Foreclosures: A Call to Action

Paul Krugman has a recommendation for policymakers:

Foreclosures: A Call to Action, by Paul Krugman, Money Talks: In today's Times, Gretchen Morgenson has a frightening piece about the troubles facing many homeowners, headlined "Mortgage Maze May Increase Foreclosures." ...[T]his isn't just a sad story. It's a call to action.

If a homeowner is fundamentally unable to pay his or debt, there's not much that can be done to avoid foreclosure. What's happening now, however, is that many borrowers who would in the past have been able to work out a mutually beneficial deal with their bank, restructuring the terms of their loan so as to avoid foreclosure, are now stuck. Their mortgage has been "securitized" — sold off to third parties, then pooled with many other mortgages and repackaged into various component parts. And because of the complexity of the securitization, there's nobody for the homeowner to deal with.

Regulators, and the Federal Reserve in particular, need to step in and serve as coordinators, ensuring that deals do get made when possible.

This wouldn't be at all unprecedented. The Fed and the Treasury stepped in to coordinate lenders to Latin American countries in the 1980s, acting to prevent a rush for the exits that would have led to widespread defaults. An emergency loan to Brazil in 2002 gave that country a chance to work its way out of a potential financial crisis. If we can rescue third-world economies, why can't we rescue American homeowners?

I hope that people at the Fed are working on this. If not, Congress should hold hearings and prod them into action.

Comments

[realpc]

One person works and saves and sacrifices so they can afford to buy a house. Another person goes deeply into debt, assuming things will work out somehow. If we follow Krugman's advice, the end result will be the same for both of these homeowners. When you have a paternalistic federal government, there is no need to use common sense.

[Bruce Wilder]

It would be helpful if we had a national rule, which gave the home "owner" the option of jingle mail.

California gives the lender no recourse beyond taking possession of the collateral property; foreclosure ends the debt, which is, in my opinion, as it should be.

I am sure realPC will be crying crocodile tears for Countrywide, and regretting the opportunity to punish a foolish home buyer with bankruptcy and financial ruin, but I don't see such rules as paternalistic.

It is a terrible injustice that Republican bankruptcy law will allow unscrupulous lenders to continue to pursue hapless home buyers, even after they have lost their homes.

[groucho]

"The Fed and the Treasury stepped in to coordinate lenders to Latin American countries in the 1980s, acting to prevent a rush for the exits that would have led to widespread defaults."

There you have it!!!!!! Krugman is espousing more of the same that has gotten the US into such a sorry debt fueled mess. BTW, Volker was the force behind the Latin mess. Greenspan watched and learned. Any problems? NO PROBLEM!!! we'll just mark to model, flood liquidity,(lie like hell) and wa-la problem goes away.............or does it?

Maybe I-banks learn from this process...maybe they learn they can do anything they want cause govt policymakers will ALWAYS bail out their sorry asses. Maybe this is why Cramer is cry'n the blues.....please bail us out again

[anne]

http://www.nytimes.com/2007/08/06/business/06home.html

August 6, 2007

Mortgage Maze May Increase Foreclosures
By GRETCHEN MORGENSON

In 2003, Dianne Brimmage refinanced the mortgage on her home in Alton, Ill., to consolidate her car and medical bills. Now, struggling with a much higher interest rate and in foreclosure, she wants to modify the terms of the loan.

Lenders have often agreed to such steps in the past because it was in everyone's interest to avoid foreclosure costs and possibly greater losses. But that was back when local banks held the loans and the bankers knew the homeowners, as well as the value of the properties.

Ms. Brimmage got her loan through a mortgage broker, just the first link in a financial merry-go-round. The mortgage itself was pooled with others and sold to investors — insurance companies, mutual funds and pension funds. A different company processes her loan payments. Yet another company represents the investors as the trustee.

She has gotten nowhere with any of the parties, despite her lawyer's belief that fraud was involved in the mortgage. Like many other Americans, Ms. Brimmage is a homeowner stuck in foreclosure limbo, at risk of losing the home she has lived in since 1998.

As the housing market weakens and interest rates on adjustable mortgages rise, more and more borrowers are falling behind. Almost 14 percent of subprime borrowers were delinquent in the first quarter of 2007. Investors, fearful that these problems will hurt the overall economy, have retreated from the stock and bond markets, creating major sell-offs.

And the very innovation that made mortgages so easily available — an assembly line process known on Wall Street as securitization — is creating an obstacle for troubled borrowers. As they try to restructure their loans, they are often thwarted, lawyers say, by strict protections put in place for investors who bought the mortgage pools.

This impasse could exacerbate the housing slump, pushing more homeowners into foreclosure. That would lead to a bigger glut of properties for sale, depressing home prices further.

"Securitization led to this explosion of bad loans, and now it is harder to unwind and modify them even where it is in the best interests of both the borrower and the investors," Kurt Eggert, an associate professor at the Chapman University School of Law in Orange, Calif., said in an interview. "The thing that caused the problem is making it harder to solve the problem."

Creating difficulties is the complex design of mortgage securities.

Some homeowners have problems simply identifying who holds their mortgages. Others find the companies that handle their loan payments, known as servicers, are unresponsive, partly because modifying loans cuts into profits.

Even if circumstances suggest fraud when a loan was made, lawyers say, the various parties protect each other by refusing to produce documents.

Compounding the problem is a law stating that when a loan is passed to another party, that entity cannot be held liable for problems.

"I don't think there is anything in the entire securitization process that is at all focused on the borrower's interest," said Kirsten Keefe, executive director of Americans for Fairness in Lending. "Everything they do is, 'How are we going to make a profit, and how are we going to secure ourselves against risk?' "

The idea of pooling loans and selling them to investors dates back to 1970, but the practice has exploded in recent years. At the end of last year, $6.5 trillion of securitized mortgage debt was outstanding....

[muckdog]

The folks taking the brunt of the pain are the latecomers. Those who bought $500,000 homes on a $40,000 income and had incorrect data on their loan applications. They got the greed bug late in the game, and lenders took advantage of that. They thought they could no-money-down and negatively-amortize their way into 30% gains every year.

Not sure the government's role here is to bail them out.

And Krugman has a screw loose anyways.

[Bruce Wilder]

"The folks taking the brunt of the pain are the latecomers. Those who bought $500,000 homes on a $40,000 income and had incorrect data on their loan applications."

And, why shouldn't it be the unscrupulous and fraudulent lenders, who bear the brunt of the pain? Why shouldn't the guy with a $40,000 income not be able to just mail in the keys and walk away?

[realpc]

Because buying a $500k house with a $40k salary requires a complete lack of common sense. Yes the lender is a con artist and should take responsibility. But those of us who refrained from getting conned should not be doing the bailing out.

People like Krugman see middle class tax payers as an infinite resource for solving everyone's problems. I do feel sorry for those who got trapped by sleazy credit companies. But if the government had wanted to be paternalistic and helpful they could have concentrated on educating the public to prevent these misfortunes. I don't know why anyone would need that kind of education, but obviously they do.

[bob mcmanus]

"This impasse could exacerbate the housing slump, pushing more homeowners into foreclosure. That would lead to a bigger glut of properties for sale, depressing home prices further." ...Anne

"And, why shouldn't it be the unscrupulous and fraudulent lenders, who bear the brunt of the pain? Why shouldn't the guy with a $40,000 income not be able to just mail in the keys and walk away?"

I would make an uneducated guess that Krugman has concerns that go quite a ways beyond the homeowners. If housing prices keep going down, the lender has no chance to get his money back with a resale. In fact, as I understand it, a resale after a foreclosure is a somewhat rushed sale at a depressed, and market depressing price. A spiral.

[evagrius]

It's just the little people that will get burned. The unscrupulous will get away as always.

[ECONOMISTA NON GRATA]

It's a little too late to close the barn door at this point in time.... Although I do agree that some, not many, of the foreclosures could be remedied by cooperation between borrower and lender, we also need to understand that most of these mortgages should not have been granted. I know this to be a fact.

Having read comments on this site for a few months, I have reached the conclusion that most if not all the commentors are not aware of how "Wall Street" functions. It is important to note that on "Wall Street", everything is about relationships. It's all about collecting a fee and passing off the risk to the collective market.... When I structure a securitization, whether it be from insurance company obligations that I have purchased or collateralized mortgage obligations, I need to pass this off to a ready buyer. The higher the rating that I can attain for these securities the easier it is for me to sell them and the higher the price that I wll attain for them... AAA, I can move without batting an eyelash and I can get that rating by using my "special blend". The most important aspect of this is to move these securities through the pipeline as fast as possible so that the c variant wont change on you while you are holding the security. Once this has been done I don't care if it goes to hell in a hand basket. I dont DD for the buyer, they have their own models. The importance of the rating agencies is that they provide cover for the retailers of my securities. Their customers have suitability requirements, statuatory requirements, that must be observed and are clearly stipulated on the agreements with the customers. You can not place anything that is less than investment grade in a retiree's fund, in many cases must be rated AAA. If a security is moving through the pipeline and it is downgraded while in the pipeline, it will never make it to it's intended final destination, the pension fund. Once there, no one cares what happens to the obligor. The point that I'm trying to make here is that no one was prepared for this. Everybody that I know of just wanted to pass the risk along the pipeline and let the next guy decide what to do with defaults and foreclosures. The same public that is being foreclosed on, is also the final destination for the toxic waste that was created with the full consent of all the parties involved.

And that's just the way it is Ladies and Gentlemen.

Best regards,

Econolicious

[Robinia]

The idea of a bailout is often fixed on by policymakers as a reaction to an economy-threatening spiral, either here or overseas. Generally, it is understood as a temporary correction to a situation that should never have developed.

Making it possible for those facing foreclosure to do workout deals is a good first step toward correction, and should happen concurrently with regulatory changes to curtail predatory lending practices. The froth of repeated sales fees as securitized investments "move down the pipeline" must be reined in.

[save_the_rustbelt]

Gee, when there was a torrent of foreclosures in the rustbelt from 2002 - 2006 nobody gave a damn. Now it hit the east and west coasts and it is big news.

The Attorney General of Ohio believes that as many as 50% of subprime mortgages may have had an element of fraud in the sales process, which casts a bit of a new light on how so many people got in over their heads (have any of you ever actually read your mortgage or deed?).

[op]

"People like Krugman see middle class tax payers as an infinite resource for solving everyone's problems"

the furious voice of
the powerless ....abiding ....sucker

[prostratedragon]

Bruce Wilder:

Why shouldn't the guy with a $40,000 income not be able to just mail in the keys and walk away?

My understanding is that for many cases even in CA, this remedy would need some encouragement for legal reasons. In CA and some other states, the walk-away clear variety of bankruptcy is only guaranteed by law for a first lien purchase mortgage: homeowner in default declares BK, mails in the keys, and is free and clear after that.

But if they have second liens refinances, piggybacks, equity line of credit say then the lender can come after them in court, though of course for business reasons they might not. A borrower can try to negotiate an agreement in advance that the lender will forbear, but there again it's the lender's option at that point. And the CA laws are more friendly than in some states such as GA.

Therefore there would still need to be some kind of intervention even to encourage this last resort measure for many busted borrowers. Or should I say "will" not "would," because given the number of simple untenable loans out there I suspect that something like this is going to be a key feature of where we're headed.

[op]

econolicious:

thank u
for repeating an obvious but powerful truth

the inter locking institutions and methods
involved here were a nice means
to accelerate a multi staged
charge to the clft edge
out of individual irresponsiblity

but now ....
dark forces wish to liquidate ...

and unfortunately decent plain folks
--as plain folks will from time to time --
wanna see some nasty comeuppance handed out here

which suggests cooler heads
need to figure out
damn quick
whether
just to teach some of our fellow citizens
a few needed lessons
we're about
to bring the whole f...in'
temple
down on our own heads

ps
licious
read comments
more carefully
lots of us
"got" your point
long b4 you made it here

[BJ Feng]

Without these securitized mortgages, many homeowners would never have been able to get their loans in the first place. No one knows your finances better than you do, it's silly to expect a loan broker to figure out if you will be able to afford a loan in the future. Where is personal responsibility?

Foreclosures are costly and ugly. Lenders don't want to foreclose, they do so because they have to in order to protect what they have left. There should absolutely be no bailout without taxpayer money. Period.

[BJ Feng]

I meant with taxpayer money. Many also don't understand how people are deliberately not paying their mortgages. I have a friend, Bernie, who took out an interest only loan in 2005 to buy a home in Riverside county. He paid 0% down and the options were very generous. He figured that, if worse came to worse, he would just stop paying the loan and walk away since he had to put 0 down. Sure he would lose the interest payments on the loan, but it was worth the potential gains. It was all speculation. I haven't asked him about the loan recently, I'll ask him next time, but don't assume these people don't know what they're doing. Some people WANT the bank to foreclose, or don't care because it was all speculation anyway.

[Sarah]

Tanta had a wonderful article on this over at Calculated Risk yesterday.
Despite her pointing out repeatedly-- both in the post and in the comments-- that she was not talking about people who had loans for far more than they could possibly pay, but only those who would be able to handle the mortgage if transfered back into the kind of loan they should have been given in the first place, there was a whole slew of nasty, mean-minded comments, one even calling, quite literally, for home-owners' blood.

Econonolicious, even if you're correct that the proportion of people who could afford a modified loan is small-- and outside of bubble markets I doubt you are-- there is really no excuse for refusing, suddenly to make the kind of loan modifications that have almost always been offered in the past.

I'm still not entirely clear on how the MBS's and CDO's work, but it looks to me like there are some perverse incentives for the upper tranches to actually prefer foreclosure over all other options.

realpc, unless they are buying their home for cash, your hypothetical 'saver and sacrificer's mortgage is as likely as any to have been securitized. So since your other straw man, the profligate who assumed things would work out is probably not a candidate for a loan modification anyway, it's going to be your virtuous homebuyer who gets foreclosed on. All so that some hedgefund can slap the lipstick on their mortgage pool to make it attractive enough for a yet greater fool to buy...

[prostratedragon]

Sarah, over yonder on some thread or other I think they were saying just today that the foreclosure completion is treated as an early payment within the security structure. That means that the higher tranches would get (more of) their money faster, before this awful spectacle gets where it's headed. An incentive problem that's always present in these structures, but in spades during a major credit episode.

[TStockmann]

I agree with Bruce, but note also the advantage of modifying the tax code so that "forgiven" debt is not treated as income in these cases, except in the case of proven fraud, and to encourage short sales, which reduce costs to all parties, including the neighborhoods that otherwise sustain collateral damage from vacant properties in a foreclosure wave.

[Bruce Wilder]

thanks for your insights, prostratedragon.

anyone waiting for a populist uprising should probably note the bloodlust aimed at the common man, and the sympathy extended to the hapless (and no doubt selfless) mortgage broker, by realPC and BJ Feng.

[Lee A. Arnold]

We should absolutely allow restructuring to prevent foreclosures. Do I have to reprint so soon Kevin Phillips' list of recent bailouts for the well-heeled and well-connected? It was only YESTERDAY... oh well... here goes..:

"Bailouts, Debt, and the Socialization of Credit Risk, 1980 - 2003." -- Figure on page 287 of American Theocracy by Kevin Phillips:
______________

1982 -1992, MEXICO, ARGENTINA, BRAZIL DEBT CRISES -- Fed and Treasury relief packages to avoid domino effect on U.S. banks.

1984, CONTINENTAL ILLINOIS BANK AID -- $4 BILLION Fed, Treasury, and FDIC rescue package.

Late 1980's, DISCOUNT WINDOW BAILOUTS -- Fed gives loans to 350 weak banks that later failed, giving big depositors time to exit.

1987, POST STOCK-MARKET-DIVE RESCUE -- Massive liquidity provided by Fed, and rumors of Fed clandestine involvement in futures market.

1989 - 1992, SAVINGS AND LOAN BAILOUT -- U.S. spends $250 BILLION to bail out hundreds of S&L's mismanaged into insolvency.

1990 - 1992, CITIBANK AND BANK OF NEW ENGLAND BAILOUTS -- $4 BILLION to help BNE, then government assistance arranging a Saudi infusion for Citibank.

1994 - 1995, MEXICAN PESO RESCUE -- Treasury helps support the peso to backstop U.S. investors in high-yield Mexican debt.

1997, ASIAN CURRENCY BAILOUT -- U.S. government pushes IMF for rescue of embattled East Asian currencies to save American and other foreign lenders.

1998, LONG-TERM CAPITAL MANAGEMENT BAILOUT -- Fed Chairman Greenspan helps arrange bailout for shaky hedge fund with high-powered domestic and international connections.

1999, Y2K FEARS -- Liquidity pumped out by Fed to ease Y2K concern helps fuel final NASDAQ bubbling.

2001 - 2005, POST STOCK-MARKET-CRASH RATE CUTS -- Fed cuts interest rates to 46 year lows to reflate U.S. financial and real-estate assets and protect the U.S. economy's newly dominant FIRE sector (Finance, Insurance, Real Estate.)
_____________

"Indeed, the quarter century before 2005 could be described as a triumph of financial-sector protection over marketplace comeuppance." Phillips, p. 286

[evagrius]

It seems that the essence of the situation is the old game of "hot potatoes" or passing the buck or Mr. Ponzi's scheme.

[Farrar Richardson]

When a subject as heartbreaking as foreclosure and loss of ones home comes up, it's pretty hard to avoid getting emotional and moralizing, but really guys and gals, aren't most of us completely missing the point. Krugman is not suggesting that congress appropriate billions to save the imprudent, as in the savings and loan crisis afew years back.

Did everybody take time to read the Morgensen article that Anne posted? I'm talking to you especially RealPC, Groucho and Feng? The problem Morgensen is bringing to our attention is simply that the new complexities of the mortgage business are making it nearly impossible for lenders and borrowers to renegotiate a loan, even when such renegotiation would be to the advantage of all concerned. Somebody needs to jump in and create a legal or institutional structure to make renegotiation possible when the situation is not completely hopeless.

[anne]

Thank you Farrar Richardson. Reading, at least a little reading, can be so helpful, but....

The problem that Paul Krugman is worried about and that Gretchen Morgenson has worried about for months while being periodically ridiculed is the distancing of owners of mortgage debt from homeowners. Even investors who have understood the difficulties that homeowners would experience when home price increases slowed or reversed, and who properly invested in anticipation, still do not appear to fully or even comfortably understand where the ownership of mortgage loans is situated.

[anne]

Though I do not expect a lowering of short term interest rates just now, even if the Federal Reserve were to soon lower rates for an extended period, as from 1991 on, I would expect the help in terms of economic growth to be limited because the problem with mortgage debt is not a banking problem. Banks do not seem to be much exposed to problematic mortgage debt, but then what institution are so exposed? Pension funds? I wonder, but do not know.

says...

Thanks Farrar Richardson for clarifying what I thought should have been clear from the start.

Maybe it would have been easier for everybody to understand if there had been a recession (rising unemployment) rather than just unscrupulous lending. A number of homeowners get in trouble due to potentially temporary problems. If this comes together with falling prices in their home market, it is in neither the lenders NOR the borrowers interest to end the loan agreement. In the past an agreement would be found. When the loans have been sold off - who makes the agreement?

[ECONOMISTA NON GRATA]

Farrar and Anne:

Do you remember the Resolution Trust Corporation (RTC), Bill Seidman,,,,?

The crisis that the RTC goverened in the early 1990s is similar to what is occuring today.

However, today, there is a question of managability. We've come a long way since 1990.

Anyone who believes in free markets, should know, that adjustments, no matter how severe, can and will resolve the excessive leverage extended to the economy. yes theree will be foreclosures, bankruptcies, both personal and coporate, probably a severe recesion....

We were, as Americans, collectively irresponssible and frivolous, both borrowers and lenders. There is no injustice here and there is no resolution with out pain...

I once stated on these pages that by the time that the election comes around that the war (occupation) in Iraq, would be on the back burner. This is happening right now as we speak. "It's the economy stupid...." You'll see....

One would have to stretch the imagination to the point of insanity to conclude that a financial catastophy is not in it's early stages. If anyone truly believes that we are not at the threashold of a major turn in economic events please be so kind as to let me know where there is an open window.... If this "Elephant is only a mouse with a glandular condition", as so many of our pundits are indicating, then, there is nothing to worry about....

My best regards to all,

Econolicious

[robertdfeinman]

I would just like to point out that all forms of credit have dried up. Today's times has a story about Oneida (makers of flatware) not being able to borrow money. We are not talking liar loans here, we are talking regular business loans for a decent firm.

http://www.nytimes.com/2007/08/07/business/07bond.html

A panic is a panic and people respond irrationally. Somewhere, somebody is already buying up fixed income securities at 80% of the face value. In a couple of years that person will be on the front page of the business section being lauded for their acumen.

If you want to play here's a typical example:
GE capital preferred stock par value $25 selling for $23.28, coupon 5.875% current yield 6.28%. If you are willing to go to B grade firms instead of A grade you can get 7-8% plus the capital appreciation when they mature.

(I'm not making any stock recommendations.)

It remains to be seen if the reluctance to make business loans is just a short term over reaction or is because of a belief that we are headed into a recession and lenders are unwilling to gamble on the future direction of some of these firms.

There is another article about USG (a maker of drywall) suffering because of the housing downturn. Recession or just sector slowdown?

[Farrar Richardson]

Yes, many will suffer, hopefully only the most imprudent and unscrupulous, but along the way perhaps we can avoid the Kafkaian situation where lenders and borrowers who might like to negotiate can't even find each other.

[Barry]

"anyone waiting for a populist uprising should probably note the bloodlust aimed at the common man, and the sympathy extended to the hapless (and no doubt selfless) mortgage broker, by realPC and BJ Feng."

Posted by: Bruce Wilder

If only there was some way that *they* could be forced to take the hits that they deserve. I'd get a large bowl of popcorn, and watch the blood spurt.

[prostratedragon]

As noted at Calculated Risk, today's WSJ continues its occasional series "Debt Bomb" with How Credit Got So Easy And Why It's Tightening.

An earlier installment is relevant to this thread: 'Subprime' Aftermath: Losing the Family Home. The article emphasizes the subprime refinance experience in struggling inner city neighborhoods far from the bubblevilles that have grabbed most of the national headlines and smug expressions of contempt. Somewhere where I can't lay hands on it at the moment is a statistic that far more than half of subprime mortgages in recent years have been refis.

Excerpt:

In 2006 alone, subprime investors from all over the world injected more than a billion dollars into 22 ZIP Codes in Detroit, where home values were falling, unemployment was rising and the foreclosure rate was already the nation's highest, according to an analysis of data from First American LoanPerformance. Fourteen ZIP Codes in Memphis, Tenn., attracted an estimated $460 million. Seventeen ZIP Codes in Newark, N.J., pulled in about $1.5 billion. In all of those ZIP Codes, subprime mortgages comprised more than half of all home loans made.

[TSmith]

I work for CurrentForeclosures.com, a foreclosures site and have seen a huge increase in the number of foreclosures in the past 7 months. I believe it is a combination of not only sub-prime and ARM mortgages, but also the high number of people who have gotten loans with interest rates at an all time low... in addition to the rapid depreciation in some areas and the difficulty some are experiencing in selling their homes.

[kthomas]

TSmith-

thanks for your insite. Please come to Mark's blog more often, your first-hand observations are valued.

[save_the_rustbelt]

Earlier this year we bought a house, and asked if the bank loan officer could expedite the deal, and he did.

Now our profile is like so, 1) excellent credit rating, 2) 40% downpayment, 3) house purchased below appraisal, 4) good cash reserves and 5) loan equals 1X annual income. Pretty conservative.

But I still thought he rushed it without a lot of documentation, but then I'm a conservative old accountant.

I'm guessing a lot of lower quality loans were rushed through in the same manner.

[save_the_rustbelt]

http://www.toledoblade.com/apps/pbcs.dll/article?AID=/20070807/BUSINESS06/70807001

rustbelt blues

[paine]

might i suggest to several
round heads commenting here
its obscene
to judge
straightened geefs
from a position
of
too much personal safety

----------------

bruce wild thing

punch line:

"anyone waiting for a populist uprising
should probably note the bloodlust aimed
at the common man...."

you're too cruel bw
what u call blood lust
is just a darwinian cry
for a needed
culling of the weak ankled among the herd

[neejerk]

I am a realtor in the Philadelphia area. Our prices are so far holding up. I am bothered when I hear negativity toward those who are losing the ground they call "home"

A lot of them did have good credit and were dumped into ARMS because they were talked into an easy NO DOC or some other goofy reasons. Many of these good folks put their life savings down on their homes and got stuck in this corporate greed.

I believe a bailout and investigations are in order.

[ken melvin]

'Twould be rife cynicism to pare Krugman's and Stiglitz's into this being a conspiracy to transfer wealth from the working class to the wealthy. Yes Bruce, they do believe all wealth comes from below and that by any means is fine.

[Alexis McGee]

The FDIC said today they were implementing a plan to help 2.2M of the 4.4M of Homeowners in trouble. This means 50% will not qualify to get modified. They will need a way out of those properties. We have to help those who do not have the income to stay in their homes, we should allow for easier assumptions of existing loans.

This also means our window to buy REOs at unbelievable prices will not be here forever. The flow of new REOs will slow down and the housing market will stabilize once the excess inventory is absorbed.