As I Promised, EU Is Colliding Into Prac…

17-01-2017 Hits:218 BoomBustBlog Reggie Middleton

As I Promised, EU Is Colliding Into Practical Confines of NIRP, Bank Hemorrhaging Up Next

Nearly a year ago, I warned subscribers of consequences stemming from the ECB's negative interest rate program. Here's an exceprt from our resarch report titled European Banking Macro Issues for March...

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Is Bitcoin Too Risky? Whenever the Bitco…

12-01-2017 Hits:1081 BoomBustBlog Reggie Middleton

Is Bitcoin Too Risky? Whenever the Bitcoin is Mentioned in Financial Pop Media, Ignorance Ensues

I hate to be the one to break bad news to you, but most of the pop media/mainstream media financial pundits that I hear and see opine on bitcoin have...

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What Happens When Rates Rise While the S…

10-01-2017 Hits:614 BoomBustBlog Reggie Middleton

What Happens When Rates Rise While the S&P 500 Relies on Cheap Credit To Boost EPS?

So, the stock market, bond market and real estate markets are all at all-time highs. Everything is Awesome! You know better than that. You see, when the bond market wakes...

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Debt Encumbered Oil, Sovereign Soil, Toi…

10-01-2017 Hits:501 BoomBustBlog Reggie Middleton

Debt Encumbered Oil, Sovereign Soil, Toil & Trouble: Can't You Hear Seems Cracking in the OPEC Empire?

@WSJ reports Libya Ramping Up Oil Production, Threatening OPEC (supposed) Plans to lift global oil place by artificially limiting supply. This would be in violation of federal antii-trust laws in the...

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Ten Years Since BoomBustBlog Was 1st Pub…

09-01-2017 Hits:808 BoomBustBlog Reggie Middleton

Ten Years Since BoomBustBlog Was 1st Published & That Initial Research Still Relevant Today

We have looked into insurance companies' performance last month in regards to our bearish real estate thesis. A small comederie of companies are suffering losses and/or declining profits as we've exected....

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The Macro Truth About The Big Bitcoin Po…

07-01-2017 Hits:968 BoomBustBlog Reggie Middleton

Bitcoin has dropped precipitously, and as is usual, we have the cacophony of instant digital currency pundits cackling about as if they had a clue. This is the inaugural post...

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To Bust or Not To Bust: Are We In A Real…

04-01-2017 Hits:682 BoomBustBlog Reggie Middleton

To Bust or Not To Bust: Are We In A Real Estate Bubble?

Banks are showing thin NIM, yet many of the big banks are able to boast stable if not slightly improving credit metrics. This doesn’t make sense considering the explosive growth...

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What Happens To Real Asset Lending Banks…

03-01-2017 Hits:528 BoomBustBlog Reggie Middleton

What Happens To Real Asset Lending Banks When the Real Funding Rate Appears? We're About to Find Out

During the financial crisis of 2008, money market funds who subjectively agreed to hold their NAV (net asset value) unit prices at $1 “broke the buck”. That is, the unit...

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Stress Test on Banks’ Earnings Facing th…

30-06-2014 Hits:44631 BoomBustBlog Reggie Middleton

Stress Test on Banks’ Earnings Facing the Veritaseum UltraCoin Value Transaction Platform

My last post on the topic of disintermediation during a paradigm shift was Wall Street Should Be First To Invest In Reggie Middleton's UltraCoin, Much Of It Won't Be Here In...

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Introducing the "Unbreakable Promis…

09-06-2014 Hits:39465 BoomBustBlog Reggie Middleton

Introducing the "Unbreakable Promise" As a Method Increasing Efficiencies and Decreasing Risk

Continuing on the margin compression theme originally laid out in Margin Compression Is Coming in the Payment Processing Space As $100 Million Pours Into Startups, I illustrate mathematically how the bit...

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Bitcoin (and Apple) Mythbusting 101

04-06-2014 Hits:40371 BoomBustBlog Reggie Middleton

Bitcoin (and Apple) Mythbusting 101

Yesterday, I did a radio interview with Benzinga. In it I busted myths about Apple, Bitcoin and Coins in general (ABCs). Listen to the interview below and the info sheets...

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Bitcoin (and Apple) Mythbusting 101

04-06-2014 Hits:44972 BoomBustBlog Reggie Middleton

Bitcoin (and Apple) Mythbusting 101

Yesterday, I did a radio interview with Benzinga. In it I busted myths about Apple, Bitcoin and Coins in general (ABCs). Listen to the interview below and the info sheets...

Read more

I have heard many sell side analysts claim the new government rules regarding loan mods to be bullish for banks. This actually makes plenty of accounting sense, since although most mods fall back into delinquency anyway, the bank gets to reclassify the delinquent loan as current and may get a refinancing fee that goes straight to the income line item to boot. Then I took a closer look. Some banks simply are not participating. I know for a fact that Citibank has simply stop modifying loans in many, if not most, cases.

 

We have looked into the possibility of the loan modification program allowing for shift of losses by banks to following periods. As of now, it appears that the program has not been receiving interest from lenders due to absence of real benefits to lenders in the program. Following are our findings:

  • 1. There was a study conducted by Boston Fed, the finding of which suggest that the program to solve the foreclosure crisis by giving the lending industry $75 billion to rewrite delinquent loans to more affordable levels is not likely to work. One of the reasons is that the scheme is not profitable for lenders. Even after rewriting the loan, there could be strong possibility of default going forward. As per the study, of the borrowers who received assistance under the scheme, upto 45% ended up in arrears again.
  • 2. The response to the program has not been strong enough to project any situation better than that of today's. Only 3 percent of seriously delinquent borrowers - those more than 60 days behind - had their loans modified to lower monthly payments and about 5.5 percent received loan modifications that did not result in lower payments. (The study focused on 665,410 loans that were originated between 2005 and 2007 and subsequently became seriously delinquent. It also followed about 150,000 borrowers for six months after they received help, through the end of 2008).
  • 3. Although the pace of loan modifications has been increasingly steadily under the program (more than 240,000 homeowners received assistance under the program), the number of foreclosure proceedings have also increased to 844,389 during the first quarter of 2009, up 73 percent from the first quarter of 2008. Thus far, the negatives are signficantly outrunning the positives!
  • 4. It is largely believed that the borrowers who are in deep trouble will default anyway and again, even after they have been given assistance under the program. This disincentivizes the lenders from pushing the program.

The increase in program allocation to incentivize mortgage lenders could prove to be in insufficient given no tangible benefits visible from the program.