Daily Show: Mortgage Bankers Association Strategic Default

[her209]

http://www.nytimes.com/2010/01/10/magazine/10FOB-wwln-t.html

The Way We Live Now
Walk Away From Your Mortgage!

John Courson, president and C.E.O. of the Mortgage Bankers Association, recently told The Wall Street Journal that homeowners who default on their mortgages should think about the “message” they will send to “their family and their kids and their friends.” Courson was implying that homeowners — record numbers of whom continue to default — have a responsibility to make good. He wasn’t referring to the people who have no choice, who can’t afford their payments. He was speaking about the rising number of folks who are voluntarily choosing not to pay.

Such voluntary defaults are a new phenomenon. Time was, Americans would do anything to pay their mortgage — forgo a new car or a vacation, even put a younger family member to work. But the housing collapse left 10.7 million families owing more than their homes are worth. So some of them are making a calculated decision to hang onto their money and let their homes go. Is this irresponsible?

http://www.thedailyshow.com/watch/thu-october-7-2010/mortgage-bankers-association-strategic-default

:hmm: So what kind of message is MBA sending? Its okay for businesses/organizations to do it but irresponsible for normal people to do it...?

 

[Vette73]

Can;t see video at work but this happened early this year, has it been updated or the Daily show is really behind.

http://mortgage-mod-monster.com/str...mortgage-bankers-association-but-not-for-you/

 

[her209]

Video works fine for me

 

[Vette73]

Video works fine for me

facepalm...

"Can't see video at work..."

 

[Jhhnn]

Great video. Moralistic double standard for the win!

 

[Circlenaut]

I just saw this. And whose the one that prevented Americans from being further fucked by a late-night bill? Oh let me guess that Muslim Hussein Obama. Seriously if this country elects another republican president, we are done for. The tea party is nothing but a psuedo patriotic front end for corporatism. The sad part is, by using the lowest common denominators in our society, they might actually succeed.

 

[UglyCasanova]

I never understood how anyone perfectly able to pay off a loan can not do so. I hear about the homeowners who bought a house that significantly dropped in value over the past 2 years walking away. They sign a binding contract and receive the money to purchase their house for whatever they agreed it was worth at the time with the obligation to pay it back in the future. House goes down in price so quit paying?

2 Scenarios: The house was for them to live in, in which case it shouldn't matter that the value went down because they bought it at what they deemed was the fair price and at the end of the day (or 360 months) they have a house to show for it, which is exactly how they planned it out to be from day 1.

The other scenario is the house was an investment, the value took a dive, and they got burned. With investment comes risk, and with risk comes the possibility that you will not come out ahead. Just because you lost on your investment shouldn't mean that you don't have to fulfill your side of the deal.

 

[bfdd]

I never understood how anyone perfectly able to pay off a loan can not do so. I hear about the homeowners who bought a house that significantly dropped in value over the past 2 years walking away. They sign a binding contract and receive the money to purchase their house for whatever they agreed it was worth at the time with the obligation to pay it back in the future. House goes down in price so quit paying?

2 Scenarios: The house was for them to live in, in which case it shouldn't matter that the value went down because they bought it at what they deemed was the fair price and at the end of the day (or 360 months) they have a house to show for it, which is exactly how they planned it out to be from day 1.

The other scenario is the house was an investment, the value took a dive, and they got burned. With investment comes risk, and with risk comes the possibility that you will not come out ahead. Just because you lost on your investment shouldn't mean that you don't have to fulfill your side of the deal.

good post and I agree.

 

[theeedude]

The other scenario is the house was an investment, the value took a dive, and they got burned. With investment comes risk, and with risk comes the possibility that you will not come out ahead.

This applies to the lender too, for them, buying a mortgage was an investment, and with that investment comes risk that the home owner will default and you won't come out ahead.

Just because you lost on your investment shouldn't mean that you don't have to fulfill your side of the deal.

Unless you want to default and face the consequences. When deal was negotiated, both sides were aware that this would be an option, so it is part of the deal.

 

[Dekasa]

This is true, defaulting is part of the contract. While typically it's not really an option because it's a huge loss, in the case of the house losing massive value, it becomes better to default + buy a different house for less than you owed on the original property.

And with a loan you're contractually obligated to pay it... or go through whatever provisions happen when you default.

 

[Jhhnn]

And with a loan you're contractually obligated to pay it... or go through whatever provisions happen when you default.

There it is, and even the Mortgage Bankers' Association agrees, obviously...

 

[manimal]

If you look at a state like Florida a large portion of the Mcmansions that were foreclosed were walkaways by rich people who had a second or third home. A friend of the family walked away from a house that was worth 40 percent of what they agreed to two and half years earlier. Rich people are walking away from these investments all the time now...

 

[Pulsar]

I've seen it happen.

I'm upside down on a fairly modest house. If I was able to sell, I could purhase a house twice that size for the same payment with a lower interest rate. I've never missed a payment, etc. But for all that, the mortgage companies won't let me refi BECAUSE I'm upside down. (houses have dropped an average of 36% in my market).

On the otherhand, my wife's friend bought a house with her husband in just her name 8 years or so ago. She declared bankruptcy and they walked away, then bought a new larger house in his name at a lower rate. They put 20% down then took out a home-equity to furnish it.

It just drives you nuts. They may get their in the end, but I seriously doubt it. Even if they bankrupt themselves complete and save zero dollars, the government programs will pick them up and pay for their healthcare, food, etc when they are older.

What's the motivation for paying your bills and being responsible when you know they'll always pick you up when you fail?

 

[BoberFett]

I just can't seem to find any spare tears for the banking system.

 

[Dekasa]

All things considered, I don't understand why a bank wouldn't refinance or lower the principle on a house that's upside-down. I mean, defaulting is far and away a good thing for the bank to go through, and while it looks bad on your record, it costs the bank a lot of money. Being able to go back and forgive part of the principle (even if the house is still upside-down barely) seems like it would be good business on the part of the bank and would definitely make homeowners happy (those that lost big).

 

[Slew Foot]

F the mortgage banking assholes. If you dont want your POS shit house that dropped in value a ton, let them eat it. If they wanted you to stay there in the first place, they would have made you put a down payment in.

 

[Jhhnn]

What's the motivation for paying your bills and being responsible when you know they'll always pick you up when you fail?

If nothing else, it'll be because "they" won't lift you up very high at all. If you're lying face down in 3" of water, they'll flip you over on your back, and that's about it.

 

[Jhhnn]

All things considered, I don't understand why a bank wouldn't refinance or lower the principle on a house that's upside-down. I mean, defaulting is far and away a good thing for the bank to go through, and while it looks bad on your record, it costs the bank a lot of money. Being able to go back and forgive part of the principle (even if the house is still upside-down barely) seems like it would be good business on the part of the bank and would definitely make homeowners happy (those that lost big).

It doesn't cost the bank anything, because the mortgage has been securitized. It's the investors who get screwed- the servicer makes money no matter what.

Depending on the terms of the MBS, the investors may have already lost everything, and the resale of a foreclosed property can apparently enrich the servicer, often the party who originally issued the MBS.

This whole foreclosure imbroglio shows just how fraudulent the whole thing really is-

http://www.scribd.com/doc/38654717/...Nation-Star-Aurora-Bac-Citi-Us-Bank-Lps-Et-Al

see item #125-

Many of the MBS/Trusts were covered by an insurance policy,
commonly referred to as a Derivative or Collateral Contract. These Derivative Contracts are not recorded or regulated by the SEC. Upon information and belief, the Defendants have attempted to receive distribution, fees or proceeds or have received distributions from the liquidation of the Plaintiffs or the putative class members homes, when the actual beneficiaries under the homeowners’ loans, the shareholder/investors have been made whole by a Derivative Contract. In other instances, the MBS has been “closed” months or years prior. Funds collected from the loans allegedly within the MBS, ar no longer being paid to the investors, but are an unearned windfall to the servicer. Additionally, there is no contract between the investors and the foreclosing entity which would allow them so act as a Plaintiff in a Foreclosure even when the MBS is not shut down.

It's a very long read, but worth the effort for anybody who wants to understand what happened.

As I've offered many times, it was the most incredible looting spree in the history of finance, with complicity at the highest levels of govt. Borrowers are mere pawns, chumps, because the real target was investors, because they had the money. Investors like pensions, endowments, 401K's, sovereign wealth funds and all the others who were active in what once was a very staid and boring market, bonds.