The Ol' Shrimp Slayer's voodoo home mortgage bill
At first, when we received a press release from Rep. Dennis Cardoza, Shrimp Slayer-Maryland, about reducing mortgage payments and, in general, solving the entire recession/depression, we were impressed and willing to applaud the effort. Later, we read the bill, or, more correctly, we tried without success to read and understand the bill, H.R. 230. Our failure derives no doubt from our residence in Merced, in the 18th congressional district of California, rather than in Annapolis, in the 3rd congressional district of Maryland. Although last night we spied a UC Merced student in a supermarket line with a T-shirt announcing, "I know something you don't know...UC Merced 2006-2007," we didn't think the video buyer would be able to help us understand Cardoza's bill, so we didn't ask him what he thought this section might have meant:
(e) Securitization-
(1) REQUIREMENT- Each enterprise shall, upon such terms and conditions as it may prescribe, set aside any qualified mortgages purchased by it under this section and, upon approval of the Secretary of the Treasury, issue and sell securities based upon such mortgages set aside.
(2) FORM- Securities issued under this subsection may be in the form of debt obligations or trust certificates of beneficial interest, or both.
(3) TERMS- Securities issued under this subsection shall have such maturities and bear such rate or rates of interest as may be determined by the enterprise with the approval of the Secretary.
(4) EXEMPTION- Securities issued by an enterprise under this subsection shall, to the same extent as securities which are direct obligations of or obligations guaranteed as to principal and interest by the United States, be deemed to be exempt securities within the meaning of laws administered by the Securities and Exchange Commission.
We also noticed certain disjunctions between the press release and the bill, particularly the term of the mortgages, which in the propaganda is presented as 30 years, in the bill 30-40 years. We figured Cardoza's flak didn't understand the bill either.
Conservatively, not counting lobbyists and ideological sectors for example, we figure finance, insurance and real estate special interests (FIRE) contributed $150,000 to Cardoza's unopposed reelection campaign. Agribusiness contributed $285,000. If you consider that agribusiness is a major real estate interest in itself, the real FIRE figure rises.
While we agree that the housing crisis certainly appears to be at the "heart of the economic downturn," particularly in California where any economic activity but homebuilding has been strangled in its crib for the last 25 years, we suspect the truth is a bit more complicated. California is upside-down on its mortgages because of the greatest speculative bubble in real estate history, a bubble that included speculation in a wide array of "securitization products" created by FIRE special interests. We also recall that Cardoza, both in the state Legislature and later in Congress, was one of the nation's leading cheerleaders for this speculative feeding frenzy, which has busted, leaving his California district leading the nation in per capita rates of foreclosure. Cardoza left his district for more sophisticated company in Maryland, taking with him his wife, one of those terribly scarce Valley physicians he is always babbling about as he foments the need for a medical school for UC Merced.
But, why did the speculative bubble in real estate, bound as all bubbles are to crash, begin? We doubt that the mortgage disaster is actually the fundamental cause of the recession/depression or that this bill approaches the real economic crisis. The real job is to get more money very quickly into the hands of people losing their shelter and livelihood, and get it out of the hands of banks, which seem to hoard it rather than lend it. We've never been convinced -- and lately are becoming extremely skeptical -- that high real estate values are in pursuit of happiness except for FIRE special interests. We aren't convinced that the Common Good in this community is best served by a wealthy realty sector, Main Streets full of antique franchises, and empty food-processing plants on the outskirts. We doubt the proposed WalMart distribution center, or its educational equivalent, UC Merced, are worth the threats to health and public safety -- the former for air pollution, the latter for pollution of a more subtle kind, an intellectual pollution that constantly takes the civic mind off its problems and prospects, drowning it in self-serving UC propaganda.
Thanks in large part to leadership like Cardoza of Maryland's, the economy of the 18th CD has been rendered as incomprehensible to its citizens as his H.R. 230.
The whole gutted real estate bubble in the 18th CD was fueled by speculation at every level -- from the home buyer to the foreign bank who bought the sliced-and-diced mortgage securities. The entire speculation was driven locally by a few developers and large landowners, ever rapacious and idiotic local land-use authorities, politicians at every level of government, and outside FIRE special interests that had absolutely no care for our economy. And still don't. These speculative bubbles rage on as the finance sector continues to destroy every shred of a real economy in its path. Cardoza's bill is as self-serving for himself and his little group of plutocratic special interests as has been his wholesale attack on the environment of his rotten bourough, where we live.
Cardoza of Maryland raised more than a million dollars in the 2007-2008 fund-raising cycle and spent more than $930,000. Having no opposition, he's become nothing but a Blue Dog bagman, a money funnel. Cardoza is irrelevant to the 18th CD and the 18th CD is irrelevant to him. His unopposed reelection last year suggests the entire political leadership of his district is equally irrelevant to the time and to the needs of the district's citizens. This is just a little crowd that rode the speculative bubble up and are doing nothing but trying to hold onto wealth and office.
1-7-09
Rep. Dennis Cardoza website
Congressman Cardoza introduces bill to reduce mortgage payments, stabilize housing crisis
http://co113w.col113.mail.live.com/mail/InboxLight.aspx?FolderID=00000000-0000-0000-0000-000000000001&InboxSortAscending=False&InboxSortBy=Date&n=566293273#
WASHINGTON, DC -- Congressman Dennis Cardoza introduced legislation Wednesday that seeks to reverse the housing crisis by significantly reducing homeowners’ mortgage payments. Under the Housing Opportunity and Mortgage Equity (HOME) Act, all current homeowners and qualified borrowers could receive a fixed 4-percent interest rate with a fixed 30-year term.
“Plain and simple, at the root of this recession is the nation’s housing crisis,” said Congressman Cardoza. “We cannot continue to throw money into the wind in hopes of turning our economy around. We must strike at the heart of the economic downturn and that means taking far-reaching action to reverse the housing crisis.”
Congressman Cardoza said the legislation would benefit all homeowners and would-be owners. Many homeowners have faithfully paid their bill each month but have not been able to refinance their mortgage due to lost equity. Other homeowners are struggling to meet their payments. Such homeowners, and buyers, would be assisted through the legislation.
Last year, the federal government became the conservator of mortgage holders Fannie Mae and Freddie Mac. Congressman Cardoza’s legislation would use the conservatorship of Fannie and Freddie to purchase mortgages from lenders who are willing to refinance or offer home loans at a 4-percent rate with 30-year terms. Many have suggested that such a method provides the greatest value to the taxpayer when compared to other stimulus and tax-cut programs being considered.
“Such government intervention would have been unimaginable a year ago,” said Congressman Cardoza of his legislation. “However, we have reached a situation where such action is vital. This legislation provides direct benefit to the economy, to homeowners and to banks. And it’s the only economic stimulus package that will provide the long-term housing and economic stabilization this country needs.”
1-7-09
Library of Congress: Thomas
Housing Opportunity and Mortgage Equity Act of 2009 (Introduced in House)
http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.230:
HR 230 IH
111th CONGRESS
1st Session
H. R. 230
To prevent foreclosure of home mortgages and increase the availability of affordable new mortgages.
IN THE HOUSE OF REPRESENTATIVES
January 7, 2009
Mr. CARDOZA introduced the following bill; which was referred to the Committee on Financial Services
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A BILL
To prevent foreclosure of home mortgages and increase the availability of affordable new mortgages.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Housing Opportunity and Mortgage Equity Act of 2009'.
SEC. 2. AFFORDABLE REFINANCING MORTGAGES AND NEW MORTGAGES.
(a) Authority- The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation shall each carry out a program under this section to purchase and securitize qualified refinancing mortgages and qualified new mortgages on single-family housing, in accordance with this section and policies and procedures that the Director of the Federal Housing Finance Agency shall establish.
(b) Purchase of Qualified Mortgages-
(1) REQUIREMENT TO PURCHASE- If a lender proffers to an enterprise, in accordance with requirements established by the Director, a mortgage or mortgages for purchase under this section, the enterprise shall make a determination of whether such mortgage or mortgages are qualified mortgages. Subject to subsection (g), if the enterprise determines that such mortgage or mortgages meet the requirements for qualified mortgages, the enterprise shall make a commitment to purchase, and shall purchase, the mortgage or mortgages.
(2) ADVANCE COMMITMENTS- The Director shall require each enterprise to establish a procedure for approval of lenders to receive commitments, in advance of the origination of qualified mortgages, for purchase of such mortgages under this section by the enterprise.
(c) Qualified Mortgages-
(1) QUALIFIED MORTGAGE- For purposes of this section, the term `qualified mortgage' means a mortgage that is a qualified refinancing mortgage or a qualified new mortgage.
(2) QUALIFIED REFINANCING MORTGAGE- For purposes of this section, the term `qualified refinancing mortgage' means a mortgage that meets the following requirements:
(A) SINGLE-FAMILY HOUSING- The property subject to the mortgage shall be a one- to four-family dwelling, including a condominium or a share in a cooperative ownership housing association.
(B) PRINCIPAL RESIDENCE- The mortgagor under the mortgage shall occupy the property subject to the mortgage as his or her principal residence.
(C) REFINANCING- The principal loan amount repayment of which is secured by the mortgage shall be used to satisfy all indebtedness under an existing first mortgage that--
(i) was made for purchase of, or refinancing another first mortgage on, the same property that is subject to the qualified refinancing mortgage; and
(ii) was originated on or before January 1, 2008.
(D) INTEREST RATE; TERM TO MATURITY- The mortgage shall--
(i) bear interest at a single rate that is fixed for the entire term of the mortgage, which shall not exceed 4.0 percent annually; and
(ii) have a term to maturity of not less than 30 years and not more than 40 years from the date of the beginning of the amortization of the mortgage.
(E) UNDERWRITING STANDARDS- The mortgage shall meet such underwriting standards as the Director shall require.
(F) WAIVER OF PREPAYMENT PENALTIES- All penalties for prepayment or refinancing of the underlying mortgage refinanced by the mortgage, and all fees and penalties related to the default or delinquency on such mortgage, shall have been waived or forgiven.
(3) QUALIFIED NEW MORTGAGE- For purposes of this section, the term `qualified new mortgage' means a mortgage that meets the following requirements:
(A) TERMS- The mortgage meets the requirements under subparagraphs (A), (B), (D), and (E) of paragraph (2).
(B) HOME PURCHASE- The principal loan amount repayment of which is secured by the mortgage shall be used to purchase the property that is subject to the qualified new mortgage.
(C) NEW MORTGAGES- The mortgage was originated on or after the date of the enactment of this Act.
(d) Exceptions to Underwriting Standards- Each enterprise shall establish such exceptions to the underwriting standards of the enterprise, including downpayment and credit rating standards, that conform to the underwriting standards established pursuant to subsection (c)(5), as may be necessary to allow the enterprise to purchase and securitize qualified refinancing mortgages and qualified new mortgages under this section, in accordance with such requirements as the Director shall establish.
(e) Securitization-
(1) REQUIREMENT- Each enterprise shall, upon such terms and conditions as it may prescribe, set aside any qualified mortgages purchased by it under this section and, upon approval of the Secretary of the Treasury, issue and sell securities based upon such mortgages set aside.
(2) FORM- Securities issued under this subsection may be in the form of debt obligations or trust certificates of beneficial interest, or both.
(3) TERMS- Securities issued under this subsection shall have such maturities and bear such rate or rates of interest as may be determined by the enterprise with the approval of the Secretary.
(4) EXEMPTION- Securities issued by an enterprise under this subsection shall, to the same extent as securities which are direct obligations of or obligations guaranteed as to principal and interest by the United States, be deemed to be exempt securities within the meaning of laws administered by the Securities and Exchange Commission.
(5) PRINCIPAL AND INTEREST PAYMENTS- Mortgages set aside pursuant to this subsection shall at all times be adequate to enable the issuing enterprise to make timely principal and interest payments on the securities issued and sold pursuant to this subsection.
(6) REQUIRED DISCLOSURE- Each enterprise shall insert appropriate language in all of the securities issued under this subsection clearly indicating that such securities, together with the interest thereon, are not guaranteed by the United States and do not constitute a debt or obligation of the United States or any agency or instrumentality thereof other than the enterprise.
(f) Federal Reserve Financing Facility- The Board of Governors of the Federal Reserve System shall establish a credit facility of the Federal Reserve System to make credit available to the enterprises at interest rates comparable to rates on securities issued by the Secretary of the Treasury under chapter 31 of title 31, United States Code, and having comparable terms, as determined by the Board.
(g) Termination- The requirement under subsection (b)(1) for the enterprises to purchase mortgages shall not apply to any mortgage proferred to an enterprise after December 31, 2010.
SEC. 3. DEFINITIONS.
For purposes of this Act, the following definitions shall apply:
(1) DIRECTOR- The term `Director' means the Director of the Federal Housing Finance Agency.
(2) ENTERPRISE- The term `enterprise' means the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.
(3) SECRETARY- The term `Secretary' means the Secretary of the Treasury.