Who Gets Hit by Mortgage Losses in Harvey and Irma Areas?

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“We need to ask for a policy change because the burden with these losses is too big.”

Somebody is going to pay for losses on mortgages of homes that were destroyed by Hurricanes Harvey and Irma. It’s a just a question of who.

The taxpayer is on the hook, along with some investors. But then there are the servicers of mortgages guaranteed by the Government National Mortgage Association, for short Ginnie Mae. The largest of them is Wells Fargo, but they mostly include smaller non-banks such as PennyMac and Quicken Loans. The amounts could be large. And now they’re asking for a bailout of sorts.

In total, 4.3 million properties with nearly $700 billion in outstanding mortgage balances are located in FEMA-designated disaster areas in Texas and Florida, according to a preliminary estimate by Black Knight Financial Services:

  • Disaster areas of Hurricane Harvey: 1.18 million mortgaged properties with $179 billion in unpaid mortgages.
  • Disaster areas of Hurricane Irma: 3.14 million mortgaged properties with $517 billion in unpaid mortgages.

Many of these homes survived mostly unscathed. So the mortgage balances of homes that have been severely damaged or destroyed remain uncertain but are significant.

And who picks up the losses on these mortgages?

  • Federal flood insurance for insured homes, but payouts are capped. Taxpayers will bail out the insurance program.
  • Investors in private mortgage-backed securities (MBS) backed by mortgages that are not guaranteed by the government. Losses on those mortgages flow through to investors.
  • Banks take the losses on any mortgages they hold on their books and that are not guaranteed by the government.
  • Government Sponsored Enterprises (GSE), such as Fannie Mae and Freddie Mac, will be hit with losses on mortgages they guaranteed, packaged into MBS, and sold to investors. Some of the losses will be borne by private-sector investors via risk-transfer securities. The remaining losses will be borne by taxpayers.




But then there are mortgages guaranteed by Ginnie Mae.

They’re unique. Ginnie Mae is part of the Federal Housing Administration (FHA), which is part of the Department of Human Services (HUD). Like the GSEs, Ginnie Mae guarantees mortgages, packages them into MBS, and sells them to investors. But according to Debtwire, there is a big difference.

These mortgages under HUD have a conveyance policy that, among other things, requires the mortgage servicers – banks and non-banks – to maintain the property in good condition, according to Debtwire, “before they can be conveyed to the agency, leaving the servicer on the hook when insurance doesn’t cover losses.”

So how big of a problem is this?

The Ginnie Mae’s portfolio of single-family and multi-family MBS has soared 112% since 2009 to $1.87 trillion!

These are the largest Ginnie Mae servicers, according to Debtwire. Their exposure to Texas ranges from 5% to 10% of their portfolio:

  • Wells Fargo, the largest one, followed by non-banks:
  • PennyMac
  • Blackstone Group’s Lakeview Loan Servicing
  • Freedom Mortgage
  • Quicken Loans
  • Nationstar Mortgage
  • Carrington Mortgage Services
  • Lone Star Funds’ Caliber Home Loans.

Now they’re clamoring for an “exception” to the conveyance rule. According to Debtwire, citing “two sources familiar with the effort,” they’re “considering an appeal for relief from a US government policy that leaves them on the hook when a property is irreparably damaged.”

“For someone that does large FHA volume, it’s a serious concern,” said one source. “We need to ask for a policy change because the burden with these losses is too big.”

Ginnie Mae’s former president and now a senior fellow at the Milken Institute’s housing finance program, Ted Tozer, explained that non-bank servicers that are less diversified and that, according to Debtwire, “have feasted on the Ginnie Mae servicing shed by banks in recent years,” are particularly vulnerable. At the top of his worry list are smaller, regional servicers with heavy concentrations in hurricane-damaged areas.

“That’s what scares me,” he said. “These other guys could sell off some other servicing. They have other tools in the toolbox.”

Two sources told Debtwire that Ginnie Mae servicers “think they have a good case to seek exceptions to the conveyance policy because it’s unique to HUD.

But Tozer is skeptical about even a one-time policy exception because the concept of a servicer maintaining the properties is “critical” for government loan programs, he told Debtwire.

He pointed at an additional hurdle: Some officials at the agency that would have to be involved in such a change in policy haven’t been appointed yet.

Citing a source, Debtwire said that servicers “may also be stressed by the advances they’re required to make on loans that are not current.” Days after Irma, according to a source, “one top servicer had already granted thousands of forbearances as part of its immediate response to homeowners.”

The “number one priority is to get those customers the help they need,” the source said. “But the dialogue behind the scenes” is focused on dealing with the conveyance costs, the source said.

Ginnie Mae has already asked services “in need of assistance” to contact the agency “as soon as possible so we can guide them through this difficult period.” Assistance is available for issuers with more than 5% of their portfolios in the disaster areas. This assistance could take three forms:

  1. Aiding Issuers in covering their advance obligations while forbearing from declaring them in default.
  2. Deleting affected loans from calculations of delinquency ratios.
  3. And authorizing Issuers to purchase affected loans from the related pools.

Note the second item – and what it means for data we see down the road: those mortgage defaults will likely not show up in the national number of mortgage defaults.

Much uncertainty remains. But one thing is clear: The devastation from Hurricanes Harvey and Irma on the ground will have deep and far-reaching financial consequences far beyond the disaster areas for years to come.

Here’s a look at the breath-taking differences in a vast country. Read…  The 30 Metros in the US with the Highest and Lowest Incomes




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  68 comments for “Who Gets Hit by Mortgage Losses in Harvey and Irma Areas?

  1. Matt
    Sep 19, 2017 at 1:21 pm

    I wonder how many currently delinquent loans will be quietly recategorized as hurricane related impaired assets?

    • cdr
      Sep 19, 2017 at 3:32 pm

      Every one that stands to stick someone else with the cost. The media will help the banks by wringing their hands over it, wondering on TV and in print “What is the Government Going To Do to Bail These People Out?”.

      • cdr
        Sep 19, 2017 at 3:33 pm

        Never waste a crisis

    • outsider
      Sep 19, 2017 at 5:29 pm

      Oh!, so Capitalism includes exceptions? Like invisible hands? Whenever Capitalism fails? Or the privileged class ahhhh, errrr, stumbles?

      Who would have thunk it could be so unfair!

      • Raymond C Rogers
        Sep 19, 2017 at 9:37 pm

        Who is advocating this? It certainly is not conservatives. Sure the Rinos are for it, as are the dems. But no suprise there.

      • michael w Earussi
        Sep 20, 2017 at 9:52 am

        Outside: that’s the “invisible handout.”

    • Chris
      Sep 23, 2017 at 12:27 pm

      Matt, that is a GREAT point! I hadn’t thought about it but, yah, you’re right.

  2. Old Engineer
    Sep 19, 2017 at 1:41 pm

    We know who gets hit: the affected homeowners and the rest of the taxpayers. The U.S. has evolved into a corporate socialist state where the financial companies are viewed as an extension of the government. The federal government identifies its interests with the economic welfare of those select corporations, their officers, and shareholders, not the American population. It will protect them from all but nominal “paper” losses. And most of the homeowners will be unable to pay the cost of home payments, repair deductibles, and finding new transportation.
    So this will provide the Fed with an excuse to not only not raise rates, but to put even more money into circulation to bail out all the mortgage and insurance companies. And based on past experience, the mortgage companies will still expect to collect from homeowners on mortgages the government has indemnitized them for, so they look to make out well.
    No, Irma was a godsend for the Fed and will provide a windfall for the mortgage and insurance companies.

    • economicminor
      Sep 19, 2017 at 2:51 pm

      At what point do the debts that can’t be paid matter? This isn’t like just printing money to pay the bills with, all this additional debt will have to be borrowed, unless the FED will put it all on their balance sheet?

      These destroyed neighborhoods were income producing to the economy for the most part. These areas will be a huge negative for years. This is a big gap in my mind.

      Again, thanks Wolf for another great insight.

      • cdr
        Sep 19, 2017 at 3:19 pm

        economicminor,

        This is known as a game of hot potato. Many people intellectualize it and describe it in detail, adding accounting, the law, a pitiful plea ‘where is the humanity?,’ and the need to government assistance into the explanation.

        A good thinker looks at a big problem in its most elemental terms. The obfuscator, such as the bank wanting to get paid, will make all kinds of references and even toss in the kitchen sink if it will help being repaid.

        Yet, in the final analysis, this is a simple game of hot potato. Don’t let the suits confuse you.

        The banks should have stuck it to someone else by taking out insurance that covered obscure events. In common terminology, this would be obfuscated as a credit default option combined with a tranch of some sorts. This would pass the hot potato to the credit insurer.

        • Raymond C Rogers
          Sep 19, 2017 at 9:51 pm

          You also have to add that these insurance entities suffered nothing but profits during a decade of no hurricanes. We have to ask, why was a portion of that money not laid asside to cover future events. I mean it is called insurance after all, and you would think an honest to god insurance company based on selling insurance would use practices that included hedging to set asside capital.

        • Mike
          Sep 20, 2017 at 12:25 am

          Well, with the Fed maintaining ZIRP for almost a decade, insurance companies have not exactly been doing well – they have been making a pittance on their high grade debt investments that they probably expected to be making 5%+ per year on… hence steadily rising insurance premiums across the board. If the Fed funding rates were normal, insurers would have a bigger margin of error to work with, and homeowners probably would have been able to afford higher levels of coverage.

          E.g. In my case, I’ve chosen to cut back on coverage my home and auto policies since the rates just keep going up, year after year.

    • two beers
      Sep 19, 2017 at 4:10 pm

      Socialism is evil when it helps working people, the poor, the sick, the elderly, but it’s the highest moral good when it helps billionaires.

    • Sep 19, 2017 at 4:24 pm

      Old Engineer,

      I don’t think the Fed will get involved. The losses are spread very far, and part of it is already guaranteed by taxpayers. So this is not a nationwide crisis.

      If the losses were concentrated on one or two very large banks and were to threaten to take down those banks, the Fed might have second thoughts, but that’s not the case.

      Also, while huge, the affected area is only a smallish part of the vast US. So this is not a problem of the same magnitude as the housing crisis.

      I think the Fed will let the different entities take the losses and move on.

  3. California Bob
    Sep 19, 2017 at 2:04 pm

    I have 2 mortgages with ‘Nationstar’ on investment properties. Nationstar recently changed its name–with much hoopla–to ‘Mr. Cooper’ (don’t ask me why such a silly name). Do you suppose they figured a name/identity change would get them off the hook for defaulted mortgages?

    • Petunia
      Sep 19, 2017 at 2:27 pm

      Foreign owners always choose names that they think sound American. Softbank, a Japanese company, seems to be the owner of Mr. Cooper. I don’t think they understand the irony.

      • will
        Sep 20, 2017 at 4:55 am

        I like the name “Agent Smith” better..

        Honestly tho, I’m so tired of hearing about Softbank and Masayoshi Son’s stupid ideas.

    • cdr
      Sep 19, 2017 at 3:35 pm

      Makes me think of a guy in a raincoat with funny ideas.

  4. Petunia
    Sep 19, 2017 at 2:17 pm

    Some of those Ginnie Mae’s are on apartment rental buildings. I hear that many eviction notices have gone out in Houston making those renters homeless. One renter quoted in a story said FEMA gave her a hotel voucher, but she can’t find a room anywhere near where her children attend school.

    Many of the Houston flood victims are refugees from Katrina. I think that experience will help them make the decision to walk away again. There are parts of New Orleans that are still not back and they know it.

    What’s clear about all these floods is that building codes need to be updated. There is no point in repairing properties that will only flood again. Places like Texas and Louisiana have almost no water management to speak of, and it’s crazy to keep rebuilding the same houses over and over.

    • Kent
      Sep 19, 2017 at 2:23 pm

      “Places like Texas and Louisiana have almost no water management to speak of, and it’s crazy to keep rebuilding the same houses over and over.”

      Those houses in flood plains are there only because their mortgages go into MBSs that are rated AAA. Fix that little problem and the big problem goes away.

      • Petunia
        Sep 19, 2017 at 2:35 pm

        Those houses in flood plains are forced to buy insurance if they have a conventional mortgage. The flood insurance program needs to be fixed so that properties are not eligible over and over again. At some point the house needs to be torn down and rebuilt, not patched up. A better solution would be to force communities to include water management as part of development.

        • economicminor
          Sep 19, 2017 at 3:01 pm

          All of that costs money and makes that makes the per square foot cost go way up.

          I agree that the flood insurance program needs fixing. It is in the hole and has been for a decade. Meaning that the taxpayers in general are subsidizing it. What I understand is that they can’t actually charge what it costs because few could afford the real cost.

          Stopping building in flood prone areas is a local and/or state decision but the flood insurance is national. That would be easy to fix except for a corrupt dysfunctional Congress. And what do we do with the trillion$ of homes already in flood prone areas?

        • Petunia
          Sep 19, 2017 at 3:25 pm

          Eco,

          I spent summers in Puerto Rico when I was young. The hotels were all open on the ground floor and tiled. I experienced a really bad storm in one once. The water came out of nowhere and crashed right through the entire lobby. Two hours after the storm surge went down, you couldn’t even tell that anything had occurred. They built the property to withstand the flooding. Even the rattan furniture was dry.

          My relatives owned some beach shacks there as well. They were wooden and built on stilts. They sometimes came apart in a storm, but they were cheap enough to rebuild. There was no flood insurance then, only common sense.

        • Duke De Guise
          Sep 19, 2017 at 7:37 pm

          It’s also why God invented zoning.

      • Karlotta
        Sep 23, 2017 at 8:24 am

        A huge majority of the flooded homes in Houston were not inside the flood plain.

  5. Kent
    Sep 19, 2017 at 2:19 pm

    I work for a county in Central Florida and I’m sitting in a Board meeting as I type this.

    Irma, just in the last week, has cost the County about $58 million in food for shelters for citizens, staff pay (I worked an extra 81 hours in the last week though I don’t personally get paid for it), fuel, generators and contractors for debris removal and other fun stuff.

    FEMA will likely reimburse most of that, but it will take years to recoup it. Hopefully, hurricane Maria is headed north.

    As for mortgage damages, most of the pain is going to be in Southwest Florida (Naples through Sarasota). Up here, the damage is mostly busted up roofs from old oak trees falling on them. That’s probably $10k – $20k/per roof with a $5k deductible. Lots of folks will have a hard time finding that $5k. We do have some limited flooding, but we’re a little better than Houston when it comes to building in flood plains (not much, but a little).

    I get to work on a road that traverses the St. Johns River. The St. Johns where I cross it is usually about 150 yards wide. Right now it is about 10 miles wide, but hasn’t breached the highway yet. It is an eerie feeling driving along a 2 lane highway with what appears to be endless water lapping on both sides of the roadway.

    No damage to my house and only lost electricity for a day. Though my wife got to experience that. I was holed up in the County’s Emergency Operations Center.

    • Petunia
      Sep 19, 2017 at 2:46 pm

      I lived through 5 hurricanes in Florida, all the govt officials there do a fine job of keeping the public informed and prepared. And they get things back to normal as quickly as possible. So, a personal thank you to you and all your colleagues.

  6. Justme
    Sep 19, 2017 at 3:23 pm

    I don’t understand that a “servicer” can be on the hook for mortgage losses. I thought that a mortgage servicer was just a middleman that collected and distributes payments, keeps track of delinquencies and penalties, etc. Unless the servicers have not performed their administrative duties, how are they liable for losses? Can someone that knows please explain?

    • Petunia
      Sep 19, 2017 at 3:51 pm

      I took a quick look at the GM agreement. It seems to make the MBS creator keep the servicing. It also makes them take back loans that go bad, whether from foreclosure or other types of losses. The bad loans can be replaced in the pool by the MBS creator, but they have to take the bad loan out of the pool.

    • Sep 19, 2017 at 4:38 pm

      Yes, except those issuing/serving Ginnie Mae mortgages. As the article said, they’re governed by a unique “conveyance” policy that requires the issuer/servicer to maintain the home in good condition. When the home is destroyed, the servicer runs afoul of the conveyance policy and has to buy back the defaulted mortgage.

      Fannie and Freddy can also force lenders to buy back mortgages, but only if there are some major misrepresentations in the mortgage documents. These battles between the GSEs and the banks over the misrepresented mortgages that blew apart during the housing crisis were raging for years.

      • Jim Graham
        Sep 19, 2017 at 5:37 pm

        Curious…..

        Does Dan Gilbert and Quicken Loans stand to take big losses due to those two storms??

        Other than insurance companies, is there a list of publicly traded stocks that may suffer heavy losses??

        • Petunia
          Sep 20, 2017 at 1:38 pm

          If they created the MBS pools and sold them to GM, then they may have losses on all the mortgages affected by Irma. GM probably has a list of the pools they buy on some web site.

      • Justme
        Sep 20, 2017 at 9:33 am

        Thank, Petunia and Wolf. It certainly is an interesting to hear that the “loan originator” (*) for GinnieMae-purchased loans can (at least in theory) (**) be made to buy back bad loans if a house is in disrepair, or the loan was a liar loan. Wow. That means that a loan broker now is what a banks used to be a long time ago, at least in theory. I guess.

        (*) speaking of which, the first several 100 times I encountered the term “loan originator”, I never understood what the heck it meant. Then finally I realized what it meant: It meant DEBT ORIGINATOR, the entity that brokered the debt offering and found a lender. The real loan originator(s) of course being the persons that collectively lent out the money being borrowed in the end.

        (**) This begs the question: How many bad loans have ever been subject to a completed forced buyback? Is the answer ZERO so far? Do “mortgage lenders” (actually mortgage BROKERS) like QuickenLoans even have any capital requirements that would ensure their ability to buy back even 1% of the loans they brokered?

        • Sep 20, 2017 at 10:37 am

          To your question (***): Banks are forced to buy back mortgages all the time, but in very small quantities, one here and there. And it’s not a big deal. Even car dealers and other loan originators are forced to buy back loans when something isn’t right. But normally, the numbers are very small. It’s a tiny percentage of the overall volume.

          When there is massive mortgage fraud, as there was leading up to the Financial Crisis, and then it blows up, it’s a different story.

        • Sep 20, 2017 at 10:40 am

          Oh, and on the Ginnie Mae end of it: there are real worries that the smaller specialized originators/servicers don’t have the capital to deal with the mortgages for destroyed homes that they have to buy back. But if a few of them fail, in the overall national scheme of things, it’s not a big deal. And Wells Fargo is so huge, it will barely make a dent.

        • Petunia
          Sep 20, 2017 at 1:44 pm

          The loan originator is not the broker. The loan originator is the business who lent you the money at your closing. The mortgage broker gets a fee for bringing you to the loan originator.

          The loan originator, let’s say a bank, can then resell the loan to an MBS originator, or create the pools themselves. The chain can be very short or very long, it depends on who needs funding and how business is going.

  7. Sep 19, 2017 at 3:43 pm

    So the homeowner skips, the insurance company is on the hook for the repairs, but doesn’t have the money, no problem. The banks simply list the asset at 100%, minus damages which the insurance co owes them. No repairs are made, which is fine, the insurance company never pays out, the banks can mark the asset at full value then attach the former owner for failure to pay and put the property in foreclosure. Meanwhile property values rise due to a shortage and people line up to bid on these damaged houses at 100% of market value. The Fed runs more QE, pump up the asset bubble.
    The banks and the insurance company make a deal over the damage payouts, most of which is mostly cleanup, and cosmetic repairs. (This is where they make a deal, otherwise they had to restore the house to its original condition, ugg) House flippers get involved, rinse and repeat.

  8. Petunia
    Sep 19, 2017 at 4:02 pm

    What I think is more interesting than the mortgage losses which will be documented in official records, are the losses taken by the big mega landlords. Houston is one of the cities with huge numbers of mega landlord properties. Jacksonville is another.

    Those rental homes are purchased for cash and maintained from revenue streams that may no longer exist. The securitization of those rental streams are going to take a big hit too. So are the stock prices and bond ratings of those mega landlords.

    • Sep 19, 2017 at 4:43 pm

      Petunia, I must say, you’re on a roll today – with some very, very good, substantive, informative comments on this issue!

    • Gershon
      Sep 19, 2017 at 5:01 pm

      The securitization of those rental streams are going to take a big hit too. So are the stock prices and bond ratings of those mega landlords.

      Not to worry. The Fed’s printing press and middle class taxpayers have their backs.

    • Sep 20, 2017 at 10:35 am

      they bought them for cash and there are mortgage losses? the housing industry has bigger problems facing it, the flow of capital from China, shrinking demographics, downsized work force. Houston is a boom bust economy. in a service economy events like this are manna from heaven, the insurance company liquidates some of its stock holdings to pay out benefits which creates jobs. which is what on the large scale we all hope would happen

      • Petunia
        Sep 20, 2017 at 1:48 pm

        The mega landlords buy for cash, they don’t mortgage properties. The cash comes from investors, directly or through stocks and bonds. These landlords incur losses when their properties have damage or lose rental income. These losses don’t show up in public for awhile until they have to release financial statements.

  9. walter map
    Sep 19, 2017 at 4:30 pm

    “In total, 4.3 million properties with nearly $700 billion in outstanding mortgage balances are located in FEMA-designated disaster areas in Texas and Florida”

    Not a problem. Just let the temporary Bush tax cuts for the rich expire and cancel the military pork.

    That was easy.

    Wanna see me solve the national debt in 144 characters or less?

    • Rates
      Sep 19, 2017 at 4:35 pm

      144 characters? I can do it in even less. “default” or “hyperinflation”

      It’s so easy, even monkeys can do it.

      • walter map
        Sep 19, 2017 at 5:03 pm

        Those are catastrophes, not solutions. I prefer approaches that are constructive and equitable and don’t collapse the global economy.

        Start with a 50% tax on unrealized capital gains on equity. Not only will that more than balance the budget but it will also begin to correct the country’s huge problem with certain types of asset inflation.

        A start on two problems for the price of one. What’s not to like?

        • Michael Fiorillo
          Sep 19, 2017 at 7:43 pm

          And a financial transaction tax on all securities and foreign exchange trading, which would be a huge revenue generator and modest deterrent to speculation.

      • Hiho
        Sep 20, 2017 at 3:17 am

        Or make the rich pay their fair share.

    • Raymond C Rogers
      Sep 19, 2017 at 10:39 pm

      Get the rich, get the rich, get the rich!!!!!

      None of this makes any distinction between those that pay taxes and those that dont.

      None of this asks whether that rich person employs people or simply makes money through investments

      None of this distinguishes whether or not that rich person puts in long hours, sacrifices personal spending, creates meaning products and services people want. Believe it or not most millionaires were not rich to begin with. And there are many millionaires made and lost, as some of these people lose when they take risks.

      My better half partially owned a business at one point was worth about 10M. That buisiness ended up failing. She is a first generation American whom had put everything she had into that buisiness. She worked long hours and went to places in the world I doubt you’d have the courage to step foot in. People in some of those jobs don’t come home.

      But she was successful for awhile, and she got herself a nice car and dressed nice. People like you would sneer at her not knowing that she was paying out the wazoo in taxes and had her own charity (with no tax breaks claimed). When she lost everything, I mean everything. She sold her jewelry and dumped in nearly every penny she had to try to save it. She didn’t put in the money she set asside for her charity work that year. She lost everything, and still used that money for charity that same year.

      Later she got sick, and as we are not married I was not able to put her on my work insurance on the time. I paid for most of the treatments in cash (you can actually go to countries that have capitalist systems that allow you to purchase good affordable care). She has put more money into the system than you probably have earned, and has taken $0 out. She doesn’t accept handouts from the government.

      So before you run your mouth inferring rich people should pay more, and suggesting every rich person has had an easy life take some time to think.

      Some rich people have always had an easy life, but most have not. They have poured many hours and have sacrificed much to get they are at. Some of those can fail if you have a single employee in a high position that destroys the company. Companies fail every day, and the average person will fail before they succeed. Some people work in dangerous parts of the world, where safety is not garunteed.

      People like her don’t need lectures from people like you that haven’t got a clue. She’s lived life, and that is only half the story.

      • Hiho
        Sep 20, 2017 at 3:23 am

        You are right. Then we should penalize the iddle rich by taxing away unearned extractive unproductive income.

        The key is to differenciate between productive and extractive activities. Having said that, we should ensure that everyone pays their fair share. Closint loopholes, make the system less regressive etc…

        • Raymond C Rogers
          Sep 20, 2017 at 5:00 am

          I don’t think anybody should be penalized, but everyone should contribute for what they use. Vehicles that weigh a given amount cause more stress on the roads and should be taxed accordingly. If you fly commercial or own your own plane you should be paying for the costs of the FAA. Not the guy who never flies.

          The tax code needs to be simplified, and most deductions should be eliminated. Same rates for everyone, single or married. And why should people get tax breaks for being married or having children? Is there a shortage of people on the planet? Are the fields not being plowed as result of this?

          State tax should not be deducted from federal taxes. If you want to live in a social paradise, that’s fine, but if we both make 50,000 you should be paying the same amount to take care of national priorities.

          And since governments are not the most efficient entities, let’s stick with the basics- defense, roads, police, fire, basic education.

          It would be nice to have workman’s comp and even SSDI if people had the desire to clean up the fraud, but there is no will as these systems generate votes. When the financial system collapses, the people who actually need society’s help will be left with nothing. You can get SSDI for stress. And I’m sure many of us know “disabled” people who can work.

          Even though I’m not on this earth to be another person’s laborer, I have no issue with my tax money spent for the care of someone with down syndrome who has no other family to do so. There other categories of people as well, but there are too many people on these programs who can function, but chose to do otherwise.

          And no, I do not support government subsidies for companies, not for wind, solar, nuclear, or any other energy company. No subsidies for farmers, the financial sector, auto manufacturing, areospace, or anybody else. If the economy needs be taken out of a downward spiral, then temporary tax breaks could be given on the first 50k or 100k of earnings.

      • walter map
        Sep 20, 2017 at 5:23 am

        Oh, those long-suffering, selfless, burdened rich people. What a bunch of baloney.

        You’re trying to argue that the rich should not be taxed because they’re poor, when in fact it is the poor who should not be taxed because they’re poor. And yet, the poor are always taxed, but the rich are not always taxed because they game the system for loopholes, using any weaseling rationalization and phony sob story they can come up with.

        Moreover, people don’t work to become rich out of some altruistic desire to provide a social good. They do it to become rich. Neither do companies hire workers to provide a social good. They do it because workers make them money. You’re trying to argue that companies should not be taxed because their workers are making them money. Companies do not hire workers out of the goodness of their hearts. They do it to exploit demand so they can profit. Any social good that may result is irrelevant, and so is your argument that they should not be taxed.

        • Dan Romig
          Sep 20, 2017 at 6:55 am

          Walter, thank you for stating, “…in fact it is the poor who should not be taxed because they’re poor.” And, “… the rich are not always taxed because they game the system for loopholes, …”

          These two points are what a ‘Modified Flat Tax’ addresses. A living wage, which is certainly different for different locations in the US, but let’s say $24,000 (or $30,000) should have no federal tax liability. After that, all income from wages, dividends, capital gains and interest carried should be taxed at a flat rate of 20%, or slightly higher. There should be no mortgage interest tax deductions as the affluent with luxury homes, and up to two of them, are subsidized by those taxpayers with no mortgage(s).

        • walter map
          Sep 20, 2017 at 12:46 pm

          “Flat tax” = another tax cut for the rich.

          We’ve seen this trojan horse before.

        • Dan Romig
          Sep 21, 2017 at 6:54 am

          The question is, should we be taxed at an equal percentage on income accrued beyond a living wage? There are loopholes for compliance with IRS tax code as you state, and there are individuals who barely get by, and individuals who make millions.

          The federal tax rate ‘bracket’ for personal income starts at 10%, then ratchets up to 15%, 25%, 28%, 33%, 35% and tops out at 39.6%. Long term capital gains are taxed at 15% when one is in the 25, 28, 33 and 35 bracket, and they are taxed at 20% when one is in the 39,6 bracket.

          For a person who makes $191,000 in ordinary income, the rate is 33%. For a person with millions in long term capital gains, the rate is 20%.

          I believe that we should all be taxed equally – regardless of type of income or amount of income. Some believe that the rich should pay a higher percentage, and they currently do on ordinary income, but IMO this is institutionalized theft.

      • Chris
        Sep 23, 2017 at 2:01 pm

        Raymond, AMEN!! You honestly couldn’t have said it any better than that. That one story, eye opening and emotion provoking, destroys any blanket statement about the “wealthy” owing more to everyone else. Perfectly put. I hope your significant other is healing, physically and financially. She’s a hero and should know it. She can hold her head up high and feel proud of herself. And you too. Things will get better if she refuses to be held down. Good luck to both of you.

  10. Wilbur58
    Sep 19, 2017 at 4:47 pm

    Ah yes, the biggest crybaby welfare queens in the world… corporate America. And more specifically, banking and finance.

    I want these people to receive zero government assistance. Of course Fannie and Freddie have their obligations. Ditto the flood insurance. But if I’m king for a day, then lenders and servicers take the hit when investments go south, period.

    I’m Wilbur and I approved this message.

    • walter map
      Sep 19, 2017 at 5:08 pm

      With a little thought you should be able to make all these millions of homeowners whole without feeding the Financial Industrial Complex. Here you have a wonderful opportunity to prove you’re smarter than 546 elected federal officials put together.

  11. Gershon
    Sep 19, 2017 at 5:00 pm

    Am wondering how much exposure American banks and insurers have to the 7.1 earthquake that hit Mexico City today.

    • walter map
      Sep 19, 2017 at 5:31 pm

      Probably not that much, since the excess exposure is assumed by the US and Mexico that bail them out.

      High finance is easy.

  12. michael Engel
    Sep 19, 2017 at 6:35 pm

    Houston is divided into 1) high elevation areas and 2) low elevation areas.
    RE in high elevation area was hardly damaged.
    A owner of RE can put his asset in the market and ask a premium.
    If you put down $100k on $500k home in low elevation area, w/ $400k
    mortgage, both you and the bank have a problems.
    The house might be condemn, gone with the rest of your belonging.
    Or, if not, it is in a need for expensive repairs when you compete w/
    others like you.
    If you are wealthy, and can afford to buy a new home, You have to
    invest in repairs, sell for a huge loss, and pay premium for high
    elevation areas.
    The $400 are bank assets. Those assets are deflated.
    Not all homes in low area have been destroyed or damaged, but their
    value fell,because the area is infected.
    This alone and other factors, in the job market, in Houston huge automobile market ( outstanding loans with zero value), can cause banks to collapse
    It can lead to the next financial crisis.

  13. maryR
    Sep 19, 2017 at 8:42 pm

    It has been known for years that hurricane-proof structures are quite feasible. Most dome shapes will resist both hurricane and tornado winds with ease. Flood proof is also possible with either the open first floor design mentioned by Petunia, or using flood proof designs and materials as in earth bag dome style homes. These are basically a two foot thick dirt/concrete type of wall stronger than simple sandbags.

    The building codes tend to favor structures preferred by builders for profit maximizing. Yes safety is considered, but it is the minimum safety standard set by law and perhaps we now need a maximum safety standard in hazard areas and to ease permit requirements for stronger buildings even if neighbors don’t like their appearance.

    Forgoing the profit from multiple rebuilding or repairs may be the key limiting factor on code changes.

    If the federal flood program were to require flood proof structures…that would give us a great start. People are not likely to move away from the coasts and local governments don’t want to give up the huge property taxes these areas provide. Even though it is a conflict of interest for the building permit issuing government to collect revenue
    where buildings should not be built …

    I sat through Irma here in Palm Beach county with winds up to 90 mph, wondering when the windows or roof would go…my 30 year old concrete block condo building held up well for which I am very thankful.

    I agree that Florida state and local government workers, and FPL the power company, do a great job in tough conditions. A big thank you to you all!!

    • Popeye
      Sep 26, 2017 at 8:37 am

      Get government out of insuring disaster prone areas, problem solved.

      Govt is never the solution. Govt is always the problem.

      • MaryR
        Sep 28, 2017 at 7:53 am

        “Govt is never the solution. Govt is always the problem.”

        This sounds like the utter nonsense spouted by Ronald Reagan.

        When the US had unbridled capitalism with virtually no regulation, workers could die with impunity in dangerous jobs with no protection or compensation for injuries.

        When the banks were deregulated and allowed to “self-regulate” we ended up with huge abuses and a crash of epic proportions.

        When corporations have no restraints, all kinds of corruption occurs whether monopoly pricing, tainted food and dangerous products, or massive pollution. The consequences are always borne by the citizenry and the negative externalities are not a cost borne by companies.

        The truth is, we may suffer from over-regulation and an inept government, but a world without governance is likely to be far worse.

        Whether we should build in flood prone areas at all, is a matter of great importance. If it is disallowed and structures relocated, this will in all probability be through government regulation, not the mythical free market, which would likely sell lots to the naive in the middle of a riverbed in the absence of any regulatory constraints.

  14. mean chicken
    Sep 20, 2017 at 9:10 pm

    “Ginnie Mae guarantees mortgages, packages them into MBS, and sells them to investors.”

    Would those investors by chance be the same investors who sell them to GM at full value when the properties default and then later buy them back at a fraction of the price?

    Rinse and repeat to infinity

  15. a.hall
    Sep 22, 2017 at 5:03 am

    Do you have to keep paying the Mortgage on a House that Irma has Destroyed?

    • Jim Graham
      Sep 22, 2017 at 2:51 pm

      YES.

      The loan was made to YOU and the folks that loaned you the money expect to be paid. The house (or other property) is the collateral standing behind the loan.

      IF you have enough insurance coverage the house can be repaired – or – declared a total loss.

      Assuming your insurance coverage is more than your mortgage – and the house is a total loss – the insurance will pay off the mortgage and give you any difference between the loan payoff and the pre-storm value of the house.

      • nirvana
        Oct 12, 2017 at 12:26 am

        “Assuming your insurance coverage is more than your mortgage – and the house is a total loss – the insurance will pay off the mortgage and give you any difference between the loan payoff and the pre-storm value of the house.”

        Are you sure? This violates the principle of indemnity.

        • Jim Graham
          Oct 13, 2017 at 5:13 pm

          The insurance (if the limits are high enough) will make you whole on your loss – but will NOT let you line your pockets at the insurers expense. In other words you will not be able to make money on the transaction.

          “”principle of indemnification. A defining characteristic of insurance, providing that a loss payment will replace what is lost, putting the insured back to where it was financially prior to the loss without rewarding or penalizing the insured for its loss.””

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