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OBAMA ADMINISTRATION GETS A KICK IN THE ASS BY THE BAILOUT OVERSIGHT PANEL ON MISHANDLING FORECLOSURE FIASCO

OBAMA ADMINISTRATION GETS A KICK IN THE ASS BY THE BAILOUT OVERSIGHT PANEL ON MISHANDLING FORECLOSURE FIASCO

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Published by 83jjmack
WASHINGTON -- A key government panel keeping tabs on the bailout strongly criticized the Obama administration Wednesday for its apparent failure on a variety of housing-related fronts, from its ineffective foreclosure-prevention initiatives to its refusal to acknowledge the growing crisis sparked by widespread evidence that mortgage companies frequently take their customers' homes via fraud.
Faced with increasingly heated criticism from the Congressional Oversight Panel, the administration's representative -- the Treasury Department's housing rescue chief, Phyllis Caldwell -- hunkered down, refusing to answer basic questions.
It was a familiar scene.
As the housing market continues to flirt with the risk of falling into a double dip -- prices are already heading downward, and the Federal Housing Finance Agency forecasts prices to return to their June 30, 2010 level in the fourth quarter of 2013 -- the Obama administration continues to face assaults on its attempts to fix the crisis threatening Americans' most valuable asset.
WASHINGTON -- A key government panel keeping tabs on the bailout strongly criticized the Obama administration Wednesday for its apparent failure on a variety of housing-related fronts, from its ineffective foreclosure-prevention initiatives to its refusal to acknowledge the growing crisis sparked by widespread evidence that mortgage companies frequently take their customers' homes via fraud.
Faced with increasingly heated criticism from the Congressional Oversight Panel, the administration's representative -- the Treasury Department's housing rescue chief, Phyllis Caldwell -- hunkered down, refusing to answer basic questions.
It was a familiar scene.
As the housing market continues to flirt with the risk of falling into a double dip -- prices are already heading downward, and the Federal Housing Finance Agency forecasts prices to return to their June 30, 2010 level in the fourth quarter of 2013 -- the Obama administration continues to face assaults on its attempts to fix the crisis threatening Americans' most valuable asset.

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Published by: 83jjmack on Oct 28, 2010
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First Posted: 10-27-10 06:40 PM | Updated: 10-27-10 08:25 PMWASHINGTON -- A key government panel keeping tabs on the bailout strongly criticized theObama administration Wednesday for its apparent failure on a variety of housing-related fronts,from its ineffective foreclosure-prevention initiatives to its refusal to acknowledge the growingcrisis sparked by widespread evidence that mortgage companies frequently take their customers'homes via fraud.Faced with increasingly heated criticism from the Congressional Oversight Panel, theadministration's representative -- the Treasury Department's housing rescue chief, Phyllis Caldwell-- hunkered down, refusing to answer basic questions.It was a familiar scene.As the housing market continues to flirt with the risk of falling into a double dip -- prices arealready heading downward, and the Federal Housing Finance Agency forecasts prices to return totheir June 30, 2010 level in the fourth quarter of 2013 -- the Obama administration continues toface assaults on its attempts to fix the crisis threatening Americans' most valuable asset.
 
Some independent experts, while critical overall, praise the administration for its role in spacingout the negative shocks from the record home repossessions taking place, lessening the chances of the economy suffering a fatal blow. Others say the administration's efforts have simply prolongedthe crisis and delayed the recovery. Either way, the consensus is that the administration hasn't pursued the right policies to jumpstart the recovery.During Wednesday's hearing, members of the Congressional Oversight Panel said Treasury'sforeclosure-prevention programs "failed to provide meaningful relief," generated "falseexpectations," and have been a "major disappointment." COP is an independent, nonpartisancommission created by Congress.More than 20 months after President Barack Obama announced a plan to "enable as many as threeto four million homeowners to modify the terms of their mortgages to avoid foreclosure," just640,300 homeowners remain in the program. Nearly 729,000 struggling homeowners have beenkicked out."We are faced with a choice here," said Damon Silvers, a member of the panel who also works asdirector of policy and special counsel at the AFL-CIO. "We can either have a rational resolution tothe foreclosure crisis or we can preserve the capital structure of the banks. We can't do both."The commissioners were just as critical when it came to assessing Treasury's response to thegrowing crisis emanating from mortgage companies' use of fraudulent paperwork to foreclose onhomeowners.That consequences of that, though, may pale in comparison to the risk faced by the nation's biggest banks when it comes to demands for them to buy back the faulty home mortgages that they bundled and sold to investors as securities. Estimates from Wall Street analysts range well into thehundreds of billions of dollars.The Federal Reserve Bank of New York is part of a group of investors that sent a letter demandingBank of America buy back some $47 billion in dodgy mortgages. The New York Fed owns themortgage debt as a result of its 2008 bailout of Bear Stearns, the fallen global investment bank.The administration and financial regulators are conducting a review, though it's unclear howcomprehensive it is or how many people have been devoted to it. Administration officials say thatthus far "there is no evidence of systemic risk."
 
 Not taking that for an answer, Silvers bore into Caldwell."I'm concerned about Treasury making representations categorically that you don't see a systemicrisk," Silvers told Treasury's chief homeownership officer. "And let me walk you through exactlywhy.""That letter asks for $47 billion of mortgages -- of mortgage- backed securities to be repurchasedat par," Silvers went on. "Do you know what those mortgages are currently carried at ... the marketvalue of those bonds today?"Caldwell declined to comment.Silvers continued:"OK, fine. Let me tell you what the Fed says they're worth. The Fed tells us they're worth 50 centson the dollar. So if the Fed's request to Bank of America is honored, right, Bank of America,assuming they are carrying these bonds, assuming when they buy them back they mark them tomarket, Bank of America will take a $23 billion loss."The Federal Reserve further informs us that there is nothing particularly unique about that particular set of mortgage-backed securities -- meaning they have not been chosen...because they're particularly bad. They believe they are of a common quality with the rest of Bank of America'sunderwritten mortgage-backed securities. There are $2 trillion [worth] of Bank of America'sunderwritten mortgage-backed securities."Five such deals -- five such requests, if honored to Bank of America...will amount to more thanthe current market capitalization of Bank of America, which is $115 billion."Now do you wish to retract your statement that there is no systemic risk in this situation? And theword is 'risk' -- not 'certainty' -- but 'risk'? And I would urge you to do so, because these things can be embarrassing later."Caldwell repeated her earlier claim that it was still early in the review. She added that Treasury isworking "very closely" with "11 regulatory and federal agencies," and that the administration is"watching this every day."And that at this stage there appears to be no evidence of a systemic risk -- but again it is early andit is something we are monitoring daily," Caldwell said.

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