|Mr. West is Obama’s secret
mortgage reform brain trust,
originator of such great ideas
as “Imma let you finish, but
where’s my Hennessey at?”
‘Puter happened to be wandering aimlessly around the New York Times website when this article on President Obama’s forthcoming mortgage reform proposal caught his bloodshot eyes.
As longtime readers know, ‘Puter works in the finance industry as in-house counsel for a small business specializing in the workout of nonperforming and subperforming commercial assets, primarily real estate secured. To call ‘Puter familiar with the mortgage industry specifically and commercial lending generally would be to significantly understate matters.
Obama’s proposal, if it includes the following notion, is going to be a massive fustercluck, no matter what other feel-good, do-nothing horseshit it may contain.
After years in which the formerly formidable Fannie Mae and Freddie Mac and their Congressional allies blocked proposals for payment of fees or risk premiums, Mr. Obama is calling for financial institutions to pay an assessment to the government on the value of mortgage-backed securities. Under his proposals, the revenue would help finance assistance for borrowers and subsidize construction of homes and rental properties that would be affordable to lower-income Americans.
The proposal, as leaked pre-release to Obama’s catamites at the New York Times, is a little complex if you’re not familiar with banks, mortgage lending and government regulation thereof. Let ‘Puter simplify it for you.
Obama’s grand plan to save the mortgage industry is to tax the Holy and Ever-Loving Snot out of it, redistributing its ill-gotten gains to politically favored constituencies. It became necessary to destroy the mortgage industry in order to save it. The only good lending institution is a dead lending institution.
In addition to the aforementioned broadside against mortgage lenders, Obama has decided to revisit such other shitty, discredited ideas such as (‘Puter’s response follows each):
Obama wants to “endorse bipartisan efforts in the Senate to wind down the two companies and end their longtime implicit guarantee of a federal government bailout.”
This is actually is a very, very good idea, and one that should’ve been done more than 50 years ago. ‘Puter is in full agreement with Obama that the private sector is now able, as it has been for the past fifty years, to correctly evaluate risk of consumer mortgage obligations in order to purchase them from banks, thereby recapitalizing the banks so banks can lend more money out to consumers. ‘Puter’s company does this, just with more complex and usually defaulted commercial obligations. Large investors are drooling at the opportunity to get into this market.
Obama wants to put “private investors primarily at risk for [Fannie and Freddie], which buy and guarantee many mortgages from banks to provide a continuing stream of money for lenders to provide to additional home buyers.”
‘Puter thinks Obama and/or whatever White House whiz kid who came up with this idea either was tweaking on meth or suffered a massive injury to his frontal cortex. These are the only two plausible explanations for proposing an idea that cannot exist in the same space-time continuum as The One’s first proposal. See, Obama’s going to wind down Fannie and Freddie by keeping them going forever, but with private money that Obama will somehow compel private investors to pour into entities that are walking bankrupts. Once Obama compels the necessary private investment through some undisclosed double secret plan, Obama’s going to have the federal government will walk away from its implicit-but-really-explicit guarantee of Fannie and Freddie holdings and debt, and the private investors are going to be totally cool with that. Great idea, asshat.
Obama says acceptable legislation “must specify the government’s role and liabilities for Fannie Mae and Freddie Mac” and “unlike legislation in the Republican-controlled House … must ensure Americans’ continued access to a 30-year mortgage at a fixed interest rate.”
Does The Greatest Constitutional Law Scholar of All Time, EVAH!!1!one! even realize as president and head of the Executive Branch, he’s got no legislative authority? Apparently Wile E. Obama, Super Genius is channeling Kanye. Obama’s all like, “Yo, Congress. I’mreally happy for you, Imma let you finish, but I’ve got one of the bestmortgage reform proposals of all time”
as Congress channels (take your pick) Taylor Swift, Beyonce or every other human being on the planet and stares at the train wreck taking place before them. Let ‘Puter say it slowly so his liberal readers can understand. There is no God-given right to a 30 year fixed rate mortgage. In fact, it’s unlikely the product would even exist but for government intervention. It is absolutely stupid for lenders to lend money at fixed rates over 30 years because of interest rate risk. That is, lenders take the risk that their cost of money spikes, usually accompanied by inflation, during such 30 year term, crushing earnings and rendering their holdings marginal or insufficient, leading to receivership and liquidation. Thirty year mortgages are only a decent risk because the government will immediately take them off banks’ hands by having Fannie and Freddie purchase the debts. No Fannie and Freddie, no 30 year fixed interest rates, at least not at any interest rate anywhere close to current rates.
Obama will tell “Congress to approve measures he proposed in 2012 to allow more homeowners who are underwater – those who owe more than their houses are worth – to be able to refinance while mortgage interest rates remain relatively low, including homeowners who do not have mortgages backed by Fannie Mae, Freddie Mac or the Federal Housing Administration.”
The stupid, it hurts! It hurts ‘Puter’s head so badly! Listen up, liberal true believers. It is unconstitutional for the government to interfere with privately held contractual rights without just compensation. Obama’s grand plan is to tell private investors, whether owners of mortgage backed securities or shareholders of regulated lenders, to take a ginormous loss because Obama has deemed it A Very Good Thing. For their troubles, private investors can expect exactly nothing for their troubles, and probably a metric buttload of scapegoating at the hands of Obama, Carney and the much-vaunted assemblage of roundheeled harlots in the press corps. If Obama wants to forgive large swathes of privately held mortgage debt, there’s one way to do it. Have government pay the current holders of underwater consumer mortgages the indubitable fair market value of their debts (i.e., all currently owed principal, interest, costs and fees discounted to present value). When the government owns the underwater consumer mortgage debts, it can do whatever the heck it wants to do with them. Until then, hands off. By the way, did ‘Puter mention it’s not the government who’d be funding this massive buyback of consumer debt? It’s the taxpayers, meaning Obama’s either going to have to significantly raise taxes to finance his shenanigans or attempt to hide the cost by floating bonds payable (plus interest!) at some future time. This idea sucks worse than a man with no lips trying to use a straw.
Obama has some other cool ideas, like “it’s totally OK to rent a house if you’re too incompetent or poor to own one yourself.” ‘Puter’s betting the stated rationale for this entire turd sandwich of an idea will be “BECUZ TEH MIDDUL CLASS!1!!eleventy!!!,” which logic is irrefutable.
If Obama were serious about helping the consumer mortgage industry, he’d propose something along these lines:
Actually wind up Fannie and Freddie. If necessary, have the FDIC do so as it would for an insolvent bank. The FDIC is a pro at this type of thing.
Auction off Fannie and Freddie’s assets by the end of the next fiscal year, even if it means selling at a loss to taxpayers. Taxpayers already lost their “investment,” let’s cut further losses.
Gradually phase out regulatory preferences for 30 and 15 year mortgage products over a lengthy period of time, say 20 years. Do so by stepping down the percentage of a bank’s portfolio that can consist of 30 and 15 year mortgages each year until it reaches a minimal level. If consumers still want fixed rate, 30 year obligations, there’s a private lender who will give them one, they’re just going to pay a ton of money for the privilege, either in fees or interest.
Let banks charge and consumers pay what the market dictates. In all likelihood, banks would move to a 3, 5 or 10 year maturity obligation with annual (or more or less frequent) resets of interest rates.
Stop forcing regulated entities to lend to subprime and worse risks because of the color of the borrower’s skin or the poverty rate in the borrower’s neighborhood. It’s rational, reasonable and (should be) completely legal for banks to lend based on a borrower’s credit risk. If that means fewer minorities qualify for loans, fine. At least taxpayers aren’t backstopping crappy loans made solely for racist reasons.
To protect lower income and poor credit risk borrowers, either updated the Section 8 voucher program or give renters a tax credit phasing out based on income. ‘Puter’s no fan of handouts, but this solution is so much cheaper than the risk of creating another financial crisis, ‘Puter’s willing to hold his nose and deal with it.
Phase out the mortgage interest deduction over the weighted average maturity of all currently issued and outstanding consumer mortgage debt. This will give borrowers and lenders time to adjust before renters stop subsidizing mortgagors.
To protect consumers, regulators could collar the interest rate risk for the consumer by instituting annual ceilings on increases, and perhaps lifetime ceilings on shorter term (3-5 year maturity) obligations.
‘Puter’s idea is vastly superior to anything likely to come out of the White House Where No One Ever Worked in the Private Sector Ever. ‘Puter’s ideas are simple, cost nothing and get government out of market manipulation altogether.
And because ‘Puter’s ideas would eliminate opportunities for graft and vote-buying by Congress and the President, they have no chance of becoming law.
Always right, unless he isn’t, the infallible Ghettoputer F. X. Gormogons claims to be an in-law of the Volgi, although no one really believes this.
’Puter carefully follows economic and financial trends, legal affairs, and serves as the Gormogons’ financial and legal advisor. He successfully defended us against a lawsuit from a liquor distributor worth hundreds of thousands of dollars in unpaid deliveries of bootleg shandies.
The Geep has an IQ so high it is untestable and attempts to measure it have resulted in dangerously unstable results as well as injuries to researchers. Coincidentally, he publishes intelligence tests as a side gig.
His sarcasm is so highly developed it borders on the psychic, and he is often able to insult a person even before meeting them. ’Puter enjoys hunting small game with 000 slugs and punt guns, correcting homilies in real time at Mass, and undermining unions. ’Puter likes to wear a hockey mask and carry an axe into public campgrounds, where he bursts into people’s tents and screams. As you might expect, he has been shot several times but remains completely undeterred.
He assures us that his obsessive fawning over news stories involving women teachers sleeping with young students is not Freudian in any way, although he admits something similar once happened to him. Uniquely, ’Puter is unable to speak, read, or write Russian, but he is able to sing it fluently.
Geep joined the order in the mid-1980s. He arrived at the Castle door with dozens of steamer trunks and an inarticulate hissing creature of astonishingly low intelligence he calls “Sleestak.” Ghettoputer appears to make his wishes known to Sleestak, although no one is sure whether this is the result of complex sign language, expert body posture reading, or simply beating Sleestak with a rubber mallet.
‘Puter suggests the Czar suck it.