My wife spent Friday night with a couple of girlfriends while I was dragging myself through the last shift of an awful week. She had some interesting news for a Saturday lunch. She told me one of her buddies, a property appraiser had sent Bank of America and appraisal on a home where the bank was offering to reduce the interest rate to 4.5 percent. All the home owner had to do was pay a few hundred dollars for the appraisal and sign the papers. Bank of America paid the costs of the refinance operation. "We're calling Wells Fargo!" my wife said with a gleam in her eye..
Then I read an item in Mish's Financial Monitor, a well known observer of the economy, one of those voices that sits outside the mainstream CC/Fox/WSJ arena. He had an item reporting that investors in Countrywide, the mortgage company bought by Bank of America in one of it's more stupid moments, are now fighting Bank of America's mortgage modifications. Investors in Country wide could legally force Bank of America to buy outright $80 billion dollars-worth of loans. This, because the investors in Countrywide are having their own stupid moment. Bank of America hasn't suddenly gone soft, it just figures it's better to keep people in their over priced homes paying a monthly nut, even a reduced one, rather than having them step away..
The investors in Country wide must be thinking this is their way to get paid off and escape the crisis, but instead if they block the loan modification program they will end up pushing more and more people out of their mortgages with predictable consequences. I shudder as I think of the estimates 600 homes in foreclosure proceedings in the Lower Keys. I have not added up the number myself let me hasten to add, but that is the number currently bandied about..
The thing that struck me about this story was that my economic mentor Ty sent me a complicated paper some weeks ago describing this dilemma precisely. The discussion mentioned the fact that most mortgages are being used to back investment packages that ultimately control the loan, and should the federal Government chose to modify the terms of the loans the holders of the investment packages can legally force the government to buy the loans outright. And guess what? Here it is- happening exactly as predicted!
This economic crises is much more far reaching and complex than a lot of people want to think it is. I hope we get a new set of l;eaders who can talk truth to us and invovle us in what they plan to do.