Banks: No One Said They’re Smart

Posted by Bill Hennessy on November 6, 2007 under Latest | Be the First to Comment

The mortgage industry is more than just banks, but let’s refer to the lot as “banks” for simplicity.

Banks are run by stupid, short-sighted people. They brought the current mortgage crisis, quickly turning into a general credit problem, upon themselves. They will wise up just in time to make us pay for their mistakes, but you already knew that.

The Independent points out the problem, but I’m giving the details:

A family with household income of more than $120K had a first mortgage for $143,000 and a second for $48,000. In the 4 years of the note, the Smiths had never paid late. The notes were both held by HomEq, a subprime subsidiary of the massive Wachovia. In 2003, Wachovia discovered that it had underfunded escrow by nearly $6,000. It informed the borrowers, call them the Smiths, that their mortgage payments would double from $1,400 per month to about $2,800 a month until the $11,000 arrearage was paid off. Oh, by the way, the bank tacked on about $5K in various penalties, fees, and other miscellany.

Mr. Smith disputed the $5K and the payoff period of 8 months, requesting that the bank extend the repayment period to 24 months and drop the $5K in penalties since the accounting error was the bank’s fault. He informed the bank that would pay only his original mortgage until his dispute was settled.

The bank returned his next mortgage payment undeposited 45 days later, saying he was not allowed to make partial payments. Because Wachovia held the check so long before informing him, he was now 2 months behind on payments. The bank kindly informed Smith that it would return any check for less than $5,400: two month’s payments plus another $600 late fee. Two days later, Smith received the notice of default and right to cure.

The right to cure required payment in full of all past due payments: $16,400. Why not $11, 400? Because the two months’ payments were added on top of the money already owed.

Smith made an offer to the bank. Since he could not possibly come up with the money before foreclosure, why not create a new loan at the punitive rate (in 2004 terms) of 8.5 percent for 30 years. Roll up the past due, the second mortgage, and the ridiculous past-due amount into that one note. Smith’s payment would fall to about $1,600 a month, an amount they would easily pay. Remember, they’d never been late before Wachovia screwed up.

Wachovia said no, of course. With the past due amount, the Smiths were turned down for a refinance by 11 different mortgage companies and banks, even in the lending free-for-all of 2004. Over the next year or so, the Smiths and Wachovia worked out several schemes to get caught up, each designed to be less possible than the one before.

In the end, Wachovia foreclosed. The house sold at auction for slightly more than the principal on the first mortgage. Under the law of the state in which the loan originated, Wachovia could not sue Smith for the $48,000 principal on the second mortgage because it held both mortgages.

Had Wachovia refinanced Smith, the bank would not have written off $45,000, and the Smiths would still own their home.

According to The Independent, Citigroup is as stupid as Wachovia:

this tightening up has led to a vicious circle. Making credit tougher has exacerbated the problems of struggling mortgage holders in America; default rates then rise and make the banks even more exposed to losses as credit agencies downgrade their assets. This seems to be what happened at Citigroup. The admission that it was unable to assure investors that a potential $11bn write-down for sub-prime mortgages would not grow has led to this fresh fit of extreme nervousness. Huge write-downs by Merrill Lynch ($7.9bn) and UBS ($3.4bn) have not helped.

A year ago, I thought the banks would wise up and fix the problem by helping borrowers out of the fines and fees nightmare the banks, themselves, created. Instead, the banks have put even A-paper borrowers at risk.

Idiots. Let’s not bail them out. Instead, let’s stone them in the streets before they breed and foist more generations of idiots upon the world.

Good Luck

Posted by Bill Hennessy on November 4, 2007 under Living | Be the First to Comment

I few years back, I went through some pretty tough times. I wrote about my situation on this blog. I won’t link to it, because I really don’t want you to read it. Financially, my family was in bad shape. Though we’re still together and very happy, that financial situation put strains on our marriage.

Hard work, persistence, an abject refusal to give in, and God’s grace (no doubt granted by your prayers) has delivered us to a great place in life.

I feel like wealth itself these days, and I am grateful. I am grateful for my wife who believed in me and in herself and in our kids. She believed in me when I had my doubts about myself.

I am grateful for and to our kids. The accepted the hardships visited upon them, the move, the change of schools, the loss of friends. They did without in an area where doing without is seen as a character flaw. They are all good kids. I’m proud of them.

I am grateful to my readers who continued to read through our problems. You put up with my infant-like whining.

I am grateful to my parents who instilled in me the fortitude to tough it out the way they did through the Depression and World War II and countles problems that I cannot even imagine.

I am grateful, mostly, to God and His Son who, in truth, is solely responsible for all the good in the world and particularly for all the good in my life. Whatever I need, He gives.

I am wealth itself. Thank you.

We’re moving into a beautiful new house this month.  It’s on the top of a hill and has views of hills aglow with the firey colors of a brilliant autumn.

I am lucky, and I get luckier every day.  I hope that by reading this, some luck rubs off on you–as if I were a chimney sweep!  Tomorrow will be a wonderful, wonderful day.

Left’s Gamble Lost

Posted by Bill Hennessy on under Latest | Be the First to Comment

From 2004 through about September 12, the American and European left bet the farm on terrorists.

Here’s Dick Durbin, the anti-American from Illinois, in September:

In a speech Friday at the Center for National Policy, Sen. Dick Durbin, D-Ill., said, “President Bush is preparing to tell the nation, once again, that his strategy in Iraq is succeeding. We know what the Bush-Petraeus report will say: The surge is working. Be patient. The reality is despite heroic efforts by U.S. troops, the Bush surge is not working. . . “By carefully manipulating the statistics, the Bush-Petraeus report will try to persuade us that violence in Iraq is decreasing and thus the surge is working.” (source)

Senate Majority Leader (and heed that title) Harry Reid declared defeat in April:

this war is lost and the surge is not accomplishing anything as indicated by the extreme violence in Iraq yesterday,” said Reid. (source)

But don’t stop there.  Google your way through the left’s treatment of war in July, August, and September.  Note the glee with which the writers reported every American soldier’s death and dismemberment.  See the joy in Nancy Pelosi’s eyes when she discusses roadside bombs.  August 2007 marks the Democrat Party’s irrevocable pact with the devil.   

Things have changed. 

Now that the US and her allies have defeated the terrorists in Iraq, the left is mum.  Democrats, for example, will not permit talk of the war in Iraq mention in the House or Senate.  The leftist media no longer mentions Bush’s war, for Bush’s war, always a just cause, is now a victorious  campaign.

The Times of London (h/t Captain’s Quarters), not exactly a right-wing blog, noticed the absence of news from Iraq.  But if you dig deeply into America’s most anti-American media, you’ll find that even the New York Times cannot hide all of the truth all of the time.  From the Lede:

Back in September, General David Petraeus reported a slide in violence that had some impressed and others saying that it might be a fluke. About two months later, many more are acknowledging progress, and Osama bin Laden sounds like one of them.

Adding to the optimism are news stories anticipating the lowest American death toll since early 2006. If the toll remains at 23 - and that won’t be a sure thing until several days after the month is over and the military finishes its October announcements - that would be a drop of 97 U.S. deaths from the month of May.

Even an alarming Pentagon estimate on a quadrupling of sniper attacks turned out to be very wrong. Indeed, sniper attacks have dropped. (source)

And remember the GAO’s propaganda attack on General Petraeus released just before his Congressional testimony?  Well, the NYT buries an update that discuss the remarkable progress in the war.

Exactly two months after its pessimistic report to Congress, the Government Accountability Office began a new report on a positive note. “Since G.A.O. last reported in September 2007,” the report said, “the number of enemy attacks in Iraq has declined.”

As this blog has maintained for a month, the war is over and the liberals lost.  If only, now, America had an unbiased media who would report the truth.