Bailout Nation

First, I just want to say that The Most Likely International Incident To Be Ignored As Insignificant And Boomerang On Our Corpulent AmeriKKKan Asses is this crap happening in Mumbai.

I know, we've had to endure these low-grade terrorist boom-boom's since Osama showed the World How It's Really Done.

But this one seems different. Blowing up a Train In Spain where the chards fall Mainly On The Plains is one thing. Spain is the trailer park of Europe.

India, in case you've been lost in a fog of hyper-consumerism for the past decade, is RICH. India is extremely wealthy nowadays, and there is NOTHING up-and-comers like to prove more than I Can Kick Your Poor Ass. We've been doing it for 50 years.

Just keep it in mind: That Mumbai shit could escalate to NUCLEAR in no time at all. Always stay alert on where the next downleg can come from.

Speaking of head-in-hand Pathetic, I still very occasionally head over to Bend Economy Board (via ANONYMOUS PROXY!!!!) to see if things are headed up over there. Well, except for BendBB's still kick-ass data collection, this thing has seemingly turned into a Ra-Ra board for RE. To wit:

Housing Consumer Confidence Returns!
posted by:
No better time to buy

All you have to do is read some of the comments to see few people, IF ANY, are buying this tripe. But there is the occasional Realtor plant:

I will admit, having been actively in the real estate market (looking for a good deal on a house) for some time now, there has been an unmistakable uptick in activity.

And there are the Ever-Ebullient Perma-Bulls, like Jack Elliott, for whom No Piece Of Bad News Is Truly Bad.

And I'm sure a lot of people think that I am of the "100% All About Any Piece Of Bad News Is 100% True, And Any Good News Is Bullshit" mindset. Not true.

I just feel that we are in the post-traumatic throes of a Bubble Deflation that will bring down this country to a financial level we have not experienced in 50-100 years. And there will be nowhere in the US that suffers more than Bend.

And I think what I've been saying here about the Nationwide Vicious Aftermath is pretty clear for all to see. Number 1 News Item for months now. But what about Bend?

I'll tell you right now that Bend is going to be ravaged harder than anywhere in the U.S. There's a bit of a somber mood about town, and you can finally actually speak about The Current Bad Times at a cocktail party without fear of ostracism.

But THIS is NOTHING. This is NOTHING compared to what is coming. Just take a look out the Side View Window:

Bend Annual October Unemployment, Oct 1990 - Oct 2008.

It's pretty plain to see that we spanned almost the Entire Gamut of the previous 19 years of economic activity, in one feel swoop, going from some of the lowest unemployment rates ever, to The Highest October Unemployment Rate On Record In One Year.

This AIN'T a Bump In the Road. Wait for February. We will see The Worst Unemployment Rates In Modern Bend History. There's going to be some Major Epiphanizing going on; People realizing EN MASSE that YES, Bend Is Different. IT'S WORSE THAN ANYWHERE ELSE IN THE U.S.

The Bulletin, of course, ran a piece regarding the Great Deflation Of Bend (Population), but it began with a hashing over of The Glory Hole Years.

"This Here? Why, This Is A Little Bump In The Road! Bigger & Better Than Ever In No Time, And So Forth. Yes, Yes. Outdoor Recreation, Wealthy Widows With Big Ol Double Deez, Monsters Of Cock On 96 Year Old Men! It's A Paradise!"

Yeah. Right.

OK, here's an interesting piece that should get your pot boiling, if you managed to act in a fiscally responsible manner for the past 10 years.

Why lenders might forgive your debt

There was a time when lenders didn't want to work with you if you couldn't pay. Now they want to avoid foreclosure, lawsuits or repossession almost as much as you do.

By Liz Pulliam Weston

People who overdosed on debt in recent years learned the paradox of easy credit: While lenders were willing to let you borrow copious amounts, they weren't particularly interested in helping you work out a solution if you fell behind on repayment.

Lenders often found it easier and cheaper to write off delinquent accounts as bad debt than work with you on a repayment plan. After all, they could get a tax break on the loss and then get on with the profitable business of extending credit to the next guy.

Lately, however, lender perspectives have changed. Soaring default rates, a weakening economy and the credit crunch have rewritten the rules.

* Credit card lenders charged off 5.47% of the total amounts owed on cards as bad debt in the second quarter, according to the Federal Reserve. A year ago, the charge-off rate was 3.85%.

* Consumer bankruptcy filings in October topped 100,000, a 40% increase from a year earlier and the highest level since the federal bankruptcy reform law took effect in October 2005, according to the American Bankruptcy Institute.

* More than 2.2 million homeowners are more than 60 days late on their mortgage payments, according to the Hope Now alliance of lenders and credit counselors, and one in six homeowners owes more on a home than it's worth.

* With home prices plummeting, every foreclosure now represents a loss of 44% of the original loan amount, up from 29% a year ago, according to data from LPS Applied Analytics.

That's why lenders are now looking for ways to keep people paying their bills, even if it means forgiving some of their debt. Now the paradox is that in order to qualify, you must be struggling, but not so much that a change in terms wouldn't help you.

How the new programs work

The most sweeping new program was announced Nov. 11. Freddie Mac and Fannie Mae, the government agencies that guarantee 31 million U.S. mortgages, will begin paying the mortgage service companies that maintain the loans $800 for every loan they modify. Borrowers would get help in several ways: Interest rates would be reduced so that borrowers would not pay more than 38% of their gross income on housing expenses. Another option is for loans to be extended from 30 years to 40 years, and for some of the principal amount to be deferred interest-free.

The same day, Citigroup announced it would halt foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments. Ultimately, it plans to modify the repayment terms on up to $20 billion in loans.

Late last month, JPMorgan Chase expanded its mortgage modification program to an estimated $70 billion in loans, which could aid as many as 400,000 homeowners. The modifications were to include reducing amounts owed or the loans' interest rates, and replacing so-called "pay option" loans that typically resulted in mortgages growing over time.

Bank of America, meanwhile, has said that starting Dec. 1, it will modify an estimated 400,000 loans held by newly acquired Countrywide Financial as part of an $8.4 billion legal settlement reached with 11 states in early October.

Loan forgiveness is a key part of the Hope for Homeowners program. This is the foreclosure prevention program that Congress created as part of the $700 billion Economic and Housing Recovery Act of 2008. Lenders that want to participate typically must agree to reduce borrowers' principal to 90% of their homes' current value.

But wait, there's more

In late October, a coalition of lenders and consumer advocates asked banking regulators to approve a pilot program that would allow struggling borrowers to pay off, over time, less than they owe -- as much as 40% less. Under current rules, any repayment plan has to be for the full amount owed.

Though the Office of the Comptroller of the Currency rejected the first draft over how banks would book the resulting losses, backers of the plan say they're committed to finding a remedy for overtaxed borrowers that's short of bankruptcy -- which would likely mean the banks see no repayment at all.

In the first proposal, a joint project of the Financial Services Roundtable and the Consumer Federation of America, applicants would have been evaluated by certified credit counselors; those who couldn't pay off their debt under a regular debt management program would have been placed in one of four repayment plans that would reduce their principal by 10%, 20%, 30% or 40%. Only consumers closest to bankruptcy could have qualified for the biggest reduction.

Travis Plunkett of the Consumer Federation of America said his group would continue to lobby regulators "to do everything they can, within bounds of the safety and soundness of the financial system, to help consumers," but that ultimately consumer advocates may have to turn to lawmakers for help.

"It may be Congress that has to step in, and I think there's a lot of interest there" in doing so, Plunkett said. "We've got a train wreck coming."

Student loans and car debt

Meanwhile, makers of student and auto loans haven't announced any new plans for forgiveness. In recent years, in fact, both groups made escaping their debt more difficult. But:

* Certain borrowers can still get portions of their federal student loans forgiven through volunteer work, military service and teaching in low-income communities. And Congress passed a law in 2007 that wipes out federal student loan debt for people who work in certain jobs and who make 10 years of on-time payments. Plus:

* Auto lenders are stepping up their education efforts to let troubled borrowers know they have alternatives if they fall behind on their car payments. According to credit bureau Experian, more than 500,000 borrowers are 30 days or more overdue on a car loan.

Yet fewer than half of consumers in a recent poll knew that auto financing companies often worked with troubled borrowers, said Eric Hoffman, spokesman for the Aware, an education group set up by auto dealers and lenders that commissioned the survey.

Auto lenders may be able to modify a loan to stretch payments over a longer period or allow borrowers to make up missing payments, Hoffman said.

"We tell people, 'Don't ignore the situation if you're having trouble,'" Hoffman said. "Get in contact with your lender and see if there's a way to work out a different payment plan."

The same advice holds true for student loans. You may be eligible for income-sensitive or graduated repayment plans or, if you're facing economic hardship, forbearance or deferment that would allow you to skip payments for up to three years.

Here's what to do about other debt:

Credit cards. If you're already behind on your credit card payments, you shouldn't wait to see if you'll qualify for any loan forgiveness programs. Make two calls: one to a legitimate credit counselor and another to an experienced bankruptcy attorney. Between the two, you'll get the information you'll need to decide whether you should continue paying your debt or have it "forgiven" by the U.S. bankruptcy court.

Mortgages. Gather your paperwork -- your mortgage documents, last year's tax return and some recent pay stubs -- and call a HUD-approved housing counselor to evaluate your situation and your options. If you qualify for a loan modification program, the counselor can help you get through to your lender's loss mitigation department, which will evaluate your application.

A lender will want evidence that you're in trouble -- and assurances that any changes will keep the payments coming. Don't expect that it will immediately hack your loan balance to what the house is currently worth; it won't.

Your lender has only a few ways to help you: It can reduce your interest rate, defer payments, extend the length of the loan or forgive some part of your principal.

With your counselor's help, you should decide what solution you want before approaching the lender. If you have a temporary situation such as an illness that will be resolved soon, for example, ask for deferred payments. If your adjustable-rate mortgage is about to reset, use MSN Money's Mortgage Calculator to see if a reduced interest rate could keep you in your home.

You may have trouble getting your lender's attention. That's particularly true if you haven't already fallen behind on your payments, something you should try to avoid, because late payments can kill your credit scores.

In that situation, consider getting an attorney's help, said lawyer and mortgage broker Alan Jablonski, author of "Successfully Navigating the Mortgage Maze" and operator of the AJ Consumer Watch Web site.

Unlike some of those who advertise loan modification help, attorneys have a fiduciary duty to put their clients first (and clients have many remedies, including lawsuits and disciplinary complaints to the bar association, if the attorney fails to fulfill those duties).

That's a far cry from many of the fly-by-night outfits that demand big upfront fees and then fail to act, or disappear with the money.If you decide to hire an attorney, you'll have to find one on your own, Jablonski said; anyone legitimate has a full workload and isn't proactively contacting potential clients.

Your state's bar association may offer referrals. In any case, you'll need to confirm that the attorney is in good standing with the bar, and that he or she has experience with loan modification.

Published Nov. 17, 2008

Just read that over. Sounds good, right? Actually, no. Most of these "workouts" are simple extensions of the loan term, or rolling missed payments into the principal.

You've got to understand these loan workouts are a clusterfuck. They ACTUALLY REWARD PEOPLE FOR DEFAULTING. You are only eligible for The Best Workouts if You Are 3 Months Behind, or are on the verge of going bust. If you are playing by the rules, you get screwed. To wit:

Feel like a sucker? You're not alone

Bailouts are going to reckless Wall Street bankers, to homeowners over their heads and now maybe even to Americans hooked on credit cards. Where's the reward in doing the right thing?

By Liz Pulliam Weston

If you feel like you're being played, you're not alone.

The financial crisis has deepened many people's suspicions that doing the right thing hasn't paid off. Instead, they feel it's made them chumps.

You see it in the "Where's my @#$%ing bailout?" T-shirts, the despair about plummeting retirement accounts and the hostile comments that greet every news story about mortgage restructuring or credit card forgiveness.

One reader put it this way:

"Doesn't keeping your promises mean anything? Most if not all of the people who snagged these (mortgages) were well aware of the risk and the responsibility. It kills me that I'm playing by the rules and bailing out those who were greedy, stupid or both."

Even when they're not directing their anger at anyone in particular, many of my readers feel like they've been led down the garden path.

"I am 62 years old and HAD been planning to retire in 5 years," one wrote. "Although I have lived frugally my entire life and put away 15% of my income every year in a retirement account, my balanced portfolio lost 60% of its value in the last two months."

What he wanted to know: Would he be a bigger fool for pulling his money out of the market now or staying in and possibly suffering more lumps?

If you have similar questions -- if you suspect you're being a chump for making your mortgage payments, paying your credit card bills and continuing to invest in your 401(k) -- read on. You're certainly not alone as you watch others exploit loopholes, mistakes and well-intentioned remedies.

Bailed out but still ruined

The question of why some homeowners are getting bailouts has really been answered by the financial turmoil of the past few months. A huge spike in foreclosures, magnified by derivatives cooked up by Wall Street firms, nearly brought down the global economy. As it stands, we're still likely to suffer one heck of a hangover in the form of a serious recession.

The foreclosure mess is far from over. Many of the riskiest loans -- the ones where homeowners weren't even paying all the interest that was accumulating on their loans each month, let alone touching the principals -- are just now resetting.

Then there's the whole vicious-cycle effect, which I wrote about in April. As foreclosures rise, banks slash the prices of the homes they recover, putting downward pressure on everybody else's property values. With more homes "underwater," more fall into foreclosure when their owners lose a job and can't sell, or simply decide to walk away.

That's why the Powers That Be are finally getting serious about working with struggling homeowners. Given how interconnected everything is in our economy, their success in saving your neighbor from foreclosure might ultimately reduce the chances you'll lose your job.

I agree that a lot of borrowers were complete idiots for agreeing to mortgages that were eight or nine times their incomes (a mortgage that was three times your income used to be considered a stretch in the days before lenders went nuts). Smart borrowers fixed their rates for at least as long as they planned to stay in their homes; dumb ones agreed to adjustable-rate mortgages on their brokers' assurances that they'd be able to refinance before the payments reset.

But borrowers didn't get these loans in a vacuum. Mortgage brokers and loan officers downplayed the risks. So did lenders, who gave the brokers and loan officers fat incentives to push them. The Wall Street machine encouraged looser lending standards and created exotic investment products that wound up multiplying, rather than reducing, the risks. Regulators, meanwhile, stood by and basically did nothing. No one involved is covered in glory.

Neither is anyone getting an entirely free ride. Plenty of people will still lose their homes, and many who get workouts will have to live with trashed credit from the payments they missed before help arrived.

Forgiven but not forgotten

Personally, I wouldn't trade places with any of them, not even the ones who'll wind up keeping the bigger, fancier homes my husband and I decided we couldn't afford. I wouldn't want to live with the anxiety those troubled borrowers have faced ever since they got unaffordable mortgages or the uncertainty they're feeling as they wonder whether a workout will save their homes. Those folks made a hell of a gamble, and even with efforts to help on the rise, most of them are still going to lose.

Give me a home bought with a fat down payment and a 30-year fixed rate any day.
Forgiven but not forgotten
So how about the people who may be about to get big chunks of their credit card debts forgiven?

Major credit card issuers are seeking permission to knock down troubled borrowers' debts by as much as 40%. Debtors would get preferential tax treatment as well; they wouldn't owe income tax on the forgiven debt until they'd paid off the remainder of their balances.

Credit card issuers are recognizing the obvious: that their free-lending ways have come back to bite them. Delinquencies are soaring, and issuers' charge-offs -- balances written off as bad debt -- are up nearly 50% compared with last year.

The issuers figure getting something out of these debtors is better than getting nothing if they stop paying or file for bankruptcy.

The number of people admitted to the issuers' proposed pilot program would be small -- about 50,000 -- although enrollments likely would rise if the plan worked as anticipated.

You might have a beef with this particular bailout if you faced a huge pile of debt and opted to pay it off rather than have it wiped out in bankruptcy.

But once again, I'd rather be financially responsible and conservative than not. I'm not sorry that we've always limited our credit card charges to what we could pay in full every month.

Maybe we haven't bought as many toys as the folks who carried debt and are about to have some of it forgiven. But we also haven't spent a fortune in interest charges, which those people certainly have.

And I seriously doubt I'd have to pay higher interest rates or suffer in any way from this program, even if it became wildly successful. Those of us with good credit still would get the best rates, as I explained in "The real victims of deadbeats? Other deadbeats."
Investing blindly makes you a sucker

How about the last station on the have-I-been-a-sucker line: investing. Surely we were sold a bill of goods when we were told stocks are a good long-term investment. Haven't they gone essentially nowhere for a decade now?

Yes, except that those who continue to invest, in good times and in bad, inevitably come out ahead. MSN Money columnist Jim Jubak explains it best in "When to start investing? Now."

The folks who blow it are the ones who take too much risk in the good times, then panic and bail out in the bad, locking in their losses.

The reader who asked whether he should stay or go is a case in point. So close to retirement, he should have been ratcheting back on his risk. Although he thought his portfolio was balanced, it clearly wasn't -- otherwise, it wouldn't have dropped 30% during the worst of this fall's gyrations, let alone 60%.

This just encapsulates somewhat, the Heinous Agency Problems we are in the midst of creating.

We've already bailed out Huge Banks and Insurers. We are starting to bailout homeowners who have defaulted (ie; SPECULATORS). We're headed towards an Auto bailout, cuz Barack loves Unions, and the largely Muslim sections of Southern Michigan.

Everyone, it seems, is being Bailed Out. Except The Responsible. Those who lived within their means. I'll agree that Hard Times can hit those who deserve it least. But I'll also put forth that ALMOST NONE OF THOSE WHO HAVE BEEN BAILED OUT SO FAR MEET THAT DESCRIPTION.

They've said that They Will Print Money Until This Thing Is Solved.

That will, of course, solve nothing. It simply devalues the proxy by which we exchange goods & services. It also redistributes that proxy. Those of least merit are simply given wealth.

This is where we are on a slippery slope. We're a Bailout Nation 100% Addicted To Government Handouts. This should sound EXTREMELY FAMILAR to our local condition. Bend is NOTHING but a taxpayer boondoggle municipality where wealth is redistributed to those who know that local government is nothing more than a wealth redistribution mechanism. Ask Hooker Creek & Knife River: These are less profit seeking corporations, than Sucker Fish on the ailing Bend Slush Fund City Council.

We're NOT governed as much as we are pilfered of our wealth in Bend. Look no further than the last City Council election. Bought & Paid For By COBA. We deserve whatever we get.

And what we'll get is endless USELESS contracts to build infrastructure & "affordable homes".

I actually saw cripple ramps next to The New COVA building on Harriman & Irving, REMOVED and replaced with regular CURBS. Our City, in it's Infinite Wisdom, has decided to allocate resources AWAY from frivolities like Firemen & Policemen, and TOWARDS bricking up cripple ramps at warp speed. Why? Cuz a cripple ramp built TWICE, and still FAILS TO MEET GOVERNMENT REGULATIONS, is a hell of a profitable racket, and THAT IS ALL BEND IS.

That's us: Schemes & Scams that rob the citizens & reward GRIFTERS. And these poeple essentially RUN our EXECUTIVE & JUSTICE systems, as well. So what should we expect?

Well, from my own experience, I can say NEAR ENDLESS ATTEMPTS TO SHUTDOWN UNSAVORY FREE-SPEECH RE BLOGS. Yeah, it's become an onslaught. And just so you know, if this thing just DISAPPEARS one day, THAT IS THE REASON.

We can also expect cops & judges to be on the dole. This fucking place is going to be The Most Corrupt City On Earth, and we are well on our way. It's just going to be a bunch of suckerfish sucking on a corpse. Sooner or later, the money will go away, and all the Corporate Welfare Sleeze will just up & leave, and we'll be left with a hollow husk. It's already happening. They're gutting city services, while erecting ridiculous roundabout art.

Simply incredible. We're going 100% BROKE, and they're still putting art on roundabouts.

We're going BROKE, and they are WAIVING SDC charges to BUILDERS.

Have no doubt: Bend is The Most Corrupt City In The U.S.A., and we are rapidly coming to the end of our RE lotto winnings. The Good Times are LONG OVER, and you are about to witness the most incredible financial implosion of a municipality EVER.

And All There Is To Do, Is Stand Back And Witness The Horror.