This blog and my life has been dedicated to following what lenders, servicers and our government have done and are doing to assist the millions of Americans that are facing foreclosure as a result of being sold defective credit instruments. AKA subprime and ALT A mortgages.
In my hundreds of hours of research and work, only one agency and person seems to have a “true” grasp of reality and what needs to be done in order to help clean up the mortgage and housing mess.
That agency is the Federal Deposit Corporation (FDIC) and that person is the Chairwoman, Ms. Sheila Bair.
The recent takeover by the FDIC of Indymac Bank and the subsequent immediate changes to their loss mitigation and loan modification policies shows just how powerful and effective government intervention can be. Prior to the takeover, Indymac Bank was one of the absolute worst banks to deal with for struggling homeowners.
Now, Indymac borrowers are getting the help and answers they deserve. Instead of cold shoulders and abusive collection techniques that was the norm before the FDIC came to town.
There has not been one agency or person more vocal about helping struggling Americans with government intervention then the FDIC and what disturbs me is that they “know” more about the “true state” of the US banking system, and the warning signs coming from Ms. Bair and the FDIC have been loud and clear.
Attention Congress!! Are you listening?
We are going on more than a year of warnings from the FDIC to step up pressure on loan modification efforts by servicers and now they are warning of more bank failures to come. Today in the New York Times, it was reported that the FDIC may need to borrow money themselves to insure the potential of trillions of dollars in losses for US banking customers.
October 1, 2007 – FDIC Chairman Wants Lenders to Fix These Loans – Federal Deposit Insurance Corp. Chairman Sheila Bair called for payments on most subprime mortgages to be fixed at current levels.
Lenders should extend “teaser” rates on all subprime adjustable-rate mortgages if the borrowers haven’t missed any payments and they live in the homes, Bair said today in New York. Modifying loans on a case-by-case basis and fixing rates for limited periods won’t avert enough foreclosures, she said.
November 9, 2007– Adopt a Wholesale Approach to Loan Modifications or We Will Make You – Sheila Bair, chairman of the Federal Deposit Insurance Corporation, said “There was a gathering of political momentum for a more radical approach than the investment and home loans industries had so far countenanced.”
December 6, 2007 – Statement of Sheila C. Bair, Chairman, Federal Deposit Insurance Corporation on Accelerating Loan Modifications – Critics of the proposal to restructure loans to the starter rate as described above argue that such an approach is untested and cannot be implemented on a broad basis. However, the FDIC is aware of servicers that have already begun to use a similar approach with borrowers. Those servicers are reporting that the approach is feasible and significantly reduces the cost of restructuring and its complexity.
Some loan servicers and investors have said that the approach cannot be applied consistent with PSAs because the duty to maximize NPV requires servicers to review loan by loan to set a new payment between the starter and reset rate. As I will explain below, this argument fails to consider that a loan-by-loan approach, given the current and anticipated rate of resets, will prevent maximization of NPV for the pool as a whole due to inherently limited servicer resources.
February 1, 2008 – FDIC: Subprime Modifications ‘Lagging’ – The pace of loan modifications on adjustable subprime mortgages is lagging, which could prompt regulatory action on the mortgage industry, U.S. Federal Deposit Insurance Corp. Chairman Sheila Bair warned Thursday.
“Unfortunately, at this point, the available information seems to show that foreclosures continue at an unacceptably high level while true loan modifications are lagging,” Bair said in prepared testimony to the Senate Banking. “It is important that servicers demonstrate and document real progress soon or they invite regulatory and legislative action to supplement the industry’s actions.”
April 8, 2008 FDIC Chief Calls for a Housing Rescue – Q.Why does the foreclosure problem warrant government intervention? Sheila Bair A.- I am increasingly concerned about the foreclosure rate and the potential for a downward spiral, where we have too much inventory, additional foreclosures adding to inventory, which forces home prices down, meaning fewer people can refinance—leading to more foreclosures and more downward pressure on home prices. If this downward spiral takes hold, there could be much broader ramifications for the economy as a whole. So I think we need to come to grips with the need for government intervention. It’s not politically popular. We just need to be honest with people that we have a significant problem here and that additional measures are going to have to be taken. And yes, it may cost money.
August 27, 2008 – Agency’s Head Says Banking’s Crisis to Worsen – More than a year after the credit crisis first flared, Ms. Bair, the chairwoman of the Federal Deposit Insurance Corporation, warned on Tuesday that the outlook for the ailing banking industry was bad — and getting worse.
The swelling tide of toxic home loans is proving to be even more worrisome than initially feared, Ms. Bair said. She is struggling to clean up the mess and forestall home foreclosures with a plan to ease loan terms for hard-pressed homeowners.
“It is going to be slog to work though this, but there is no easy way to do it,” Ms. Bair said about her plan during an interview in her office here. “We haven’t seen the trough of the credit cycle yet.”
Moe Bedard – The FDIC and Sheila Bair should know more about the true state of our banking system and also what is needed to help clean up the mortgage mess than any other government agency. I have listed here for your reading pleasure, a year of testimonies and statements by Bair and the FDIC that has been all but ignored by the rest of our government and certainly by lenders and servicers.
All the while, the Federal Reserve and congress continues to bail out Wall Street while turning a blind eye to the people which they represent on Main Street who are losing their homes.
I guess this is business as usual in the US when the “credit shit” hits the fan. The little guys (homeowners) are expendable causalities of war and the remaining “insolvent” banks are being propped up by nothing more than propaganda and false HOPE!