Morning Report – People don’t understand HARP 09/23/13

Vital Statistics:

Last Change Percent
S&P Futures 1699.3 -3.1 -0.18%
Eurostoxx Index 2914.4 -12.8 -0.44%
Oil (WTI) 104.5 -0.3 -0.24%
LIBOR 0.251 0.001 0.40%
US Dollar Index (DXY) 80.39 -0.038 -0.05%
10 Year Govt Bond Yield 2.73% 0.00%
Current Coupon Ginnie Mae TBA 104.8 0.1
Current Coupon Fannie Mae TBA 103.9 0.0
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.42
Markets are lower as they start to worry about the machinations over the debt ceiling and the continuing resolution. Bonds and MBS are more or less flat.
We will have lots of relevant data this week, with Case-Shiller and the FHFA Home Price Index on Tuesday, Lennar and KB Home earnings on Tuesday as well, and the third revision to 2Q GDP on Thursday. Note the Fed took down 2013 GDP projections by 30 basis points in its economic forecast, so maybe they know the revision is going to be bad. The Street is at 2.6%. Don’t forget Q1 GDP started at something like 2.5% and was revised downward to 1.1%.
The tea party wing of the Republican Party is demanding that obamacare be delayed or de-funded as a condition to raising the debt ceiling. Needless to say, this is going nowhere in a Democratically controlled Senate and won’t be signed by the author either. The continuing resolution will be the first hurdle, and Republicans do have something to protect in that it keeps sequestration-level spending in place. The debt ceiling is a messier affair, but Republican leadership is dead-set against defaulting on the debt, so this will get passed one way or the other, but it may cost Boehner his speakership if he passes an increase in the debt ceiling by relying on Democratic votes.
The FHFA is trying to figure out why eligible borrowers are not taking advantage of HARP. There seems to be this perception that you have to be delinquent to take advantage of it, which is false. LO’s take note.

24 Responses

  1. The debt ceiling is a messier affair, but Republican leadership is dead-set against defaulting on the debt, so this will get passed one way or the other, but it may cost Boehner his speakership if he passes an increase in the debt ceiling by relying on Democratic votes.

    I am fascinated by Obama’s public stance on this. He is forcing the opposition to get something from him. I know it’s all battlefield preparation. I just can’t fathom how he thinks taking the no negotiating stance is believable to anyone. It really is a “don’t call my bluff” situation.

    Let’s say we miss raising the debt ceiling by a month. How much more would it cost the US to borrow considering Teh Bernake is buying a trillion a year in bonds? What are the consequences, besides the opportunity cost of money, is some don’t get their bills paid for a month? If it somehow makes it more expensive for the US to borrow, is that a bad thing?

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  2. Wonkblog on the Richmond eminent domain scheme.

    There’s no way this can qualify as a public purpose:

    “However, in a technique argued since the beginning of the crisis by Cornell law professor Robert Hockett, rather than use eminent domain on the house itself, the city would seize the mortgage. A private investment company, Mortgage Resolution Partners (MRP), would in turn write down the mortgage amount to something closer to the current value. They would collect a profit and refinance the loan. The homeowner would be less likely to default with a lower loan amount, or would be able to sell without a short-sale, leaving him or her with more money to spend locally.”

    http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/21/is-richmonds-mortgage-seizure-scheme-even-legal/

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    • jnc:

      There’s no way this can qualify as a public purpose:

      I would have said the exact same thing about Kelo before Kelo. It is increasingly apparent that for a significant number of people, the Constitution is not so much a guide to what government can do as it is a troublesome obstacle to be overcome in doing whatever the fuck they want it to do. And, at that, it hasn’t proven to be a very formidable obstacle.

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  3. What I don’t get is the lack of recognition of basic property rights. Is the assumption that all upside down loans are because of fraud? Or, is there just not a belief in property? If that’s the case, why not say it?

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  4. But the borrower will spend more money and that is what the economy needs right now! They are more likely to spend it as opposed to the banksters who will just sit on it.

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  5. I love the fact that McCain “hates” Cruz.

    http://www.talkingpointsmemo.com/livewire/aide-says-mccain-f-cking-hates-cruz

    I bet the only people in the Senate he “hates” are Republicans.

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  6. This:

    “Or, is there just not a belief in property?”

    Dig down deep enough and you find that the consistent people on the left who advocate for this (i.e. those who subscribe to Jacobin) view property as a privilege granted by the state.

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    • I do not see the Richmond idea as anything but theft, absent a jury trial. Follow me:

      I own a $100,000.00 unsecured note receivable that is performing. I can put on expert testimony that my debtor is well able to continue paying the note and my debtor will testify that he intends to pay like clockwork and not get sued by me. Jury would make county pay me nearly 100 cents on the dollar, after county put on evidence of the time value of money.

      So my note would be worth less because it is partially secured?

      I cannot even imagine a California state court buying off on that. Kelo was bad, but it was truly a natural extension of bad law existing since we gave railroads the right of eminent domain in the 19th century. There is, AFAIK, no such history of bad law to support this obscenity.

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  7. Interesting. Good luck New York

    “A Mayoral Hopeful Now, de Blasio Was Once a Young Leftist
    By JAVIER C. HERNÁNDEZ
    Published: September 22, 2013

    The scruffy young man who arrived in Nicaragua in 1988 stood out.”

    http://www.nytimes.com/2013/09/23/nyregion/a-mayoral-hopeful-now-de-blasio-was-once-a-young-leftist.html?pagewanted=all

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  8. He’s not young anymore.

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  9. I think Kelo was more of a watershed. You can make a case that railroads are like regular roads in terms of right of way. Kelo was simply stealing entire parcels of land to give to a private developer.

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    • JNC: the regrettable progression was from railroads to pipelines to urban renewal to stadiums to Kelo. The last is the worst. The progression was relatively subtle each time.

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  10. High Frequency Active Auroral Research Program

    http://en.wikipedia.org/wiki/High_Frequency_Active_Auroral_Research_Program

    HAARP . . .

    If you really want to understand.

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  11. “pipelines to urban renewal”

    There’s the BS jump.

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    • Ha! I thought urban renewal to stadia was the worst BS until Kelo.

      No matter, it was a progression. Or a regression.

      Do you know if there is a right to jury on a condemnation case in Cali?

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      • Mark… condemnation cases, both imminent domain and inverse condemnation are spelled out in the 5th amendment of our National Constitution.

        Imminent domain and inverse condemnation are THE SAME.. except… imminent domain is when the “taker” of the property approaches the “owner” of the property BEFORE actually taking and all details of compensation to the owner, etc. are worked out. Inverse condemnation is when the “taker” did not approach the “owner” and work out all the details, including “just compensation, but just took use of the property owner’s property.

        In an imminent domain case, there should be no need for a trial by jury since, by it’s own nature, everything was already “contractually” worked out between the “taker” and the “owner”. In an Inverse Condemnation case, they almost ALWAYS end up in a jury trial because the poor “owner” has to take the “taker” to court in order to be awarded any “just compensation”… and it is up to the “owner” to PROVE their case that the “taker” actually took their property for public use.

        I know all this because I have been in an Inverse Condemnation case since Jan, 2011…. after the City of Broken Arrow made “flood” changes to 2 new subdivisions built near our subdivision. The result of their efforts to “help” the 2 new subdivisions was that ALL the diverted storm drainage was diverted, by trenches, to the edge of our property… causing repeated flooding (every time it rained) for 4 solid years which has resulted in our $150k home now having to be torn down and rebuilt. And unless I hear anything different between now and then, we are FINALLY scheduled for our Pre-trial on Oct. 3. I do already know that the City will NOT make any kind of a reasonable offer to us at that time and we WILL proceed to a jury trial. How long that takes I have no idea… especially since it has been 5 years since the first flooding and almost 3 years since we filed our lawsuit. My husband and I just hope we live long enough to see the end of this.

        Summary… since Condemnation is covered by our Constitution, no state can deny a jury trial in an inverse condemnation case.. and Imminent Domain shouldn’t require one.

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        • Geanie, you have stated the matter through a glass darkly. Eminent domain is the power to condemn. If the private owner is unwilling to convey on the condemnor’s terms, she has a right to trial.

          But not a federal constitutional right to a jury. That is a matter of state law. And we in TX and OK are fortunate to have that jury right, b/c the County Judge would screw us every time, unless we were big donors.

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        • I hear you Mark. And yes, if the property owner isn’t willing, then yes, they should have a right to a jury trial (and as I stated earlier MOST states align their Imminent Domain laws with the Federal laws. However, that rarely happens because the property owner usually cannot afford to take it to trial… even in my case with inverse condemnation the ONLY way we’ve been able to keep fighting is our attorney is working via contingency… and they are very hard to find in an imminent domain case… they are easier to find in an inverse condemnation because the damages have already occurred.. My brother had his home taken by imminent domain… he fought hard… not via a trial though… he just held out (about 3 years) until he was the last property needed… he got what he wanted out of it (about 10 times what his property was actually worth) and was able to stay in his home until he did get what he wanted. Then took the money and bought 2 lots just a short walking distance to the shore of the largest and most beautiful lake we have in the area, with a new home on one of the lots… believe me, what he gave up wasn’t even worth $10k.

          I don’t know how all this imminent domain stuff works in CA or any other state that is attempting to go around the 5th amendment… but I sure hope they are unable to circumvent it.

          The biggest issue a property owner faces when having to “go all the way to a courtroom” to settle an imminent domain or inverse condemnation, is having the time and funding to do so… that part is NOT in favor of the property owner. As in our case, we have already spent almost $20k while waiting almost 3 years just to get to a pre-trial, to have the City repair the damages they caused. And we still have a long way to go in time, and sadly, funding.

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      • Mark:

        No matter, it was a progression.

        Isn’t that generally the case? One marginally questionable interpretation leads to another marginally questionable interpretation and then another, and before you know it we are miles removed from what the constitution actually allows.

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  12. Troll, most of the complaints about public ed are valid. It’s definitely not a money shortage, or even a resource shortage. Quality of text books is also an issue that could be looked at; I don’t think expurgating God from public education has any effect on the quality of that education, pro or con. The main culprit is the stupid effort to teach “critical thinking”. This is expressed in our local middle schools as a flood of projects that the parents have to do, or let their children get a bad grade. It’s just nonsense. But there are plenty of other expressions . . .

    Most of the rest is parenting and quality of teachers. That is, the course schedules for most public schools are rock solid. If the teachers are decent, and the students study. Everything else is there, from food to iPads. The teachers have to teach the material, and the students have to study. Or the parents have to make the students study, which comes to the same thing. The other solution, which is to have every teacher being brilliant and inspired and worthy of a Hollywood movie based on their transformative effect on their students would be awesome, but it ain’t gonna happen.

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  13. Worth a read if you haven’t seen it before. This struck me in the context of the recent eminent domain discussion:

    “As we noted previously, esteemed economists such as Hernando de Soto have identified that the respect for title, proper documentation, contract law and private property rights are the underlying reason capitalism works in Western nations, but seems to flounder elsewhere.”

    http://www.ritholtz.com/blog/2010/10/why-foreclosure-fraud-is-so-dangerous-to-property-rights/

    Like

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