Obama wants to reduce mortgages for unemployed homeowners

March 26, 2010 by · Leave a Comment
Filed under: Policy News 

This is not good news for the holders of many of these mortgage bond holders that are expecting payments from these financial instruments.  These efforts are still focusing on trying to support prices at still elevated levels.  If you want a recovery, lets these homes foreclose and have the pricing fall to fair market value which would be closer to 1.5 to 2 times the yearly income of the area you live in.

This is just punishing people who did not participate this our speculative housing craze and were prudent and saved their money to have a real stake in their home purchase.  Obama’s heart is in the right place wanting to help homeowners but if he wants to help us all, let market forces do what they do best…determine prices.

First American stated is very clear, “The problem of “underwater” borrowers has bedeviled earlier administration efforts to address the mortgage crisis as home prices plunged. Underwater borrowers now make up about a quarter of all homeowners, according to First American CoreLogic.”  Translated, this means that homes are overpriced and until the principal is reduced, they will continue to create problems for the U.S. real estate market.

Washington Post – The Obama administration announced new ways Friday to tackle the foreclosure crisis, in part by requiring lenders to temporarily slash or eliminate monthly mortgage payments for many borrowers who are unemployed.

The Treasury Department said adjustments to the Home Affordable Modification Program and the Federal Housing Administration program would help “responsible homeowners who have been affected by the economic crisis through no fault of their own” by expanding flexibility for mortgage servicers and originators to assist more people who are unemployed and who have been hit by falling home values.

“These changes will help the administration meet its goal of stabilizing housing markets by offering a second chance” to as many as 3 million to 4 million struggling homeowners through the end of 2012, Treasury said in a statement. It said costs would be shared between the private sector and the federal government, with the federal costs funded through a $50 billion allocation for housing programs under the Troubled Asset Relief Program.

Source: Washington Post

Donald Kohn to Leave Fed at End of Term as Vice Chairman

March 2, 2010 by · Leave a Comment
Filed under: Policy News 

Who Obama chooses as his replacement will be very important and is to be watched.  Vice Chairman Kohn has been an establishment at the Federal Reserve for over four decades.  Even though I personally have issue with many of the policies responses in crisis, Donald does have a wealth of knowledge after being near the helm for over 40 years and they will lose some of that wisdom when he steps down at the end of his term.  Mr. President choose wisely, the markets will be watching very closely.

Vice Chairman of the Fed

Vice Chairman of the Fed

Business Week –  Donald Kohn will leave the Federal Reserve at the end of his four-year term as vice chairman after helping Ben S. Bernanke and Alan Greenspan steer the U.S. through recessions and crises.

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Freddie Mac ends buying interest-only loans in September

February 26, 2010 by · Leave a Comment
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It is surprising Freddie was actually purchasing these loans in the first place.  I would automatically assume a interest only mortgage was not used by a first time home buyer and more likely used by a speculator that was assuming appreciation through a refinance or flip on the sale.  Maybe I am wrong but that seems pretty close to the case.  We do not need to be using taxpayer money to support this type of activity.  We need to help people trying to stay in there home that intend to stay there.

Reuters – Freddie Mac, the second largest purchaser of U.S. residential mortgages, said on Friday that it would stop buying and securitizing all interest-only mortgages because of the poor performance of those loans.

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Feinberg Says He Spoke With Goldman Sachs CEO About Compensation Plans

February 8, 2010 by · Leave a Comment
Filed under: Policy News 

It is good we are seeing more compensation that is based on performance of the stock of a firm and not large cash payments that could encourage one-time bumps in earnings for bonuses even if they are putting the firm into more risk.   Over time this will also help shareholders because everyones goals will be much more aligned and investors can have more confidence investing in these firms for the long-term, opposed to speculating.

Bloomberg – Kenneth Feinberg, the U.S. special master on executive compensation, said Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein consulted with him on the firm’s pay plans and adopted his “prescriptions.”

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Ex-Fed Chairman Paul Volcker to urge curbing risky trading by commercial banks

February 2, 2010 by · Leave a Comment
Filed under: Policy News 

I fully support Mr. Volcker’s stance on this issue.  Even though it is extremely profitable for commercial deposit taking banks to do trading on their own books, they should either convert into a investment bank or stick to lending which is still very profitable if done properly.  As I have stated before on here, our commercial banks should be our most risk adverse institutions and that is why prudent regulations are needed and should be in place to limit this.

Investment banks are on the other hand, not regulated very much so they are allowed to make very risky trades and profit greatly.  Conversely, if they make bad choices they should be allowed to fail without the same assistance that our vital commercial banks get if we have a classic “run” on the bank.

Washington D.C., Reuters – White House economics adviser Paul Volcker will urge Congress on Tuesday to rein in risky investing by big banks to help prevent them becoming “too big to fail,” according to testimony obtained by Reuters.

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