December 2, 2022

Archives for April 2009

Sub 620 FICO Score FHA Lenders


FHA Only Option For Some

The FHA loan program is the only viable option for many mortgage applicants who no longer qualify under Fannie Mae or Freddie Mac guidelines.  Most of the larger lending institutions have implemented a minimum FICO score requirement of 620 for FHA loans.   Here are some lenders that are still doing sub 620 FICO score mortgages.

US Bank

US Bank is a premier major direct lender that operates nationwide.  I have dealt directly with US Bank and they are a well run and reputable bank offering a wide range of mortgage products.  According to Scott Lambert, a seasoned US Bank Mortgage Loan Officer, US Bank “offers a no minimum credit score requirement on our FHA and VA programs”.   Scott’s background  and service pledge follows:

I have over 10 years of mortgage banking experience. Selecting an experienced Mortgage Loan Officer is just as important as what company qualifies to be your financial partner. We’re proud of our reputation as a strong bank and millions of people have selected us as their financial partner.

My promise to you is that I will put my years of experience to work for you! I will help you analyze what mortgage programs may be the best solution for you. I promise to provide honest and dependable service. Our reputation depends on it!

Scott Lambert can be reached at:

Scott Lambert
Home Mortgage Division
1401 Wilshire Boulevard
Santa Monica, CA 90403
Direct: 310-394-8745

Below are other loan programs that I can offer the consumer.

* FHA Program
– No Minimum Credit Score Requirement
– 3.5% Down Payment. Can be Gifted.
– Seller Paid Closing Cost to 6% of Purchase Price

* Rural Development (USDA)
– 100% Financing
– No Minimum Credit Score Requirement
– No Mortgage Insurance

* Community Program
– No Minimum Credit Score Requirement
– No Mortgage Insurance
– 97% Financing. CA, AZ, MI to 95%
– 12 Month Credit Depth

Do Your Homework

Keep in mind that lenders sometimes promise more than they can deliver. Sub 620 FHA loans are difficult to get approved so do your homework.   Check out the lender with your state banking department and talk to several different lenders before deciding where to apply.

More on this topic:

FHA Introduces New Minimum 580 Credit Score Requirement

New FHA Minimum FICO Score Requirements Meaningless To Many Borrowers

What Are My Odds Of FHA Loan Approval With A FICO Score Below 620?

Second Mortgage Investors Facing 100% Losses


Risky Lending

Second mortgage liens have always been considered risky lending.  Investors in second mortgages are about to find out that the risk was higher than anticipated.

WASHINGTON, April 6 (Reuters) – The U.S. Treasury will soon finalize details on a plan to extinguish and modify second-lien mortgages as part of its overall housing program, a senior Treasury official said on Monday.

The second liens — home equity loans that were often written in tandem with a primary mortgage during the housing boom years — have been an obstacle to refinancing and modifying loans to make them more affordable.

The official, speaking to reporters on condition of anonymity, said assistance would be provided and also guidelines that “comprise a clear path for the reduction of second lien debt.”

He said these range from extinguishing them to keeping them in place as a part of mortgage modifications done under a $75 billion program the Obama administration is implementing to make failing mortgages affordable to home owners.

Under the “old rules” obtaining a second mortgage was not easy.  There were tough restrictions on loan to value levels and the borrower needed sterling credit.   Investors are now discovering why the old rules made sense as they face total losses on second mortgages approved during the lending boom.

Mortgages Secured By Negative Equity

During the peak years of the housing boom it was common for second mortgage lenders to allow borrowing up to 100% of a home’s value.   As housing prices cratered over the past three years, the collateral backing these high risk second mortgages was vaporized leaving lenders  with an essentially unsecured note.

It has become somewhat of an open industry secret that second mortgage investors  do not even bother trying to foreclose or collect since recovery would be minimal.   The second mortgage lien remains on title, however, preventing homeowners from selling or refinancing unless they can come to a settlement with the second mortgage lender.

It now appears that most of the underwater second mortgage investors will be forced to recognize a 100% loss of investment based on legislative decree.

Many Losers, Some Winners

The end result of the second mortgage easy lending fiasco is a total loss for many second mortgage investors.  Most of the companies that specialized in second mortgage lending are no longer in business.  Many future applicants looking for a second mortgage loan will be out of luck as lenders abandon second mortgage lending.

Every disaster, however, seems to have some winners. Those homeowners who borrowed to the max and used second mortgage money for cars, furniture or exotic vacations and such are no doubt smiling at the prospect of having their debt extinguished.

Are You The “Perfect” Mortgage Borrower?

big bag of indeterminate moneyLow Rates But Large Fees

Only the perfect borrower gets the lowest advertised mortgage rate in today’s market.  Many mortgage borrowers are now subject to various fees based on credit score, loan to value, property type and loan type.   The fees are assessed by the government lending agencies and must be added to the loan by the lender and passed on to Fannie Mae or Freddie Mac  – see Fannie and Freddie – The New Subprime Lenders.

The fees are known as “adders” or “delivery fees”, but the bottom line to the customer is that they can dramatically increase the cost of a refinance.   The various fees can be substantial and are cumulative – it is not uncommon to see total fees approaching 5% of the loan amount.   Keep in mind that that the adders and delivery fees are in addition to regular closing costs and points which can add another 1 to 3% in costs to the mortgage transaction.

Three years ago, most of these fees either did not exist or were at much lower levels and could be absorbed by a slight increase in the rate.  Today, the fees can be so high that not only must the rate be adjusted higher but many of the fees have to be directly charged at closing.

The Perfect Customer

A borrower with a credit score of 720 or higher and a loan to value of 60% or less qualifies at 4.625% with no additional fees.

Examples of Less Than “Perfect”

The following are actual pricing  examples of what a borrower would be charged by Fannie or Freddie on a $250,000 cash out refinance at 80% loan to value (LTV) on a single family owner occupied residence with full income verification.

1.)  Borrower has a FICO score of 660-679.  Fees would total 4.0% or $10,000 on a loan of $250,000.

2.)  Borrower has a FICO score of 680-699.  Fees would total 2.875% or $7,187 on a loan of $250,000.

3.)  Borrower has a FICO score of 700-719.   Fees would total 1.5% or $3,750 on a $250,000 loan.

4.)  Borrower has a FICO score of 720-739.   Fees would total 1.0% or $2,500 on a $250,000 loan.

Rates have declined to all time lows, but depending on your situation, it may be very expensive to refinance.    Before refinancing, find out in advance what fees you may be charged so that all costs can be taken into consideration when determining if the refinance makes sense.   Sometimes, the benefit of a lower mortgage rate is more than offset by the closing costs.

Banks Offering 3.875% Fixed Rate Mortgages


TARP Dollars Deployed

Two Washington State banks are now offering 30 year fixed rate mortgages at 3.875%.

SPOKANE, Wash. — Spokane-based Sterling Savings Bank and Walla Walla-based Banner Bank are offering mortgages at interest rates below 4 percent to stimulate sales and help builders move homes.

Bank officials said the low rates benefit buyers and builders, and demonstrate the banks are putting federal government bailout money to work in the Northwest.

Banner received $124 million from the federal Troubled Asset Relief Program, or TARP, while Sterling collected $303 million.

Sterling is working with Golf Savings Bank, its mortgage lending subsidiary, to offer qualified borrowers either a 3.875 percent fixed mortgage rate or a 3 percent lender contribution, up to $20,000.

Golf Executive Vice President Donn Costa said the program helps reduce the inventory of unoccupied homes and firms up prices in markets where sales activity have been slow.

Sterling has set aside $25 million of its federal bailout money to the program, which has allowed it to do 10 times more loan volume than it would have without that money, Costa said.

Expect Mortgage Rates To Continue To Decline

To some extent, this low rate lending program is political theatrics and a public relations effort.   Although the banks in question are offering below market rates, Sterling Savings Bank is only allocating $25 million of its TARP funds to this program after receiving $303 million.  In addition, Sterling is accepting applications for this low rate program only from March 25 to April 15, 2009 and most borrowers will need a 20% down payment to qualify.  The program applies only to new home purchases and not refinances.

Nonetheless, expect to see more offers of low mortgage rates for the following reasons:

-The government is actively pushing  banks to lend TARP funds.

-Both the Federal Reserve and Congress are convinced that reviving the housing market is key to economic stabilization and recovery and will supply the banks with whatever amount of funds is necessary to achieve this goal.

-Continued purchases of mortgage backed securities by the Federal Reserve  (theoretically), will keep mortgage rates low.

-Banks are currently parking massive amounts of excess reserves in low yielding treasury securities.  At some point, especially if the housing market appears to be stabilizing,  funds should start flowing  from treasuries into mortgages. This asset reallocation  would be highly profitable for the banks, given the wide spread between cost of funds and mortgage yields.

In the long term, free market forces will ultimately determine the level of mortgage rates and housing prices.  In the short term,  I would view any  chance to refinance in the mid 3% range as the opportunity of a lifetime.

It’s Time To Give Every Member Of Congress A Bonus

Gone Fishing

Market Investing Made Simple

Many people probably suspect that Congress causes more harm than good and now we have the proof.   Forbes Magazine has uncovered what appears to be a foolproof method for timing stock purchases based on the  Congressional  work schedule.  The method is simple to use and relies on the elegance of intuitive reasoning.

Eric Singer, a 56-year-old fund manager with past stints at Smith Barney and PaineWebber, has something he calls the Congressional Effect Fund. The $2 million mutual fund invests in Treasury bills when Congress is in session and in the S&P 500 the rest of the time.

How does this theory work over the longer term? Singer whips out a study he did of stock performance in the 44 years ended last December. Over the course of the 7,244 days that Congress was in session the S&P was up an average annual 0.3%, dividends excluded. Over the 3,821 days that legislators were home, stocks averaged 16.1% in annual returns.

Give Congress A Bonus And A Long Vacation

The variance in stock returns for Congress in session/out of session time periods is too extreme to ascribe to random chance.   Since Congress has had their chance and things have only gotten worse, why not give every member of Congress  a large bonus if they promise to go fishing for the next six years?   At a 16% annual return, six years is about what’s needed for the market to recoup its 50% drop since early 2008.

This experiment certainly couldn’t make matters any worse than they are now.   My guess is that with Congress out of the way, the markets and the economy would recover in a lot less than 6 years.

Capital One’s Losing Strategy


The Trust Dilemma

It is widely known that the credit card industry has serious problems.   Defaults are reaching all time highs as unemployment and high consumer debt levels impede borrowers’ ability to repay their debts.  Defaults based on job losses or over leveraged customers  are nothing new to credit card lenders, who have traditionally lent to less than sterling credits at rates commensurate with risk.

In the past, card issuers extended generous credit to all borrowers, seemingly indifferent to credit or income levels. The lower credit score borrowers’ losses would be covered by higher rates. Card loans to homeowners could always be paid off when the borrower refinanced his home. The higher credit score borrowers got lower rates but would never default in large numbers. This scenario worked well and produced huge profits for the card companies until the housing market crashed and the securitization market for credit card debt disappeared.

Recently, in addition to expected losses,  the credit card industry is now experiencing a troubling new phenomenon not accounted for in their risk models.

Customers with high credit scores and no previous history of default are suddenly defaulting on their card payments.   Since the credit card companies never expected large default rates by their “high credit high income” borrowers, they now seem forced to suspect that every customer is a high risk and should be dealt with accordingly.

Have the dynamics of the credit card industry fundamentally changed or should the credit card companies have done a better job of qualifying their borrowers before extending generous lines of credit?

Capital One Can’t Identify Their Low Risk Customers

Here’s a real life verified example of a borrower approved for a credit card based only on stated income and a credit score.

The applicant’s on line credit card application to Capital One was approved instantly for $30,000 after providing name, address, social security number, name of employer, job title and income.   Income was never verified according to the borrower’s employer.  Credit score was 800 plus when the credit card was approved several years ago.   The borrower has used her card frequently, always paid on time and incurred interest charges at 7.9% when the monthly balance was not paid in full. The borrower has maintained a plus 800 credit score and her credit line has not been reduced. Capital One knows the borrower’s current credit score since they  monitor customer scores on a monthly basis.

This 800 plus FICO score borrower who has never been late with any payments recently received a notice from Capital One that effective April 17, 2009, the interest rate on unpaid purchase balances will be 17.8% and on cash advances the rate will be 24.9%.   Is this just another example of rates being adjusted to reflect lending risks, or an indication of how little Capital One knows about its customers?  Here’s what Capital One does not know about this customer since they never bothered to ask.

Customer has a secure job, little debt and her income comfortably exceeds all living costs.   In addition, customer has verified liquid assets in excess of $1 million plus home equity and other assets that put her net worth in the $2 million range. Net result for Capital One is that this customer will be paying off all monthly balances in full to avoid paying interest at 18%.  Should the need arise to borrow money, the customer has access to a home equity line of credit at 4%.

Establish Lending Parameters Based on Sound Underwriting

In order for Capital One to rebuild their business going forward, they should consider re-qualifying their customer base with a detailed loan application and then verify the information.   For those determined to be low risk customers, charge a lower interest rate.

Capital One now seems to have a strategy of charging high rates to all of its customers which seems counterproductive.   The customers who are  financially strong will not pay 18% rates – they will either pay off their balances monthly or borrow cheaper elsewhere.   Customers willing to pay 18% to 25% interest on a loan are probably stressed financially and the most likely to borrow and default.  This bizarro business strategy of targeting the weakest borrowers in a weak economy seems destined for failure.

Perhaps one day Capital One may come up with the unique concept of restricting lending to borrowers with a verified ability to repay.

Late Update

US consumers in February reduced outstanding revolving debt (which is primarily credit card loans) by $7.8 billion.  Some of the decrease is due to decreased credit card lines and consumer reluctance to take on more debt.  My guess is that a good portion of the decrease in credit card balances is  also due to the sky high rates being charged by the credit card lenders.   The higher quality card customers are accessing lower rate money elsewhere or simply saying no to 25% lending rates.

More On This Topic

Consumer Credit In US Falls $7.48 Billion As Recession Cripples Spending

capital one

Feds Say FHA May Need Taxpayer Bailout

big bag of indeterminate moneyFHA Bailout Appears Likely

Government officials said that a taxpayer bailout of the FHA appears likely based on increased mortgage defaults.  The FHA has traditionally had higher default levels than Fannie Mae or Freddie Mac due to more lenient underwriting standards.  For those familiar with the FHA lending program, a taxpayer bailout comes as no surprise (see FHA – Ready to Join Fannie and Freddie).

FHA Losses Spur Talk Of A Taxpayer Bailout

WASHINGTON — Rising mortgage defaults could force the Federal Housing Administration to seek a taxpayer bailout for the first time in its 75-year history, housing officials and lawmakers said during a Senate hearing Thursday.

If defaults drain the FHA’s insurance fund, the Obama administration will have to decide whether to ask Congress for taxpayer money or raise the premiums it charges to borrowers. That decision will be spelled out in President Barack Obama’s 2010 budget, Housing and Urban Development Secretary Shaun Donovan told lawmakers.

“We are looking very closely at that issue — at the premiums that we charge, at the losses that we have,” Mr. Donovan said.

Rising defaults are now eating through the FHA’s cushion of reserves. Roughly 7.5% of FHA loans were seriously delinquent at the end of February, up from 6.2% a year earlier. The FHA’s reserve fund fell to about 3% of its mortgage portfolio in the 2008 fiscal year, down from 6.4% in the previous year. By law, it must remain above 2%.

Asked at the hearing whether the FHA would need a bailout, HUD Inspector General Kenneth M. Donohue said he couldn’t predict. “Based on the numbers we’re seeing, I think it’s going in the wrong direction,” he said.

The FHA often finds itself balancing two sometimes competing goals: fulfilling its mission of providing affordable loans for first-time home buyers while remaining self-funded.

Bailout Or FHA Mortgage Insurance Increase?

The alternative to a taxpayer bailout is to raise the mortgage insurance premiums for FHA borrowers.  FHA mortgage insurance premiums are already quite high and  can significantly increase the total monthly mortgage payment.  The insurance premiums were increased last year on a risk adjusted scale so that borrowers with lower credit scores or higher loan to values would pay an increased premium.

There are two components to FHA mortgage insurance premiums for a borrower – a one time upfront mortgage insurance premium (UFMIP) and a continuing monthly mortgage insurance payment (MI).  The rates can be as high as 2.25% up front (UFMIP) and .55% monthly (MI) depending on credit score and loan to value.  On a $250,000 mortgage a borrower could be charged as much as $5,625 for the UFMIP and $114.58 per month for the MI.

Instead of making the FHA program more restrictive and expensive for every borrower, it would make more sense to reduce the mortgage insurance premiums and tighten underwriting guidelines.  Increasing the mortgage insurance premiums only serves to defeat the FHA’s mission of making first time home ownership affordable.   Turning down less qualified applicants who are more likely to default would reduce the FHA’s losses and allow a reduction in the mortgage insurance premiums.

The FHA is currently the only viable option to purchase or refinance a home for  those who do not qualify under Fannie or Freddie guidelines, but the large FHA losses indicate that lending standards became far too lenient.

Whether or not insurance premiums will be raised remains to be seen, but a federal bailout of the FHA at this point is almost a certainty.

Would Mortgage Rates At 3.625% Stimulate Home Purchases?

percentThe Limitation of Low Rates

The Fed has done everything under its power to bring down mortgage rates and the best customer today can get a 30 year fixed rate mortgage at around 4.75%.  Despite the all time low in mortgage rates, the housing market continues to suffer as foreclosures and mortgage delinquencies mount.  If mortgage rates dropped even lower, say to 3.625%, would such a low rate stimulate the purchase of houses?  Rock bottom rates offered by some home builders give us some insight into this question.

Mortgage Rates Cut By Builders

As mortgage rates fall to near historic lows, some home builders are offering even lower interest rates, in an effort to lure buyers amid the slow spring selling season.

The latest sales promotion: Lennar Corp. is offering a fixed 3.625% rate over the life of a 30-year fixed rate mortgage. The deal is besting average rates that have fallen below 5% nationwide, but it comes as other builders are reporting mixed results from similar incentives.

Hovnanian Enterprises Inc.’s recent offer of a 3.99% rate sparked “underwhelming” interest from home buyers, says Dan Klinger, president of the builder’s mortgage operation. “It wasn’t like we needed crowd control,” says Mr. Klinger.

Bargain mortgage rates are the latest sales strategy from builders struggling to sell homes. Mounting unemployment continues dogging the sector, because people without jobs, or those afraid of losing one, are unlikely to purchase, no matter how low the rate.

The builders’ low rates may help first-time home buyers, “but it’s not going to goose the trade-up market,” says Thomas Lawler, a housing economist. “That’s because most trade-up buyers use the equity from their previous home for a down payment, and that equity often doesn’t exist any more.”

While some builders acknowledge that price cuts are the most effective way to move inventory, such cuts could cause buyers who have already bought a house at a higher price to walk away from their deposits.

It Always About Jobs

Apparently, low mortgage rates can help but not cure the sick housing market.  Bailouts and stimulus spending may help housing in the short run but in the long term it’s always about jobs.  Until the economy starts to recover and jobs become secure, potential home buyers will lack the confidence to purchase homes.   Expensive homeowner bailouts and foreclosure holidays accomplish little in addressing the underlying fundamental problems of housing.   Once the jobs come back, the housing market will cure itself.

Unfortunately a housing recovery based on income and job growth just became less likely.  The ADP March employment report just released shows major job losses in every sector of the economy.  Non farm private employment plunged by 742,000 jobs in March.  This is the 15th consecutive month of job losses with no hint of recovery on the horizon.   Anyone looking for a fast recovery in the housing market will be disappointed.

The GM Debate Continues – Why GM May Survive

dealCharles Wilson, the head of GM in 1952, stated that “what is good for the country is good for General Motors, and what’s good for General Motors is good for the country”.  This imperial statement was made at a time when GM and other US manufacturers dominated  world production of goods.  Times have changed and the country now debates the best way to keep GM in business.  Opinions vary – here are some well crafted thoughts on the matter.

GM’s Problems Are 50 Years In The Making

The remarkable thing is that, once you account for the economic cycles, the trend for GM is exceptionally steady — an exceptionally steady trend downward.

If I were an alien beaming down from Rigel-3 looking at this pattern — an alien with an MBA degree — my first guess is that it would reflect some sort of systemic problem, some chronic imbalance that magnified over time. Something, in other words, like the costs of GM’s retiree pension and health care programs. It’s difficult to get a precise figure on these so-called legacy costs, but they averaged about $7 billion per year between 1993 and 2007 and are probably at least $10 billion per year now. Considering that GM has never made as much as $10 billion in profit in a year and that its entire operating lossses in 2008 were $13.8 billion, you can see why this is a significant problem.

Of course, GM benefited by promising its employees access to lucrative retirement programs — it benefited by being able to pay less to those employees in the form of salary. But whereas the benefits to GM came long ago, the costs come now.

GM was willing to cut its employees some very attractive deals in the 1950s through the 1980s — provided that they took them in the form of retirement benefits rather than salary, which wouldn’t hit GM’s books until much later and which until 1992 weren’t even required to be carried on its balance sheets all, making its financial statements (superficially) more appealing to its shareholders.

This issue is wrongly portrayed by both the liberal and the conservative media as one of management versus labor, when really it is a battle between General Motors past and General Motors present. In the 50s, 60s and 70s, everyone benefited: GM and its shareholders got the benefit of higher profit margins, and meanwhile, its employees benefited from GM’s willingness to cut a bad deal — for every dollar they were giving up in salary, those employees were getting a dollar and change back in retirement benefits. But now, everyone is hurting.

Nor does this provide for much in the way of solutions. The retirees might have benefited from GM’s short-sightedness — but they also worked hard Monday through Friday every week of in expectation of receiving the benefits that GM had promised them. From the standpoint of fairness, it would be much better to require GM to take the hit — but there isn’t much of GM left to punish, as its outstanding retiree obligations exceed its market capitalization many times over, and as the decision-makers who led GM into this position left the company decades ago. Today’s employees at GM, and the unions that organize them, likewise don’t have anything much to do with the problem — most of the excess costs it requires to produce a Buick versus a Toyota come in the form of legacy costs, not what those employees are receiving in salary and benefits today. And the taxpayer is bound to to get screwed either way, either picking up the tab to bail out GM, or bearing the costs of the pension programs, which are guaranteed by the government (although the legacy health benefits aren’t guaranteed).

US Hopes to Ease GM into Bankruptcy

The government may seek to ease General Motors into what it calls a “controlled” bankruptcy, somewhere between a prepackaged bankruptcy and court chaos, by persuading at least some creditors to agree to a plan that would cleave the company into two pieces, according to people briefed on the matter.

G.M.’s new chief, Fritz Henderson, also said that the pressure from the government pushed the automaker closer to bankruptcy.

“By no later than June 1, if we’re not able to accomplish this outside bankruptcy, we’ll be in bankruptcy,” he said at a news conference in Detroit on Tuesday. “It’s pretty clear. The government was unequivocal.”

G.M. joins a long list of companies in industries like airlines, railroads and steelmakers that have faced the prospect of being remade in bankruptcy.

The administration hopes to win support from some of G.M.’s creditors, notably the United Automobile Workers, which would be forced to pare its health care benefits and whose pension obligations would probably remain in the old company.

History offers almost no precedent for a G.M. bankruptcy filing. Companies like Continental Airlines and the Delphi Corporation, the auto parts maker, have used the courts to transform their businesses and reduce their costs. But none matched the size and interconnectedness of G.M.

There are critical differences between the airlines and G.M. There was no question of the demand for air travel in the United States, while critics of American automakers have questioned whether there is demand for their products and whether reducing costs will produce viable businesses.

GM Bankruptcy? Tell Me Another

President Obama rightly says “sacrifices” must be made if GM is to emerge as a viable company. But there’s one sacrifice he won’t make: his re-election chances, by leaving the fate of the UAW truly up to a bankruptcy judge.

Keep that in mind amid the defenestration of Rick Wagoner, who was not as popular with UAW Chief Ron Gettelfinger as Mr. Wagoner’s replacement, Fritz Henderson. Keep that in mind amid reports the administration favors a “quick and surgical” bankruptcy. It’s a bluff. The same administration that inserted itself into GM’s corporate governance to order the resignation of a CEO is hardly likely to defer to the prescribed legal order for a failing company, namely bankruptcy. Even a “prepackaged” filing runs too much risk of a judge imposing more “sacrifice” on the UAW than the administration is prepared to tolerate.

GM bondholders understand this: They’ve been intransigent precisely because they calculate the UAW is too important to Democratic electoral politics for Mr. Obama to risk losing control of the reorganization process to a bankruptcy judge.

Mr. Obama played the tough guy in getting rid of Mr. Wagoner, but he won’t go after the labor monopoly. In fact, the union will emerge with a stronger grip on Detroit — because it will be a major shareholder in a reorganized GM.

The irony is that Detroit has given plenty of evidence that it can make money, even with UAW overhead. Three of the top seven best-selling vehicles in February were Ford, Chevy and Dodge pickups.

Better than trying to rewrite GM’s business relationships — the job of a bankruptcy judge — Mr. Obama might take up the duties of a president. He might try giving the country a coherent auto policy for a change. He could repeal two fleets so Detroit could build its small cars profitably offshore and tame the UAW monopoly in the process. He could dump CAFE or impose a $5 gasoline tax so at least customers would have a reason to buy the cars Washington is forcing Detroit to build.

None of this will happen. Mr. Obama will be content with incoherent policies that poll well — which means GM, Chrysler and perhaps Ford eventually will need taxpayer subsidies as far as the eye can see — or until a real bankruptcy sometime after November 2012.

Can GM Survive?

There is no easy or quick solution for GM.  Politicians, economists and others can debate forever, but whether or not GM ultimately survives will depend on the American consumer.  If there is no demand for GM cars and trucks then GM will have no future.   I believe that GM can survive and prosper long term based on my great experiences with GM products, having owned 5 different GM vehicles over the years.   My last GM vehicle was a Cadillac CTS, a superb vehicle that outclassed any competitor in its class.   As long there are buyers for GM products, GM will have a future.