Voting on Principal Reductions: Treasury: YES… FHFA: NO… Obama Administration: YES… Congressional Republicans: NO. Good Lord.

Clowns to the left of me, jokers to the right, here I am, stuck in the middle with all of them…

So, are you ready for this?  I can promise you that you’re not.  ProPublica, a Website I’ve just recently started paying attention to, is reporting that there seems to be one giant stupid, and inconceivably insensitive debate going on in our nation’s capitol concerning the use of principal reductions as related to loan modifications.

Now, before I say anything about this, I just want to mention that this was a stupid debate last year when a similar group of untrustworthy buffoons were kicking the idea around, but this year it’s just turn-your-head-and-look-the-other-way STUPID.

Last year, and I write about it then too, they were discussing whether principal reductions were a good thing or a bad thing.  I mean, do you think it occurs to these people how incredibly embarrassing it is for them to be having such a discussion… talking about concepts like “moral hazard” and the like?  These people are the moral hazard… they’re the crown princes of moral hazard, are they not?  And as far as irresponsible borrowers go, well shiver me timbers, like the world has never seen they are irresponsible borrowers.

So, for them to actually have a job where they get to sit around and pontificate about the pros and cons of granting principal reductions, and the potential impact of doing so as opposed to not doing so… as if they’ve done even one thing right, or forecasted even one aspect of this housing meltdown correctly, well… it just boggles the mind, that’s what it does… it just flat out boggles it.

If I could be a little talking bird that could land on the window sill of their meeting room, I’d say… come on guys, you’ve already lost all credibility, no one will believe you anyway… give it a go… what can you lose?  I mean, Treasury was suppose to launch the HAMP PRA, that’s Principal Reduction Alternative program on October 1, 2010, according to their own press release.  Anyone seen hide or hair of it?  Right… the answer is no.

And that overlooks that HAMP was supposed to offer some number of principal reductions in the first place, after taking the interest rate down to 2% and the term of the loan out to 40 years… the servicer was supposed to consider reducing the principal.  Let me guess at how the banking lobby would respond to that:

“Servicers do consider reducing the principal on every single loan modification application.  They just decide against it every time.”

To which all I can think about is beating the crap out of some fictional banking lobbyist.

So, anyway… enough of that… Treasury is allegedly for principal reductions… the House Republicans, as if they should get to vote on anything, say Nay!  The Obama Administration is purportedly for the idea of bringing down the balances on loana, but now… are you sitting down… the FHFA, the Federal Housing Finance Administration, the regulator of the failed Fannie and Freddie, says no.

And no, means no, I suppose?

Who the hell is the FHFA, is that even a real regulatory agency?  I think they just made it up a few years ago to make it appear as if something was actually regulating Fannie Mae.  And that brings up another good point.

Now?  Now when perhaps there could be the modicum of a chance to perhaps save even a few from foreclosure, like it could be my next door neighbor we’re talking about, and hence maybe another fifty grand slashed off of my fast diminishing theoretical equity position… now you start regulating Fannie?   Like, where the heck have you been… say, when Fannie was leveraging itself 110:1, I believe the figure was when the bough broke.  And Freddie… a jaw dropping 170:1?  And now you’re looking at saving a few foreclosures and you saw…

“Nope.  It wouldn’t be prudent, not at this juncture.”

Since when is anything that Fannie Mae does even remotely prudent?  Yeah, because that’s what comes to my mind when I think of the word “prudent”… Fannie Mae.  Nice castle, by the way.

You guys are smoking crack over there, right?  Tell me you are and I’ll leave you alone.  I promise, you won’t hear another word out of me.  Otherwise, I’m going to find a way to friend your mom on Facebook and tell her what you do at work.

And Fannie Mae and Freddie Mac… excuse me for a moment, but am I wrong to say they’re both entirely bankrupt, like as in gonzo… out of here… the showers are on… ball four, take a hike, you’re all done here?

Oh, I know, you’re going to tell me about how their in something called “conservatorship,” right?  Yeah, well then let me rephrase my question.

If Fannie Mae and Freddie Mac were anything but fraudulent-semi-pseudo-quasi-government agencies in the first place, would they be long gone bankrupt?  Thank you… I thought so.

So, FHFA… what are you doing over there?  The President of the United States and the most powerful man in the world, Treasury Secretary Tim Geithner both say they want Fannie and Freddie doing some principal reductions, who are you to say no to them… I mean, I can understand you telling Obama to pound sane, half the bankers on Wall Street don’t even show up for his meetings, but Tim Geithner?  Don’t you know who he is?  That man can snap his fingers and Ben Bernanke starts up the printing presses from his nightstand by his bed.  Tim Geithner… even Lord Blankcheck over at Goldman Sachs takes his calls.  And Vikram Pandit over at Citi?  Yeah, well I heard he comes over to rub Geithner’s feet in the evenings.  It’s true, that’s what I heard.

Seriously now… Freddie and Fannie were GSEs for years… you know… “Government Spending Entities.”  What’s the big deal if they shave a little off the balance balance due on a few thousand homes.  It’s not going to natter anywat… buy next year at this time they be underwater again… you won’t have really changed a thing.  And besides, the two mortgage queens have never had any principles before why not cut some of them off now that they’ve got a few.

For God’s sake man, Fannie Mae stock is trading OTC right next to Blockbuster!  What could you possibly be holding onto?  Are you holding your shareshoping for “the bounce”?  Dollar cost averaging into either one of those piles of dung, is that what you’ve got going on over there?

And get ready for this whopper of a sentence from the article on ProPulica…

“In this case, reducing principal for some homeowners could add stability to the housing market and save Fannie and Freddie money in the long term, but it would also force them to take an immediate hit to their balance sheets.”

Okay, first of all… “balance sheets,” as in more than one?  Was that just your Freudian slip showing, or are Fannie and Freddie running two sets of books again?  Wouldn’t be the first time, you know.

And back up… read that paragraph again… reducing principal “for some homeowners could ADD STABILITY to the housing market and SAVE FANNIE and FEREDDIE MONEY in the LONG TERM, but it would also force them to take an immediate hit to their balance sheets?”

So, who gives a crap about their “sheets?”  Treasury dumps tens of billions into their bottomless pits every quarter that I can remember anyway.  To hell with their “sheets”.  In fact, while you’ve got the go ahead to pull Fannie and Freddie up to the Treasury Department every quarter and say: “Fill ‘em both up.”  Wouldn’t now be a good time to take the hit to the “sheets?”

Because the way things are going, the Democrats may be replaced by a whole team of Alvin Greenes next election, or who knows… maybe even a few Republicans, and if that happens, how long do you think it’ll take the GOP to change your sheets?  An hour?  Not even that long… they’ll phone that vote in from their limos on the beltway.  And then what will you say when you go down in history as the man… I’m assuming it’s a man we’re talking about, but I’ll look it up in a second and tell you for sure… what will you say when you go down in history as the only man ever who couldn’t throw a few hundred billion away?  It’ll be embarrassing at the club, have you thought about that?

ProPublica asked Fannie Mae for a statement and apparently Amy Bonitabus, Fannie Mae’s spokesbetch said:

“We are continuously reviewing our policies regarding the modification of mortgages based on changing economic circumstances and our analysis of whether the policies are working.”

I swear… did she sound like she was smacking her gum when she said that, or was that just me?

Hey Amy… pssst… over here… that’s right, here… to the right… a little closer… that’s it… good… blow me.

Was that too unprofessional for you?  Yeah, well I’ve got a few choice words for you too in that case.  This is out of control… someone needs to take someone over his or her knee and give him or her a hot bottom.  (You know, that’s a better sentence when you don’t make it grammatically correct.)

And first of all, what “changing economic circumstances” are you currently reviewing your policies by?  And name one policy Fannie Mae has ever had that anyone but that clown Franklin Raines thought was working?  And besides, wasn’t that Franklin Raines that played Lamont on Sanford & Son?  I think it was… that’s why you never see the two of them together.

You guys at Fannie have never reviewed a loan modification policy in your lives… I don’t believe it.  Name one.  One thing that Fannie Mae does consistently that has to do with loan modifications?  Go ahead, betch, I’m waiting.

Oh, did your Crackberry go off and you’ve got a meeting… I thought as much.  Loan modification “policies” at Fannie Mae… that may just be the finniest thing I’ve heard all year.

And how about what the Wall Street Journal reported last week… according to ProPublica…

“The Wall Street Journal reported last week that the Obama administration has been pressuring the FHFA to allow Fannie and Freddie to reduce principal, and that they are “in talks” about joining the program that targets borrowers who aren’t behind on their loans.”

Oh, come on… is this some sort of gag article… am I on Candid Camera… I’m serious… is that a camera in my closet next to my “Nobody tell Obama what comes after a trillion, okay?” coffee mug?

Obama has been pressuring them… the President of the United States is pressuring them… Ohhh, is it like Guantanamo… or more like Canyon Ranch… pressure me some more, Barack… I like it when you pressure me… a little to the left… ahhhh, that’s it… now down… yeeesss…

And the pressure has resulted in “talks” and after all that they may consider participating in the program that targets borrowers who AREN’T LATE?  You mean the program that’s never been used once… because no one modifies loans that aren’t late, and if they do, they certainly never tell a soul for fear of embarrassment.

And the hits just keep on coming…

“Industry analysts, however, have expressed doubts that the talks will have much impact. Congressional Republicans have been particularly vocal in pressuring the FHFA against doing principal reduction.”

Congressional Republicans, huh?  Do I have one of those in my district?  If I do I think I‘ll go find out where he parks and key his car… every day… for a year.  I’m kidding about that, by the way, I’ve never keyed a car in my life.  The sound would kill me… screeeeech… yikes.

But why do Congressional Republicans have a view on this issue?  What are they a roving bunch of bullies that prowl the halls of the Capitol and intimidate people on issues that don’t have anything to do with them?

But, I’ll tell you what… why don’t you check to see if you have a Congressional Republican in your life and start sending him or her letters.  Every day.  Write seven on Sunday and then drop one in the mail every day of the week ahead.  Then, get a friend of yours to do the same thing… then another… and another.  I’m not sure you’ll accomplish anything for the principal reduction cause, but you’ll start feeling a whole lot better by Wednesday of week two at the very latest, I promise you that.

The ProPublica story explained that Obama does appoint the head of the FHFA, and that really blew me away.  Obama appoints the head of the FHFA but Obama’s been pressuring him and it’s still a no go.  Damn it, Obama, call Dick Cheney… he’ll tell you have to handle this… can you imagine this same thing happening to Cheney?

The article also said that Congress can also pass a law forcing the FHFA to allow principal reductions, but no one thinks Congress can pass anything but gas.

And get this… from the ProPublica article touched on my favorite subject… bankers putting down aid for homeowners because it constitutes a bailout:

Credit Suisse analysts wrote last week, “Given the current make up of Congress, it would be difficult to get a borrower bailout law approved, in our view.”

A “borrower bailout bill?”  Did the guys from CREDIT SUISSE actually say “bailout bill” and sound snarky?  Someone needs to find out where they hang out after work, throw them in the truck as they’re leaving, and take them on a Hannibal Lecter Tour of Great Places for Liver and Onions”.  That’s just what I want to hear, snarky Credit Suisse guys making fun of principal reductions by branding them a “bailout bill for homeowners.”

Now, get this… ProPublica claims that based on data from OCC’s Mortgage Metrics, their analysis shows that banks have been doing principal reductions and discovering that they do make sense.

Meanwhile, banks have also been seeing the benefits in reducing principal in certain cases as well. Indeed, nearly all principal reductions that occur happen for the loans banks hold on their own portfolio, where they have the fewest obstacles to the modifications. Over the last year, banks have used principal reduction on almost a third of modifications on loans they own, according to ProPublica’s analysis of regulator’s data.

The article even goes as far as to say that both Wells Fargo and Bank of America have agreed to CONSIDER principal reductions for those that qualify for HAMP… but there’s that word again… “CONSIDER”.  Why does the Treasury keep using that word?  Don’t they know that we got hip to that crap like more than two years ago?

But, according to ProPublica…

Wells Fargo and Bank of America, for example, have both agreed to consider principal reductions in the Treasury’s main loan modification program, but only for loans that they own outright. One bank executive said that their internal analysis predicts that a “good percentage” of their government modifications will soon involve principal reduction, since the calculations indicate that they will recoup more money by reducing principal.

“If it’s good enough for their own balance sheets, where the banks have the risk, why wouldn’t it be good enough” for Fannie and Freddie, asked FHA Commissioner Stevens.

Gee, I don’t know Commissioner Stevens… but you might… why don’t you share the answer with the rest of the country.

The article goes on to explain that Fannie and Freddie have arrangements that are different from others, because they can force others to cover losses on some delinquent loans, and it also implies that by granting a principal reduction, their ability to recoup losses from lenders that originated mortgages to buy back bad loans becomes limited in some way, although I don’t understand exactly why that’s the case.

And the article points out that many of Fannie and Freddie’s loans have mortgage insurance, so there’s an insurance company on the hook should the loan default.

Now, does that mean that the two insolvent GSEs are actually allowing those loans to default and go into foreclosure instead of modifying them because they’d prefer to recoup the insurance proceeds than prevent a foreclosure?  Because that’s sure what it sounds like to me, and that’s just unbelievably wrong in so many ways… and must be exposed and stopped.

Look at what’s happening here…

Treasury Secretary Geithner just recently testified that he thought there’s a solid economic case for Fannie & Freddie to participate in the principal reduction programs, such as the new HAMP PRA, but they don’t participate in any of them.  I mean, F&F aren’t participating in the new PRA even though, as the article says:

“For example, the voluntary “Principal Reduction Alternative” to Treasury’s main loan modification program encourages adjustments only where reducing principal costs less than letting the home go to foreclosure or than doing a modification that doesn’t trim the loan. But Fannie and Freddie are not participating, even though the program is only for principal reductions that would save them the most money.”

That means that it’s all about short-term losses for Fannie & Freddie, avoid them at all costs, and their regulator, the FHFA is enforcing that stance.  But, Fannie & Freddie, in my way of thinking shouldn’t even be given the choice.  They are both bankrupt.  Gone.  History.  They’ve already been NATIONALIZED, for God’s sake.  Oh, I know… it’s a conservatorship, or whatever… and that means… I DON’T CARE WHAT THAT MEANS.


Listen up, Washington D.C.  You don’t have any money.  You’re the world’s largest “irresponsible borrower.”  You are where you are to serve the people of this country.  You are not here to hand out our money, and then say… “Do whatever you want to them, we don’t care.”

You are paid to care… elected to care… there to care.  Stop not caring…

Mandelman out.


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