I discovered your paper while searching today for the approximate aggregate "hit" to banks' capital that would result were they to write down their home loan portfolios from "book" value to FMV. The similarities between your ideas relating to the mortgage crisis, which were e-posted a few days before I expressed my views in a letter that I e-mailed to a San Jose Mercury News financial reporter, virtually jump from the page. I am greatly encouraged that, contrary to my insular belief, my “take” on solving the “underwater” mortgage dilemma is far from original and has actually been implemented. With your permission I will use your posting in upcoming meetings I have scheduled with my Congressional representative, Jerry McNerney, and my California State Assembly representative, Joan Buchanan. The odds are long that any legislator will support an initiative not coated with a four-figure contribution to his/her campaign. But we can hope.
In a separate e-mail I am forwarding the e-mail that I sent the reporter and the SignOn petition that I am circulating.
Thank you for taking the stance that you have.
Howard T. Goodman
871 Richard Lane
Danville, CA 94526
(925) 820-6437
howard t. goodmanof CA9:39PM April 11, 2012
Author,
You (or your editor who writes the headlines) are assuming the "fix" to the "underwater mortgage problem" is to reduce the water level. This is deflationary = recession = even more unemployment. It's a vicious cycle.
You haven't explained how the shared appreciation is any better logical incentive for the underwater mortgagee than stop payment + foreclosure option. Besides questionable legality, it is complex and would be difficult to administer. Home value appreciation would be based on - what? The appraisal? You must know, or have read about the questionable appraisal practices that were (and still are) part of the mortgage process. This deal does not sound attractive to a logical borrower, given the available alternatives.
What you are describing is lucrative for banks, not good for the resident.
A better option is what is already happening across US - owner-occupied homes are converting to rentals in areas where people choose to live (= where the jobs are). Even people who can afford to buy homes are choosing to rent. Why buy an asset that has a high probability of decreasing in value in the near term?
The best solution is get people back to work, reduce unemployment, reduce debt. Market values will work themselves out. Banking will decline, but not cease to exist.
Fielderof CA3:26PM February 09, 2012
They were not "mistakes". They were criminal acts...fraud. They should be prosecuted rather than rewarded with OUR money. Banks that committed these frauds and/or failed in their fiduciary responsibilities should suffer the fate they created for themselves. If that means they go bankrupt, that means they go bankrupt. Others will buy the pieces and go on. This socialism for the rich MUST END!!!
Paying MY Mortgage of CT12:42PM February 09, 2012
John I understand what you are trying to accomplish with your article, and I do agree that there may be some forgiveness in some heavily distressed areas. What I believe you may have missed is what Fannie and Freddie are so very concerned about - if you open the door for mass forgiveness, when will it stop.
I have been working on a project that is starting to get some federal attention and it greatly minimizes forgiveness, reduces payments, and is financially beneficial to banks. It also requires that we eliminate the distressed properties from entering the marketplace with their highly discounted prices. That's right - the floor would be set, and the banks would be solvent. You can see an overview of what I have done at homevaluecrisis.blogspot.com
The goal of the blog is to have citizens contact their elected officials to start the conversation with us.
David DeBoisof WA5:35PM January 27, 2012
PASSING the losses onto someone else through PRINCIPAL REDUCTION will not solve the problem at all. That idea will not only not work and it can harm FUTURE homeowners by increasing down payment requirements, etc. I could go on and on about the ramifications of this. Also how in the world could FNMA, FHLMC and FHLB (GNMA) even possibly cover these losses. Also the legality of that idea is in question to begin with. Shared equity appreciation on it's face seems to be a possibly better idea but that too has huge answered questions as well.
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howard t. goodman of CA 9:39PM April 11, 2012
Fielder of CA 3:26PM February 09, 2012
Paying MY Mortgage of CT 12:42PM February 09, 2012
David DeBois of WA 5:35PM January 27, 2012
John of OH 1:55PM January 27, 2012
ckubisz of NJ 12:57PM January 27, 2012