Sunday, July 29, 2012

Eminent Scopolamine Mortgage Seizure Update

I continue to read updates on this insane plan and my initial response is always that there just simply is no way it will be allowed to push forward. However, a dedicated reader highlighted the plan has spread to Chicago and they're having hearings on it. One can hope that whomever is at the hearings will not be in a drug-induced coma and see the glaringly obvious problems surrounding this idea, but just in case I'll highlight a few in a an easy to read bullet point format:

"some arguing that the initiative may actually do more harm than good", from the article.
  • No more mortgages available to Cook County residents. Ever. Big bad mortgage lender finds out that in Cook County, they're contracts are worthless. Why would they ever, ever lend here again. No one would ever lend in Cook County again, and home prices would dramatically decline. After homeowners were devastated by the new equity losses, the law would ultimately be reversed, similar to what happened in Georgia when they pushed through a flawed assignability law.
  • One municipality is simply stealing from residents outside the municipality - the victims will not be happy. The plan is to focus on Non-Agency mortgages first, then Agencies. So, the responsible mortgage payer in one part of the country (via their ownership of pensions, mutual funds, and ultimately Fannie/Freddie/Ginnie) will ultimately be bailing out irresponsible mortgage defaulters in another part of the country (Cook County, in this example). Can someone pull out the history books and see what happened the last time a State seceded? Oh yeah, it was something about States feeling their rights to govern themselves were infringed on due to some constitutionality thingy - even though the key argument was over slave ownership (aka their property, in their opinion, not mine) not their property in the sense of retirement accounts, investments, tax dollars, but I can see the correlations. Please feel free to call me crazy in the comments.
  • Does nothing to help the struggling homeowner. They're only focusing on mortgages that are current, but underwater. So, your typical beneficiary has no problem making the mortgage payment, the value of their collateral has simply declined - instead of having to post new collateral, this is suggesting they just get a pass on their losses... I can't even dream up the situation where that makes sense. It certainly doesn't solve any problems, and only creates more. I guess if you bought a house with your savings, and no mortgage, and the value declined we should just send you a check for your loss - heck, if you bought an apartment building as an investment, you should get a check for your loss too. Let's let our government(s) pay for it so basically every investment everyone makes will never lose. I'm sure it will work out fine...
  • The community on the forefront of this idea is going bankrupt. Are we really suggesting that we should look to a community who has failed to manage its expenses properly for solutions to a complex financial issue?

No comments: