John Dugan, head of the U.S. Office of the Comptroller of the Currency, shows why he was a terrible choice for the job as he admits not only his surprise that over half of the borrowers who received help with mortgage modifications earlier this year have re-defaulted on their payments, but then confesses he doesn't know what to make of it still!"The results, I confess, were somewhat surprising, and not in a good way," said John Dugan, head of the U.S. Office of the Comptroller of the Currency, in prepared remarks for a U.S. housing forum...
Dugan said recent data showed that after three months, nearly 36 percent of borrowers who received restructured mortgages in the first quarter re-defaulted. The rate of re-default jumped to about 53 percent after six months and 58 percent after eight months, Dugan said, without providing an explanation for the trend.
Regulators speaking at an OTS-housing forum did not provide any explanations for the causes behind the data. "We don't know the answers yet, but these are the types of questions that we have begun asking our servicers in detail," Dugan said...
My, my, my; Mr. Dugan, the alarming naivete gripping you and your government peers about how credit works (and doesn't work) is truly remarkable.
Credit is not a universal right like freedom or dignity. It isn't deserved by everyone. And handing out cheap credit not only endangers the person carrying the loan. As we're seeing on a terribly large scale nowadays, we see that cheap, shaky credit credit endangers the whole system.
Why on earth should you be scratching your head over basic economic realities? You've got bad credit risks in the first place, folks who do not yet possess the 3 C's which would make them acceptable credit risks: character, cash flow and collateral. They are awarded a house they can't afford. They can't make the payments. Then they are allowed a "mortgage modification" which, in truth, merely shaves off a minuscule percentage of the monthly payment. But their income still hasn't gone up enough to make their payments. Of course, they're going to crash again.
Why can't the "economic experts" see what everybody who works, pays their taxes and pays their own way in the world sees?
And, of course, these "3 Cs for good credit" are not only true for individuals, they're true for corporations, banks and government itself. We're seeing this in some pretty scary ways already with bailouts that need continual repeating. And, like the poor Joe who was tempted to forego patience, frugality and savings and instead overextend himself to where he couldn't make his house payment, an awful lot of the failing businesses that the taxpayers are now being forced to underwrite are simply going to burn through the new cash and fail yet again.
When will the madness stop?
