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"Every government interference in the economy consists of giving an unearned benefit, extorted by force, to some men at the expense of others."

Ayn Rand

Nobody's listening.

CHOKING ON THIS CRAMDOWN BILL

By
Neal Boortz
@ February 26, 2009 8:57 AM Permalink | Comments (27) | TrackBacks (1)

The Heritage Foundation has issued a report on Obama's mortgage cramdown bill, officially known as The Helping Families Save Their Homes Act. This is the one that would allow bankruptcy judges to reduce the principal owed on a mortgage. Just call this a wealth transfer from mortgage lenders to irresponsible home buyers. Irresponsible home buyers, it seems, vote Democrat. You know this is a lousy idea, I know it's a lousy idea, Rick Santelli knows it's a lousy idea .. and here comes the Heritage Foundation to assure us that .. yes .. it is a lousy idea. Here are just a few ways they believe this cramdown bill is going to actually hurt the housing market:

Raise mortgage costs. Cramdowns would add additional risk that mortgages will not be repaid as the contract requires. Lenders must charge for that added risk, and experts estimate that the additional costs would raise mortgage rates by as much as two full percentage points or substantially increase required down payments. (This, by the way, is exactly what I was telling you earlier this week). These added costs would fall hardest on moderate-income and first-time homebuyers, who have a higher risk of defaulting on a mortgage. This will price many families out of the housing market. Obama will blame the lenders, and the people who can't buy homes will continue to vote Democrat.

Further undermine the value of mortgage-backed securities. Banks and other investors are already facing heavy losses because mortgage-backed securities have lost much of their value because of uncertainties about whether the mortgages will be paid. The language in H.R. 1106 increases this uncertainty. Investors will be at risk of both foreclosure and cramdowns that reduce the earnings of these securities. Many (if not most) cramdown mortgages will later go into foreclosure. Since investors have no idea what this new provision will do to the value of their securities, prices will drop further.

Fail to help many homeowners. Only one-third of all Chapter 13 filers complete the process successfully and get the fresh start that bankruptcy promises. The other two-thirds "pay court fees, pay attorney's fees, pay fees to the bankruptcy trustee, invest time and money to restructure their financial affairs, and then wind up with nothing more than temporary relief. It is therefore not surprising that a substantial number of Chapter 13 filers--nearly one-third--go on to file for bankruptcy again." Once a deadbeat always a deadbeat. But .. and this is important ... they will continue to vote Democrat. That's because they're ignorant.

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TrackBack URL for this entry: http://boortz.com/blogging/mt-tb.cgi/22731

» Baffling Democrat logic from Matt and Pat

This mortgage bailout is pandering at its worst, and the Heritage Foundation tells us why with actual facts. But look at it this way: people who couldn’t afford mortgages went out and got them, and now they can reduce the principal on their loan.... Read More

Tracked on February 26, 2009 9:58 PM

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What others are saying

  • CRAM DOWN OR GIVE AID TO NORTH KOREA
    I don't know how we got into this mess[Olie], how ever we are all in it together. We have been paying for AID to the world for decades, did you ever say and when are they going to help americans with our money instead of giving aid to north korea ,USSR[WHEN IT WAS EXISTED] AND EVERY OTHER NATION THAT STUCK OUT THEIR HAT ! Now that americans need aid you all stand up and scream ,being american is to be a risk taker and to belive you can do it . that's what our dream is and they cant get help from the richest country in the world that helps everyone!, even with our young flesh and blood. shame on us all. screw the americans but make sure you find them in the street and tax them so you can give it away to some nation who despise us all!
    By DrP @ 05/06/09 01:14:27 AMreport abuse
  • MORTGAGE CRAM DOWN
    My 1st mortgage was up to date. I payed all my mortgage payments on time. My property was valued at 646,000. I owed
    478,000 on a first mortgage. I refinanced two times in the previous year. My payment was 2,100 dollars per month. The bank offered me a negitive amertization loan ARM at 6.75% The lowest payment I found out latter would only pay part of the interest. The rest of the interest would be payed from my equity. To make a long story short I now owe 514,000 dollars and the property value has droped to 246,000 dollars. Through no fault of my own I am serverly upside down. I would like you to know this is not a good feeling. I do believe I have been taken advantage of. The mortgage cram down is my only way out.
    By DAN STONE @ 03/21/09 10:15:03 AMreport abuse
  • cramdown
    CRAMDOWNS HAVE BEEN A COMMON PRACTISE IN COMMERCIAL BANKRUPTCY (CHAPTER 11) FOR YEARS. THERE IS NO SIGN THEY HAVE HAD ANY EFFECT ON THE BORROWERS ABILITY TO GET FINANCING OR THE COST OF FINANCING. THAT ARGUMENT SIMPLY DOSEN'T STAND THE SMELL TEST.
    THE SUREST WAY TO REDUCE MBS VALUES IS TO FORCLOSE AND RECOGNIZE THE DEFICIENCY BALANCE, WHICH REMAINS THE OTHER ALTERNATIVE. IT IS EVEN MORE DAMAGING AS IT HAS AN IMMEADIATE NEGATIVE EFFECT ON COMPARABLE PROPERTIES. IT IS UNLIKELY CRAMDOWNS WILL HAVE ANY EFFECT ON MBS VALUES. THEY DON'T CHANGE REALITY.
    MANY INDIVIDUALS FILING CHAPTER 13 ARE NOT SUCCESSFUL IN REORGANIZING. ONE OF THE BIG REASON IS THE COURTS INABILITY TO RESTRUCTURE WHAT IS NORMALLY THE DEBTORS LARGEST OBLIGATION, THEIR MORTGAGE. THE BILL WILL RESULT IN SIGNIFICANT IMPROVEMENT IN THE RATE OF SUCCESS IN REORGANIZATION.
    COMMENTS IDENTIFYING BANKRUPTS AS "DEADBEATS" IS INAPPROPRIATE AND SHOULD NOT HAVE APPEARED.
    By ebolks @ 03/05/09 03:58:55 AMreport abuse
  • VOTE YES TO H.R. 1106
    THE BANKS WERE GREEDY, AND PUT PEOPLE
    IN BAD LOANS. LOAN PAPERWORK IS COMPLICATED (EVEN ALAN GREENSPAN WITH
    PHD'S DOESN'T UNDERSTAND MORTGAGE BACKED SECURITIES. PEOPLE HAVE A RIGHT
    TO SAVE THEMSELVES. I WILL NEVER VOTE
    REPUBLICAN AGAIN, THEY ACT LIKE BIG
    BABIES. GROW UP. YES TO 1106.
    By Kathy @ 02/27/09 10:43:58 PMreport abuse
  • We built this city on inflated home values
    One of our problems here in Colorado is that, during the housing boom, appraisers seriously over-valued homes during the process of the sale. So the government swept in to regulate the industry.

    I really do blame the banks and their appraisers for what happened in my state. They give credence to the idea that businesses will slit their customers' throats to make a sale and we need big government to protect us from them.
    By Kore @ 02/27/09 06:10:52 AMreport abuse
  • Cramdown for ALL!!!
    I haven't seen anyone deal with what this stupidity will lead to!! It will NOT be very long before many people catch on that if they dont't pay their mortgage (ON PURPOSE!!), let it go into cramdown stage, and get a reduced principle!!
    This is exactly like the deadbeat who deliberately runs their credit cards up, and then files bankruptcy. You are naive if you don't see this coming!!
    This country is screwed. 99% of what Congress is doing is NOT consitutionally allowed!! Does anybody give a damn??
    By Mike Welch @ 02/26/09 09:06:57 PMreport abuse
  • Chicken Soup for the Economy
    Easy.
    Quit Taxing New First Small Business Start-ups.

    Consider this. Joe the Plumber finally decides to quit working for Tom, and take off on his own. He is going to install geothermal air conditioners. Joe then proceeds to goof up his bookkeeping for three months, during which time his income is just a little over a thousand bucks. Joe is working 70 hours a week, and he needs a smaller truck. Somehow he manages to sort out all his troubles. He starts to make a living wage and even manages to see Mrs. Joe for a whole day!
    Joe is making it. Joe knows that Joe is worth all this trouble.

    Now comes the new year. Joe hands the paperwork to Mrs. Joe and she does the taxes. They owe 6000 dollars in taxes. Joe winds up making the same wages he used to make working for Tom.


    Now, lets fix this. Somehow, lets talk the Dirty Filthy politicians in Washington into leaving Joe alone for two years. Quit requiring first time entrepreneurs to pay taxes, providing the business is a new, non-franchised start.

    Neal, you hava a microphone. If 20,000 people e-mailed this idea to whitehouse.gov ,then PrezBO might get the message. This would give the economy an immediate jolt, and I can tell you how I know, I was Chris the Carpenter, and I cried big tears when Mrs. Chris told me the tax bill. And no, I did not have health insurance at the time... It was funny, I was the most productive worker I knew. Now lets do the same for Joe. Joe would be like a pit bull on the economie's heels.

    Chris the Carpenter
    By Chris Bogardus @ 02/26/09 07:35:20 PMreport abuse
  • "Once a deadbeat always a deadbeat. "
    Neil, half of all bankruptcies are a result of staggering Medical bills... a severe medical problem than can in no way be blamed on deadbeats. For you to call people who suffering from staggering Medical bills "deadbeats" is adding insult to crippling injury. You need to apologize.
    By rdhood @ 02/26/09 05:37:43 PMreport abuse
  • Mortgage help?
    This bill reminds me of something Ben franklin said. "The ultimate result of shielding men from the affects of folly is ti fill the world with fools."
    By Scrap Iron @ 02/26/09 04:52:29 PMreport abuse
  • Robin
    Robin, what you are hearing is our total frustration. I don't care if it's 100% deadbeat or 50% deadbeat. I shouldn't have to pay for them at all. And sorry, but if a good person loses their house do to illness or any other no fault of their own situation the point still remains: too bad but why should I pay for it? We are getting tired of forced charity, plain and simple.
    By Joyce M/Blythe @ 02/26/09 03:35:23 PMreport abuse
  • Why do I have to pay?
    Why should I have to pay for the irresponsibility of others? The banks made a mistake in lending money, but the people made a mistake in taking the money. Why sould everyone else who didn't make the mistake be punished for others? Since when is owning a house an entitlement and not a privelege? I spent 6 years in the Navy and am now going to school I can't afford a house (yet) but I will someday. Unfortunately because of irrisponsible people I might have to wait longer than expected so that I can pursue my american dream.
    By Jared @ 02/26/09 02:17:37 PMreport abuse
  • Cram Down vs. Trickle Up
    I don't know the author of this quote, but thought it quite intuitive: "Obama's Tax Plan: Trickle Up Poverty".
    By Lawrence @ 02/26/09 02:00:44 PMreport abuse
  • Cramdown Bill
    I love it! I'm close to being in the no taxpaying spectrum...just a little above it, so I do have to pay some income tax. But hey that's ok, because as soon as all this pork spending gets going, I'll probably fall into the "poor and impoverished" category, then I can hold my hand out with the rest of the welfare recipients. Works for me, because as it is right now, I'll be working until I'm 90 after losing most of my 401K. The sooner anarchy reigns the better off we'll be. Then maybe liberals will see what they've been missing out on all these years. FREEDOM and INDIVIDUALISM!
    By Bill Fold @ 02/26/09 12:57:43 PMreport abuse
  • Revenge of the Nerd
    Stan 'ol boy, aren't you comparing apples to oranges?? or better yet a peach to a pile of horsesqueeze! I hope your further drivel will have some content that is meaningful....
    By SF @ 02/26/09 12:41:08 PMreport abuse
  • government plan?
    And what then? Does the government impose a huge "income" tax on the forgiven debt to raise government revenue after taking it out of the evil banks pockets? Then the irs can seize the homes to cover the back taxes people will obviously not be able to pay?
    By Greg Fisher @ 02/26/09 11:25:41 AMreport abuse
  • Now they appear
    Where were all these economists when Bush was giving the economy a 5 trillion dollar abortion?
    By Stan Gable @ 02/26/09 11:11:21 AMreport abuse
  • Sorry Robin, but the statistics say otherwise
    Unfortunately, liberals suffer from an acute mental disorder that prevents them from recognizing facts. The FACT is, Robin, that 66% of people who have had their loans re-structured under the TARP provisions, DEFAULTED AGAIN on their mortgages WITHIN 6 months.

    Excuses, excuses, excuses. Whaa whaa whaa. Why don't you liberals admit once and for all that you people aren't fit to own property and should resign yourselves to be renters.
    By $mooth Operator @ 02/26/09 10:54:44 AMreport abuse
  • All or nothing
    Really, every person filing for bankruptcy is a deadbeat? 100% of them? Sixty percent of folks that file do so due to medical bills, and they had insurance. People are not perfect and they will make mistakes. Making blanket judgements about other people is just a way to excuse not looking at the numbers to see if you are as right as you think you are. Calling people that aren't perfect names and insulting them is hardly a motivator and really just ruins everyone's day. Neal can't find anything positive to talk about so he whines about how the world is coming to an end. Not entertaining, nor enlightening. I want to listen but really, nothing constructive nor creative is being offerred.
    By Robin @ 02/26/09 10:30:37 AMreport abuse
  • Cramdowns
    Who needs the rule of law. It clearly does not apply to Congress. They void the constitutional contractual duties of corporations through TARP, They void employment contracts, They are in the process of ignoring the Constitution with the addition of DC as a voting representative in congress. Whats a little thing like voiding mortgage contracts. If this passes I think we will be looking over our shoulder to the good old days of Jimmy Carter and a 12% mortgage, if you can get one!.
    We need a perf walk of 535 ( soon to be 537)in washington!
    By Bob @ 02/26/09 10:13:28 AMreport abuse
  • A new "Declaration"
    OK, so we can count on nothing anymore. When a legally binding contract can be changed at the whim of a judge the foundation of our entire system will be shattered.

    The Declaration of Independence says "Governments are instituted among Men, deriving their just powers from the consent of the governed, --That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it".

    Maybe it's time for a new "Declaration".
    By John in Charleston @ 02/26/09 10:10:26 AMreport abuse
  • It's Alright for Business but not Homes
    Bankruptcy courts have had the ability to cram down a commercial mortgage, or most every other type of mortgage contract for years. Neal having been a lawyer for real estate knows this already. The only mortgage contract that has been off limits to the court has been the mortgage on a Primary Residence. So it is a better business practice to have the mortgage holder foreclose on a property then have to re-sell at current market value as opposed to having the court knock down the principle and at least keep getting paid by the home owners. It is a financial write down and will not stop the world from rotating.
    By Apples but not Oranges @ 02/26/09 10:05:58 AMreport abuse
  • Home Mortgage Cram Down
    Please excuse me, but hasn't this process been standard practice by bankruptcy courts on many different real estate contracts for sometime now? The only real estate mortgage contract that has been off limits to the bankruptcy court has been the mortgage contract for a primary residence. So now the proposed change will apply to primary home mortgages. The amount of real estate that will be effected by this change is low and the above whine is typical of those whose attitude is, I've got mine and the rest are parasites taking advantage of the successful. Good lord please get your head out of your seat. Maybe the observations from the American conservative party are off as well.
    http://www.americanconservativeparty.org/?q=node/1235
    By Nailman @ 02/26/09 09:56:02 AMreport abuse
  • Cramdown bill
    Wouldn't this fall under the 'taking' clause of the Constitution? In the case of a judge reducing the principal of the loan, the mortgage holder is having property taken by the government, which requires:
    1. Demonstrable public good.
    2. Compensation for the loss.

    Are the taxpayers then going to have to pay the difference to the lein holder?
    By Larry @ 02/26/09 09:43:28 AMreport abuse
  • WHAT????
    Ok. According to the Congress (Dem Controlled), as of April 2008 everything was fine with the mortgage situations in this country. This even after repeated attempts by experts, other members of congress and the President on repeated occasions to warn them.

    Then, around June or July of 2008, suddenly and without warning 6% of the mortgage holders in the country are in trouble and we have a crisis. St this point I have to ask how 94% of the people paying is a crisis?

    Now we are to this point. We suddenly have to bail people out. For the first time that I can remember people losing their home has become a national crisis. This is what is so two faced about this. Where was all this concern 5 years ago, when people would lose a house due to unexpected med costs, lose of job, or buying more house then you can afford? Politicians would tell you then to grow a set and deal with it.

    Politicians have people are worked up about the evil lending practices in this country and then go about creating a situation that will make it worse. Where were some of you who now post here, 2 years ago? Didn’t hear you complaining when you were getting pay raises and you 401k was doing real good. Didn’t hear some of you that are complaining now saying a word when lenders were being told that the feds would back these loans, get more people in homes.

    Some of you say people like me are whining, well I had a good teacher, LIBERALS! You started the day President Bush was elected and you never stopped. You enjoyed your 401k and stocks getting bigger, but you want to yell failed economics. You run this BS that tax cuts don’t improve the economy now, when for the past few years you have benefited from it. You conveniently over look the fact that Democrats have been in charge of congress for the last few years and they like the money that was coming in.

    Some of you now justify congress doubling the GDP again because the Republicans did it.

    PEOPLE! QUIT LISENING TO POLITIANS AND START WATCHING POLITICS. PRESIDENT OBAMA IS NOTHING MORE THEN A POWER HUNGRY BLACK CLINTON. RATHER THEN BLAME THE PARTIES, WHY NOT BLAME THE POLITIANS AND NEXT TIME SEND A CLEAR MESSAGE TO BOTH SIDE – VOTE FOR THE UNKNOWNS. No name recognition. Its about time that we reminded all of them that they are there for us, not us for them!
    By D.D. @ 02/26/09 09:38:50 AMreport abuse
  • ENABLING
    Since when do politicians (especially Democrats) do what "really" is best for America? This is clear evidence that it is all about two things ... getting into power and keeping it. We know that enabling a drug addict by giving them money is not good, yet politicians will do just that. They get you hooked on government.
    By Scrappy @ 02/26/09 09:32:02 AMreport abuse
  • Why have a contract?
    The Helping Families Save Their Homes Act - is Stupid.

    What's a contract worth if its unenforceable? This is going to shake the core of America. How the heck are you going to "factor-in" rule change risk? This is worse then the spending bill.

    So, why not apply the same principle to all secured loans? Why stop at houses? Why not all types of collateral, cars, boats, planes (neal you should like that), CD's and etc? Let's totally through out the concept of UCC filings; Secured lending? Under a communial state - the government owns the property anyway, so its moot?

    What a moron!
    By Scott Gardullo @ 02/26/09 09:24:39 AMreport abuse
  • Heritage Foundation
    This makes me feel better about the mortgage bill, because The Heritage Foundation is never right about anything.
    By Alabamastan @ 02/26/09 09:23:43 AMreport abuse
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