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 Why Wall Street Is Very, Very Angry at Richmond, California, Right Now

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richard09

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PostSubject: Why Wall Street Is Very, Very Angry at Richmond, California, Right Now   Why Wall Street Is Very, Very Angry at Richmond, California, Right Now EmptyWed Sep 11, 2013 6:40 pm

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NoCoPilot

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PostSubject: Re: Why Wall Street Is Very, Very Angry at Richmond, California, Right Now   Why Wall Street Is Very, Very Angry at Richmond, California, Right Now EmptyThu Sep 12, 2013 5:32 am

Yes, very interesting. Many questions left unanswered. What interest rates for the new loans?  One of the drivers of the current foreclosure crisis is the low federal lending rate, making loans less profitable than banks would like.

I'm all in favor of using Eminent Domain to wrest control away from current banks, but selling the new loans to Wall Street investors sounds like a huge interest rate hike to me. Who would buy a 3.125% loan?
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_Howard
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PostSubject: Re: Why Wall Street Is Very, Very Angry at Richmond, California, Right Now   Why Wall Street Is Very, Very Angry at Richmond, California, Right Now EmptyFri Sep 13, 2013 3:39 pm

Several cities have attempted - or at least looked into - trying the same thing. I think it's a great idea and hope that Richmond can pull it off.

We've seen eminent domain used much in the past for the benefit of business with home owners being screwed. I see no problem with turning the tables, and letting some investors take a hit for the benefit of home owners (sometimes referred to as "actual people"). I vaguely recall writing a paper about the abuses of eminent domain in university nearly forty years ago. The abuse of the process for corporate benefit is nothing new.

There is no reason to believe that this action would affect mortgage rates (and I don't think there is any mechanism in place to allow it). The rates are based on long bonds and various indexes, primarily LIBOR.. I don't know where you got the 3.125% figure, but 30-year fixed rates are now above 4 percent. I would love to get 3 percent on my savings; the idiotic Fed program to give free money to the banks is costing me thousands of dollars a month, and will continue to do so as long as the Fed props up bank profits with our money.

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NoCoPilot

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PostSubject: Re: Why Wall Street Is Very, Very Angry at Richmond, California, Right Now   Why Wall Street Is Very, Very Angry at Richmond, California, Right Now EmptyFri Sep 13, 2013 3:47 pm

_Howard wrote:
I don't know where you got the 3.125% figure
I guess it bottomed out at 3.41%
http://www.freddiemac.com/pmms/pmms30.htm
But if you look at rates historically you can see why banks want to foreclose on loans made in the last 5 years.
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_Howard
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PostSubject: Re: Why Wall Street Is Very, Very Angry at Richmond, California, Right Now   Why Wall Street Is Very, Very Angry at Richmond, California, Right Now EmptyFri Sep 13, 2013 4:20 pm

Typically, banks don't make money on foreclosures today. Why would they want to foreclose on a mortgage in which they loaned $500,000 for a house that has a current market value of $300,000, thus incurring an immediate loss of $200,000 (plus expenses). The big banks don't own the mortgages, except for the (typically-nonconforming) loans which they keep in their portfolios. The rest are sold to the secondary market and the bank gets a small amount, maybe a quarter percent, for servicing the loan. The bank no longer owns the loan and has no direct fiduciary interest in the long-term loan activity.

In turn, the bank contracts the loan servicing to companies who only do loan servicing. The loan servicing companies make a small percentage of the transactions. But they make a significant income with problem loans. Much - sometimes all - of the fines and other extra charges added on to problem loans go directly to the loan servicing companies. It is in their best interest to fuck over the mortgage holders, including foreclosing.

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NoCoPilot

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PostSubject: Re: Why Wall Street Is Very, Very Angry at Richmond, California, Right Now   Why Wall Street Is Very, Very Angry at Richmond, California, Right Now EmptySun Sep 15, 2013 5:45 pm

_Howard wrote:
Why would they want to foreclose on a mortgage in which they loaned $500,000 for a house that has a current market value of $300,000, thus incurring an immediate loss of $200,000 (plus expenses).  
Well I may not have my facts straight here, but it is my understanding that although the bank has sold the loan to a consolidator, they still have some responsibility for ongoing maintenance of the loan. If the borrower defaults it's not Fannie Mae who forecloses.

As to losing $200,000 that's not real money. That's a future payment which the bank now has no hope of collecting -- hence the foreclosure. By seizing the asset, and throwing out the delinquent borrower, the bank gains some chance of reselling the property to another borrower, albeit at a lower price.
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_Howard
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PostSubject: Re: Why Wall Street Is Very, Very Angry at Richmond, California, Right Now   Why Wall Street Is Very, Very Angry at Richmond, California, Right Now EmptyMon Sep 16, 2013 10:14 am

I'm not talking about derivatives, just single mortgages. When a mortgage is sold to the secondary market, whether Fannie or a private investor, the buyer owns the loan lock, stock and barrel. Who does the servicing of the loan is up to the new owner of the loan. Some banks do servicing of the loans they sell, but they are compensated for it; it is not their responsibility.

Quote :
As to losing $200,000 that's not real money.
Okay. I don't understand this at all. When a person borrows money from a bank to buy a house, it's the bank's real money that is given to the seller of the house. If the bank is not repaid and has to foreclose on the house which it then sells for less money than is owed by the mortgage holder, it loses real money (of course, the actual loss may be reduced by whatever interest the borrower has paid).
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