Holiday Movie Review: Governator Saves California Borrowers — Script By Lenders?
Posted @ 9:06 am - Filed under Financing, subprime, Investment Physics
So, Jeff, what’s yer take on this whole sub-prime mess? Before I answer, let’s look at not only what I’ve been saying, but what’s actually been happening. Grandma used to say, empirical beats anecdotal every time — and Grandma wouldn’t lie.
All over the country, lenders big and small report sub-prime borrowers are living their lives, paying their payments, and acting like super-prime borrowers. 
They say, when pressed, the sub-prime problem is real, but not the tsunami portrayed at every turn by the ever reliable media.
Anyone who has followed this site for any time at all, knows I’ve been shouting from the mountain tops, the lenders will figure a way not to foreclose on thousands of homeowners. Many of them would be outa business if they did, which violates one of the top three BawldGuy Axioms. We’ll get back to the applicable axiom later.
The empirical?
How ’bout Wall Street has, for the most part already written off their losses — put them on their books. B of A, a giant among giants, has set aside less than $2 Billion as reserve for anticipated losses. That’s kinda like you and I setting aside a few bucks a week for the office donut fund.
Several of the central players on Wall Street have now publicly taken Billion$ in losses. Their profits are now up. My favorite move though, at least so far, is what happened in my state last week. The Governator announced four lenders — Countrywide, GMAC, Litton and HomeEq — who between them now service more than 25% of bad credit sub-prime loans in the state, have agreed to the following.
They’ll allow these borrowers to keep their initial lower interest rates — as long as they live in the home, have made their payments on time, and can prove their inability to make the new, much higher payments. You can read more on this by going here, or here.
Well, Surprise, Surprise, Surprise. Lenders who don’t wanna take back hundreds of homes, proving what failures they are — and saving their own skins. I’m shocked and chagrined — NOT.
In a nutshell, the deal was, according to reports, brokered by the Governor.
Here’s a scenario possibly more believable. In fact, it’s more believable because it’s so plausible. Call me cynical, but I’ve seen the earlier versions of this movie, and think I may know the ending. The story begins somewhat differently than is being reported. Again, this is just my take on things — an opinion. 
The lenders (actually, lenders servicing the loans) called Arnold — not the other way around. They deserve a Best Director Oscar nomination.
Why?
The Governator gives them cover. Also, they gain platinum political points by making Arnold the hero. They make themselves look like very empathetic, reasonable folks, who just wanna do the right thing.
The industry buzz is, it’s gonna be the feel good movie of the year.
See? Everybody wins.
Arnold looks like a hero, a role which,
by now he plays seamlessly. The lenders create an ending reminiscent of It’s A Wonderful Life, and the borrowers, all of whom play the part of Jimmy Stewart, leave the theatre with that familiar warm glow. You know the one — when Hollywood writes the ending we all wanna need to see.
Compare what’s been reported to what I’m suggesting.
Which one makes more sense to you?
Are we to take seriously the scenario, uh script, saying Arnold had to persuade the lenders to volunteer for this happy ending?
Wanna know who’re the only ones panning this movie? The lenders who weren’t included by the casting director. “Hey, we wanna be good guys too!”
Expect to see some pretty sad knock-offs of this classic effort — and probably fairly soon. I’d say before the end of the first quarter of ‘08. You know Hollywood loves to imitate success — no matter how bad it makes them appear. It’s all about the Benjamins. Again, duh.
For Heaven’s sake we’re on Friday The 13th XXXIV aren’t we?
Remember, as so correctly pointed out in the linked posts, foreclosures cost lenders tens of thousands of dollars each. 
Contrary to the belief of most, lenders do not want your property back — period, end of sentence, no argument.
They’d rather eat bugs.
BawldGuy Axiom: Lenders lend.
This is just another example of the lengths to which they will go in order to — here it comes — keep lending sans interruption. Giving borrowers, especially a relatively small minority, a break for a few years, is a huge bargain to them.
They just bought 3-5 years for pennies on the dollar.
They’ve seen this movie before too. Duh. By altering the ending, they’ve enabled themselves to go from a Friday The 13th feel, to well, a Christmas Classic.
Casting the Governator in the starring role? Brilliant in its simplicity and effectiveness.
Even though we’ve all seen this movie a few times before, this version is well done.
The lenders accrue great PR. They secure the best cover possible in the Governator. Arnold gets to save all the borrowers, not exactly a dangerous political move on his part.
And the best part of all? The borrowers can now go about their lives minus the omnipresent mind-numbing anxiety of not knowing if they’ll have a home this time next year.
Two Bawld Thumbs up for this one.
This entry was posted on Monday, November 26th, 2007 at 9:06 am and is filed under Financing, subprime, Investment Physics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.