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New MBS Liability Law: Good or Bad Idea?
invite response
2007 Apr 10, 5:08am 22,871 views 248 comments
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Your point sounds good, let’s look at it in detail. First, get one thing straight, renters are the end payers of property taxes not the landlords. Property tax is is just an operating expense to us, and we pass the costs onto you. Next, the argument higher taxes are needed to fund schools is propaganda. The lottery was supposed to fix all of that it’s failure is proof of what happens when you tax for the sake of taxing. Next, every few years we have bond measures which promise to be a cureall for schools, and when they pass it almost becomes a free for all, the following election there are even more bond measures.
California is something like 48th in spending per pupil when adjusted for cost of living. And yes, California is still growing, so we need to keep passing bonds to pay for infrastructure growth.
And no, you can't just "pass on" operating costs to tenants, if you believe that, you are not really a landlord. You get to charge what the market will bear, not what you need to cover your costs. And in rent-controlled areas, sometimes not even that.
sfbubblebuyer
2007 Apr 11, 4:40am
As a note, it should be obvious that I meant that he got the settlement if he walked, or he gets nothing if he keeps the house and takes the free refi into a sane loan.
Peter P
2007 Apr 11, 4:47am
Claim1: It purports to “protect†low-income seniors from being “thrown out into the streetâ€.
They can sell and live very well in luxurious assisted living condos. The one across from Stanford Shopping Center looks amazing.
Claim2: It purports to “protect†all homeowners from large tax hikes due to excessive inflation and speculative bubbles.
More incentives for residents to favor market processes and oppose NIMBYism. :)
Ideally there should not be a property tax. If there must be be let's make it a consumption tax and charge according to utility (e.g. rental) value.
Starting to look like a bailout might actually happen:
http://news.yahoo.com/s/nm/20070411/bs_nm/usa_subprime_congress_dc_1
Would Bush veto this?
Uh... I was in no way suggesting that Hi-Yield funds "appreciating" 25-30% in '02 was a stroke of genius. There's nothing to gloat about there.
Remember ( Randy H was in the trenches on this one) and telecoms were defaulting left and right. In fact defaults on non-investment grade bonds were running 10-12% at the time. And STILL people were throwing money at this!
What we keep glossing over is that w h e n you are retired you have to maintain at least a min. std. of living. If you don't have true critical mass... well then you have to chase yield (and in a lot of cases take on a helluva lot more risk than you otherwise would).
This is the REIC eating everyone else's lunch. Stock meltdown drove money into MBS/REIT's bidding up prices, driving down yields. Creating...? What? Even cheaper money for the REIC to feed from!
Blaming bondholders makes about as much sense as bayoneting prisoners for drinking out of a puddle on the Bataan Death March.
What we should do is make a Patrick wiki and whenever a newcomer veers into a discussion that we have already covered in detail, just point them to the wiki. If they have something to add to the topic that has not been already covered, they can add their two cents there.
Only half joking....
Peter P
2007 Apr 11, 4:52am
California is something like 48th in spending per pupil when adjusted for cost of living. And yes, California is still growing, so we need to keep passing bonds to pay for infrastructure growth.
Infrastructure can be privatized.
We should spend more on students but that can be financed by Casinos. Also, perhaps religious groups should sponsor and run more schools.
Stock meltdown drove money into MBS/REIT’s bidding up prices, driving down yields.
That's one part of the reason. Other is reduction of short term rates by Fed. I remember opening an ING Direct acconit because it was paying the highest APR (in FDIC world) of ...gasp... 2% !
So all these people who are arguing about bondholders being held responsible, should do even more root cause analysis. Why in the world did a bondholder even went that route ? Because other yield avenues were eliminated. And who kind of forced them to do that ?
SFBB,
Solid post. Finally some sense. I can't see anyone objecting to that. Of course assuming the FB can prove they were defrauded.
2nd life member bailout of 3 italian girls who were trying to sell a parcel of island land but a landbot owned by "landbaron merlin" purchased the whole parcel ripping the girls $2000us--- read the fascinating story here--
come on patrick posters !! I am confident in the collective collaberating mindsets here that you can indeed develop some "open source" programming to "stop the insanity" within the linden's TOS guidelines, of course, and create a
"virtual utopia" for patrick posters to live in happily ever after.
@randy please take us there metaworldbaron!!!
all of us technosexual metrosexual ckin2u wannabees
randy our father in virtual heaven
internet be your name
thy virtual kingdom come
thy wannabee life be won
on 2ndlife as it isn't here on earth
give us this day our daily linden dollars
and forgive us our bots
as we forgive those that have bots against us
and lead us not into TOS
but deliver us from real life
for thine is the surrealest kingdom
of opensource knowledge forever and ever
amen
StuckInBA,
Exactly. I'm sure there were a number of conversations with these seniors before they were reduced to eating "cat food" (MBS/Junk)
Peter P,
Why don't we get the hydrogenated fat industry and the madrassas together. While we're at it, let's make sure they think algebra and calculus and the internet are evil, so they can't build sophisticated bombs.
Are you sure you're not a sushi fueled jukubot here to inflict chaos on us? :)
Peter P
2007 Apr 11, 6:15am
Are you sure you’re not a sushi fueled jukubot here to inflict chaos on us?
Let me dig up some futurist.typepad.com articles and get back to you.
Randy H
2007 Apr 11, 6:55am
@bruceb
/sigh
/wretch
My only regret is that I didn't think of the idea of a landBaronBot myself.
As for the incantation. "Oh my".
I should perhaps think about making a novel out of all this. After all, this is becoming far stranger than fiction, on so many levels...
Peter P,
Yum, futurist bait...
Awesome conclusion to Friday Night Lights tonight. Definitely the best show of the year, possibly the best TV show ever.
justme,
Amen. Barney Frank is a deleterious idiot (at least for the Democratic Party). Maybe he's a Republican plant deeeep undercover.
justme,
Yeah, the Republicans appear to have gone through purge phase of an autocratic party and now they have message discipline down pat.
paloalto renter is too stupid to understand anything.
So the california state teacher's /fireman/policeman or whatever fund is holding some cmo's written on now defaulting alt-A bonds.
They are losing money on a bad investment. By PAR and a few other people's logic, they should be open to a lawsuit from the original homebuyer who feels the original loan originator put him into an inappropriate loan? Brilliant. You can be the one to explain to the teacher and fireman etc why their retirement benefits are being cut...
He also tries to act educated by saying CMO's are not "marked to market" cause they cost $25000 + and aren't commonly held by indivual investors. They are sold in a market, and thus by definition are marked to market. When held in funds their value is not updated until a ratings change, but that has nothing to do with them being marked to market or not.
And as a last example, Georgia passed a law along these lines a few years ago. It basically modified it out of existence within a few months because of "unintended consequences" some of which included a complete lack of lending available for anyone.
Get your mba first PAR before you try to challenge me on anything in finance
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Mortgage Bondholders May Bear Subprime Loan Risk
Some excerpts:
The top Democrat and Republican on the House Financial Services Committee said investors in mortgage bonds should be liable for deceptive loans made by banks.
Democratic Chairman Barney Frank of Massachusetts and Spencer Bachus of Alabama, the committee's highest-ranking Republican, said such legislation would discourage lenders from extending loans to people with poor credit histories by making it more difficult and expensive for the banks to sell the mortgages.
``More money was being lent than should have been lent,'' Frank said in an interview from Washington. Frank, who last month predicted that the House would approve such a bill this year, said growth in the market for mortgage bonds ``provided liquidity without responsibility.''
...Bachus said he favors legislation similar to a law enacted in New Jersey in 2003 enabling homeowners whose loans are the result of predatory lending to gain compensation from lenders and investors who purchased the mortgages. The indemnity includes attorneys' fees, the borrower's total loan payments and the cost of terminating the borrower's remaining liability.
...By dispersing risk, the bonds fueled reckless and unscrupulous lending and compromised underwriting standards, he said. ``There should be a decrease'' in the money available for subprime mortgages, he said.
Reckless investors shouldn't receive any sympathy, Frank said.
Hmmm...
Ok, I'm as big a critic of the explosion of MBS/CDOs (as a prime cause/trigger) in the housing bubble as anyone on this blog. I basically agree with Frank's latter statements criticizing MBS/CDOs as encouraging reckless lending by dispersing too much risk away from loan originators (the banks & the retail mortgage brokers). But I'm not so sure that exposing MBS/CDO bondholders to massive lawsuit risk --on top of getting hosed by the BBB & Alt-A implosion-- is really the way to go here.
Come to think of it, aren't MBS/CDO bondholders pretty much holding the bag here already? They're pretty much the bottom guys in the mortgage food chain --after the originators and Wall Street middlemen have taken their cut and washed their hands of any risk or responsibility. After all is said and done, the only real legal/financial recourse the final bondholder has is to demand repurchase (by the originator) on MBSs that contain non-performing loans. If the originator is some fly-by-night New Century/Fremont/Ameriquest/MLS type outfit, and that outfit goes belly-up, then what options does the bondholder really have left? They basically have to eat the loss, right? Do they really deserve the threat of class-action lawsuits by FBs on top of already being stupid and broke?
If Congress wants to start regulating/curtailing fraud and reckless lending in the MBS bond markets, why not place a little legal liability on those who receive the maximum amount of profit for the very least amount of risk --the originating banks and mortgage brokers?
I'm all in favor of regulation that properly aligns risk with reward, but frankly I don't see how this proposal accomplishes that.
Your thoughts?
HARM
#housing