Everyone in the country gets to pay for the $700 billion Hank Paulson slush fund, and if you’re a Countrywide customer in good standing you get to pay some more.
Washington residents who got mortgages through Countrywide and who already lost their homes to foreclosure will be eligible for money, said Washington Attorney General Rob McKenna, who will discuss the settlement this morning at a news conference.
“This is a very large and important first step in helping to stop the cycle,” McKenna said. “We are going to put the brakes on that downward spiral.”
McKenna said Countrywide used predatory lending practices similar to those found in investigations of other large lenders across the country. They issued loans to people who couldn’t afford them by falsely inflating borrowers’ incomes, used hidden fees and made deceptive marketing claims, saying, for example, a loan had “no closing costs,” when borrowers were actually paying closing costs.
To be honest, at least this plan actually seems to be addressing the heart of the problem, namely bad mortgages caused by a combination of ARM’s, industry fraud and overreaching by home buyers during a bubble.
You can call this situation a lot of things, but you can’t call it free market capitalism. Someone always has to pay, and the money for this plan appears to be coming from Countrywide customers and Bank of American customers. (As an aside, it’s a curious fact that consumers are allowed no choice about whom to do business with when it comes to home loans, no? They just buy your loan and you get no say.)
The details of the plan seem to make sense, but are still maddening:
Rates could decline to 2.5 percent, depending upon a borrower’s ability to pay, and remain at that level for five years. Then the rate would adjust to prevailing interest rates charged by Fannie Mae on its fixed-rate mortgages.
The program will focus on borrowers placed in the riskiest loans, including adjustable-rate mortgages whose interest rates reset significantly several years after the loans were made.
Pay-option mortgages, under which a borrower must pay only a small fraction of the interest and principal, thereby allowing the loan balance to increase, are also included in the modifications.
Borrowers whose first payment was due between Jan. 1, 2004, and Dec. 31, 2007, can participate. The loan balance must be at least 75 percent of the current value of the home, and the borrower must be able to afford the adjusted monthly payments.
So the reward for resisting outrageously risky ARM’s and paying your mortgage on time is that you get to enjoy severe declines in the stock market, including IRA’s and 401(k) plans, decline in the amount of equity in your home, a shaky job market and higher prices for everyday items like food and fuel.
Now, I know not everyone is impacted equally. There are plenty of folks out there who don’t have much in the way of savings and investments, and an Obama administration and a “more and better” Congress will need to look hard at issues like real wages. In bad economic times, the working poor always take it in the shins.
Sadly, there’s really little choice in the matter of Countrywide. The politicians, though, will have to forgive we plebeians if we’re wondering why our families don’t get a special low interest rate and maybe some principal knocked off our mortgage. Hell, we’d settle for a nice four-figure contribution to the old college fund, which is looking rather battered at the moment.
Some people might be concluding that paying on a loan is a sucker’s game. Not my family, of course, because we believe in old-fashioned progressive values like honesty and personal responsibility, but there is a palpable sense of frustration out on the hustings. Our government and large portions of corporate America need to clean up their act, big time.
Hmmmm…I guess it really matters if you loan money to people who can’t pay it back.
If you look at the article you will see that this settlement was due to ELEVEN STATE LAWSUITS against Countrywide for abusive lending practices. They engaged in illegal conduct in marketing of their loans and even more illegal conduct in the servicing of the loans. These included the worst of the “exploding mortgages” which are at the heart of today’s financial crisis.
Note that the reason the states had to bring suit against Countrywide was because the FEDERAL GOVERNMENT refused to get involved in oversight of the industry, and the states had to go at it on their own to protect their own citizens.
If the federal government had attempted to address this two years ago, or even one year ago, the problem would not have become so acute as it is now. The spiral of deflation causing foreclosures causing more deflation ad infinitum could have been averted, causing the taxpayers little money.
But the Bush administration wasn’t worried when mere homeowners were losing their houses, figuring that the average homeowner got whatever they deserved when they attempted an arms-length deal with an industry giant such as Countrywide. But when it affects Wall Street bankers, then suddenly it’s a crisis!
By the way, Palin was on the stump this morning at a Florida rally, promoting (among other things) “Drill, Baby, Drill” to solve our energy crisis. Previously she had derided Democratic opposition to offshore drilling, saying that they don’t understand that “new technology” makes offshore drilling “completely safe” from spills.
Unfortunately for her (and the Gulf Coast), an estimated 500,000 + gallons of crude oil are now washing ashore on the Gulf Coast (mostly Louisiana), as a result of damage to offshore oil platforms during hurricate Ike.
Source: Tons of Oil Spilled Into Gulf During Ike
Wasn’t it countrywide that gave chris dodd (DEMOCRAT) preferential loan treatment?
Like any smart corporation, they donated to both parties.
Wow. Obama got $19,000 after only a couple years in the senate, most of which time was spent campaigning compared to mcsame “over the years.”
How progressive is old fashioned values?? The correct term would be old fashioned conservative values. To be progressive means progress, not old fashioned. But you got to give jon credit for trying to spin it to make “progressive” look good.
Hey Marvin, you conservatives do NOT have exclusive rights to values like honesty and personal responsibility. Those are American values, open source values that we all aspire to. Or we should. You republican sure are doing a bad job of it.
Where is the personal responsibility of ENRON? Where is the personal responsibility of the day traders who don’t invest in companies, they invest in a price change? Where is the personal responsibility of companies who keep caymen island mail boxes to avoid taxes. How honest is george bush or karl rove? Where is the personal responsibility of the bankers who took down the economy?
Back to Progessive values. Progressive values want things to be better for everyone, not just the rich. So honesty and personal responsibility are part of those values.
Old fashioned conservatives used to believe to those values too. I think it’s the NeoCons who don’t care. It’s all about the money and power for them.
Are you speaking of the same Countrywide that made sweetheart loans to Sen Dodd and others? Even Sens. Murray and Cantwell are mum on the issue.
If they are found to have broken the law, they should step down, or at least be replaced with BETTER Democrats over the next election cycle.
Then why do lefties believe in more government if they believe in personal responsibility?
Why don’t democrats preach personal responsibility to poor people?
This is going to be tough for you to understand so I will type slow.
Enron is not a person, it’s a corporation.
Personal responsibility is for a person.
Did I type slow enough?
@ 9
Why do you righties fail to grasp the distinction between “more government” and “better governance”?
It just keeps getting worse for McCain.
http://www.pollster.com/polls/.....ge-mvo.php
12 – News like that sure makes the trolls tear their hair out.
See video proof of who warned about the coming Fannie Mae meltdown, and who was in denial:
http://www.youtube.com/watch?v.....re=related
@ 10
Enron is not a person, it’s a corporation.
According to the U.S. Supreme Court, corporations are persons as a matter of law.
Don @ 15 is correct. Marvin, go back to Business 101. (Heck, my son even covered that in a class in HIGH SCHOOL he took as a junior!)
And review the business classes offered at any major university, and you are sure to see at least one “business ethics” course offered under one name or another.
16 Are you sure those courses are still being taught? The last few years it seems “business” and “ethics” have become rather difficult to fit in the same sentence.
I was wondering what pulled the Dow out of its tailspin–it was down over 800 points about an hour before the close, but regained about 500 by the time the ticker caught up an hour after the bell.
Well, it seems that during the day, the Federal Reserve announced that it would make another $900 billion available to lend to banks. This is separate from and in addition to the Paulson “bailout” of holders of near-worthless derivatives that Congress agonized over last week, but the money’s basically coming from the same place as Sarah Palin’s debating points–out of a monkey’s ass.
Art @ 18: That makes sense.
I posted earlier that I was curious whether Paulson’s Goldman Sachs protoge, Kashkari (“Cash-Carry?????”) was using his 750 billion to prop up McCain’s electoral chances by preventing headlines showing a financial collapse. I had wondered if the whole bailout bill was just a cover for the Republicans to find a way to get the taxpayers to fund their re-election schemes (it wouldn’t be the first time). Since there is no oversight until AFTER the election, what’s to prevent him from just dumping it into the stock market to prop it up until after the November elections, and then letting it collapse?
But as you mentioned, having the Fed pump in money has the same affect. Was it REALLY 900 billion???? The amount of money the fed has thrown into keeping this ponzi scheme going over the last year is just incredible. And despite that, Wall Street is STILL on life support!
What’s really hilarious about this is that it was the Republicans who used to accuse Democrats of “throwing money at a problem”. But these days the Republicans have a virtual conveyor belt directly from the treasury to stock market. Although it’s more like a blast furnace that’s consuming the money as fast as the Republicans can shovel it in.
“Kill Him!”
http://voices.washingtonpost.c....._roug.html
I mentioned that the Republicans had used taxpayer money to pay for their own re-election campaigns before. There have been so many scandals among the Republicans these days, it’s hard to remember the ones from a couple of years ago, so I’ll refresh your memory.
Tom Delay, Congressman from Texas, was instrumental in the “K Street Project” which sought to sever all lobbyist ties with the Democratic Party and instead shackle them permanantly to the Republican Party. The Republicans wanted lobbyist dollars, and of course the lobbyists wanted access. Key to this was DeLay’s insistance that lobbyists only give money to support Republican candidates, and any who supported Democratic candidates would be shunned from any access to Republican corridors of power.
But DeLay also had his own special plans, to funnel some of that lobbying money into Texas election campaigns. He was instremental in persuading the Republican legislature in Texas to open an office in Washington D.C. to “further the interests of Texas and it’s economy”. Funny, I thought that was what DeLay and the other representatives did. But this lobbying office was more than an office space, telephone, chairs, and a couple of staffers. It also included a substantial budget to further it’s activities.
How did it spend it’s budget? Well, a lot of it went to lobbyists, including Abrahomoff’s firm, hiring them to advance the interests of Texas. What did the lobbyists do on behalf of Texas? Well, aside from a few phone calls, they made significant donations to Texas political campaigns. The money ostensibly came from other client’s funds, but the amounts were roughly the same. In other words, the Abrahomoff firm was used by DeLay and the Republican Party to launder Texas taxpayer money to go to Texas Republican candidates for office.
So even if you were a Democrat in Texas, you were being compelled to donate to the Republican Party.
Dow Jones ends day below 10,000
So?
Republicans throwing money at the problem??
Have you forgotten that democrats run the House and Senate? Or do you want people to forget that? very strange…
rhp…the problem for the GOP is that they can’t run the pumps fast enough keep the ship from sinking.
The really worrisome part is that absent some sort of economic “deux ex machina” and Obama/Biden gaining ground against Senator Gramps and Governor Airhead, the Bush Gang is likely to trot out some other kind of “October surprise”, probably involving high explosives.
“…bad mortgages caused by a combination of ARM’s, industry fraud and overreaching by home buyers during a bubble.”
Overreaching? Overreaching? It was a perfect storm of greedy lenders, corrupt politicians and very, very foolish homebuyers. Homebuyers who thought that earning $36K a year would get them into a $500K house!