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North Jersey Community Bank CEO Frank Sorrentino and Meister Seelig & Fein’s Steven Meister on the FHFA decision to not allow principal reductio...
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Are you gotta love this evidently our government what's good for the -- is not good for the gander.
They don't believe in aren't the government requires private lenders to reduce loan balances its struggling homeowners but that Federal Housing Finance Agency -- the FH FAA.
Is now for -- government backed mortgage giants Fannie Mae and Freddie Mac.
Of doing the very same thing joining me for more on this one is real state attorney Stephen Meister and CEO of north Jersey community bank ranks soaring -- Thanks to both of you for coming in to help us sort this -- out.
This to me is just amazing I mean after.
The government force this medicine down the throats of banks of Bank of America JPMorgan saying you must reduce the principal.
These poor underwater homeowners then their own regulator the epic ahead of the FHFA.
Ed DeMarco my new hero.
Came out and said.
You know what.
Just doesn't makes us there's no proof that works and people might intentionally defaulted they think they're gonna get out of their mortgages -- I mean where you just last.
80% of those of those homeowners are still making their payments.
And even those that have.
That are underwater by 125%.
Of their won't a loan to value.
75% of those people -- making their payments.
So you know what are we what are we telling our our home buyers -- war are homeowners as as a nation it's located strategically default know so I agree with the position as the market.
That's shocking and very yeah -- you -- a small community bank right yeah how would you feel if you had been forced to reduce principal.
And then the government's own agent comes out and turns around to Tim Geithner and says.
You know why we're not reduce at Fannie Mae and Freddie Mac because it doesn't make cents I mean wouldn't you be -- leave it they don't wanna take their -- -- And I think that's I think that's a really good point.
And absolutely we wouldn't want anyone telling us what we should do with our own contract with with someone that -- contract with who who says they're going to pay us back -- should be our decision to me to say whether or not.
We -- willing to make take a principal reduction.
Stephen what do you think about that I mean they say there's no proof this this Ed DeMarco says there is no proof that this is a sure fire financial next it's not -- about it.
It's not going to work the only thing that's going to work use the free market that's what worked in the commercial sector where the price adjustment was even lower.
And now the commercial sector is back and -- it.
So what happens here is hundreds of millions or billions of dollars of taxpayer money would be wasted.
And as the -- correctly noted this in an enormous moral hazard here.
Right I mean -- you have half the taxpayers not paying any taxes -- how does it feel to the people who were paying taxes and are current on their mortgages why should other folks get tax money.
To pay down their mortgages frank.
And -- fact he said -- he warned that such move would cause some borrowers to default intentionally in hopes of getting taxpayer -- yet thank.
I mean -- -- or just what everyone has been saying all along right.
Because of this is that this is a disaster and you know this whole situation with interest thing about the entire economy here is that at this moment in time right here today.
The housing market is starting to recover and house prices are starting to move in the other direction so clearly this is an issue of time and as time goes on.
And house prices recover people are gonna get out of this on the we have situation and they're going to be okay.
I think is so interesting about the -- and we were making this point during the commercials this is Ed DeMarco he's a regulator in Washington you know he works for the -- I mean you know he says he -- a regulator working for suffers on agency.
But he's under the auspices of this administration Doctor Who has set up this situation where they're saying.
We must do principled world as we must keep in police homes and he's sticking it to -- He is sticking it to them and it's it's great that he's doing his job look all these programs have had the effect of roaring out the healing process.
Because they delayed free market processes and what it's gonna happen here.
Is that we will still have a huge foreclosure overhang when interest rates inevitably rise which they eventually would it may take quite a long time from today.
But that's where we're really gonna get hurt when those interest rates go up we still have the -- And he makes the point every writing valid contracts would spook investors corset that's -- it does it mean you both agree with every -- to pairing up a mortgage and saying you don't know what you're buying for the first let's listen what -- -- open what's gonna happen to the pricing of mortgages and what's gonna happen to interest.
Rates on mortgages if in fact we don't know whether or not we have a -- we don't have a contract and the risk is going to go up dramatically.
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