Only in America: Mortgage Machinations

May 30, 2009
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You gotta read this story about PennyMac from the people who brought you the Mortgage meltdown – the graduates of CountryWide Financial. The business model is quite simple – “goes to a demolished bank or the FDIC and buys up delinquent mortgages at, say, 20 cents on the dollar. Kurland’s people then call the delinquent homeowner and say, “How would you like to pay $2,000 a month instead of $4,000?” Once the homeowners realize it’s not a scam, they say “hell, yes.” PennyMac then books the often-massive spread between what it paid for the loan (20 cents) and what it is getting from the loan (50 cents).”
Now this CountryWide II==PennyMac operation is doing an IPO for $750 million and the betting appears to be they may get what they asking for.
Dilbert.com

Now my question is why the hell the banks themselves who have been given tons of money and many political injunctions to do the same – take 50cents on the dollar and bring the mortgages down to livable levels don’t do so – is it just a matter of time? They don’t want to book the losses now because it will precipitate near insolvency? Why don’t Hedge Funders or Private Equity shops do the same … ohh they are holding out for even better Geithner Guarantees and even more favorable terms on TarPuss Rescue funds. Or is it a case of NYTimes David Brook’s explanation – Stupidity among the Bankers and Titans of Finance?

 


What is really scary about this proposition is that those new CountryWide II loans can be leveraged, securitized, and otherwise re-dosed up to appropriate toxicity since regulations have yet to appear from Treasury or any government agency to prevent this mess from happening again. No wonder the banks and financial institutions are working triple overtime to get their TAR money repaid - not only do they want and already have restored those “modestly massive” pay levels; but also they don’t want to miss out on the action. Cheezo-beezo they can’t afford to let the Coutrywide alumni get a head start in these mortgage machinations.

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