-April Foreclosure Action — Preview of Market-Moving Headlines This Week
-Potential False Bottom as Servicers Game the System in March
-Nearly Half of the Decrease in April NOD’s was caused by Chase Gaming the System
-Mortgage-Mod Recidivism Update — We Can’t Modify Our Way Out of This
-Loan Mod Re-Default Rates at 80% at Countrywide and WaMu
-Large Bank Origination Default & Foreclosure Performance
-Large Servicer Action
Food for thought on housing: 50% of buyers in the bubble states are first timers buying at the low end of the market, vacating a rental. The majority of the remaining buyers are investors tripping all over themselves trying to get a deal — just like they have done all the way down — in hopes of renting the property to the very same renters (first time buyers) buying the low end properties. DOH!
Nowhere to be found are move-up buyers at the mid-to-upper end that is experiencing a default crisis identical to the beginning stages of the Subprime crisis with respect to supply/demand fundamentals. As the surge of for-sale listing of mid-to-upper end properties hits for the busy season and the major mid-to-upper end default wave — that began in earnest in Dec — turns into REO supply, an exact repeat of the beginning of the housing crash that began in 2007 with the Subprime sector and its housing supply will occur.
Most assume that because the low end is stabilizing after a 50%+ price drop that the mid-to-upper is also stabilizing. The fact is they are not connected and will bottom independently. The crisis yet to befall the mid-to-upper end will take its participants — the mid-to-upper end earners — through the same painful housing led de-leveraging as their Subprime counterparts. The macro economy can’t handle the sequels…Subprime Returns, The Son of Subprime and Subprime vs. Alt-Zilla.
Total April Foreclosure Activity Down M-O-M as Servicers Game the System in March, but Actual Foreclosures Rise
The April, market-moving popular foreclosure reports from RealtyTrac and others will be out this week and do much to confuse people — especially in CA. This, as new laws are planned for, moratoriums ceased, Administration plans kick into gear and banks and servicers continue to spin out of control managing the volume. Needless to say, getting a handle on what is really happening is difficult even if you have all of the data.
The West will see an aggregate drop in total foreclosure activity but only because in March we saw an artificial spike in Notice of Defaults due to a new law hitting the books July 8th dubbed ‘The CA Foreclosure Prevention Act”. This new law essentially stretches out the foreclosure timeline by adding three months between the NOD and NTS stages.
Because of the present timelines servicers had until the end of March to stuff the mailboxes with new NODs in order to get the NTS out under the July 8th law enactment wire. I estimate that about 15% of March’s total NOD count surge was due to front-running the new law.
Still, when all is said and done April’s NOD counts will be roughly 44k, down only 11k from March’s all time high of 55k and in-line with 2008 and 2009 highs.
April Notice-of-Trustee Sale counts also fell but less sharply than NODs — down only about 15%. This is because NTS are not constrained by the new law time line and are simply a function of how many properties servicers plan to take to the courthouse for sale. With no new laws or regulations in place since Obama rolled out his plan, there is little reason to fill the mailboxes with NTS unless the borrower does not qualify or does not want saving. The past two-month spike in NTS should be a fairly accurate near-term leading indicator of what is to come with respect to CA foreclosures.
The wave of foreclosures that I keep harping about is coming to shore — we saw signs of that in April as actual CA foreclosures jumped about 40% over March. Similar stats were seen in other significant foreclosure states. Expect to see actual foreclosures to continue to rise — likely sharply in May — going into the summer just in time for the busy real estate season. What a coincidence.
Drop in Notice-of-Default & Trustee Sale Counts Caused by Only Four Servicers – Chase (WaMu) Accounts for Nearly Half as They Game the Calendar
The chart below shows the monthly NOD counts for each top servicer that showed a significant month-over-month decrease. The four below account for the total 11k month-over-month decrease with Chase pulling a fast one.
In the month of March, Chase fired up the NOD machine at WaMu servicing for one month only in order to get more borrowers on record ahead of the new CA Foreclosure Prevention Act to be enacted on July 8th. The new law effectively stretches out the CA foreclosure process by 90-days. Borrowers that were not on NOD-record by the end of March could benefit by the new law.
When adding Chase and WaMu together, Chase now holds the record for the most NODs ever filed by a single company at nearly 12k in the month of March.
Mortgage-Mod Recidivism Update — We can’t Modify Our Way Out of This
Yesterday, FHFA director Lockhart was on CNBC talking about how they have to get even more aggressive with mortgage modifications. He shot down Bill Ackman’s GSE plan and scoffed at him within 30 seconds of laying out his plan — you should watch the clip.
How much more aggressive should they get with such terrible results attempting to re-lever homeowners? It is proving painfully obvious that mortgage mods are more exotic than the actual loans that put the homeowner in default in the first place and their effectiveness even at the margin questionable at best.
The Obama-mod does the same as most other mods — it turns the homeowner into an underwater, over-levered renter for life unable to sell, re-buy or refi. Modifications with combined loan to values of 150% to 200% are not uncommon. Many borrowers would be better off walking away today because their credit will be hurt for a shorter period of time than they will be underwater in their home. As a note — I think the Obama 105% GSE refi is a good thing but doubt many will fit into the tight box especially in the regions that need the most help.
Wide scale mortgage modifications will ensure that housing remains a dead asset class for years — every time a homeowner gets a mod they are taken out of the mortgage and housing economic equation indefinitely.
Below is a great chart taken out of a very interesting Barclay’s Securitized Products Weekly. This shows just how bad mortgage mods are even for borrowers that go into a mod current on their payments.
Bottom Line — after seeing these latest figures I am more convinced than ever that the next step is wide-spread principal balance reductions that will reduce the massive negative equity burden in America and be a first-step to solving the mortgage and housing crisis once and for all.
Large Servicer Action
For those of you that are interested in tracking what the large servicers are doing, the data on several are below.
Bottom Line — Notice-of-Defaults for the past 5-months have been massive. NODs turn into NTS’s within 4-5 months so in the past 2-months NTS counts have seen a sharp spike. Actual foreclosures/REO have been negligible but based upon the recent surge in NTS, the foreclosures are coming. When viewing like this it is easy to see.
Notes on chart above
Countrywide: New Notice of Defaults in past 4 months have surged. New Notice of Trustee Sales are growing rapidly. REO taken back from the foreclosure courthouse sale almost nil. This wave will break shortly and result in a massive foreclosure spike at Countrywide.
IndyMac: Perhaps the most interesting and a leading indicator because the loans are not owned by a large commercial bank any longer. New Notice of Defaults in Dec through March surged as the new portfolio owners made up for all of the wasted time during the FDIC ownership and sale process. There were a couple of months in 2008 leading up to the sale when they sent out very few Notice of Defaults. Actual foreclosures are ramping up hard — this chart pattern is what you are likely to see across other large servicers beginning in May.
Chase: The top servicer with respect to total volume in the nation. On the past 6 months Notice of Defaults have surged and are working their way to foreclosure. This can be seen in the last 2 month surge in Notice of Trustee Sales. However, actual foreclosures/REO have been very low for the past few months as they have also been on a moratorium awaiting the new Administrations plans.
Wachovia: On near-full moratorium for all stages of foreclosure. If you have one of the $122 billion in Wachovia Pay Options you are in no eminent danger of losing your home to foreclosure. If you are a Wells Fargo shareholder, don’t look for loan losses on their portfolio either because they have to foreclose in order to rack up losses. That is of course unless they continue to give principal balance reduction modifications which they are doing now. But I am certain they are only giving principal balance reductions that are within the limits of their forecasted merger losses. Ultimately this will not have the desired effects on modification recidivism they are looking for because most homeowners will remain trapped even with the principal balance reduction.
WaMu: This is very interesting. The WaMu servicing platform is virtually out of business after the Chase buyout. However, in March we saw Notice of Default surge as Chase fired up WaMu’s NOD machine in order to front-run the new CA Foreclosure Prevention Act. This was a one month event that effectively doubled the amount of new Notice of Defaults that Chase sent out to homeowners.
Wells Fargo: Wells has never really conformed with respect to moratoriums or what their peers are doing. They do things their own way. However, in the past 6 months their NODs have soared, in the past two months their NTS counts have spiked meaning foreclosures will follow in the next couple of months.
**Financial Institutions: For more information in our default/foreclosure related research including real-time mortgage default, foreclosure and loss tracking across large-named publicly traded companies please email me at the address below. Looking ahead of the housing and mortgage market and into bank’s residential mortgage portfolios and balance sheets is now much clearer.
Mark@TheFieldCheckGroup.com
Analysis by Mark Hanson, Field Check Group Real Estate & Finance
Data provided by ForeclosureRadar.com
May 13th, 2009 at 9:04 am
>>I am more convinced than ever that the next step is wide-spread principal balance reductions
And who’s money is going to do that? Taxpayers will have the heads of their congress reps if they propose using their money to bail out others.
Actually, I’d like the government to subsidize my rent while we’re at it.
Why should I help people who likely lied on their loan app? I’m fine with loan help – as long as its proven there was no FELONY LOAN FRAUD.
Want a stimulous? Start investigating each loan mod attempt for fraud. That’d put a TON of people to work.
May 13th, 2009 at 9:27 am
Thanks, Mark. These posts are SO well-written and clear, very informative!
May 13th, 2009 at 9:47 am
Mr. Mortgage said: “I am more convinced than ever that the next step is wide-spread principal balance reductions.”
my comment: WHATCHOOTALKIN’BOUT Mr. Mortgage??!!
Punishing the prudent once again.
Any estimate of the cost to the taxpayer for this?
Still, thanks for another great post.
May 13th, 2009 at 9:53 am
>>I am more convinced than ever that the next step is wide-spread principal balance reductions
Who’s going to take the loss then? Banks? No, then they’ll be insolvent yet again. Treasury? Will it get approved in Congress? The fact of the matter is somebody has to take a loss, I think the most suitable people to bear the loss are the “homeowners” (it’s a shame I call them homeowners).
May 13th, 2009 at 10:27 am
>>I am more convinced than ever that the next step is wide-spread principal balance reductions
Do not worry, they will use the – how a foreclosure next door will affect your house value excuse. In effect they are bailing out the foreclosed upon neighbor to help YOU! So you had better be grateful for this help.
May 13th, 2009 at 10:44 am
MM: “With no new laws or regulations in place since Obama rolled out his plan, there is little reason to fill the mailboxes with NTS unless the borrower does not qualify or does not want saving”
I thought one had to be current on their payments to qualify for either of Obama’s plans? In which case, no NOD or NTS has been sent.
May 13th, 2009 at 10:47 am
The servicers have their head up their a**, or in the sand. Been trying to get Wachovia to refi my current SoCal upside down, underwater, negative equity, toxic option arm for over six months.
Everything current, but the cancer of this loan is spreading, and can’t be supported much longer. I am sure there are thousands like me who are trying to “shore” things up before the tsunami of foreclosures occur that Mr. M writes about.
I am tired every month to hear..”We haven’t gotten everything in place yet and still waiting on information (from who I don’t know)…please call back next month”?
Stall…stall…stall. I have heard this for six months.
Let’s all hide under the covers and maybe this big bad recession will go away.
May 13th, 2009 at 3:43 pm
Great info Mark! The banks won’t eat principal reduction, they just won’t.At some point the big banks will break in a foreclosure/eviction stampede and the prices will crater in CA and the other bubble states – off unbelievable percentages and the Treasury/Fed will step in to create an “orderly market” and make the monthly mortgage payments to the banks and collect “fair” payments from the homeowners/tenants,
May 13th, 2009 at 6:23 pm
Re: Wow in CA
Same here! WaMu/Chase is now requesting more docs, new docs, updated docs that were already faxed in two months ago. They have no interest in a making a MoMo for us. I wonder what they’ll do with another wave of foreclosures from people like me: current, but nearing the end. I am hanging on for the credit rating. But after awhile, who cares? That will be a devastating Phase II for the economy and Treasury. And B. Hussein can go pound sand.
May 13th, 2009 at 9:19 pm
I think Mark’s right, no choice but to bail out the homeowner. Problem is that with 65% of GDP based on consumer spend, there is ZERO hope of this economy improving with 25% of US homeowners with a mortgage underwater. People just don’t spend when they are upside down.
So angry renters – choose – watch the homeowners around you get a “freebie” or sit in an economic malaise for years and years to come.
Total cost is likely $4T. Shoot the Fed has spent $9T and they don’t even know where it is. This has to be better than that.
May 13th, 2009 at 9:55 pm
I see some are asking who’s going to pay for the lost asset valuations when lenders are forced to consider principal reductions.
I sure hoe shareholders and depositors!
See, the bubble buyers should have been keenly versed in the nuances of how debt-income and price-income ratios, constant maturity treasury averages and credit default leveraging could effect their prospects of home-ownership. Yada yada ya…
And guess what? “Prudent” savers should have vetted these same financial institutions they themselves invested in and expected handsome savings yields from for the same transparent defects they’re now accusing defaulters of having ignored.
So, suck it savers. Be thankful for 1% APY while your savings devalue faster than an inland empire McMansion.
May 13th, 2009 at 11:43 pm
Alt-Zilla…. NICE!
May 14th, 2009 at 8:05 am
Mark,
Sometimes I think you see things that just aren’t there.
It looks like Chase/Wamu was justifiably behind in their processing of NODs (due to the takeover) and was finally able to catch up. Even if I believed you that they got aggressive to beat the clock, I wouldn’t call that “gaming the system”. They have since returned to a normal processing of NODs. I guess I’m just not seeing the conspiracy, nor do I see it say anything useful about the future. What is the takeaway?
May 14th, 2009 at 8:30 am
“I am more convinced than ever that the next step is wide-spread principal balance reductions.”
This step is already occuring in virtually every foreclosure these days. The beneficiary is just not the owner who got foreclosed on. Many of you are asking who will take the loss on a principal reduction. Why would it be any different than who takes the loss on a foreclosure? Whether a current occupant (”homeowner”) has their principal reduced or the principal is reduced via foreclosure/auction/REO sale, aren’t the same entities taking the loss? The biggest loss which may be realized in a full-scale owner-received principal reduction program may be felt by the law firms who are processing the foreclosures for the banks.
Anyways, I just think that it’s kind of funny to hear talk of principal reductions as the next thing to happen when it has been happening all along. And if the question is really, “Will owners start getting principal reductions?” the answer is, probably not. Once lenders start that ball rolling, every single homeowner will come knocking, asking for a reduction. And if the lenders require a certain amount of delinquency first, people will just stop paying. Who really knows what will happen? The only guarantee is that the next program which is offered up will have very little to no chance of working and will have administrative costs which render the program non-profitable anyways.
May 14th, 2009 at 8:41 am
I have heard there is increasing portion of houses suppose go foreclosure went to short sale. If that’s true, we may not see that many foreclosure houses in the future.
Do you have data about short sale?
May 14th, 2009 at 9:03 am
Bottom line, valuations are going down. That’s what matters. That’s what needs to happen.
May 14th, 2009 at 10:33 am
Just spitballin’ here…
Where’s the difference if we bail-out the homeowners by incentivizing lenders to do actual principal reductions or bail-out banks when their capital ratios plummet due to recognizing short sale/foreclosure losses?
May 14th, 2009 at 10:58 am
Where’s the difference if we bail-out the homeowners by incentivizing lenders to do actual principal reductions or bail-out banks when their capital ratios plummet due to recognizing short sale/foreclosure losses?
Righteous indignation
May 14th, 2009 at 11:09 am
Like many of here, the idea of “principal balance reductions” really pisses me off.
May 14th, 2009 at 11:20 am
The idea of our treasury paying banks to never face reality really pisses me off.
May 14th, 2009 at 12:56 pm
That too Benzy. Could we agree that the idea of our government paying off irresponsible people sucks?
Think about it, our government sticks their hands in a “free market” and says, “banks, bad bad bad, BUT you’re too big to fail and therefore, here’s some money”, then they say, “owners, poor thing, victim victim victim, we know you signed contracts, but clearly you’re just too dumb to understand. Therefore, we will stop banks from foreclosing your prop. We will also allow judges to re-write your contract. Because we love you, you little stupid people you.”
BUSH/OBAMA/PAULSON/GEITHNER = SAME
May 14th, 2009 at 2:21 pm
Wontan, about 50,000 people are foreclosed on every month. How many people have benefited from any one of the government plans? 200? 300? I know the first plan had a 50 or so beneficiaries. That’s Five-zero.
Your vigor is very misplaced. Nobody is making out except the banks. Period.
May 14th, 2009 at 2:34 pm
Thanks again Mark “Cutting Through the BS” Hanson for the fantastic breakdown of the numbers.
RE: “Bottom Line — after seeing these latest figures I am more convinced than ever that the next step is wide-spread principal balance reductions that will reduce the massive negative equity burden in America and be a first-step to solving the mortgage and housing crisis once and for all.”
Well, isn’t this what the Obama Economic Crisis Dream Team just announced? An updated hope/rescue plan to “save” the current “owners” by having the banks take it further on the chin by eating huge principal reductions and short sales (often well over 100K+ per home), while at the same time ensuring that said “owners” are forgiven for those differences (the principal reductions) and not held accountable for them? Including no credit blemishes for short sales?
I can’t understand how anyone in their right mind would be holding ANY of these financial institutions stocks right now. Nationalization is inevitable IMHO.
May 14th, 2009 at 3:08 pm
Bailouts just do nothing. Look at the automakers. Look at the stock market. Chrysler has said they are unlike to repaid any of the TARP money because guess what they are bankrupted. GM is likely to say the same… $15bil here $20bil there. What’s the point of extending a 3-month lifeline when the inevitable will still occur. They need to just let the market take it’s course and stop playing god. Remember Jurassic Park? “Nature will take it’s course.” And it did….
The best thing they can do it’s let housing crash. Let it find a bottom. Only then will we be able to rebuild from that. All this crap with the bailouts is making me ill as I will be paying for this for the rest of my life. ugh..
Oh, and look what happened when they imposed the stock market shorting band for few weeks. That was suppose to keep the stock market from crashing. Sure enough, as soon as band lifted, market tanked. Again, stop playing god. After the market crashed hard, we found that bottom and have recovered since then….Let nature take it’s course Obama.
People will buy housing again…let it fall. Go look at the prices in Santa Monica. Absolute joke. You’d think the year is 2006 all over again.
May 14th, 2009 at 3:23 pm
MM… I think you’re convinced wrong!
- reduce principal???? with gov’s money??? you must be smoking
WHAT’S NEXT?? NO MORE PAYMENTS?? JOBS?? RIOTS?? HYPER INFLATION??
May 14th, 2009 at 3:29 pm
WHAT’S HE REASON FOR ANYONE ANYMORE TO EVER MAKE A PAYMENT… ????
PRICES WILL KEEP GETTING LOWER AND LOWER, TROW YOUR MODEL IN THE TRASH! IF SUCH NON SENSE WOULD PASS…
WHAT HAPENED WITH BANKRUPTCY LAW??? NEVER MADE IT… KEEP ON WISHING MARK!
May 14th, 2009 at 3:30 pm
MM… where can I buy a crystal ball too??
May 14th, 2009 at 4:57 pm
buy from me. free 2 big balls
May 14th, 2009 at 5:41 pm
I guess this answers my question above-#7
http://www.latimes.com/business/la-fi-homes15-2009may15,0,7489359.story?track=rss
May 14th, 2009 at 5:42 pm
Quote from above link:
Guy Cecala, publisher of trade publication Inside Mortgage Finance, doesn’t expect to see large volumes of loan modifications before July or August. “The basic problem is that the program is very complicated and involved to set up,” Cecala said.
May 14th, 2009 at 6:57 pm
MM..which bank is paying you and how much?
May 14th, 2009 at 7:02 pm
Colin, I bet you like lolly pops…
May 14th, 2009 at 7:05 pm
Field Check Group’s unbiased real estate and mortgage research
unbiased? sure… you’ve been calling for this … for almost 2 years now..
May 14th, 2009 at 7:25 pm
Once you start reducing… every homeowner will want theirs reduced!
(if no balance, they could take the $ out/refi.. and stop paying)
(new buyers…stop making payments right after purchase, the 1st month)
(existing buyers with balance below value, refi) and stop making payments..
.. a down spiral you can’t stop!
We would be sure fixing this problem.. and start devaluation of the dollar with the borrowing for your 2ball prediction.. and household income would be used for food only.. great idea Mark.. NOT!
WIMPS! take a loss.. and move on, repair, rebuild.. let prices get low (normal) again…so new generations can take advantage…and we can be strong again
WAIT.. WHY DON’T WE JUST CONFISCATE HOMES FROM PEOPLE THAT HAVE MULTIPLES.. AFTER ALL YOU CAN ONLY LEAVE IN ONE.. START RATIONING.. !! and make sure everyone is entitled to a home!
May 14th, 2009 at 7:28 pm
let banks fail! and start new banks! let prices come down! the sooner the better! let owners refi (lower interst) or walk!
everybody needs to learn a lesson!
oh.. i forget… how man existing homes prior to 2003 have been sold? prior to 2000? how many homes in america?? WHAT PRICES WERE THEY SOLD FOR??
May 14th, 2009 at 8:46 pm
Been saying it since Mr Mortgages last blog…
PRINCIPAL REDUCTIONS ARE THE ONLY SOLUTION !!!
BUT THEY MUST BE ACROSS THE BOARD FOR ALL HOME OWNERS AND SET TO A FIXED % OR EVEN BETTER, A FIXED PRICE OF SAY 1999 PRICES OF THE PROPERTY
otherwise let the entire ponzi scheme continue for as long as possible, but the pain will eventually become unbearable FOR ALL !
the Making Homes Affordable has been/will be a waste of everyone time and is just another bone thrown at the masses to shut them and make them dizzy until get tired and they just give up
May 15th, 2009 at 10:55 am
I don’t want a principal reduction. I only want to be able to approach my lender and negotiate a solution without the government whispering into each of our ears.
May 15th, 2009 at 1:59 pm
If I wasn’t so stupid, I would have not sold my house in early 2008.
If I was smart I would have taken ALL of my equity via Home equity Line of Credit and bought Gold. Then, stopped making payments until the bank or the Gooberment helped me in some manner.
At the worst I would have lost my credit, but who cares, you can easily rebuild it these days.
Yes, if I had any brains I would have kept my house and lived in it “rent free” after withdrawing cash.
God, why was I born so stupid?
May 16th, 2009 at 8:18 am
I am not saying principal balance reductions are a great solutions but it is the only way to get the economy back on track. It is not only the banks that have to de-lever and raise capital. It is also the homeowner. There is no way for the homeowners to earn their way out of the massive national negative equity. In CA last month the average negative equity at foreclosure was $205k. That is a life time of savings and two decades of normal appreciation. Unless the homeowner is de-levered, the US will see several lost decades in succession.
May 16th, 2009 at 10:13 am
Mark,
Thank you for your wonderful research.
I couldn’t agree with you anymore on your conclusion of “wide-spread principal balance reductions” is the only way to go. Debt forgiveness is the only answer I’ve been able to see when t comes to getting the economy back on track. And the debt forgiveness especially includes the homeowners who didn’t ATM their equity over the last few years, and who are current on their contractual requirements.
Politically however, I don’t see this happening. Not as long as the banks own the Senate. A sad fact that we all have seen demonstrated in the last two weeks when it came to homeowner mortgages and credit card interest rate caps. And if anyone noticed, President Obama really didn’t try to spend any of his political capital on those two issues, either.
I think we’re headed for a lost decade or two now.
May 16th, 2009 at 3:25 pm
There is another way for homeowners to de-lever – it’s called foreclosure.
May 16th, 2009 at 3:27 pm
Right Dunbar — I am all for foreclose and get the props back in the hands of those who will one day own them. But since they keep spending trillions on the symptoms of the problem why not throw $3 trillion at the homeowners and buy down principal balances. They would never have to throw another dollar at the problem if they did so.
May 16th, 2009 at 4:41 pm
Mr. M
Can I get a tax credit for the average size of the principle write down then? No income phaseouts please!
May 16th, 2009 at 4:52 pm
Principal reduction? Horrible idea! As if we don’t have enough stimulus in the pipeline already and pissed away enough trillions. I am so tired of the bailouts. Every principal reduction would also be done at the expense of taxpayers. Think about it. The answer is the good old fashion FOREECLOSURE. If you can’t afford your home, then you need to let it go. Sorry.. welcome to finance 101.
May 16th, 2009 at 6:04 pm
“There is another way for homeowners to de-lever – it’s called foreclosure.”
There are not enough “prudent” renters to make a dent in this inventory at any price. So, if Alt-A and prime borrowers were to foreclose en masse this economy would absolutely implode.
I don’t anticipate wide spread PRs, but banks are going to continue to make trivial concessions that will fuel their manufactured illusion of solvency. And most underwater or near underwater homeowners from here on out will take the bone thrown at them, be it a below market rate or exotic refinancing options that keep them a faithfully remitting borrower for many years.
End result: The banks and the borrower are going to be absolutely strapped for a decade, and so will the “prudent”. The lender isn’t going to be making sh*t on their loans, so you prudent savers ain’t going to be making sh*t on your CDs.
It’s called a zombie economy with zombie banks and zombie borrowers.
And, those of you who think these zombie borrowers are low earning losers think again. The sub-prime low-lifes bounced in 2008. When confronted with an underwater home and a loan reset, they didn’t give it one thought – they walked and are renting again.
The Alt-A and prime zombie is a whole different walking financial corpse. They earn the bucks, and buy all that sh*t your company has to make to keep you employed. And they ain’t going to be buying your companies sh*t for a decade because they, unlike the sub primer, actually gave a thought or two about staying in their home – and decided they’d rather pay up the ass to keep their home and creditworthiness than to delve further into a the American consumer abyss.
I sure hope you “prudent” have income totally detached from consumer activity
May 17th, 2009 at 9:53 am
I’m unclear, are you suggesting simply because the house is worth more than the mortgage, that all those prime and alt-a borrowers will simply walk. If were talking about thoese with high DTI, I can understand. If you’re just saying all these people will walk away from their obligations and the country implodes, than were saying it’s the end of capitalism. Where does the walking away from our debts stop? When we look at the “stuff” we bought on credit cards, and realize it is not worth what the balance on our card is, do we simply stop paying? Same thing for our cars! This will eventually come down to a question of whether we have had a change in our culture, that says our words mean nothing, and therefore we default on everything. Our society simply reverts back to cash for all purchases, and no more credit. At that point it may not be even cash that’s accepted, but rather some sort of bartering system. I don’t see the solution as taking 3T of over leaverage that 25% of homeowners have, and instutionalize the debt across the entire tax base. We will simply have to raise taxes to then pay for it, thereby reducing standards of living going forward. Debt is debt!
Question Mr. M – Why should the person who bought a home with say 31-33% DTI walk away simply because the asset is trading at a distressed price. I would suggest that they intended to pay down that home over years regardless of the day to day market value. Where does the bailing out of bad decisions stop?
May 17th, 2009 at 9:59 am
I haven’t heard anything about the imputed income that mortgage forgiveness represents.
Does anyone believe the IRS won’t send you a tax bill for your reduction (income)?
Perhaps the President will means test this and pick winners…again.
May 17th, 2009 at 4:29 pm
Benzi.. you’re asking Obama..to forgive/reduce balance.. apply to the rich (prime + alt A)? Keep dreaming!
May 17th, 2009 at 5:08 pm
Housingrealist, not sure if you’re addressing me. But, to be clear, I am saying the opposite. I think from here on out, as negative equity becomes a reality for ‘higher quality’ people who do in fact take their obligations seriously, we will see a greater percentage of the whole deciding to hunker down and make due on their bloated mortgages at the expense of consumer spending. And, this will translate to very little economic growth, if any.
Call it stagnation, a zombie economy, lost decade, etc, one thing is clear. Unless your income is detached from consumer spending you will feel the pain irrespective of your involvement in the RE market.
May 17th, 2009 at 6:50 pm
I am more convinced than ever that the next step is wide-spread principal balance reductions that will reduce the massive negative equity burden in America and be a first-step to solving the mortgage and housing crisis once and for all.
The lending institutions said that they didn’t like their chances in court. They’re going to want that one back.
Benzy: So, if Alt-A and prime borrowers were to foreclose en masse this economy would absolutely implode.
yeah, it would
HousingRealist This will eventually come down to a question of whether we have had a change in our culture, that says our words mean nothing, and therefore we default on everything.
It’s coming down right now.
God bless America!
May 18th, 2009 at 12:38 am
First off, to a recent comment, I believe there IS a new law/rule from the IRS that says you won’t be taxed on certain forgiven debt. Amazing huh? If that applies to all these cash-out refi’s and HELOCs, then all those folks might be able to basically earn hundreds of thousands of dollars tax free. While us renters have to pay taxes on our “earnings” from a regular job/income source.
Speaking of renting: My wife and I made a smart, conscious decision in 2005 not to buy a house and to keep renting a house instead. It wasn’t luck or the lack of money to buy a house… just obvious economics. Why buy something for 3x the monthly price of renting it (and have no other expenses or risks)? Only made sense to buy if one was blind enough to think 20%+ annual appreciation was the new norm. I remember similar euphoria when the dot-com stocks were rising – that they’ll never go down! Ha. I digress…
Renting: why is it not a solution to this mess to turn all irresponsible borrowers into renters? Is it so horrible that folks should rent? Let their houses foreclose, and then the new owner can buy it at the true market value (based on rental income potential) and let those former owners rent it. Heck, all these folks are already getting to live in these homes “rent-free” for months on end… If they can pay a lower mortgage amount based on this principal reduction plan, then they certainly should be able to rent from the new owner, or there’s no point in trying to save them – they’ll never pay anything anyway (seems to be happening). Some small multiple of the NPV of rental income is around where your housing bottom will be found anyway. Let’s just get there and be done with it.
Otherwise, will we have any semblance of capitalism left? I don’t think anybody is too big or too small to fail — that’s the only way people will make better decisions and otherwise pay the consequences. The moral hazard growing in this country is shameful.
And all of us responsible folks are getting the real shaft-end of this.
May 18th, 2009 at 4:26 am
I love how the prevailing tone here seems to be “screw all you sh*tty little savvy renters! Prudence? Pfft! F*cking jerks!”
I get the feeling this lot is a bunch of whiny baby boomers with their sagging tits in the wringer, pining for the subordinate tax payer to come and rub in the Bag Balm. The checks in the mail, you spoiled brats!
It’s plain: if you bought a house in the last eight years, you had larceny in your heart, and deserve to feel the sting. It was a no-brainer, and I have no more sympathy for you than I do for the banks. I don’t even make a distinction anymore. Nobody forced anyone to sign a mortgage. There should be a lot more backlash here, but the sentiment is at best, abiding, and at worst, enthusiastic.
I am surprised by the moral and logical twilight many of these posters clearly enjoy. I guess the good news is that I am still surprised.
May 18th, 2009 at 6:05 am
No matter what you think about principal balance reductions, the massive negative equity around the nation will make the housing market a dead asset class for decades.
Remember, the average neg-equity on CA foreclosures last month was $205k. There is no way for most to earn their way out of that — good luck on appreciation.
I rather have nothing — no mortgage mods, foreclosure moratoriums or principal write downs because its the fastest way to the bottom But short to mid term, it will also be devastatingly painful. The choices made with respect to mortgage and housing will guaranty a ‘lost decade’ no doubt – at least one decade.
May 18th, 2009 at 7:21 am
I noticed above the Javagold suggested reducing principle on all homes back to 1999 levels. For those of you supporting principle write downs, how do you feel about that timeline? Should it be 1999, 1997, 2001, 1900 etc?
May 18th, 2009 at 7:53 am
Mr. Mortgage: “No matter what you think about principal balance reductions, the massive negative equity around the nation will make the housing market a dead asset class for decades.”
I say: “As well it should be.” Why should a house — a rotting box of wood in the rain — be anything other than shelter, an expense. Sure the land may have some value, but the house itself is a depreciating asset that rots and needs maintenance.
Don’t the statistics show that housing was relatively flat in real terms for most of the past 100+ years until this past 20-30 or so years of bubble? And in the past 10 years, it simply became the ponzi replacement for the .com stocks. People who bought into housing as a stock investment scheme should take the same lumps as those who bought pets.com for $100/share.
At the end of the day, it’s a blessing that housing would go up with inflation. A decade or more of that is a good lesson.
And the reason you don’t hear more outrage is that such a high percentage of Americans got into this mess that there’s not a loud enough voice from the rest of us taxpayers to drown out the sound of them sucking on the bailout teets.
May 18th, 2009 at 10:37 am
“I rather have nothing — no mortgage mods, foreclosure moratoriums or principal write downs because its the fastest way to the bottom But short to mid term, it will also be devastatingly painful.”
Mark, it will be painful, more devastating to some than others. But isn’t that what the free market is all about? People have been using their credit cards and mortgages as an ATM machine and now they’re shocked that they have to pay it all back.
May 18th, 2009 at 3:15 pm
“BUT THEY MUST BE ACROSS THE BOARD FOR ALL HOME OWNERS AND SET TO A FIXED % OR EVEN BETTER, A FIXED PRICE OF SAY 1999 PRICES OF THE PROPERTY”
Well, here’s a plan Javagold… instead of foreclosing properties, why don’t banks immediately approved short sales at 1999 prices? There are many first time homebuyers sitting on the side line waiting for this. Banks will clear out their inventories quickly, current homeowners out on their asses for not meeting their obligations and a new wave of homebuyers who can actually afford to own a home.
May 18th, 2009 at 6:49 pm
The primary reason we have not seen a massive number of ruthless defaults in the mid to high end is that the previously envisioned ARM re-set/re-cast tsunami was quelched to a great degree by a cliff-diving LIBOR index. Huge payment spikes would have resulted in almost immediate defaults across the board – now that those have been avoided (for the time being), the only immediate issue is that of being underwater. Being underwater, if you have ability and do not have to sell, in and of itself is not necessarily a pressing problem.
I am a prime example of what I believe is happening in SoCal – I can easily afford my 80/20 mortgages, in fact my payments are less now than they were when I purchased in ‘05 as my ARM index plus margin is hooking me up nicely. But I am $150K upside down and sinking. When you factor in all my outflow for ownership, then deduct the tax benefits, I am paying fair rental value. So I am staying put and waiting to see what happens as time goes by. If LIBOR spikes and my payments spike, my payments stop and we enter the negotiation game. My 2nd mtg. is completely underwater, a complete wipeout, so maybe they will deal. We’ll see. In any event, I am not going to eat $150K. Not going to happen. When push comes to shove, the lenders can either write down the principle or foreclose – A or B – their choice. Either way there is a write-off, the only difference is the lenders save a boatload of costs if they just write-down the loans. And my neighbors don’t get another sh_tty REO comp to drag down their values even more.
I think everyone needs to face the fact that principle is and is going to continue to get written down/off, be it via a true write-down, short sale or foreclosure.
May 18th, 2009 at 7:03 pm
flion – What was your objective when you bought the house? You are looking at 150K upside down at the potential bottom of a cycle. Why don’t you hold the home for 15 years, amortize your payment like the rest of us, and you’ll be fine? Is the mindset that if it’s not worth what I paid at all times, shit can it & give back to the bank. What changed in your thinking in 05 vs 09? Did you not do the same rental equivalents computation in 05?
May 18th, 2009 at 8:26 pm
“The critics are correct in that any servicer worth its salt should be able to obtain an exemption under this bill by demonstrating that it has a loan modification program in place.”
http://www.jdsupra.com/post/documentViewer.aspx?fid=f400fa50-e5e-4956-a773-45a89546c98d
May 18th, 2009 at 9:10 pm
I think Benzy is right about the system imploding if it were allowed to run its course post haste. That’s why the economies always go zombie on a credit defaulting tidal wave. It’s a slow grind down. I think Mauldin said it the other day…rather have 15% unemployment for 10 year than 30% for 5 years.
May 19th, 2009 at 12:55 am
“And my neighbors don’t get another sh_tty REO comp to drag down their values even more.”
This is always the party line. Foreclosures do not make property values go down – the lack of a beggars banquet for credit hungry mosquitoes is what makes property values go down. In this climate especially, where property values are still hugely overstated, this argument is just tired.
May 19th, 2009 at 2:03 am
The way I see it, foreclosures are the way to showing what the real market is… It’s like how stock prices are set — the “market order” is the clearing price for someone who wants to sell or buy right then. Anyone can say their shares of IBM are worth $150, but if the market order is selling at $85, then you are welcome to wait all you want for $150, but everyone else is transacting at $85 and you shouldn’t get $150 from anyone.
Same thing with property…you can sit on your supposed $1.5MM house all you want, but thanks to your neighbors’ foreclosures, the true market is known to be at $850k. The only difference is that in real estate, there may just be some sucker willing to pay $1.5MM (it’s like an after hours trade). But with foreclosures setting the market, presumably nowadays, a bank will not loan to something so out of line with the comps — it’ll have to be a cash transaction.
Go Foreclosures — set the real “market” price!
May 19th, 2009 at 7:12 am
flion….well said
and if comes to where the rates go thru the roof, and they will eventually….make sure you live in the house rent free for as long as possible and maybe even wreck the place on the way out…
dont let any of the knuckleheads here tell you anything about morals or stupid BS they come up with….you most likely bought that house to live in, not make a fortune as these liars on here want others to believe, but your down payment has disappeared, your home equity has vanished and you are upside down and never to get back upright ALL BECAUSE OF A MASSIVE PONZI SCHEME/BUBBLE ALLOWED TO HAPPEN BY THE BANKS , GOVERNMENT AND RATING AGENCIES…if you cant get a bailout from uncle sam, make sure you make your own BAILOUT TARP…good luck !
May 19th, 2009 at 11:11 am
Wonton, Mr M’s research and that of most of the RE analyst bloggers have made the argument that there are not enough first time buyers to make a dent in this inventory at any price. It is statistically impossible.
While there are still many “on the sidelines”, the pool of first time buyers is going to go dry in 1-2 years.
I do believe that since most foreclosures thus far have come from the low end, there are few qualified move-up buyers to make a dent in the mid and upper end markets. I also believe that a greater percentage of mid-upper end bubble buyers (compared to sub primers) are more capable of waiting it out – in fact most of them will. And I say capable in terms of having the earning potential to pay an inflated mortgage and the “ethical” component required to take one’s credit history seriously.
Contrasting this with the sub primers who have defined the market to date, and I think he prospects of an “Alt-A crisis” is overblown. I anticipate a steadying of prices in desirable metro markets, although inflated with respect to price/income ratios, as mid-upper end owners hunker down and pay a greater percentage of their income to banks at the expense of other consumer goods.
May 19th, 2009 at 1:05 pm
Housingrealist – I bought the home as a place to live and as an investment. Why do so many people seem to think it has to be one or the other? Never understood that. Anyway, as a place to live it has been great. As an investment it has not been great. My line of thinking between ‘05 and ‘09 has not changed. At no time did I ever intend to bring $180K to the table to move from this bachelor pad into a home to raise my family, which I will be ready to do in a few years.
I’m not optimistic about values coming roaring back anytime soon. What I do believe will happen is that rates are going to stay low for several more years and then begin climbing. A monthly outflow far in excess of rental value on an asset substantially underwater is not going to work for me. I obviously made one bad investment decision – I do not plan to follow it with another.
May 19th, 2009 at 1:13 pm
Reply to Benzy
Why would a high and mid end home owner not choose to walk as long as the amount saved is considerably greater than the damage to his credit score. Suppose he can buy a comparable home for $250K to $400K less than his current mortgage, why not walk? Buy the new lower priced home in someone else’s name and credit history before he walks. Once he decides to walk, he can rent his current home out for at least a year before it gets foreclosed upon. It would seem that if someone can gain $250K to $400K just by walking and have a temporary damage to one’s credit score than the choice is simple. Like Mr Mortgage says, the current loss severity is around $205K for banks when a home is foreclose, which means that a borrower can gain this amount by purchasing a comparable home, then choosing to walk.
Seems simple to me.
May 19th, 2009 at 2:06 pm
Sam,
I’m not sure you’re able to get another loan (in today’s market?) to buy another home while the underwater owner is still making payments on present home. I think 6 months – 1 year of reserves is needed ..for this “rented” home (even though you would lie..that it’s rented) + 20% down minimum for the new home.. as you/or underater owner would not qualify for an FHA..since it would be a second home. ..
Also your idea – that you could buy with someone else’s name/credit.. WHO would put their name? that hasn’t bought yet.. or waiting to buy for them self.. or having the income to qualify? What about those tax deductions.. how do you deduct on someone else’s name?
May 19th, 2009 at 2:08 pm
not simple…
May 19th, 2009 at 2:13 pm
simple is , as simple does….
be creative, plan ahead, and make sure you get yours (as no one else will be looking out for your family)
May 19th, 2009 at 2:14 pm
There’s suffering either way you look at it:
– stay and pay – eventually it will work out
– forclose, and rent/save/rebuild – eventually it will work out
But to say you can just scam the system is ludicrous!
I’ve said it before… banks/gov/whoever will not reduce to everyone underwater (and under..for what ever reason. ..peak purchase/heloc~refied~atm) BECAUSE EVERYONE WILL WANT THEIR CUT!! period!
so while some may forclose and suffer in their way (like me) some will not and stay ..and suffer in their way.. (but they still have the house!)
May 19th, 2009 at 2:29 pm
Sam, I think ex-owner addressed it. But I think the circumstance of most underwater Alt-A/prime borrowers falls between having to walk away and having enough cash for 20% down plus reserves on a second property. .
I will say that if one has the determination to game the system to the degree in which you describe, they certainly don’t fit my characterization of an underwater Alt-A/prime borrower -that is one who would put some effort negotiating a solution with their lender.
If the lender can care less, then I’m sure the scenario you describe will cross many minds, as I am sure this one has:
http://blog.youwalkaway.com/?p=164
May 19th, 2009 at 5:42 pm
Javagold – you said “make sure you live in the house rent free for as long as possible and maybe even wreck the place on the way out”
So when you destroy the house on your way out, who are you hurting? The rest of us next door and down the street who are making out payments. I do not understand your thinking. It’s everybodies fault but me, and because I’m pissed my home is worthless than what I owe, I’m going to destroy it. F- the people it hurts around me. ITs all about ME baby!! Principle reductions to 1999 values
you got to be shitting me!
May 19th, 2009 at 5:47 pm
oh yea, how about a principle increase on my stock portfolio back to Ocotber 2007 levels. It was a ponzi scheme, a conspiracy that stock prices were higher than. I think the taxpayer should make every stock holder whole. Where does this shit end. I let me holdings ride, knowing housing was in peril. I fault myself, nobody else, just me!!! I will have to save more to make up for what I lost. Shocking isn’t it. Taking responsibility for one’s own decisions!
May 19th, 2009 at 5:51 pm
MM – At the risk of sounding bearish, you say the low end is bottom. I’m thinking anything under 400 is low end. We have seen in some places as much at 40% off on the low end. Places priced at 400k are selling fast.
If – big if – but if the mid to high end sees as much off as the low end, that potentially could bring a 700k house down to 420k. That could be considered low-end pricing, FHA loanable.
So if you had to buy a low-end house today for 400k, but next year you can pick up a mid to high end house for 420k, what’s it going to do for the low end next year?
The mid range could see prices pushed down close to the low range. Why would I pick a low range priced house next year for 400k when I can get a mid-range one for 420k. I would think that’ll put further downward pressure on the low end as well.
There will have to be further reductions on the low end to get someone to buy that versus a mid-range house that’s been reduced to low end.
May 19th, 2009 at 7:39 pm
You guys are still missing the point. The govt has already committed $10 trillion to the SYMPTOMS. They will throw another $20 trillion at the symptoms always chasing their tails. A targeted $3 trillion buying down principal balances and wiping out $500 billion in 2nd mortgage debt and the symptoms go away. The $3 trillion in principal balance reductions would have already paid for itself in spades. It is not about the free markets, it is about saving my kids kids from paying for this mess.
May 19th, 2009 at 8:54 pm
Mark – Let’s do it. However, who gets the write down, and to what level? Like Javagold suggests, to 1999 prices. If prices continue down further, after the write down, do we write down again? The 10T figure I believe includes the FDIC guarantee of bank debt and the Fed accepting questionable colateral in repo market, where there may or may not be losses that come to fruition. I’m all for doing it as efficiently as possible that minimzes taxpayer losses, but where is the line drawn. What about a solution where you give each income tax payer 100K write down of principle or if no house has ever been purchased by that taxpayer, they receive a tax credit for 100K. There should be no income phaseouts to this credit. It would only apply to those that pay INCOME TAXES!
May 20th, 2009 at 4:32 am
It is not about values because they are an arbitrary and moving target — we roll loan amounts down to an amount sufficient to get a time-tested 28/36 debt-to-income ratio using a market-rate 30-year fixed. When a borrower is at 38/36 the house goes from being the biggest investment of his life to a place to live reducing the risk of default.
May 20th, 2009 at 10:18 am
“Wonton, Mr M’s research and that of most of the RE analyst bloggers have made the argument that there are not enough first time buyers to make a dent in this inventory at any price. It is statistically impossible.”
Now that’s bull, Benzy. When a seller says “I can’t sell or I don’t have a buyer”, it just means that he’s not willing to sell it at a price that buyers are willing to accept”. Let it drop, if prices drop another 25%+ from current level, watch buyers jump in. If not not enough buyers are willing, then drop the price some more. That’s market elasticity.
MM, it IS about the free market and heck yeah, it’s also about your kid’s kids. In the free market, you can win big or lose big. Do you really want the lesson for your children to learn is to do whatever they want, because if they screw up, our government will bail them out.
May 20th, 2009 at 12:23 pm
Well, Wonton. Let’s looks at the numbers.
Home ownership rate: 68%
Let’s characterize the 32% who don’t own homes. Say, in any given community half of renters, 16%, can afford a home at a price adjusted from 1987 prices plus inflation (CPI). Then consider that perhaps 3/4 qualify to buy a home by way of down payment and credit history (3/4 is generous because most people rent for a reason). We’re down to 12%
Now, say that for a myriad of reasons such as job stability or personal reason only 3/4 of the 12% who qualify even want to buy a home.
8%.
May 20th, 2009 at 12:53 pm
Benzy, when you say “can afford a home” or “qualify” or “want”, you are not just talking about income but prices as well. As I’ve said, lower the price enough to a level where people can actually afford it, then you will see the demand. Your math says 8% but if prices fall, the percentage of people who “qualify” “can afford” and “want” a home would increase.
Not to forget current homeowners who would buy additional investment homes.
I’m not suggesting that banks can sell all their bad assets in a short time. It may be a long painful process but the sooner they lower the price, the faster we’ll get out of this mess.
May 20th, 2009 at 1:03 pm
Wonton, that 8% is a generous figure describing the amount of non-owners who are likely to buy a home at 1987 prices plus inflation, meaning another 15-20% decline from today’s prices in the bubble markets.
Just as the bubble buyer was smoking something to think prices would go up forever, you must be smoking crack of you think prices will not track inflation.
Don’t be irrationally exuberant on the downside. The prudent can’t make a dent in this inventory at any price. This not conjecture, it is a fact.
May 20th, 2009 at 1:22 pm
Wonton,
Lets see i bought a house for $600,000 and PUT DOWN 20% ….my $120,000 “equity” has been basically wiped out by the PONZI SCHEME/FRAUD of the government, banks and ratings agencies…
For me to SELL my house TODAY, i will probably have to take $50,000 or more or off the Zillow price of $500,000 ….if you think for one second i am going to come to closing with a check for $50,000 to sell my house to you for being “so smart and prudent” …..YOU ARE F&@KING NUTS !
May 20th, 2009 at 3:15 pm
So.. Javagold.. then you stay..and within time it will work out… I don’t think a forclosure for you.. would be good either
May 20th, 2009 at 3:19 pm
Benzi,
If homeownership is 68% now.. what was the peak?? 70%..72%? If you think about it.. 12% would be a lot + ex owners.. let prices go back to normal levels.. and we should be able to be strong again!
May 20th, 2009 at 4:44 pm
“For me to SELL my house TODAY, i will probably have to take $50,000 or more or off the Zillow price of $500,000″
Java, I’m not telling you to sell. If you can afford it, then continue to pay and enjoy your home. In a few years, the value of your house may or may not be more than what it is today. But hell, it’s your home so don’t focus so much on it as an investment.
I was referring to banks. I would rather see them lower prices and sell to real buyers instead making deals with current homeowners who shouldn’t be owning homes in the first place.
And Benzy, I don’t think prices will fall forever. I know, when people think it will fall forever, that’s when it starts to go back up. I bought Gold under $300 an ounce so I know what I’m talking about.
May 20th, 2009 at 5:20 pm
Housingrealist – I say draw the line as follows: have a legit BPO performed, write down the principle to that amount in a refi that is a recourse loan, and be done with it. The borrower wins because the neg equity is gone and payments go down, the lender wins because they don’t have to sit on a non-performing loan, eat fees and costs, and then try to sell the place as an REO, plus they now have a recourse loan where they can pursue a deficiency if needed. In fact it is a much bigger win for the lender than if the borrower goes into foreclosure.
If you have a borrower with ability who wants to stay in the home and is willing to put himself in a recourse loan in exchange for a write-down to FMV, the lender should take that deal if the alternative is a foreclosure.
May 20th, 2009 at 5:48 pm
Bottom Line — after seeing these latest number of sales I am more convinced than ever that the next step is wide-spread FHA loans for ex-owners that lost in 2008 that will reduce the massive number of homes for sale and be a first-step to solving the mortgage and housing crisis once and for all.
May 20th, 2009 at 8:42 pm
Ex-owner, I love the shameless plugs for people in your precise situation!
If the solution is giving masses of defaulters FHA loans with 3.5% down then Mr Mortgage will have a very popular website for a very long time.
May 21st, 2009 at 6:21 am
MM,
You’ve said: “It is not about values because they are an arbitrary and moving target ”
Isn’t “debt-to-income” a “moving target” as well?
May 21st, 2009 at 6:28 am
You state a fix loan for 30 years, but shouldn’t the payment go up when debt-to-income improves?
Should I get a raise automatically at work, when I have a new kid? to improve my debt-to-income.
Should the homeowner (like my sitatuation I may add).. one of us had a loss of income… should the mortgage have been adjusted imdediately? to just balance one 1 income? should it go up again, if wife had got a job?
too many moving targets… THAT’S WHY IT WILL NOT WORK..let housing go lower where is afordabale one 1 income! as it should be… forclosures are major part of this process of return to afordability!
May 21st, 2009 at 6:37 am
Benzi… I’m sure you love it.. but remember…there are millions of us that lost a house in 2008.. the shame should be on someone like Javagold.. who put 120K down (big income my friend? or a fliper?) and his debt-to-income probably hasn’t changed.. but yet his ready to destroy the house, forclosure, and buy another one (cheaper due to forclosure) before he add more downward pressure to the market… due to greed?
May 21st, 2009 at 6:39 am
THIS WHOLE IDEA THAT HOUSING IS FOR INVESTMENT (AND MANY OWN MULTIPLE HOMES) IS BAD.. is should be a place to raise the family.. and be afordable.. in order for economy to be strong!… LET PRICES GO DOWN TO 1997!
May 28th, 2009 at 9:14 pm
Despite FTC Settlements, looks like EMC,SPS and others are up to same old Mortgage Servicing Fraud.
http://www.ftc.gov/os/caselist/0323014.shtm
FTC v. Fairbanks/SelectPortfolioServicing
http://www.ftc.gov/os/caselist/0623031/index.shtm
FTC v. EMC/Bear Stearns
June 2nd, 2009 at 1:57 pm
Renter says:
I say: “As well it should be.” Why should a house — a rotting box of wood in the rain — be anything other than shelter, an expense. Sure the land may have some value, but the house itself is a depreciating asset that rots and needs maintenance.
I agree with most of your comments with exception to this one. Most homes across a 10, 20, 30 year period will certainly appreciate more than when it was initially bought. Sure it may fluctuate up and down throughout the years , however, across decades it will be a positively linear increase. History records of homes support this, so long as they were NOT used as ATM’s.
I believe there are several places to point fingers for this whole debacle. Govt deregulation, mortgage companies/banks lienient lending, fraudulent LO’s, and the consumer themselves for not doing their due dilligence understanding the loan program they actually signed their name to on the promissary note. People would think twice about walking away if it werent for mortgage debt forgiveness. http://www.irs.gov/newsroom/article/0,,id=205004,00.html
In regards to comment 65 by Sam Sterns:
Sure the ‘buy-and-bail’ scenario makes sense for a lot of people. Yet, there are several tactics that have guideline stops in effect. You might want to look up Fraudulent terms such as straw buyers, buy and bail policies, and rent skimming. Best of luck to those that get away with it knowingly.
PR’s: When is the last time anyone remembers the IRS letting someone go tax free on income or ‘equity’ in this case?? In the future, see how much $ you actually net from selling your home. There are some repercussions to PR’s.
June 2nd, 2009 at 2:16 pm
Thanks for the info Mr. Mortgage. Is there a way to get more granular data as to Southern California, counties, and zip codes?
June 8th, 2009 at 9:44 am
Chipotle,
Thanks for your comments. I agree that on a very long-run basis, real estate moves up. Though, if it’s closer to inflation, excluding the recent years’ bubble pricing, it may not be much appreciation in real terms.
The key point though is what is doing the appreciation? I believe it’s the land, not the house. The house itself is a maintenance cost and is depreciating over time. Take for example this case: imagine two pieces of land next to each other that are exactly the same size. Each has an identical house on it, except that one was built 40 years ago, and the other one was just built as a copy. If they both went on the market at the same time, would you expect the property with the 40 year old house to be valued at more or less than the one with the new house on it? If the answer is less, as I suspect it would be, then the only reason would be because newer is better, and the older has depreciated due to age (and may have higher near-term maintenance costs going forward than the new one).
Thoughts/comments?
June 22nd, 2009 at 5:04 pm
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March 27th, 2010 at 3:54 pm
Ron Park The Fraud Master DO Not trust this guy .– All of Southern Arizona Tucson Real Estate Daily http://www.tredaily.com 1873 N Kolb Rd Tucson AZ 85719 Ph. – (800) 536-7480 About TRE Daily TRE (Tucson Real Estate) Daily is a fraudulent one-stop Tucson less then quality real estate resources. Ron Park a self proclaimed homo sexual, and member of Tucson REALTORS fraud, is the manager of TRE Daily. Before Ron Park became a real estate agent/lead manager in August 2007, he was a male prostitute selling himself successfully online and on the Tuscon streets for 7 years. After learning the ins-and-outs of sucking dick, he entered into Tucson?s real estate market after a night of longing passion with his male boss to provide oral services that are rarely found, but certainly needed.
http://www.tredaily.com
Both Ron and Lisa Park are SCAMMERs Watch out for them.
March 27th, 2010 at 4:13 pm
Ron Park The Fraud Master DO Not trust this guy .– All of Southern Arizona Tucson Real Estate Daily http://www.tredaily.com 1873 N Kolb Rd Tucson AZ 85719 Ph. – (800) 536-7480 About TRE Daily TRE (Tucson Real Estate) Daily is a fraudulent one-stop Tucson less then quality real estate resources. Ron Park a self proclaimed homo sexual, and member of Tucson REALTORS fraud, is the manager of TRE Daily. Before Ron Park became a real estate agent/lead manager in August 2007, he was a male prostitute selling himself successfully online and on the Tuscon streets for 7 years. After learning the ins-and-outs of sucking dick, he entered into Tucson?s real estate market after a night of longing passion with his male boss to provide oral services that are rarely found, but certainly needed.
http://www.tredaily.com
Both Ron and Lisa Park are SCAMMERs Watch out for them.
April 21st, 2010 at 2:16 am
Would you publish guest content? I would like to write a few articles here.
June 16th, 2010 at 3:46 am
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