I was interviewing Mr. Bruce Norris for my radio show on KTIE 590AM http://www.590ktie.com/ (You can listen to me from 5am to 6am Mon, Tu & Wed.  Write and tell the management you like Roger and I.  They’re a small station so they get very excited if you write in!  ienewshour [at] ktie590 [dot] com ) and he said something that is very true.  People are getting upset because the government keeps getting involved and not allowing the market to correct itself and by doing so and by helping people that may not have acted responsibly, we’re delaying things and causeing more and more people to consider walking away from thier mortgages.

Look, for the purpose of this post, we need to recognize this; if the comments below from Bloomberg’s article come to fruition, people who are paying their mortgage are going to get upset.  At some point, even I’m going to begin to feel like an idiot paying my mortgages from my dwindling savings.  I can prove a hardship.  Not a problem.  If we’re now going to offer principle reductions and continue to delay a recovery, I might as well jump on the band wagon and follow my governments advice.  Fall behind, box yourself into a corner, do the math and determine that it will be your grandchildrens 18th B-Day before you have equity again and walk away.  Or, at least threaten to.  For sure, I need to stop making my payments.  Once thats done, they actually pay attention to you.  Then if we all hold out, we may get a principle reduction.  However, this will most likely lead to a financial meltdown, but why should I be the only idiot paying my mortgage?

There is a HUGE difference between those who have had an illness, a death, a job loss and someone who took out 300K, lived high on the hog and stopped making their payments.  Yet these are the ones that keep getting a modification or principle reduction.  Why?  Because there is no fairness to this process.  I’ve watched too many who are struggling in their small homes get nothing and just as many who are upside down 300 to 600k get a break.  If we don’t stop this madness I assure you there will be greater challenges ahead.

Here are a few soundbites from Bloomberg today:

For HAMP to succeed, the program will have to be changed to include principal reductions on mortgages to offset value declines, according to Karen Weaver, global head of securitization research at Deutsche Bank AG in New York, and Laurie Goodman, the New York-based senior managing director at Amherst Securities Group.

Principal Reductions

In its current version, HAMP lowers mortgage payments to about a third of borrowers’ income by reducing interest, lengthening repayment terms and deferring principal repayments.

“If the other measures in HAMP aren’t working, the government will have to look at principal reductions,” said Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts.
One in Four

One in four U.S. homeowners holds a mortgage with a balance higher than the property’s value. The number of borrowers with so-called negative equity reached 10.7 million, or 23 percent, at the end of the third quarter, according to a Nov. 24 report by First American CoreLogic, a Santa Ana, California-based real estate research firm. Government programs to help underwater borrowers exclude jumbo mortgages that aren’t eligible to be purchased by Washington-based Fannie Mae and Freddie Mac of McLean, Virginia.
The government spent $230 billion to support HAMP and other housing programs in the 12 months ended Sept. 30, according to the Congressional Budget Office in Washington. The Federal Reserve has pledged to spend $1.25 trillion buying mortgage- backed securities in an effort to reduce fixed-mortgage rates. That program is set to end this quarter.
Currently, 6.5 million households are either in default or at least one payment behind on their mortgages, according to the Center for Responsible Lending based in Durham, North Carolina.

If enough of those are seized by lenders, it could lead to a “double-dip recession or at least to a slower recovery,” said Julia Gordon, senior public policy counsel for the research and policy group, in testimony before the House of Representatives Committee on Financial Services last month.

Chris Miscellaneous