only give each of California’s deadbeats about $8,500, after which most would still be underwater by a couple hundred grand.
So when Big Dick Bove says: “What this settlement did was to help 1 million people who were deadbeats.” It’s not really the case. Okay, sure… maybe a few deadbeats are technically getting a tiny bit of help, but we’re pulling the rug out from under them before anything would rise to the level of true help. Let Dick know… I’m sure he’ll be relieved to hear it.
Also, I’m wondering something… when you say that, “foreclosures are a necessary ingredient to the housing market’s recovery,” how many do you figure we’re going to need to recover?
I only ask because we’ve had about 9 million so far, Amherst Securities says about 11 million coming. Do you think 20 million foreclosures, roughly one out of four mortgages in this country, will that be enough to get my equity back and put us on easy street once again?
If not, maybe we should start lobbying the Obama administration to extend that HAMP loan modification thing, because that sure was effective at generating foreclosures. Let me know your thoughts.
Martin Andelman is a staff writer for The Niche Report. He also writes an almost daily column on ML-Implode called Mandelman Matters. He also publishes a Monthly Museletter and you can follow “Mandelman” on Twitter. Send your responses to Martin@TheNicheReport.com.