The plain vanilla mortgage, once a stunning bit of common sense that has emerged in a sea of financial obfuscation, is now a policy proposal of the past.

Barney Frank dropped the Obama Administration’s plain vanilla language in the Consumer Financial Protection Act Tuesday.

Many writers, approaching this issue from a behavioral economics perspective, saw a lot of merit to this idea.  Richard Thaler, who studies how people make financial decisions, called it “mortgages made easy.”The logic of his viewpoints are neatly expressed in this (more…)

Taylor is back.  A passing comment can’t be ignored – it is so opaque – but also significant.  He comments, “in my neighborhood, Roxbury, where I grew up…”

That’s a telling comment because Roxbury is in Barney Frank’s district.  Taylor represents NCRC in DC, but he actually lives in Boston, in Frank’s district.

Rep. Marchant wants to talk about extending CRA to new institutions.  This is a hot subject.  Credit unions and insurance companies may get a CRA obligation.  It seems very likely that if CRA Modernization passes, that it would extend coverage to independent mortgage companies.

Rep. Marchant (R-Tx): “Is it your opinion that even if the CRA was properly enforced under current law, would it bring enough money to neighborhoods?”

Taylor: it is not well enforced.

The Mass. Commissioner of Banks points out that while no state-chartered institutions are currently not meeting their requirements under the Mass. state law, some did not always reach that level.  And, he says, credit unions have not (more…)

In lockstep, Citigroup and JP Morgan Chase are putting foreclosures on hold. The hiatus is in force until March 6th.

Here’s an excerpt of a letter from Jamie Dimon to Barney Frank, D-MA, and the House Financial Services Committee.

We will not add  to the foreclosure process any new owner-occupied residential loans that are owned and serviced by JPMorgan Chase.  This moratorium replicates the 90-day foreclosure freeze we announced on October 31, 2008.  We believe three weeks is adequate time for the Treasury to announce – and for us to implement – a new plan.

The implication is that JPM is waiting for more specifics from Congress.  This puts the onus squarely on the people in Washington, DC to come up with a solution.

One area that has been eerily without action is some kind of policy movement on mark-to-market accounting.  As it is now, toxic assets that can’t be sold have to valued at little or no worth.  This weakens balance sheets and creates a second impact on lending, as banks have to pull back on leveraging their capital in order to make their capitalization ratios.

If its just a matter of market fear, and there is actually value underneath these “legacy assets,” then doing something about mark-to-market accounting could restore the markets.  The darker scenario is that these assets are really the dogs that we fear that they could be.  In that event, then the observations of NYU professor Nouriel Roubini may be on the mark.  We may be facing widespread insolvency in the US banking system.

This comes at a point when it seems that the problems associated with foreclosure are only getting worse. In their latest mortgage metrics report, the OCC and the OTS issued a joint paper chronicling the continued weakening in loan performance across the country. The next table shows the percentage of all mortgage loans that were either in one of two stages of delinquency, or that are in the foreclosure process, at the end of the specified quarter.