Roll call for House bill on housing bailing out

[poindexter]

http://clerk.house.gov/evs/2008/roll301.xml
See how your congressperson voted

In a 266-154 vote ... lawmakers approved a proposal ... to let the Federal Housing Administration (FHA) insure up to $300 billion in new loans over four years if lenders agree to reduce the mortgage principal.

To qualify, the lender would have to cut the debt to no more than 85% of a home's current appraised value. If the FHA-refinanced loans went into default, the FHA would pay the lender the remaining principal owed.

While 1.4 million loans are likely to be eligible for such a program, the Congressional Budget Office estimates such a measure would end up insuring 500,000 borrowers. The CBO estimates the FHA expansion program would cost taxpayers $1.7 billion.


Incomprehensibly stupid.

 

[Piotr Rasputin]

The lenders are predators.

 

[alleyallen]

Kevin Brady, R-The Woodlands (TX) just made my crap list.

 

[The Big Ragu]

The lenders are predators.

Looking at a company like Countrywide, I guess it is clear then that the predator became the prey.

 

[poindexter]

The lenders are predators.

Looking at a company like Countrywide, I guess it is clear then that the predator became the prey.

Andrew Mozilo took home over $130 million in compensation and exercising of stock options in 2007. I don't think he minded being the prey. David Sambol, the CEO, only took home $10.4 million in 2007.

 

[The Big Ragu]

The lenders are predators.

Looking at a company like Countrywide, I guess it is clear then that the predator became the prey.

Andrew Mozilo took home over $130 million in compensation and exercising of stock options in 2007. I don't think he minded being the prey. David Sambol, the CEO, only took home $10.4 million in 2007.

Only Mozilo matters, because he was one of the founders. And apparently the SEC and FBI are knee-deep in investigations for fraud. They also dragged him before Congress two months ago to get him on the record under oath so they can make something stick later. Seems fishy that he cashed out in the midst of a stock buyback that would boost prices, prior to the meltdown that would have stripped him of all of his net worth. Either way, a company he founded, which was sitting on top of the world, was looking at bankrutcy if BofA hadn't made what now looks like an incredibly stupid investment (they are going to end up with a worthless asset). So yeah, the predators did become the prey. In just about every way -- I'll bet anything there are going to be indictments related to the subprime meltdown. And there have been billions of dollars of wealth pissed away, this guys $140 million that everyone with a brain knows he obtained fraudulently, notwithstanding.

 

[poindexter]

Ragu, you seem to think that somehow Countrywide has been harmed, since they have become "the prey". I take a different view, I look at it like a ponzi scheme that's run its course. A ton of people made money, from the executives, to the loan officers to the appraisers. Heck, I have a friend who worked a mid-high level accounting position at Fremont. He got a one year bonus for staying on last year, when their troubles started. A one year bonus (at mid-$100,000 salary) for staying on one more year and not bailing ship.

To me, it's more like a "hit it and quit it". Everybody made money, and moved on. Sure, Mozilo will have to be paraded in front of congress a couple times, and spend a couple million in attorney's fees. Call me if he serves a day behind bars. I'm voting no.

 

[flopflipper]

The lenders are predators.

Yes, they force people to sign mortgages at gunpoint. Bastards.

 

[The Big Ragu]

Ragu, you seem to think that somehow Countrywide has been harmed, since they have become "the prey". I take a different view, I look at it like a ponzi scheme that's run its course. A ton of people made money, from the executives, to the loan officers to the appraisers. Heck, I have a friend who worked a mid-high level accounting position at Fremont. He got a one year bonus for staying on last year, when their troubles started. A one year bonus (at mid-$100,000 salary) for staying on one more year and not bailing ship.

To me, it's more like a "hit it and quit it". Everybody made money, and moved on. Sure, Mozilo will have to be paraded in front of congress a couple times, and spend a couple million in attorney's fees. Call me if he serves a day behind bars. I'm voting no.

Well, Countrywide has certainly been harmed. At least BofA was for buying it, because it is a near worthless asset. That was my only point. A whole industry went poof. The predators did become the prey. Not sure how anyone can not agree with that.

The subprime lending market was like a ponzi scheme in a lot of ways. It was predicated on assets that didn't exist. They were extending credit to people without the assets to justify those loans. And it came crashing down hard.

I have no idea what is going to happen to Mozilo, but he is being investigated by the FBI. I actually think he is in deep doo doo, but we'll see.

Whatever happens to him, I make a big distinction between fraud and outright larceny -- and everyone knows this guy is a slimeball -- and the underlying reasons the housing market fell apart. Those appraisers and mortgage brokers and real estate brokers --and your friend -- rode a bubble based on a fallacy. They weren't trying to defraud people. They were along for a ride.

Boosting a stock price and cashing out when you know it is about to lose most of its value, based on insider information, is illegal and fraudulent. There is a huge difference between Andrew Mozilo and a mortgage broker who had a good run for a few years.

 

[poindexter]

Ragu, we are in agreement on most of this, but I disagree with They weren't trying to defraud people.

Everybody involved with "stated income" loans (liar loans) were absolutely trying to defraud people. Putting down false income on "no income verification" loans, in order to obtain a loan? You'd really have to speak in yoru best lawyer-ese in order to convince me that these weren't fraudulently obtained loans.

And the work done by many appraisers comes very close to the definition of fraud as well.

 

[poindexter]

In case you are wondering what types of homes are being bailed out by the "yes" votes in this bill, take a look at this list of newly foreclosed loans in los angeles. Pay particular attention to the prior sale price, and date.

http://www.latimes.com/classified/realestate/news/la-re-foreclosed9-2008may09.pg,0,6015640.photogallery

My favorite:

Sold for $449,000 in August 2006 in La Puente, an absolute dump of a town.

 

[The Big Ragu]

poin, Not a lawyer, so I can't do that. But unless you walk in lying about your income, and sign your name to it, there is no loan.

Those people weren't defrauded.

 

[poindexter]

poin, Not a lawyer, so I can't do that. But unless you walk in lying about your income, and sign your name to it, there is no loan.

Those people weren't defrauded.

People did walk in and lie about their income.

The ones defrauded were the bag holders at the end of the line, who bought tranches of mortgage-backed securities expecting an income stream based on payments made. Income securities fully rated AAA by the rating services (another despicable participant in this mess).

 

[The Big Ragu]

poin, Not a lawyer, so I can't do that. But unless you walk in lying about your income, and sign your name to it, there is no loan.

Those people weren't defrauded.

People did walk in and lie about their income.

The ones defrauded were the bag holders at the end of the line, who bought tranches of mortgage-backed securities expecting an income stream based on payments made.

Oh.

I don't quite see it that way. You buy mortgage-backed securities in a risky subprime market and, you get paid a higher yield based on the risk involved. You are getting paid more money to take on risk. You make the investment knowing that there is nothing backing those loans except people's signatures. When you get stuck holding a bunch of defaults, it seems disingenuous of me to cry, "no fair!" What did you think you were getting those huge yields for?

It's no different than the junk bonds and LBOs in the late 80s. You're getting double digit yields to buy a risky security. No one forced you to buy it. You should have looked at what you were buying and understood exactly what it was. On a common sense level, pretty much everyone knows nobody gives you money for nothing. That should send up your radar and get you to think about what you are buying.

Either way, it's just funny that the bottom line of what you just said is that Bear Stearns and Merrill Lynch and Citigroup were the ones defrauded. People usually don't shed too many tears for them.

 

[Ben_Hecht]

poin, Not a lawyer, so I can't do that. But unless you walk in lying about your income, and sign your name to it, there is no loan.

Those people weren't defrauded.

People did walk in and lie about their income.

The ones defrauded were the bag holders at the end of the line, who bought tranches of mortgage-backed securities expecting an income stream based on payments made. Income securities fully rated AAA by the rating services (another despicable participant in this mess).

And these cycles will never end, because it's too easy to make a score during madness-of-crowds time, and with a smart lawyer, you're in like Flynn . . .

 

[Baron Scicluna]

In case you are wondering what types of homes are being bailed out by the "yes" votes in this bill, take a look at this list of newly foreclosed loans in los angeles. Pay particular attention to the prior sale price, and date.

http://www.latimes.com/classified/realestate/news/la-re-foreclosed9-2008may09.pg,0,6015640.photogallery

My favorite:

Sold for $449,000 in August 2006 in La Puente, an absolute dump of a town.

Loved the first home on the link. Buyer spent $1.2 million and put $200 grand into it. Now they can't even get $700 grand for it.

There's a few people taking a huge hit here.

 

[poindexter]

I don't quite see it that way. You buy mortgage-backed securities in a risky subprime market and, you get paid a higher yield based on the risk involved. You are getting paid more money to take on risk. You make the investment knowing that there is nothing backing those loans except people's signatures. When you get stuck holding a bunch of defaults, it seems disingenuous of me to cry, "no fair!" What did you think you were getting those huge yields for?

A couple of points:
I really don't see any of the bagholders crying "no fair".

These bagholders bought securities rated "AAA" by the ratings agencies. I've read a lot about the ratings of these securities. Entire tranches reviewed and rated in a day. No review of the underwriting. Flawed methodology (looked at pre-payment risk; not risk of loss due to lowering housing prices/defaults).

A teacher's pension fund in Switzerland was relying on the rating. They didn't buy "liar loan" MBSs.

 

[poindexter]

I make a big distinction between fraud and outright larceny -- and everyone knows this guy is a slimeball -- and the underlying reasons the housing market fell apart. Those appraisers and mortgage brokers and real estate brokers --and your friend -- rode a bubble based on a fallacy. They weren't trying to defraud people. They were along for a ride.

FBI discusses mortgage fraud

http://www.fbi.gov/publications/fraud/mortgage_fraud07.htm

 

[Pancamo]

Did BOA buy Countrywide's servicing portfolio? If so, it isn't a worthless asset.