Every successful loan modification undertaken by the GSEs or FHA is paid for by the US taxpayer — paid for by you. The GSEs have already required a $150 billion government bailout, and the FHA is next on the bailout horizon. The losses on these entities that are not recovered are supplemented with tax dollars that you paid. So what’s the big deal? We pay for wasteful government programs all the time. The difference is simple. The money these entities lose, particularly those through loan modifications or principal forgiveness has no benefit to you whatsoever, but instead it’s a direct [Read More...]

Residential real estate is generally valued by comparable neighborhood sales. When a property sells for a new high price, it doesn’t just affect the value of that property, it impacts the value on all similar properties within a mile of the new sale. During the housing bubble, neighbors cheered each new higher comp because it added to their (illusory) net worth. With unrestricted access to equity with no-doc loans and 100% LTV HELOCs, everyone near a new high comp was basically given free money. The late arrivals all eagerly waited a greater fool to come along and buy at an [Read More...]

Major banks were bailed out during the financial crisis of 2008. Ever since then, they have been scrambling to avoid financial responsibility for their imprudent lending practices that precipitated the crisis. The banks entered into a large settlement with the attorneys general across the country to ostensibly pay restitution for their shoddy paperwork and foreclosure practices, but that was not the end to the pain for their misdeeds. Now, a series of both public and private entities are suing them for fraud, duping investors, and lax underwriting standards. I hope they lose. They deserve to lose. The banks must bear [Read More...]