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When the bankers appeared before Congress a couple days ago, the moment that a moratorium on foreclosures was requested, their demeanor changed. There was a genuine hesitation and then the CEO of Bank of America, Ken Lewis insisted on a closed time period in which it would be in effect.

This tells me that the bankers did not want to stop the foreclosure process and that may be why they are dragging their feet about helping people to stay in their homes and avoid foreclosure.

What if there is an income stream coming directly from the foreclosure process that would be unavailable to the banks in any other manner? It would then be in their best interest as a business to pursue full foreclosures on each of the properties rather than anything else.

What if the “lenders mortgage insurance” whose premiums are being paid either by the property purchaser directly or through higher interest rates being paid by them, is actually paying out the full principle of these residential properties at the previous appraised value or at the value of the actual mortgage? That wouldn’t happen if the banks worked with people to arrange repayment of the mortgage in some reasonable or reappraised package. And, since property values have declined, this would be the only way that the mortgage lenders would receive the previous high values for these properties.

On top of that, what if the banks derive further benefit from the foreclosure process by writing off whatever depreciated value of the mortgage that did not go to its maturity? That would offset other profits, taxes, fees and tax liabilities which would represent real money to their corporations’ bottom line, also.

And, the auction process restores a certain cash value directly and immediately to the bank as an assured income stream to help recapitalize their extraordinary losses from other risky ventures and toxic assets.

If these are even part of the income stream coming from the process of foreclosures into the banks’ coffers, then it is little wonder that they are pursuing the process of foreclosure rather than working with individual families to keep their homes. It wouldn’t serve the banks’ interests to do anything else as it is set up now.

I would guess that the lenders mortgage insurance would not be paying anything to cover the mortgages if a deal is struck with the home buyers.

Beyond that, there was a note yesterday by someone on the cable news business coverage that the bankers don’t want to write down their CDOs and other toxic assets, mortgage-backed securities, default swaps and structured investment vehicles (SIVs). Although a degree of write-downs have occurred, is it possible that they are sitting on the remaining portion that would require substantial write-downs if the government at taxpayers’ expense don’t buy them out of the mess?

That means, these banks and investment bankers, mortgage lenders and other holders of these financial products are operating with the knowledge that sooner or later, a more sizable write-down on these assets will have to occur. The faster they can get an income stream to cover these losses, the better their chances of survival will be in their estimation of it. But, maybe it only looks that way from where they are sitting.

It also means that they are essentially insolvent, even with the additional US government bailout funds, purchases of toxic assets up till now, TARP funds and availability at the discount window for huge sums of moneys. And, even with the substantial purchases of commercial paper that the US government has been making for them since several months ago – it still isn’t enough to reasonably account for their balance sheets’ disparities.

They are insolvent and they know it. That is why the black hole they have become is eating its way through everything the government is giving them which the taxpayers are providing and pursuing every opportunity to foreclose properties and sucking in everything else they can get as well.

It is why they have raised interest rates on credit cards, raised fees, added fees and found ways to hinder people’s ability to pay a reasonable minimum on time (by changing due dates and minimum payments beyond reason.) I would guess they are protected by some kind of insurance that pays the full amount if and when it is not paid by the borrower, just as the mortgages are covered for them.

My guess is that the CDO’s and other credit derivatives will have brought down the entire system by the time they are done. What it means for me is that, I and my children and grandchildren along with everyone in America like us will be among those who suffer for it because I can almost guarantee that the bankers and Wall Street groups that created this mess won’t even notice the difference in their worlds, aside from an odd and uncomfortable question or two from the news media or Congressional committee members. They are without consequence from their actions while each and everyone of us are paying for it.

– cricketdiane, 02-13-09

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Lenders mortgage insurance

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Lenders Mortgage Insurance (LMI), also known as Private mortgage insurance (PMI) in the US, is insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan. It is insurance to offset losses in the case where a mortgagor is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property.[1]

http://en.wikipedia.org/wiki/Private_Mortgage_Insurance

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Comparison of Personal Saving in the National Income and Product Accounts (NIPAs)
with Personal Saving in the Flow of Funds Accounts (FFAs) – Annual Data shown
http://www.bea.gov/national/nipaweb/Nipa-Frb.asp

National Income and Product Accounts Table
Table 1.1.1. Percent Change From Preceding Period in Real Gross Domestic Product
[Percent]
Today is: 2/12/2009 Last Revised on January 30, 2009 Next Release Date February 27, 2009
(2005 – 2008)
http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=1&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Year&FirstYear=2005&LastYear=2008&3Place=N&Update=Update&JavaBox=no#

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http://www.imf.org/external/country/USA/index.htm

IMF Data and Projections portal for United States – current and historic data

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