ソラバドのほん: Life in the Convergence Zone

Clearing out my econ queue...
Economy.com is reporting that 10% of mortgage holders are now "underwater," which is to say they owe more on their house than it's worth. That's 8.8 million "homeowners" who are now eligible for the Just Walk Away economic plan. The Senate has a plan to give bankruptcy judges more leeway in rewriting mortgage contracts - but that means, amoungst other things, cutting the value of the loan to no more than the market value of the house, a huge bailout/giveaway of theoretical bank money. Obviously, lenders of all kinds are opposed, and plan outright to jack rates up through the roof to cover their asses against this kind of thing moving forward. Of course, they haven't been helping their own cases by failing to keep even the most basic paperwork, which has been making foreclosures dramatically more difficult, if not impossible.

Oh, and sometimes, it's not even getting that far before people walk away. Mike Shedlock shows evidence that people who are only 30 days late are sending in jingle mail on properties - and this is in a pool of supposedly top-grade loans, packaged by Washington Mutual. Go look, it's neat.

In areas a little more esoteric, on Friday, the markets staged a nearly 2% turnaround in 30 minutes as rumours of a monoline insurer bailout floated through the market. AMBAC may get $3B in new capital from banks. That's stupid, by which I mean, not close to enough, but it was enough to send the markets skyward. (As Mish notes, this bluntly cannot work, but may give Moody's, Fitch, and S&P an excuse not to downgrade the monolines further yet, which is to say, continue the current ratings fraud a little while longer.) This is also part of their plan to split in half as previously discussed here. MBIA, not wanting to miss any of the fun, dumped in with the same commentary a few minutes later. One might wonder how much good even the muni spinoffs will be, with Berkshire Hathaway Assurance Corp. eating new muni insurance market share by leaps and bounds.

And, as usual, Dr. Roubini's commentary on the LBO markets is worth reading.

Current Mood: antsy