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Verdict: Hamp Failed

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http://market-ticker.denninger.net/archives/2397-Verdict-HAMP-Failed.html

"See, I told you so"

Redefault rates on 1.2 million first-lien single-family mortgages are running above 50%, according to an internal note sent Wednesday to the company's salesforce by Sean Dobson, the chairman and chief executive of Amherst Securities Group LP.

You have to chuckle at the claimed "problem" though:

"As we predicted, it [Hamp] did not work," Dobson wrote. "If we want families to escape foreclosure, a real solution to the second-lien issue must be implemented.

There isn't one other than forcing the banks to eat those loans. And as I have pointed out repeatedly, doing so likely means that all or most of these institutions are recognized as insolvent.

Otherwise the Hamp program has only had the effect of loss deferral and exacerbation rather than a more responsible goal of foreclosure avoidance and loss minimization."

Translation: The banks are lying and the longer they lie the worse the eventual damage will be.

"Force the bad loans out into the open and default them" has been my mantra since the beginning of this mess. Why? Because losses due to bad loans happen when the loans are made and cannot be avoided. They can be "deferred" through various accounting tricks and games (some of which were retroactively made legal where they were not before) but doing so both fails to actually avoid the loss and increases the dollar amount of the eventual loss.

There is no escaping this fundamental fact folks.

Another banking crisis looming in the US? HAMP I would have assumed that must have helped many banks to avoid taking the loss, but it would appear that the losses can't be avoided because the banks have made too many stupid loans and people can't pay the money back.

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Is this one of the schemes that converted defaulting non-recourse loans into defaulting full-recourse loans?

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Is this one of the schemes that converted defaulting non-recourse loans into defaulting full-recourse loans?

On the reduced amount, yes. It was a clever way to put a floor under the problem in most non-recourse states where modified loans become full recourse loans.

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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