The US House of Representatives voted 188-241 to reject a measure that would have given bankruptcy judges the ability to reduce principal balances and change the terms of mortgages for the financially distressed homeowners.
first tuesday take: Apparently Main Street, and its hundreds of thousands of distressed homeowners, aren’t considered “too big to fail.”
It appears Congress means to continue turning a blind eye and crossing its fingers in hopes that Main Street’s foreclosure crisis will fix itself if kicked down the road long enough. They’ve apparently taken a page out of the lender’s “Extend-and-Pretend” book on this one.
Barring a market miracle (which no one is foolish enough to hope for except lenders, speculators and politicians), the distressed properties will continue to slowly turn into foreclosures, which will slowly be churned into more inventory to be slogged through in the coming months. With the more-than-likely slow job growth in 2010, where are the buyers to be found for this new glut of housing?
Perhaps it will take more foreclosures for these politicians to get off their (lender-funded) moral high-horses and make the necessarily difficult decision to restore cramdown authority to bankruptcy judges. Who knows — they might even remember that it’s the voting public, and not banks, who they’ve promised to serve…
For more information on the unemployment picture, see the first tuesday blog article Analysts see unemployment peaking this month.
Re: U.S. House Rejects Mortgage “Cramdown” Measure from Reuters and the New York Times
If you really want to see credit dry up – or become a gov’t only issue, then extend cram-down to our suicidal judicial system. What do you think lending rates will be on an unenforcable loan, assuming anyone was willing to lend $200,000 you to buy a house?
Play more chess, look more than one move ahead!
Have a problem letting Judges make these decisions, we need to own our decision to take on debt that don’t make sense, bailout just transfers peoples bad decision consequences to the rest of the people, not acceptable. A free market decision by lender to reset balance and terms makes sense in many cases, reduces loss in many cased, next door for closed at 213,000 balance, finally resold at 90,000 about 20 months later.
Rather than giving the power of “Cram Down” to bankrupcy courts” (most “distressed” homeowners do not, and will not want to go the bankrupcy path), I’d rather see the Real Estate industry praising the Wells Fargo strategy for dealing with their Wachovia inheritance. They are actively using “Cram Down” along with Loan Modification strategies, usually together, to provide long term solutions to for many of their defaulting loans.
With a long history of prudent and pragmatic lending policies Wells Fargo they are an excellent example of what the banks could and should be doing to both minimize their losses by keeping as many as possible of the problem loans viable. This is in direct contrast with the short sighted strategies being used by the majority of other banks with similar problems. These could most kindly be described as re-arranging the deckchairs on the Titanic.
Wells have also vastly improved the processing of Wachovia short sale contracts. They are now the most sensible and organized company in the busines today.
Bill
Like your articles. Son, Cullen, is at UCSB as a junior and leads the volleyball team #12.. Go Gauchos!
We have become a sorry lot in that the majority of US citizens no longer read. We have become a herd of “sound bite”, “talking heads” followers and see only what the corporations wish for us to see and hear and of course that is “give us the money”.
Woe is we!!!!!
You keep trying to help and don’t give up! Maybe someday a “plague” will level the corporate, souless system we have become!
Jerry Irons