The [Fannie Mae] “seriously delinquent” rate has gone parabolic, increasing by roughly 5% sequentially and just under 300% YoY [year-over-year]. As mere text will simply not do this metric justice, please enjoy this chart of the dataset from Blytic. It tells you all you need to know about the Fed’s containment of the housing problem.

The August seriously delinquent single-family number comprised of a 2.87% non-credit enhanced delinquencies and a very bothersome 11.52%, consisting of credit enhanced loans

~~~

The deterioration of FNM’s book however did not stop it from increasing the size of its book [loans]. In September Fannie’s total book of business hit $3.242 trillion, up from $3.229 trillion in August and $3.079 trillion in the prior year

~~~

This trend should bother you, dear taxpayer, because it is your money on the hook here, which is not only massively mismanaged by Bernanke & Co., LLC, but which sees another $80 billion of free funding every month courtesy of the dollar printing press to onboard even more toxic garbage onto your balance sheet.

And who is paying the price?

“Absent any catastrophic home price decline, FHA will not need to ask Congress and the American taxpayer for extraordinary assistance—we will not need a bailout,” Mr. Stevens said in prepared testimony before a congressional panel on Thursday.

Concerns are growing because the agency’s annual audit, due to be released later this fall, will show that its projected reserves will fall below their federally mandated level. The FHA has a capital cushion of around $30 billion, and it has insured some $725 billion loans. The agency’s annual review estimates the value of its reserves after accounting for estimated losses on loans it has insured.

“It appears destined for a taxpayer bailout in the next 24 to 36 months,” mortgage-industry veteran Edward Pinto said in prepared testimony. He estimated that the agency faces losses of $70 billion on loans it has already made, leaving it short of its current reserves by around $40 billion. That estimate is modeled under the assumption that FHA-backed loans will perform similarly to loans made by Fannie Mae in 2006 to borrowers with low down payments.

But it’s all good to Barney Frank:

If many of the loans turn into pumpkins, that’s OK. House Financial Services Committee Chairman Barney Frank, D-Mass., actually told The New York Times, “I don’t think it’s a bad thing that the bad loans occurred. It was an effort to keep prices from falling too fast.” In other words, soaring defaults are not a bug. They’re a feature.

What can you even say to respond to such idiocy?

Amazing that the DNC believes their ad to be a winning strategy: Let’s characterize and flippantly dismiss concerned Americans on both sides of the political aisle as nothing more than torches-and-pitchforks-style rabble-rousers. Brilliant.

Thanks to skye for use of her photos and apologizes to Dana Loesch for pillaging her photos like the uncouth, ill-mannered mobster, that I am.

The ones who are “scripted” and “astroturfed” are the Democratic leaders out there following their “playbook”. Any “community organizing” on the part of the vast rightwing conspiracy of an honest-to-goodness- grassroots movement should be described more like Miracle-Gro than the manure-fractured outrage which the term “astroturfing” suggests.

How dare they condescend and dismiss the concerns of real ordinary Americans! The reason why some of these “mob” citizens resort to anger and “shouting down” is because they already tried listening and reasoning with their congressional leader, and all they are getting back in return are DNC-talking points and pre-scripted answers. The Dem leaders aren’t engaged in debate and conversation but following their own Pelosified marching orders; they aren’t talking to their constituents, but at them.

Meet the mob.

Someone should make one of those “I’m with stupid ->” style t-shirts, but saying “I’m with the mob” with arrows pointing every which direction. Oh, and bring along some (cardboard/fake) torches and pitchforks.

I am not equating capitalism with free markets here as is too often done, because that would imply an inclusion of international communities into a common basket, and there has to be balance and common sense in the application of “free trade,” between participants as we have discussed in previous articles.

Recessions inevitably deliver capitalism a bad rap. Making matters worse, there are usually groups or individuals who have taken advantage of power and influence, or who hustle the provenance of panicked confusion into magnified opportunities for fortune creation. All the while, wide swaths of society are struggling to meet basic needs. Visible abuse of the system that leads to wealth concentration provides thresholds over which those so inclined will leap to promote expansion of government and its insinuation into the corporate fiber of the Nation. Such intrusions usually come from those with little grasp of the elements at the heart of economic growth, human nature, creativity and the human spirit. On the other hand, extravagant, unrestrained, and unconscious excess fosters jealousy, and reaction. It can also propel overreaction, which in turn empowers those in government who seek increases in government intervention at all levels of commerce.

Such exercises in reactive belligerence pretending concern for the public “good,” are actually acts of self-interest intoxicated by ideology, or worse, driven by overwhelming ego. The reactive process ignores long term consequences of hysterically applied policies, and absolutely cannot effectively evaluate the secondary or tertiary repercussions.

We lament the often-declared unintended consequences of unctuously presented self-righteous actions such as the promotion of dubiously structured mortgages. It is reasonable to expect a chicken in every pot. It was, however, unreasonable to have politicized the American dream of home ownership into a structural expectation and promoted it as a fundamental right. Somehow, the “home” became the vessel that would bring forth the promise of collective prosperity. Both of the dominant American political assertions, Republican and Democrat, signed onto the program. Both sides of the political isle bent all rules of common sense to exert pressure in effort to curry favor with the electorate, and corporate benefactors, while satisfying expectations of lobbyists.

The department of Housing and Urban Development from the early ‘90s on, pushed minority applicant quotas on mortgage bankers, and set targets for the purchase of less than median mortgages by Fanny Mae and Freddie Mac (FM & FM). With the taxpayer on the hook for trillions in questionable debt, banks and bank executives were dancing in risk-free ballrooms up to the rafter in money. As the trillions accumulated, FM & FM, with the applause of Wall Street financial institutions such as Morgan and Goldman, “creatively-accounted” for the real value of the toxic assets that taxpayers would one day be required to cover. Oversight? Sure there was oversight – oversight that appropriate kickbacks made their way to all of the proper pockets. The Clinton Administration and Congress pushed banks to adhere to the Community Reinvestment Act (CRA) in order to be allowed to diversify. Again, where was the risk? Thank you FM & FM. No, make that, thank you taxpayers. Then along came George Bush with the American Dream Downpayment Initiative (ADDI) signed into law in December 2003 to increase home ownership rates with funds to be provided to first time buyers for down payments and closing costs.

Making matters more fragile, in came galloping the Morgan and Goldman types, smarter and more ruthless than the deplorable dunces at AIG who were easily perverted into insuring Collateralized Debt Obligations, and seducing banks to over-leverage, using complex instruments the bankers didn’t understand. The financial community availed itself self-servingly of the opportunity created by the government’s intervention. Morgan, Goldman and other investment banks made billions selling tainted goods to banks and to foreign governments. Lack of awareness and understanding by the general community encouraged a galvanization of international endorsements for what were worthless toxic assets from the outset. The long-term consequences of this extensive and forceful government intervention will have unintentionally synthesized some extremely substantive burdens on our grandchildren.

What old and repeated lesson has once more been reinforced from this generation-long exercise?

Government is using taxpayers’ money to build powerful infrastructures that will in effect work against them, and encroach on their freedoms. Uncontrolled government intervention and cronyism are destructive potencies that destroy the fundamental bulwarks of the capitalist system, and Washington has been practicing the schemes for too long. In so doing it has eroded the openness and efficiency of America‘s economic broad-wealth creating environment. I say broad because any government reinforcement of excessive concentration of wealth and power is not conducive to the long-term health of the broader society.

Entrepreneurial energies bloom most abundantly in small clusters. The more the better, but each succeeds best without encumbrance of committees, or group designed strategies. Government on the other hand is by its nature a giant mushrooming amoeba, incapable of creativity, requiring endless approvals, with all departments and agencies in a continuous phase of expansion, justified by egos requiring satisfaction and aggrandizing the turf. Government bureaucracy instills dependence upon itself whenever and wherever possible. History shouts that dependence on government becomes dangerously habitual, and leads to loss of liberty. That goes for individuals, as well as for businesses.

Stifling true entrepreneurial spirit will destroy that critical energy at the foundation of the American economy. It is this fundamentally critical energy that strives to anticipate needs or wants of the broader society, then creatively delivers solutions, and augments output. It strives to become educated in order to better understand whatever might advance its ascent along the risky path to success, and endeavors to minimize its assumptions. Above all it applies as much common sense as it can muster to minimize the chances of failure, and improve the odds of producing something greater than what began. As this energy succeeds, many prosper and benefit. Entrepreneurial independence operating within the boundaries of the Nation’s laws has for two centuries differentiated America from every other country on Earth.

It is understandable that not everyone can be an entrepreneur in the strictest sense, however, each can be entrepreneurial in personal practice and mindset, and each one of us can be thoughtful. At the very least, we can all void jealousies that might restrain that spirit in others, or attempt to obstruct their right to exercise positive natural tendencies and capacities. So doing might quell the demagoguery that is inflating the ascent against the private sector, productivity, and the creation of wealth.

We should not accept deceitful rationalizations artfully packaged through demagoguery and homiletics, or allow them to deliver prepackaged thinking on our behalf. We are presented with economic realities which demand reason, and summon our uncompromised reasoning. The economic challenges presented should apprehend the participation of the whole of population. Such participation is occasion for self-education at a very singular level to understand, as much as is possible, all of the causes that led to the events now chastising the country. The comprehension will guide the electorate toward a more judicious discernment, as it navigates through the political passage ahead. Assuming that others “on The Hill,” will have the answers, would be a gross abdication of rights and capabilities.

Capitalism provides the platform for the individual to push the boundaries of creativity and productivity in the creation of wealth. Government’s role is to protect the environment, through laws, and judicious oversight, within which capitalism is allowed to strive. Broad participation is required, without ambiguity, if there is to be sensible pushback on the advancing and infringing hoards from “The Hill.”

Crossposted from The Pacific Gate Post

What the PolitiFact tracking system doesn’t discuss if it spending the taxpayers money has any any effect on the foreclosure trend. And the fact it, reality dictates it not only hasn’t prevented… or even slowed… foreclosures, but they’ve been on the rise since the O’Inaugural festivities…. despite still relatively low interest rates.

Well… congratulations, Obama. You kept your promise, put us further in debt, and time has proven this is not working, nor is likely to work in the predictable future. Allow me to ’splain…

According the RealtyTrac trends (graphics which I am prohibited to reproduce here for copyright restrictions that I will honor), the two highest months for foreclosures in 2008 were August and December, where the numbers were just slightly above 300,000 each month. All other months were below.

In February, Obama’s first month in office, they were up, but still under the 300K mark.

Enter Obama and his $75 billion Making Homes Affordable Program… a real loser of an idea that I posted on back in mid February. This brainstrom was not a creature of legislation, but of the omnipotent Treasury department, and utilizes mostly TARP funds approved by Congress in that fiasco passed last fall. Tho in retrospect, a $750 bil bailout, and appropriations of only half that prior to Obama’s assumption of power, is starting to look like a blue light special in price.

For more details on this HASP plan – aka Making Homes Affordable and Homeowners Stability Program – check my above linked Feb post. But I’ll summarize. Your mortgage can neither be too much, and cannot be too “toxic” (an asset upsidedown in value). Additionally, you are subject to strict restrictions on your employment income, and income to debt ratios. In other words, if you’ve lost your job, don’t count on a remodification under the Obama plan, or any other plan. Under HASP, the government buys down the rates to no more than 38% of the distressed borrower’s income, and the banks get to eat the rest by buying the rates down to 31%.

Any of you ever buy down your purchase or refi mortgage rates in a real estate transaction? If you have, you’ll know that a reduction of .0125% in the rate usually costs 1% of your loan value. It is not a cheap proposition.

To make it even more absurd, this HASP/MHA plan was no different than an ARM…. it was a teaser rate that reset after five years. Needless to say, if those that modified out of their loans into this, and didn’t default on the new payments (as more than half of them have) for the five years, they were again in a pickle five years down the road… still saddled with an asset that may or may not appreciate to the toxic loan value.

Obama’s plan hit the media with great fanfare all thru February… his plan to “prevent foreclosures” it was. The details were not announced until early March. And thus far, it’s been not only ineffective, but utter chaos.

March and April foreclosures were just below the 350K mark, with a slight dip in May due to under 5% rates for a brief period, but still well over 300K in foreclosures monthly. BTW, the rates rose almost a full percentage point in the three weeks that followed, and new mortgages and refis dropped 30%.

In mid april, a month following Obama’s Treasury plan, the foreclosure stats released by RealtyTrac showed in increase by 9% nationally.

RealtyTrac’s latest foreclosure statistics are now available, and once again the news isn’t very good. According to the U.S. Foreclosure Market Report for the first quarter of 2009, foreclosure filings — default notices, auction sale notices and bank repossessions — were reported on 803,489 properties, which sadly translates into a 9 percent increase from the previous quarter and an increase of nearly 24 percent from the same period in 2008. The bottom line: One in every 159 U.S. homes received a foreclosure filing during the months of January, February, and March.

But wait, you want to say… Obama’s program didn’t get implemented until early March. Give it time, you say. Fair ’nuff. It’s now July… three and a half months after the spending spree debacle to “prevent foreclosures” was implemented. How we doing now, bucko?

In May… that “better than previous” month because of low rates, foreclosures were still up 18% nationally compared to the same period last year.

“May foreclosure activity was the third-highest month on record and marked the third straight month where the total number of properties with foreclosure filings exceeded 300,000,” said James J. Saccacio, chief executive officer of RealtyTrac, a California company that tracks foreclosures nationwide.

Saccacio predicted that foreclosure activity will pick up in the months ahead as delays and moratoriums in several states end.

Early June Tabitha Berg in enewschannels paints a tarnished rose with a bit of a happy face using the Foreclosure Listings database.

ForeclosureListings.com compiles and tracks data about foreclosures throughout the United States. According to their results, many cities and states have seen a decrease in the number of foreclosures between April and May 2009. These cities include Las Vegas (8.33 percent), Phoenix (2.28 percent), Atlanta (2.03 percent), Detroit (1.02 percent), Miami (6.10 percent), and Denver (7.56 percent). California, Georgia, Texas, Nevada, and Colorado have all seen their statewide numbers of foreclosures decrease by 5 percent or less. While that may not seem significant, most of these states have seen gains in foreclosures every month for at least a year.

Sounds good until you realize that four out of the five states mentioned are in the top 10 states with the highest foreclosure rates. California was having over 90,000 foreclosures monthly, so that 5% translations to 4500 homes. What is not made clear is if these homes sold out on a short sale to avoid the foreclosure process.

Berg then goes on to name the places that were seeing increases in their foreclosure numbers (somehow placing Nevada in the dubious position of having a decline, and also having an increase… huh?)

Despite the positive results listed above, ForeclosureListings.com… also noticed some hot spot cities on the horizon for potential investors. These are cities that have seen tremendous jumps in the number of reported foreclosures. According to ForeclosureListings, Chicago increased by nearly 13 percent, Minneapolis increased by almost 10 percent, North Las Vegas saw an increase of over 6 percent, and Memphis jumped by over 31 percent. Both Illinois and Nevada saw statewide increases: 6.62 percent and 4.65 percent, respectively. Florida, Ohio, and Michigan all saw increases statewide of around 1 percent. While these state increases may seem small, these states have already seen large numbers of property foreclosures and the situation does not seem to be drawing to a close if these most recent figures are any indication.

Adding another voice to the housing market status is Debra Tone of the send2press Newswire in late June, noting in her headline that the housing market “Shows Little Hope the Housing Crisis is Nearing an End.” After citing foreclosure increases via Jacob Christensen from ForeclosureWarehouse, she solemnly states in her final paragraphs:

These findings are contrary to the predicted outcome. Because the high number of foreclosures has glutted the market with unsold properties, the prices have decreased. In California, for example, the average home price decreased by nearly $200 just between April 30th and May 30th. Other states have seen similar decreases during that period: Michigan ($900), Ohio ($600), Florida ($300), and Georgia ($100).

These prices have been steadily falling since the housing market began crashing two years ago. These reduced prices were expected to prompt an increase in home purchases.

The problem is mortgage rates have increased and have made home buying less desirable and less affordable for the average consumer. Mortgage rates for a 15 year loan increased from 4.82 percent in the middle of May 2009 to 5.25 percent just one month later. Thirty-year mortgage rates increased from 4.86 percent to 5.72 percent during the same period. Without a decrease in these rates or a significant reduction in foreclosures by state, the prices for homes should continue to decrease.

Absolutely true. But we have now put ourselves into the conundrum that we’re borrowing to the hilt to placate a self-absorbed POTUS and welfare state oriented Congress which will cause the dollar value to fall and inflation to ensue. The ways we’ve been able to control inflation in the past… ala the 80s… was to increase the rates for credit – including mortgage loans. For those of you too young to remember, or never learned, we were seeing 15-19% rates for mortages.

Have you any idea what that does to a $200K loan on your modest home today? A 5.8% rate on a $200K mortgage (principle only) is $1,148.16. For a buyer to purchase your home, and pay off your mortgage, at a 15% rate entails a payment monthly of $2528.89. Talk about emptying your buyer pool potential….

So what’s the problem with Obama’s Treasury plan, and why am I so sure it’s not going to work now, or in the future? Stephanie Armour of USA TODAY documented the chaos with the Making Homes Affordable plan, and noted that the lenders… despite the incentives… still aren’t making those modifications. Some of it is sheer backlog from the high influx of new purchases by first time homebuyers, seeking that $8,000 tax credit we the taxpayer are gifting them, plus refinances. And with these delays of overload comes risk. There is only so much time in a preforeclosure status before the court steps auction looms. Those in the arrears live in a very time sensitive status.

Naturally, there’s gotta be someone who rattles off the absurdity that banks are deliberately refusing to deal with the remod requests for “political” reasons:

“Some lenders may not be turning (homeowners) down right away because it might be politically easier to push them off and delay,” says Joel Naroff at Naroff Economic Advisors. “No one will admit they’re doing this.”

Okay… perhaps Mr. Naroff will explain to us why the little guy in the remod chain has a “political” motive to refuse remods. Can he possibly be under the assumption that banks are just dying for another foreclosure in their asset column? Not likely.

Naroff gets a little closer as he continues… and also indicates that mortgage deliquencies… and thereby foreclosures (or short sales)… are likely to increase as the unemployment numbers continue to rise. And this can result in a remodification merely delaying the inevitable.

Naroff also says banks today are dealing with even more demand for mortgages, including refinancings, than during the peak of the housing bubble in 2006, and the backlog is likely to get worse as more homeowners lose their jobs. Mortgage delinquencies have been growing in areas where unemployment has been rising fast, and even homeowners who successfully get modified mortgages could face trouble later if their incomes or home values fall.

Besides the delays and backlogs, others are simply not qualifiying… much to their confusion and misinformation.

Robin and Craig Doyle of Woodland Hills, Calif., have been trying to get a loan modification through their lender, JPMorgan Chase, since February.

Robin, who does freelance writing from home, said she initially was told to send a letter describing her hardship, paycheck stubs, tax returns and other information.

She assembled a 200-page file and sent it along. A month later, she was told she had to redo the information because the file she’d sent had become outdated.

Another time, Robin says, she was told her file had been mistakenly closed altogether. On another occasion, she was told the request couldn’t be processed because she hadn’t included information about a homeowner association fee, even though her family doesn’t belong to such an association.

“I’ve had to resend it four times,” says Robin, 35. “It’s making me sick. It’s been five months. I’ve spent hours and hours on this and sleepless nights. It’s foremost on my mind. I look at my beautiful home and wonder if I’ll have it next month.”

The Doyles pay $5,031 a month on a mortgage of $947,000. They have an interest-only loan at a 6.3% rate that will reset in about seven years. On interest-only loans, borrowers pay only interest for a specific period to temporarily reduce the payments. After that, they pay interest and principal.

After finally getting their paperwork thru, they were told… as they would have known from the beginning if they checked the government website and used the eligibility query… that they don’t qualify for the Obama plan because their loan amount is too high. These people are *not* the “little people” Obama plans on helping.

Judy Lederman, 49, of Scarsdale, N.Y., a freelance writer after losing her full-time job in public relations a year ago, says she tried to get a modification with Chase about three months ago. She has an interest-only loan at 5.25% that resets in one year. How high it will rise depends on interest rates then.

She says Chase denied her request a few weeks ago because she has an adjustable-rate mortgage, but other borrowers with ARMs are getting modifications under the Obama plan.

“They kept me on hold and waiting for months. I bent over backwards to get them what they needed, but it was like no one was home,” Lederman says. “I really don’t know what else to do. I don’t know who to trust.”

The day after USA TODAY called Chase for comment, Lederman says the bank called her. She says the representative told her she was turned down because of missing information and that new forms to apply for a modification were being expedited to her home. “There was some miscommunication, but we have reconnected with the borrowers and are working on finding solutions for them,” Zuccarelli says regarding the complaints about Chase.

I’m not too sure what to say to someone who opts for an ARM/interest only loan except that she needs a financial advisors. This is obviously someone inept at making wise decisions on financing.

But let me give Ms. Lederman an answer to her question… she is not getting a loan modification because she is not employed and, as a self employed entity to replace regular employment, her income is not increasing. So she will not qualify since the bank is not sure she will be able to sustain the new payment. As another self employed individual, I know all too well where the banks are saying yes, and saying no. And thanks to a Congress, who has demanded that lenders scrutinize buyers to insure they can pay back a mortgage over the length of the loan (like how would anyone know that?), their “caution” is resulting in very tight restrictions on just who gets modified.

UPDATE: NYT’s David Streitfeld’s article today, “Tight Mortgage Rules Exclude Even Good Risks” echos what I say above INRE the extreme swing from easy money, to tightening up credit to the absurd…. especially for the self employed.

Mortgage brokers say those who are being rejected for loans are often entrepreneurs who are used to taking risks. “They are chomping at the bit to get into this market, but are forced to the sidelines,” said Stuart Fraass of Guaranteed Rate Inc. “If you’re self-employed, you have virtually no chance of getting a mortgage now.”

Mr. Fraass was unable to help Raghbir Singh, a real estate investor who owns a gas station in Dover, N.H. Mr. Singh tried to buy a $301,000 house for himself and his family with 10 percent down and excellent credit, but was rejected. “It was unfair,” Mr. Singh said. “I’m a good risk, but I’m forced to rent.”

The range of denials runs the spectrum… “…incomes are adequate but irregular; they are self-employed and take many deductions, reducing the taxable income on which lenders focus; their credit scores are below the cut-off point, which has been raised drastically; their down payments are less than 20 percent.” What is most important is that delays in housing recovery is a delay in economic recovery. For as Streitfeld accurately states:

Housing usually leads the country into a recession, which certainly happened this time, and also leads it out — which will not happen in 2010, the real estate industry contends, without stronger efforts to thaw the market.

The man that nailed the mortgage scene accurately is Lou S. Barnes, an owner of a mortgage bank in Colorado, the Boulder West Financial Services.

“The credit pendulum is stuck at ‘stupid.’ I am turning down loans every day that my grandfather in his Ponca City, Okla., savings and loan in 1935 would have been happy to make. And he was tough.”

I might make a more sweeping statement and say that a meddling Congress and a WH admin bent on “remaking” American into a Euro-socialist welfare state are *also* “stuck at stupid”. END UPDATE

Craig, a writer in the TV industry, is finding considerably less work. And his 2008 year couldn’t have been too stellar since the writers went on strike for over three months, and again almost crippled the industry. But instead of recognizing the WGA’s part in his own reduced income, he sums up Obama’s plan as this:

“I feel like Obama’s plan has done absolutely nothing,” says Craig, 38.

The fact is, even withstanding Craig’s self-inflicted reduced income (and the repercussions of that strike on everyone else’s income…), Obama’s plan *has* done absolutely nothing.

Since its debut, the plan has led to offers of more than 190,000 mortgage modifications with lower monthly payments, according to the Treasury Department. During that time, lenders either have started or advanced foreclosure proceedings against more than 1 million homes, according to RealtyTrac. About 20% of those were foreclosed upon and repossessed. The Center for Responsible Lending says 2.4 million Americans are at risk of foreclosure in 2009, and 8.1 million could be over the next four years.

A “promise kept”? I’ll give you that. But it was a costly promise that leads to just a pile of wasted taxpayer money.

Hold on to your hats, folks. Buy now when the rates are low, and park your butt for about a decade. Don’t plan on refinancing (also meaning, don’t buy with an ARM) for about a decade until this (if possible) blows over. Because, as Bette Davis famously said as Margo Channing in All About Eve:

“Fasten your seatbelts. It’s going to be a bumpy night”…. and it’s going to be one long night in the mortgage industry.

No, there’s not a male escort service operating out of his townhouse this time. That’s so 1989.

This time, Barney is pushing for, you guessed it, relaxed mortgage standards.

Since that worked out so well for our country the first time, Barney wants an encore:

Rep. Barney Frank says that unless Fannie Mae and Freddie Mac relax their recent tightening of mortgage standards on new condominiums, the economic recovery could be threatened.

That would be the same Barney Frank who famously boasted that the two federal agencies — which lost billions by making improvident loans — were “fundamentally sound financially and [can] withstand . . . disaster scenarios.”

Then came the disasters.

But to Barney Frank, Fannie and Freddie are essentially taxpayer-funded social-service agencies whose mission is to turn all Americans into homeowners — whether or not they can afford it.

Fannie and Freddie recently announced that they would no longer guarantee mortgages on condos where fewer than 70% of the units have been sold; the previous threshold was 51%.

The agencies also said they’d no longer guarantee mortgages in buildings where 15% or more of the owners are behind in their condo dues or where more than 10% of the units are held by a single owner.

And they’ve raised fees on buyers whose down payment is less than the standard 25%.

The tightened standards are intended to limit the exposure of the two agencies — which purchase or guarantee most US mortgages — in buildings with potential financial problems.

Obviously, this means that some condo owners may find it more difficult to sell their units — because buyers will find it more difficult to get mortgages.

Enter Barney Frank — backed by New York’s own Rep. Anthony Weiner, who aspires someday to be mayor.

…snip…

Here we go again.

Frank, it should be noted, declared last fall that “we’ll have to raise taxes, ultimately” to pay for all the increased government benefits he’s also demanded in order to alleviate the crisis his bad advice helped create.

To say that Barney Frank has a bad track record here is putting it mildly.

Problem is, he’s also chairman of the House Financial Services Committee, so his “suggestions” have political muscle behind them.

But following Barney Frank’s advice is a prescription for disaster.

Some people never learn.

The Congressman, and the voters, of MA are prime examples.

Now, over the last several weeks, we have seen a return of the politicization of these issues that have characterized the last several years. I understand that these problems arouse passions and concerns. They should. We are confronting some of the most complicated questions that a democracy can face. But I have no interest in spending our time re-litigating the policies of the last eight years. I want to solve these problems, and I want to solve them together as Americans.

Gee, so…why’d President Obama hold his speech today, at that hour? Because he knew that Vice President Cheney was going to defend his name, his honor, his legacy, and his innocence, and he wanted to pre-emptively attack those same things. He wanted to divide and distract the nation on a day when awful economic numbers came out (higher unemployment, higher unemployment rate, longer unemployment expected, unemployment expected to rise, new home sales down, existing home sales down, GDP lower than expected, stimulus doing nothing, and….my favorite, number of homeowner families helped by Obama/Dem homeowner rescue package over past 5months:1 per CNN).

Somehow, I’m skeptical of calls for unity that come in a political attack speech. Call me crazy.

“We’ve had quite enough capitalism the last eight years. I think we need some regulation now.”

Politic’s Daily has some more quotes from this interview:

Former Democratic National Committee Chairman Howard Dean was on CNBC today debating the likely impact of President Barack Obama’s economic policies and the $17 billion in cuts that the president has included in his $3.5 trillion budget. In the course of defending Obama’s policies, Dean made some statements that the Administration may come to regret.

Dean first said that there would have to be tax increases, which he called “revenue increases,” to pay for President Obama’s spending priorities (1:40). Dean followed that up by endorsing a “carbon tax,” (1:45) referring to a cap-and-trade pollution emissions system that the Administration and Democrats in Congress have shelved because, in the president’s own words, the plan would cause electricity rates to skyrocket. Finally, Dean asserted that President Obama’s economic policies are good for the country because, “[W]e’ve had quite enough capitalism the last eight years. I think we need some regulation now.” (5:00)

Video below:

Of course he ignores the real root cause for the economic downturn, or as Mataharley called it “The Perfect Storm.” The housing crisis finally led to this collapse and the root cause of this was government regulation, not deregulation:

The Clinton “improvement” of CRA was done in 1995. Now… look at the charts above one more time. Notice that from 1989 to 1995, the home prices remain relatively flat. Now notice that the increase in home prices corresponds to Clinton’s revamping of CRA, and his new mandates to prove compliance by firm numbers.

Now we see a clearer picture to “the perfect storm”.

The mandated easy money (documented by actual loan numbers and not intent) to high risk lenders was accomplished by the creative loan packaging…

The influx of so many buyers from the low rates and exotic loan packages flooded the inventory with ready and able buyers…. this led to overinflated prices of homes and the big boom of 2004-2006…

… which led to the inevitable foreclosures of the high risk buyers. They were unable to refi because of the inflated value…

…finally setting the stage for the high lending losses today – money the banks put out for inflated property values that can not be recouped in a resale in today’s market.

But to Howard Dean and his cohorts, including Obama, it was capitalism at fault. Ignoring the fact that more regulation is what ultimately led to this crisis he now wants more of it…..

Incredible!

Kellermann, 41, and a 16-year veteran of Freddie Mac, had been the company’s CFO since September, after a government takeover of the company following the housing crisis. County records show the large home in Hunter Mill Estates was worth about $900,000.

~~~

Kellermann was named acting chief financial officer in September 2008, after the resignation of Anthony “Buddy” Piszel, who stepped down when the government took over.

According to securities reports filed in March, Kellermman was to receive an $850,000 bonus.

Kellermann owned 43,000 shares of Freddie Mac stock last summer, worth about $395,000. As the company’s stock plummeted from $9 a share in July to 80 cents or so this morning, he had slowly sold off some shares, for pennies on the dollar. His holdings of 38,861 shares, as of April 11, were worth $30,000, according to ABC News’ calculations of Security and Exchange Commission filings.

In filings with the SEC in March, Freddie Mac said it had entered into a pact with Kellermann and two other company executives to protect them from liabilities and expenses in connection to any threatened or pending lawsuits. The agreement, which kicked in retroactively from the time of the government takeover, would not protect the officials from willful criminal misconduct.

In an SEC filing from September, Freddie Mac disclosed that it received a federal grand jury subpoena from the U.S. Attorney’s Office for the Southern District of New York seeking information about the company’s accounting, disclosure and corporate-governance procedures. The subpoena was withdrawn, and the investigation was taken over by the U.S. Attorney’s Office for the Eastern District of Virginia.

Before he was named acting CFO, Kellermann served as senior vice president, corporate comptroller and principal accounting officer.

What can we take away from this INRE motives? Was Kellermann… father of a young five year old daughter… panicking about possible criminal charges?

Or was he worried about publicity leading to ACORN style public harrassment? According to the New York Times version of the story, Kellerman had to hire a security firm after reporters started showing up to question his $800K bonus.

Mr. Kellermann, 41, had been Freddie Mac’s chief financial officer since September. He was named to the position when the federal government seized the company and ousted its top executives last fall. In recent weeks, according to neighbors and company officials, Mr. Kellermann had received a bonus of about $800,000. Such bonuses — which totaled $210 million for executives at Freddie Mac and its sibling company Fannie Mae — caused some controversy earlier this month, and some lawmakers called for them to be rescinded.

According to neighbors, Mr. Kellermann hired a private security firm after reporters came to his house to ask about his bonus.

Some neighbors told The A.P. that Mr. Kellermann had lost a noticeable amount of weight under the strain of the job, and some said they suggested to him he should quit to avoid the stress.

Also on Kellermann’s plate was “tense” negotiations with federal regulators over public disclosures. The Freddy execs wanted to emphasize to investors that the company was being run for the benefit of the government, rather than shareholders.

In contrast, the regulator – Federal Housing Finance Authority – wanted to play that notion down.

Freddie Mac ultimately reported that it made changes to business practices to help the government that “have increased our expenses or caused us to forgo revenue opportunities.”

OpenMarket.org has more on this disguised “disclosure”, and in fact has some serious criticism of the government’s handling (yes, including this administration) of the financial crisis.

Since the government takeover, the GSEs have been in an ambiguous balancing act of private/public status. The FHFA has full authority to direct the company’s affairs after the take over, but the Obama administration is reluctant for a full government nationalization, as this would end their pursuit of profits and the requirement that they make regulatory disclosures for the benefit of private investors.

From a linked WaPo article March 27th, the dual between the Freddie execs involved in the negotiations about the public disclosure reporting centered around how much should be disclosed about the government’s role in Freddie’s losses.

Federal officials who took over Freddie Mac stopped short of nationalizing the company, leaving it partly in private hands. This means Freddie still has to answer to investors and file financial disclosures.

But when Freddie Mac’s executives concluded a few weeks ago that they had to disclose that the government’s management of the McLean company was undermining its profitability and would cost it tens of billions of dollars, the firm’s regulator urged it not to do so, according to several sources familiar with the matter.

Freddie Mac executives refused to bend. The clash grew so severe that they threatened to go to the Securities and Exchange Commission, which oversees corporate disclosures, to secure a ruling that the regulator’s request was out of line. The company’s regulator backed down, the sources said.

~~~

Now these unresolved questions about Freddie Mac’s status are driving the dispute about what it should disclose as a publicly traded company listed on the New York Stock Exchange.

As Freddie Mac executives were preparing their annual 10-K financial disclosure this month, they reported that carrying out the Obama administration’s housing plan would cost $30 billion this year. That sum would have to be covered by the Treasury Department. The federal government has pledged to cover $200 billion each in losses for Freddie Mac and Fannie Mae, of which the pair have asked for about $60 billion.

The housing agency asked that the cost of the program be withheld and that the firm soften language describing how government management was undercutting profitability, according to sources.

The Freddie execs… presumably including now deceased Kellermann. were ready to take the regulator to tasks on what what was their requirement to disclose what the government regulator wanted them to withhold…. that the new O’admin plan was about to plunge them into further jeopardy. What the execs ultimately did agree to do was work with the regulator on the “language” that softened the truth.

What Freddie was warning was that it’s mandated participation in Obama’s HASP debacle for “saving homes”… which as I dissected in my February 19th post as tandamount to taxpayer financed buyouts of mortgage points for some, and refinancing into a five year government sponsored ARM loan … would incur a $30 bil initial pre-tax charge that would grow exponentially with the economic decline, and lead to the need for future taxpayer cash infusions.

The main way that the government is c ausing Freddie to incur losses is by requiring it to play a central role in the Obama administration’s Homeowner Affordable and Stability Plan, a $75 billion effort launched this month. The program aims to restructure mortgages that struggling borrowers cannot afford, bolster the sagging housing market and bring down interest rates on home loans.

The Obama plan will require Freddie Mac to modify mortgages, which entails reassessing the value of loans and marking them down to current market price. The company must then record a charge to reflect these decreased values. Based on Dec. 31 figures, Freddie Mac said it would incur “an initial pre-tax charge” of $30 billion. That number could grow as the economy declines and would have to be offset by infusions of government capital.

“These initiatives are likely to have a significant adverse effect on our financial results or condition,” Freddie Mac warned in its regulatory disclosure.

Lending creditability to the GSE’s financial state in the wake of the government/exec disclosure battles, Bloomberg reports today of the rising mortgage defaults occuring at Fannie and Freddie.

Fannie Mae and Freddie Mac mortgage delinquencies among the most creditworthy homeowners rose 50 percent in a month as borrowers said drops in income or too much debt caused them to fall behind, according to data from federal regulators.

The number of so-called prime borrowers at least 60 days behind on mortgages owned or guaranteed by the companies rose to 743,686 in January, from 497,131 in December, and is almost double the total for October, the Federal Housing Finance Agency said in a report to Congress today.

Of all borrowers who ended up in default, 34 percent told Fannie and Freddie they were earning less money, about 20 percent cited excessive debt as a reason for missing mortgage payments, and 8.1 percent blamed unemployment, FHFA said.

Keep in mind, that “FHFA said” is the same FHFA that was fighting with Kellermann and other execs to mask the government’s role in Freddie’s profitability…

So where does this leave us with Kellermann’s death? Was he in fear of criminal prosecution? He certainly didn’t appear to be financially destitute.

There’s the darker, conspiracist side of things. Self-admitted white supremecist, Hal Turner of the Turner Radio Network blog, is proudly taking twisted credit for inciting followers to violence… “lynching” Kellermann in retaliation for for the financial crisis. I absolutely refuse to link his site here… not a nanobyte of hotlinks from me. In fact, just typing his name, and I feel the need for a bath.

I do believe this man is equally despised by conservatives and liberals. But it’s more than ironic to see a neo-nazi siding with the deeds and actions of ACORN, and their assault upon CEOs.

I’m not sure what the story is behind Kellermann’s death… suicide from pressure or fear of exposure? Or could it possibly be murder? But it is a scenario fraught with intrigue, money, power and corruption already.

The Obama administration’s bank- rescue efforts will probably fail because the programs have been designed to help Wall Street rather than create a viable financial system, Nobel Prize-winning economist Joseph Stiglitz said.

“All the ingredients they have so far are weak, and there are several missing ingredients,” Stiglitz said in an interview yesterday. The people who designed the plans are “either in the pocket of the banks or they’re incompetent.”

The Troubled Asset Relief Program, or TARP, isn’t large enough to recapitalize the banking system, and the administration hasn’t been direct in addressing that shortfall, he said. Stiglitz said there are conflicts of interest at the White House because some of Obama’s advisers have close ties to Wall Street.

“We don’t have enough money, they don’t want to go back to Congress, and they don’t want to do it in an open way and they don’t want to get control” of the banks, a set of constraints that will guarantee failure, Stiglitz said.

The return to taxpayers from the TARP is as low as 25 cents on the dollar, he said. “The bank restructuring has been an absolute mess.”

~~~

The Public-Private Investment Program, PPIP, designed to buy bad assets from banks, “is a really bad program,” Stiglitz said. It won’t accomplish the administration’s goal of establishing a price for illiquid assets clogging banks’ balance sheets, and instead will enrich investors while sticking taxpayers with huge losses.

“You’re really bailing out the shareholders and the bondholders,” he said. “Some of the people likely to be involved in this, like Pimco, are big bondholders,” he said, referring to Pacific Investment Management Co., a bond investment firm in Newport Beach, California.

Stiglitz said taxpayer losses are likely to be much larger than bank profits from the PPIP program even though Federal Deposit Insurance Corp. Chairman Sheila Bair has said the agency expects no losses.

“The statement from Sheila Bair that there’s no risk is absurd,” he said, because losses from the PPIP will be borne by the FDIC, which is funded by member banks.

~~~

Stiglitz said the Fed, while it’s done almost all it can to bring the country back from the worst recession since 1982, can’t revive the economy on its own.

Relying on low interest rates to help put a floor under housing prices is a variation on the policies that created the housing bubble in the first place, Stiglitz said.

“This is a strategy trying to recreate that bubble,” he said. “That’s not likely to provide a long run solution. It’s a solution that says let’s kick the can down the road a little bit.”

While the strategy might put a floor under housing prices, it won’t do anything to speed the recovery, he said. “It’s a recipe for Japanese-style malaise.”

So what is the impact on the markets? We’ve had a nice relief rally, when some sort of rescue plan was put in place(previously there was no coherent plan at all), now we have to see whether the plan actually works.
My guess is after this market rally, we’ll see your markets have some pullback or stagnate for sometime. We’ll only see a sustained uptrend start in your markets if there is a perception that Obama is on his way out.

The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s.

New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and other assets from U.S. banks. The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.

According to the Congressional Research Service (a non-partisan group that Senator and now President Barack Obama doesn’t even know exists), the war in Iraq cost about $500billion over 6years.

Allegedly, the Bush tax cuts cost about $400billion over 10years.

President Obama’s first 2 1/2 months cost as much as:
7 wars in Iraq
25 Bush tax cuts
or
1 full year of every American’s productivity
(1 year of our Gross Domestic Product)

They’ve been spending money and giving it away for almost half a year now.

I think it’s time to say it’s not working.

Toxic Asset Rip-Off

That’s how analysts describe the trillion-dollar toxic-asset buy-up program proposed this weekend by the Obama Administration: “the president is putting forth his idea to have the Treasury become the new AIG. In order to get hedge funds to buy up toxic debt, Obama is proposing that the Treasury provide loans up front and insurance against potential losses on the back end. It’s what Paul Krugman called ‘heads I win, tails the taxpayers lose.’ By the way, it may cost another $1 trillion.”

The Treasury Secretary claims taxpayers won’t lose a full trillion, because the assets aren’t as worthless as their current market prices suggest. But if that’s true, why does he continue to insist on federal accounting rules that force banks to value their assets at the current depressed market prices? Either the accounting rules are right — in which case taxpayers will end up losing a trillion dollars — or they are wrong, amplifying financial panics — in which case the rules should be repealed, so that banks, not taxpayers, will be able to take the risk of holding the assets. (If these accounting rules, known as “mark-to-market” accounting, had been in place in the late 1980s, “every major commercial bank would have collapsed,” wiping out the economy).

The above is the cost of getting the government involved in issues the private sector should handle. Of course letting the private sector handle this is how a politician who believed in Capitalism would lead.

Meanwhile Obama’s former nominee for Commerce Secretary, Sen. Judd Gregg, just admonished Obama over his budget proposal:

This translates to a debt-to-GDP ratio that we have not seen in this country since the end of World War II, when we were trying to pay off war debt,” he said. “If you take all of the presidents from George Washington to George Bush, and add up all of the debt they put on the books of the American people, President Obama’s plan adds more debt than that.”

Sen. Mitch McConnell, standing with Gregg, warned Democrats against passing the budget along party lines and using budget reconciliation to pass sweeping new programs. “If you do it with no bipartisan buy-in at all, then you own the whole thing.”

Oh, they own it….all of it.

CNN:

Senate Banking committee Chairman Christopher Dodd told CNN’s Dana Bash and Wolf Blitzer Wednesday that he was responsible for adding the bonus loophole into the stimulus package that permitted AIG and other companies that received bailout funds to pay bonuses.

On Tuesday, Dodd denied to CNN that he had anything to do with the adding of that provision.

…but the video is priceless (look how red his face is).

Also, note that he says he did the discreet removal-not because he’s the largest campaign recipient of money from AIG (noooooooo), but because Obama’s Treasury Dept urged him to do it. That’s the same Treasury Dept that claims they were shocked and surprised, and the same Administration that says it was shocked and surprised…all while we’re supposed to ignore that they knew about the Bonuses months ago. Apparently, not only did the Obama Admin KNOW about the bonuses, but they went out of their way to covertly get them allowed!

…here comes this fantastic story, courtesy of the Boston Business Journal, about East Bridgewater Savings in Boston:

Bad or delinquent loans? Zero. Foreclosures? None. Money set aside in 2008 for anticipated loan losses? Nothing. … The bank even squeaked out a profit of $87,000. And its Tier 1 risk-based capital ratio was 31.6 percent, or more than three times higher than many community banks in Massachusetts. “We’re paranoid about credit quality,” Petrucelli said. The 62-year-old chief executive has run the bank since 1992.

Yet the FDIC has turned up the heat on Petrucelli’s bank, giving it an apparently rare “needs to improve rating,” for not making more risky loans under the Community Reinvestment Act. Here is how the FDIC puts it: “There are no apparent financial or legal impediments that would limit the bank’s ability to help meet the credit needs of its assessment area. The FDIC examiners also faulted East Bridgewater “for not advertising and marketing its loan products enough. The bank, which does not have a Web site, offers fixed-rate mortgages.”

“Paranoid about credit quality.”

If more of financial institutions had felt the same way, or were not so heavily penalized because they did run their business the same way, we would not be in hole we are in. Sure, we may still have been in a hole because there were plenty of other factors involved, or as Mataharley termed it….“The Perfect Storm”….but that hole is deeper then it ever should of been because of the CRA.

This weekend, I spoke on free trade at the Club for Growth’s annual meeting in Palm Beach this weekend. At dinner last night, I heard an amazing story from Steve King, a Republican congressman from Iowa. I was amazed at two levels: (1) the story itself and (2) the fact that he was not amazed.

King is a member of the House Judiciary Committee. Recently, the Committee has been meeting about the “cram down” bill, a proposed law that would give the power to judges in bankruptcy meetings to alter the terms of people’s mortgages. King, realizing that the bill is likely to pass, was trying to minimize the harm it would do. So he offered an amendment that would prevent anyone from taking advantage of this special deal if he/she had engaged in any material misrepresentation during the original mortgage process. His amendment passed by a vote of 21-3.

But later the staff of the Committee, who report to Chairman John Conyers, altered the amendment, after it had been voted on, to state that no one could take advantage of the special deal if he/she had been convicted of fraud. Of course, there’s a huge difference. What they voted for is very different from the language that the staffers substituted without the permission of those who voted.

I was shocked. I asked King if there was anything he could do about this dishonest behavior on the part of Conyers’s staffers. He said that there wasn’t.

A reader to the above blog questioned how this could be possible, everything on the thomas.loc.gov… site shows the exact markups King described, no other changes.

Congressman King responded:

Your research is correct as is David’s characterization from our dinner conversation. The Judiciary Committee staff changed the language and coupled the “Cram Down” legislation, which passed the Judiciary Committee, with two of Barney Frank’s bills.

The bill then got a new number. That’s why you can’t track it on Thomas. Technically, they can bring a bill directly to the floor without committee action. This was an arrogant contemptuous action that disenfranchised 21 Members of the Judiciary Committee and every, bill paying, law abiding American.

In response, I challenged Chariman Conyers before the full committee, brought my amendment back to the Rules Committee twice, and went to the floor to speak several times. Mostly there is just no response from them. They know they’re wrong. They have the votes to beat us fair and square every day. They cheat because it’s easier.

King’s amendment makes complete sense. If your gonna give a judge the power to rewrite mortgages during a bankruptcy then at least ensure that the initial loan application was true and correct and there was no misrepresentation. Instead the Democrats, who understand they have the majority and have no desire for compromise, trashed the amendment. They understand they need those liars votes also.

Those liar loans isn’t the whole story either. This amendment was altered AFTER 21 committee members voted for it and forwarded it to the house by Conyers which gives the false view that those 21 members actually voted for Conyers version, not Kings.

This is the new age of Obama apparently.