FEDERAL AND STATE AGENCIES TO CRACKDOWN ON MORTGAGE MODIFICATION FRAUD

The March 26, 2009 article I published on this site explained why the Obama administration’s homeowner bailout program would fail.  Among other things, I stated: “Loan modification is a relatively complex and time-consuming process.  Most borrowers do not have the wherewithal, time, or resolve to work through the process.  As a result, many homeowners who qualify for modification under the Program will not complete the modification process.”

The complexity related to loan modifications, made many homeowners easy prey for companies that offered to represent the homeowner in the modification process.  These companies obtained their fee from the homeowner upfront, and in many cases made little or no effort to modify the homeowner’s mortgage.  As a result, these homeowners did not obtain a mortgage modification, and lost their homes to foreclosure.

Today, Treasury Secretary Geithner announced a multi-agency plan to crackdown on companies and individuals who run foreclosure rescue scams, and otherwise defraud homeowners.  Federal and State prosecutors will coordinate their efforts as part of the plan.

Secretary Geithner’s initiative will not make the Obama administration’s program more likely to succeed, but it will prevent many financially distressed homeowners from losing money to unethical self-proclaimed modification specialists.

© 2009, by John Butrus, All Rights Reserved

HOUSING CRISIS DEEPENS

The Office of the Comptroller of the Currency and Office of Thrift Supervision reported today that mortgages in delinquency rose 30 percent in the fourth quarter.  In all, more than 10 percent of all mortgages are delinquent.

The report also contains data that confirms mortgage loan modification programs will not significantly reduce the unprecedented number of nonperforming mortgage loans, or reduce the mortgage foreclosure rate. The Obama administration should abandon the Treasury Department’s mortgage modification plan.

As I concluded in an earlier blog related to mortgage modification, the housing crisis will resolve itself the old-fashioned way. Delinquent borrowers will lose their houses through foreclosure. This will increase the housing inventory, which will cause housing prices to decline. At some point, prices will fall far enough for qualified borrowers to buy the houses.

Margaret Chadbourn and Kathleen Hayes published an article today on Bloomerg.com, which provides an excellent summary of The Office of the Comptroller of the Currency and Office of Thrift Supervision’s report (Link to Article).

© 2009, by John Butrus, All Rights Reserved

Treasury Removes GM Plan From Its Website

Since GM submitted its February 17, 2009 Restructuring Plan, the Treasury Department published the plan on its website in pdf format.  Mysteriously, Treasury removed the GM Restructuring Plan from its website this past Monday (03.30.09), the same day it   issued its Determination of Viability Memo which concludes the GM Restructuring Plan is not viable.  Obviously, this was not a coincidence.  Tomorrow I will offer a theory as to why Treasury may want the public to forget about GM’s Plan.

© 2009, by John Butrus, All Rights Reserved

GM – JUST FIX IT!

Last fall, Saturday Night Live introduced an ersatz financial consultant, Oscar Rodgers (Kenan Thompson), as a Weekend Update guest who offers advice on how to fix the economy. In the sketch (see video), Rodgers’ repeatedly shouts his proposed cure for the economy, “FIX IT!”  When pressed to provide details, Rodgers boisterously elaborates, “Identify the Problem – FIX IT! Identify another problem and – FIX IT! Repeat as necessary until IT IS FIXED!”  Surprisingly, Rodgers’s prescription adheres to Albert Einstein’s advice that, “Everything should be made as simple as possible, but not simpler.”  The comedic character and pre-eminent physicist provide practical guidance with respect to the deteriorating GM crisis.

TAX REBATES – DIRECT STIMULUS PLAN

Last spring, President Bush and Congress gave Americans a direct tax rebate.  The government hoped Americans would spend the rebate, which would increase economic growth.  Oddly, many rebate recipients deposited the rebate funds into their savings account, or used the rebate to pay debt.  Accordingly, the tax rebate failed to stimulate economic growth.

Recent stimulus proposals excluded tax rebates on the assumption Americans who receive tax rebates would once again either save the money, or use it to reduce their debt.  Perhaps, the government should adopt a version of ATT’s successful rebate plan as a means to entice rebate recipients to spend the money.

OBAMA – Never Allow A Superstar To Play To His Strength

In his prime, no one could stop Shaquille O’Neal when he had the ball within 10 feet of the basket. Moreover, opposing teams found it nearly impossible to prevent O’Neal from getting the ball while positioned near the basket; he was just too strong – unstoppable.

Excellence Requires Focused Hard Work – Then You Pay Higher Taxes

The Wall Street Journal recently published an article entitled, “Mastery, Just 10,000 Hours Away.” The article discusses the commitment required to master endeavors such as music composition and  golf.  A professional tennis player once commented that he rather dig ditches every day than endure the daily regimen required to become, and remain, a professional tennis player.  This article explains the reasons why.

Original Article – March 19, 2009 Wall Street Journal, By John Paul Newport

AIG Bonus Recipients May Give Taxpayers A Bonus

Last week AIG Chairman and CEO Edward Liddy asked bonus recipients to repay at least half their bonus.  Reportedly, some bonus recipients returned at least part of their bonuses.  Those who returned their bonuses without an obligation to do so may have created a substantial gift tax liability for themselves.