Bernanke wants the banks to do what?!

[amy5708]

Um, now I wish I had a huge mortgage!

Did I hear the guy right when he asked banks to forgive part of the mortgage?

Just right it off? Yeah, I bet the banks will be jumping on board this one!

 

[ziggy29]

Meanwhile, all those people who were responsible, didn't borrow more they could afford and didn't fall prey to those exotic interest-only, little-down ARMs get to pay for their prudence. What a country.

 

[Retire Soon]

Quotes from a related Los Angeles Times article:

"The ... decline in equity reduces both the ability and the financial incentive of stressed borrowers to remain in their homes."

"A troubling new phenomonon is is currently at work , in which people abandon their homes rather than make payments on a property that is worth less than they paid for
it".

"By the time the housing slump is over nearly 14 million homeowners, or 16%, will have zero or negative equity."

"The goverment is going to have to need to become bolder and put taxpayer money on the line to keep some of thes homeowners in their homes." (scary isn't it?)

"Increasing numbers of borrowers especially those who paid very little or nothing down or who refinanced out all their equity, and who live in areas of steep home price declines... are walking away from their homes."

Sign Up

 

[Rustic23]

Seems there is a partial solution available for banks. As I see it, there are three types of situations out there.

1. People are need to sell do to a move.
2. People are need to refinance and home has no equity
3. People bought more home than they could afford and can't make payments

For 1 and 3, I am not sure there is a good solution. For 2, however, it would seem that the bank could refinance the total debt, with the value of the home at one interest rate, and the difference of the value and the debt at a higher rate, due to more risk. With lower interest rates on the majority of the note, their monthly payments may actually decrease. This may also work for some folks in situation 3. Banks would not have to lower the amount owed, folks that stay in their homes long term could refinance when the loan to values are normal again.

 

[freebird5825]

re "The goverment is going to have to need to become bolder and put taxpayer money on the line to keep some of thes homeowners in their homes." (scary isn't it?)

none of my taxpayer money is available for that.

can i go out and have a reall fling with my credit card? will they also pay off everyone's credit cards each month while they're at it? where do i send the bill?

this stuff takes me real close to a proper rant. LOL

 

[Notmuchlonger]

re "The goverment is going to have to need to become bolder and put taxpayer money on the line to keep some of thes homeowners in their homes." (scary isn't it?)

none of my taxpayer money is available for that.

can i go out and have a reall fling with my credit card? will they also pay off everyone's credit cards each month while they're at it? where do i send the bill?

this stuff takes me real close to a proper rant. LOL

I would like to be reimbursed for my paper stock losses since last November. Come on where is my guvmint bailout.

 

[freebird5825]

I would like to be reimbursed for my paper stock losses since last November. Come on where is my guvmint bailout.

thank you for finishing the rant for me. LOL

ditto!!!

 

[emilylynn]

What I understand Bernake to be suggesting is that the banks buy these loans back from the investors and then enter into whatever restructuring makes sense to preserve the value of their assets. This, for the first time, would be a true market solution--quite the opposite of the taxpayer bailout that has been bandied about.

 

[MichaelB]

Better now than later

Keeping negative equity on the books for both borrowers and lenders is one of the reasons behind Japan's lost decade. He's not asking for a bailout, he's acknowledging that this is an anchor around our whole economy and it needs to be dealt with - the sooner, the better.

Bernenke's leadership skills are in question right now, but not his knowledge or understanding of our financial system weakness.

Michael

 

[ziggy29]

Keeping negative equity on the books for both borrowers and lenders is one of the reasons behind Japan's lost decade. He's not asking for a bailout, he's acknowledging that this is an anchor around our whole economy and it needs to be dealt with - the sooner, the better.

Bernenke's leadership skills are in question right now, but not his knowledge or understanding of our financial system weakness.

This I actually agree with. But if he panics the market every time he speaks, maybe he should be quiet and work discreetly with affected investors, lenders and homeowners.

Ideally a negotiated easing of some of the terms of these mortgages to avoid foreclosures would help matters. If this is all the government does, I think it's worthwhile (even if I don't like it philosophically, it's practical).

 

[Notmuchlonger]

thank you for finishing the rant for me. LOL

ditto!!!

My pleasure

 

[freebird5825]

wait til you see Tax Rant II, coming soon to a theatre near you.

it will happen when i'm finally done with my taxes...i'll be sure to leave you a good opening line...LOL

 

[Freein05]

Banks are required to write down the value of a loan to it's current market value. A corporation is also required to write down the value of investments to current market value so what Bernenke is suggesting probably already been done by the investor or bank. A lender could structure a write down of a mortgage so that the borrower and the lender could share in equity increase in the future.

I am also guessing that Bernenke's comment that we will probably see small bank failures this year has a lot to do with bank regulators requiring banks to write down the value of loans. These banks would than have to get new equity. In todays financial environment that would be almost impossible which would lead to the larger number of bank failures.

I like Bernenke's suggestion it does not require a taxpayer bailout. I think one reason lenders don't like it is they are hoping for the taxpayer to step in. Remember what I said before the lenders have already written down the value of these loans. That is where a lot of the losses they are reporting is coming from. They have had to increase loan loss reserves to cover not only the real losses but the potential losses.

 

[chinaco]

I think the banks will wait for the government to do something. It is an election year.

 

[deserat]

Just to add another twist (or hijack the thread!)- did anyone read the "Mark to Market" op-ed in the WSJ the other day? Seems the mark-downs are being done but some of the CEO's are mumbling about the 'artificiality' of it and expect mark-ups soon.

Back on thread - I steadfastly reject a taxpayer bailout of any kind for the current 'market woes.' The percentages of people who are actually in the dire straits being depicted are not as large as the amount of ink and political attention being directed to them.

Awaiting the tax rant.....

 

[Texarkandy]

I think if I were a bank I would work to restructure loans as necessary so the occupants of the bank's house could continue to pay for as long as necessary to earn ownership of the house.

(& if that makes them vassals of the bank for life - so be it)

 

[liveitup]

We need to do something to stop the falling Knife.Bernanke's proposal does nothing but give some people an equity position at the cost of the banks.In a matter of months they could be flat to upside down all over again.

I feel like the only thing that can get us out of this mess in the near term is lower interest rates,which helped ignite the housing boom in the first place.

I realize that it's easier said than done,but imagine what a 4.25% 30 yr fixed rate would do for this market??With the tighter lending standards,more people would qualify for loans,people would be put back to work and the economy receive on hell of a spike in the short term.

Just don't overdo it.