Time to 'Sober Up' on Foreclosures: TARP Official (Elizabeth Warren)

[sabra]

Source: CNBC

Banks and homeowners alike need to take a more realistic view about how to stem the tide of foreclosures overtaking the housing market and the economy, the head of a government watchdog panel told CNBC.

The more than $700 billion the government allocated toward dealing with foreclosures has only made a minor dent in the problem, said Elizabeth Warren, chairwoman of the Congressional Oversight Panel for the Troubled Asset Relief Program.

That's because those on both sides of the equation are not taking a proactive enough approach, she said.

"We have to sober up on this and say, 'Look, it's time to get realistic,'" Warren said. "It's time for the banks to get realistic about the value of the second mortgages, it's time to be realistic about doing some principal writedowns."

But the onus is not entirely on banks. Homeowners with distressed mortgages also may need a reality check.

"Some of you should stay in your homes...and some of you don't belong in those homes and you've got to be moved out," Warren said. "And frankly, those houses need to get back onto the market and get into the hands of people who can afford them."

Read more: http://www.cnbc.com/id/36497737

[xchrom]

1. Banks first.

They created this mess.

But I think she's on the right track.

[SkyDaddy7]

2. The truth is what it is!

Thank-you Elizabeth Warren!!

[jotsy]

13. I think the truth here has more layers than any onion.

I watched a good bit of the FCIC hearing last week and got the impression big banks quietly funded pass thru 'warehouse' lenders that wrote many of the 'bad' loans before selling them off.

I see the structure of the pricing in the market as artificially driven in order to make demands of homeowners for the difference, either they get a ton of dough, or repossess the property, which they've already insured themselves against.

This continues to be the biggest land and money grab ever, yet even as it is exposed as that, the apathy of a robbed people astounds me.

A kick for sabra, I'm glad somebody besides me is watching.

[ixion]

3. The first step is to reset everything to market value

because there's no way in hell a 150K house is going to be worth the 300K paid for it any time soon.

That is going to hurt both the banks and the homeowner, but there is really no other way to begin to actually fix the problem, because that IS the problem: over-valued houses financed on what amounts to credit card terms.

[Froward69]

4. 40 year Mortgages.

Same interest rate, same principal amount. just extend the term from 30 to 40 years and you cut the payment by a 1/4. thus saving Families.

did that 70 years ago and it worked beautifully. (My Grandma had one.)

[mbperrin]

8. Numbers don't work out.

40 years on $200,000 at 6.25% = $1135/month

30 years on $200,000 at 6.25% = $1231.43/month

20 years on $200,000 at 6.25% = $1461.86/month


When I worked for banks 30 years ago and 30 year mortgages were new, the question was, "What's the difference between a 20 year and a 30 year mortgage?" Answer: 10 years of interest payments.

Hilarious. Well, as long as you were the bank.

[SoCalDem]

5. It could have been done quickly and relatively easily

Anyone with a mortgage taken out within the last 10 years should have been able to submit a new appraisal (along with documentation), and a voucher for the difference could have been issued to the mortgage holder (as part of TARP). the principle amount would have been reduced by that amount.

Homes would have been realigned price-wise, and mortgages would have been automatically adjusted.

All mortgages should have also been reset at a 30 yr fixed rate .

People who were truly in homes they never should have been talked into buying, would probably still have defaulted , but millions of people would have been "made whole" again, and prices would have moderated to a realistic level.

[jody]

6. People who gamble should bear their own losses. n/t

[Betty]

9. depends what you mean by gambling

If someone buys a house that they can't afford and they know it (and the mortgage broker knows it, too) that is not gambling.

If you buy a house that you can afford and then you lose your job, I think you deserve some slack.

[jody]

10. ROFL you know precisely what gambling in the real estate market is. n/t

[slackmaster]

7. She's right, and I'm glad she had the ovaries to say it.

:toast:

[Taverner]

12. "got the ovaries to say it" - love it

[louis-t]

11. She also said banks are not cooperating on the 6

programs that are supposed to help. The 4 that I know about are HAMP, HAFA, 2mp, and HARA. They have to do with remod, refi, 2nd mortgages, and short sales. Only about 10% of people in this situation have been helped, but the banks don't want to help anybody. CNN this morning had the 10% figure and left it at that, leading one to believe the programs "aren't working".