The Housing Bubble

Wouldn’t pumping in ‘liquidity’ tend to increase the nominal value of real assets (like stocks = corporations), especially in a low-interest rate environment?

Only if there is a customer. pump up liquidity interest rates rise food rises fuel rises and customer has less money for cell phones, cars, eating out, health club memberships ect.

Our best outcome is stagflation alternating with stagdeflation. Massive inflation or deflation has the same results in the same thing civil unrest.

Is $11 trillion the total amount of mortgage owed by actual house buyers, or does that figure include all the derivatives? How much “equity” is owed as debt (i.e. in a heloc/refi)?

There are a lot of folks who thought the Fed should have just paid off all the debt at the bottom end (FB’s), rather than pump millions into the top and hope it’s written down over several years. But if the total owed by FB’s is $11 trillion…that would stop that talk in a hurry.

$11T is the total amount of residential mortgage debt outstanding. Sleepr not sure where you got the impression that there’s $11T in lost equity out there - the correct figure is somewhere in the neighborhood of $3T.

What’s a few trillion between friends?

I got the 11T number from an article by Paul Krugman in the Times Magazine this weekend but I forget the exact context and may be mis-quoting.

In any case, there is an awefull lot of equity bloat that has gone to money heaven and it’s not coming back in any form other than perhapse the force animating the zombie banks. I still don’t get the sense that the PTB in this country really grasp that.

3 trillion is the loss in housing value. 11 trillion is probably what the feds have spent or back-stopped to save the economy.

2% money is only reserved for the “best of the best” borrowers like, AIG…

Shirley you jest!

Don’t call me shirley

Thanks SFobaygal!

I threw that lure into the water and glad you took the bite!

“Has everyone forgotten about the $8k tax credit? That’s already proven to go quite a ways towards re-inflation.”

The impact of the $8K tax credit seems fairly limited and unsustainable. In fact, as many of us have commented already, unless it is renewed, its removal may actually result in a renewed decline in home prices going forward, as all the fence-sitters who were thinking about buying over the foreseeable future already did so in order to take advantage of the free money.

Th $8K brought forward tomorrow’s business to today, just the same as lax underwriting did. Every move made by the PTB seem designed to screw the future for the benefit of the present.

Agree, if it’s not renewed and/or increased even, prices certainly will drop again more; most likely they’ll drop even if it were only renewed and not increased. The question was asked though how could the reinflation be engineered - I was presenting one possible source. Don’t count out the possibility of not only renewal but increase of the credit, as well as expansion to a greater scope of buyers. Exactly that was done in Australia for example (though I’m not sure the impact it had).

I wouldn’t rule out the possibility of the scenario nhz has described in the Netherlands - where the government enacts various methods of keeping prices artificially inflated essentially indefinitely (I believe he said it was about 30 years and still going). Unfortunately we may end up bankrupt in the process (bankruptcy to me being defined as either hyperinflation or repudiation).

Where the heck has nhz been anyhow?

“…about 30 years and still going…”

That’s a long time to be a renter!

Packman, I miss NHZ. He was one of our best and most interesting posters.. I wonder if prices in the Netherlands are falling yet, considering the situation in Ireland, Iceland, Spain, etc.

I believe nhz has his own blog.

The link, please?

“Probably beats the careening plunge that is equities in any case.”

Why do you expect this, given that the stock market (almost) always goes up (with last fall begin a noteworthy exception)?

“…begin…”

My Freudian slip is showing again today. I meant to write ‘being’ and instead began to write ‘beginning.’

I expect another leg down in the stock market because despite all the interventions into the bond markets, there is alot of bad debt hidden off of balance sheets. We’ve seen them pump out much of the “subprime mortgage” bad debt that caused the crisis last year. But the second leg is defaults on mortgages caused by job losses and the defaults on comercial real estate are just starting. The PTB are trying to replace non-sustainable levels of consumer and mortgage debt with non-sustainable levels of government and federal reserve debt. IMHO equity prices don’t yet reflect the idea that these huge interventions are not sustainable in the long term.

“IMHO equity prices don’t yet reflect the idea that these huge interventions are not sustainable in the long term.”

Right. I tend to agree with you — it is a question of when, not whether — with the caveat that a sufficient amount of dollar weakness could potentially offset an awful lot of stock (and housing) market weakness.

“I expect another leg down in the stock market…”

The other reason I tend to agree with you is based on my assumption that extreme dollar weakness is not a US policy objective.

We’ve seen them pump out much of the “subprime mortgage” bad debt that caused the crisis last year.

Pump it where? I was reading in the NYT this weekend that wall street has simply been re-securitizing this garbage and is once again trying to find the next greatest fool. I really don’t know how long they can continue to package rat turds into boxes labled ‘rasins’ but its a sure bet that it will collpse sooner or later.

I think this ‘holiday’ season will be the death knell.

“I expect another leg down in the stock market…”

But I also keep recalling my grandma’s kitchen placard: A Watched Pot Never Boils. Isn’t the stock market a very highly watched pot?

extreme dollar weakness is not a US policy objective.

That isn’t what Snow or the other guy kept saying 3 yrs ago. He said the dollar decline was good, or something similar, which caused much scratching of head and further added to furrowed brow. Got botox?

“We’ve seen them pump out much of the “subprime mortgage” bad debt that caused the crisis last year. But the second leg is defaults on mortgages caused by job losses and the defaults on comercial real estate are just starting.”

Interestingly, places in NV which have had the highest numbers of foreclosures and largest declines in price to date, are still hitting record foreclosure numbers. Given these facts, how can the worst be behind us? It seems to me that, if record defaults are taking place right now, record bank losses are in banks futures, not their pasts.

Oh, I NEVER meant to imply that the worst was behind us, at least when we’re talking about the effect on the stock market. Now in many cheaper neighborhoods like mine, RE declines are closer to done. (With foreclosures going for ~50% off peak price they’d HAVE to be.) But there’s more money at stake in costlier neighborhoods and those declines still have a ways to go.

“I expect another leg down in the stock market…”

I’ll go one better than that:

If we do not have a significant (25%) dip in the equity market before the end of the year I will be fleeing the dollar like the plague. This market screams currency devaluation to me.

Totally agree, dude.

The pakistani’s cannot cook, but they are also hamstrung by the fact they work for Supreme. If it was KBR, it would be different.

I am going to start making the trip to the American DFAC. The food is like home and it just plain tastes better.

If that is where their leaders are located..it would be a good start

I’ll check about the Russians

and thanks again for this blog ben…I still want you to come to the Beeg Apple…boy can we show you a lot.
—————————————-
would it subdue the resistance if they blew up the local church buildings?

The cray-zees will formulate all kinds of warped (il)logic and twisted apologies to rationalize death and violence…… We’ve seen and heard it all….. death is good, war is really peace, threats are really good will, etc.

Wow Ben, didn’t know your interests were that broad (4g warfare). Very cool.

More war is peace BS and other blah blah blah. Save it until you have an audience larger than one.

The cray-zees will formulate all kinds of warped (il)logic and twisted apologies to rationalize death and violence…… We’ve seen and heard it all….. death is good, war is really peace, threats are really good will, etc.

ex is correct and frankly,james,this happens to some extent in all countries during “war” and occupations. I doubt he is referring to most. But as Ben points out, history will out.
Always does.

I think you didn’t get the point of my post.

The best information I could get, from a relative that had years on the ground, was the situation in Afganistan was not sustainable.

Its nice that we have good intentions and would like to make the situation in Afganistan better. Unlikely to happen because their is no economy.

About the best you can do is bomb the “bad” guys and disrupt opperations.

And the situation isn’t unsustainable because of the expense either. We can keep this up for a long long time.

War is peace? You are confusing me with a person with a set of morals.

Time to step up to the morals and family values rhetoric my friend.

War is peace? You are confusing me with a person with a set of morals.

Exeter, do you read posts before replying?

The Greeks whipped Afghanistan. So I guess we’re ignoring that?
Not to mention the Mongols & Tamerlane, both made mincemeat, sometimes actual mincemeat, of Afghans who resisted them. Those two militaries are the main reason Afghanistan is so backward today.

It is up to the soldier to determine if an order is illegal or not, and the Geneva Conventions are there as guidance.

It is up to the government to determine if a war is a just war, and the populace is there to provide guidance. If soldiers begin making determinations on which conflicts are to be undertaken, then the military has begun making policy and is in effect overthrowing the elected government. That clown from yesterday didn’t realize what he was asking for.

“The overall mission is moral (to help the afghan or Iraqi people).”

Please don’t tell me you’re that deluded to believe the strategy is to “help” anyone but ourselves.

Please don’t tell me you’re that deluded to believe the strategy is to “help” anyone but ourselves.

The two aren’t necessarily mutually exclusive, you know.

Back in the day, I was actually issued the Geneva Convention on a plastic card and told I would be held responsible for my actions.

I understand things have changed.

The two aren’t necessarily mutually exclusive, you know.

Perhaps not, but when conflicts of interest arise…

“Back in the day, I was actually issued the Geneva Convention on a plastic card and told I would be held responsible for my actions.”

Back in my day, I actually had to attend classes on the Geneva Convetion. We were also given scenarios and tested on how we were to use the Geneva Convention.

I don’t know what happened Blue, but I am sorry.

That was stupid,sorry, I am an idiot, but I didn’t read the posts above. I’ll bet you they get back that the initial naive enthusiasm when they come home.

My mistake here. I apologize.

No apology needed. I understand your good intentions.

Thanks Blue.

Afghani women currently enjoy rights that they didn’t have under taliban rule

During the rule of the Taliban (1996 - 2001), women were treated worse than in any other time or by any other society. They were forbidden to work, leave the house without a male escort, not allowed to seek medical help from a male doctor, and forced to cover themselves from head to toe, even covering their eyes. Women who were doctors and teachers before, suddenly were forced to be beggars and even prostitutes in order to feed their families.

Since the fall of the Taliban in late 2001, many would agree that the political and cultural position of Afghan women has improved substantially.

“…The geneva conventions are only for the good guys….”

Please tell me you’re being ironic?

tinyurl.com/kvfg7e
Alberto Gonzalez refers to Geneva Conventions as “quaint” and “obsolete.”

That too

Good. Tell her I was asking about her. I hope the best so much for you and your Mother.

I lavishly spent money at restaurants in Phoenix over the weekend. I normally don’t do it.

As for PB’s point, I agree. Bernanke is earnestly using the opposite approach of the depression. He’s throwing out money from the helicopter. This is called monetary inflation. Monetary inflation precedes price inflation. Price inflation is what the consumer sees. Price inflation is inevitable. Gold has seen this back in the days of 9/11. Government policy was to throw money around. 9/11 occurred again last Fall. Gold could go up four-fold again in the next six years.

Also the Fed sees the threat of too many boomers retiring or downsizing their jobs (and spending) and not enough young people to replace them. That is a price deflation situation that they are countering with monetary inflation.

Seniors will dump their houses and sell stocks, but that won’t necessarily stop price inflation in other assets. Gold looks at monetary inflation, not price inflation.

If you don’t have Series I’s TIPS, or precious metals in your portfolio, you better do something about it.

For the record, I always try to play the Devil’s advocate, as I doubt the validity of faith-based dogma.

“Not sure where all the people went because they weren’t at the beaches, the restuarants, the bars, the bakeries, or the stores.”

OK, so I did visit a largely-empty Home Depot yesterday, followed by a trip to a nearby largely-empty Trader Joe’s, but I just assumed everyone must be at the beach…

Boater friends of mine, who have devoted this holiday to motoring around the lake every year in the past, didn’t show. I stopped at their house and found them busy canning tomatoes. They have also started raising ducks for eggs and meat.

My kids came out to visit me last night and we went out on the lake to grill kabobs. I saw two boats the entire evening.

There was an open house at my club on Sunday to sell boats. Over 30% of the boats had for sale balloons on them.

As reported earlier, I spent eight weeks cruising this summer. Passed through 117 locks along the way, the vast majority of which I went through alone and heard about how slow activity was from the lockmasters. It strikes me as a tremendous expense for zero gain to the state. I seriously doubt that NY can sustain this luxury for a few guys like me for long. They have to maintain the dam system for flood control, but they don’t have to keep the locks running for pleasure boaters.

Bill: The price inflation already occurred during 2000-2007 thanks to a bubble of virtual wealth that was created by housing and cheap credit. Now, monetary inflation is being formed to essentially pay for the price inflation, by making the debts whole. In this situation, monetary inflation actually lags price inflation.

Actually my take is that “twice” the normal monetary inflation will occur - part of it will compensate for the past price inflation, and part of it will create new price inflation. While most of the past price inflation was for services (medical care, tuition, sports), the oncoming wave of price inflation will be for goods as the USD finds its place in the global scheme of things and as we all know, everything is made in China.

“They have also started raising ducks for eggs and meat.”

Geoducks?

“He’s throwing out money from the helicopter. This is called monetary inflation. Monetary inflation precedes price inflation. Price inflation is what the consumer sees. Price inflation is inevitable.”

Price inflation is inevitable but the timing is, as usual, the tricky part. The money being created isn’t going anywhere beyond the banks balance sheets. As long as the zombie banks are allowed to keep shuffling along absorbing all the increased money supply, price inflation won’t follow.

budget and current-account deficits are coming back into focus as President Barack Obama’s stimulus measures revive the economy

This is kind of optomistic on the effect of the stimuli.

Went sailing this weekend and contributed to stimulating the economy. Didn’t think we would have good winds and decided to go at the last minute. Thought no boats would be available on the big weekend.

Nope. Had my choice of several. Looked like only 3-4 boats rented out of the entire available fleet (8 boats). Got a discount because it was a last minute rental.

same here…

was in silverdale - poulsbo WA over the weekend. Saw lots of boarded up businesses in a variety of industries (RV sales, Auto Sales, Used Car lots, Real Estate Offices, independant coffee shops, chain stores, restaraunts). Had to go to Best Buy in S-dale (across from Kitsap mall) twice, once Friday night and again Saturday late morning. Dead both times, had to fight off the blue-shirts (had 3 accost me before I had a chance to tell one what I was looking for… a 12vdc lighter socket phone charger for my crackberry).

I didn’t find any geoducks though… what a shame.

Did however watch a sea-lion swimming next to the ferry until it got bored and dove under the water. Don’t see em’ in Minnesota outside a zoo in the “wild”.

Didn’t run into Oly either, although I did venture into the woods very far… too dark and damp, gotta watchout for them there slugs.

Over the weekend, I made two trips to Home Depot and one to Lowes. Didn’t see a lot of traffic during any of my visits to these stores.

Also noticed a lot of strip shopping centers with vacancies. And, to all of those people who thought that renting out the house until the market improves is a good idea, you’ve got lots of competition. I’m seeing University of Arizona rental vacancies (of houses that just didn’t sell at the wishing prices) like I haven’t seen in years.

Does the Fed accept MBS at their nominal value as collateral? If so, what are the implications for the value of the underlying mortgage debt, and the houses which provide the ultimate source of MBS collateral?

Does the Fed accept MBS at their nominal value as collateral?

Yes, they do….that is the scam……

If so, what are the implications for the value of the underlying mortgage debt, and the houses which provide the ultimate source of MBS collateral?

The houses that are the collateral are already worth less than the mortgages that make up the MBS, the Fed knows this and is turning a blind eye….

Emperor’s new clothes and all that…….

“Emperor’s new clothes and all that…….”

Does the emperor happen to be Chinese?

What do you think about your tax dollars subsidizing a communist country’s sovereign wealth fund? Senator Eugene McCarthy must certainly be rolling over in his grave about now. Good Night, and Good Luck

China’s CIC set to invest in US mortgages
Mon Aug 17, 2009 8:12pm IST

* China to invest in US Treasury PPIP program-sources

* CIC talks with nine US-designated PPIP managers

* China seeks safer, more profitable US investments

* US Treasury aware of, approves CIC plan-sources

(Adds responses from BlackRock, background)

By George Chen, Asia Private Equity Correspondent

HONG KONG, Aug 17 (Reuters) - China’s $200 billion sovereign wealth fund, which lost big on its ill-timed 2007 Morgan Stanley and Blackstone bets, plans to invest up to $2 billion in U.S. mortgages as it eyes a property market rebound, two people with direct knowledge of the matter said Monday.

China Investment Corp plans to soon invest in U.S. taxpayer-subsidized investment funds that will acquire “toxic” mortgage-backed securities from the nation’s banks. CIC believes these assets are a safer bet than buying into the U.S. Federal Reserve’s Term Asset-Backed Securities Loan Facility (TALF), the people with direct knowledge said.

CIC is in talks with nine U.S. Treasury-designated Public-Private Investment Plan managers, the sources said.
…

12*$1,500=$18,000 Or in the hole $42k+ interest of the original $60k…

But people don’t always react logically to numbers.. you can put the numbers right in their faces but, come crunch time, decisions are often made based on feelings.
——-
We (USA) buy about 167 bottles of water per person, each year. 50 billion bottles.. some $16 billion in sales.

The Pepsi product, Aquafina, is one of a few brands that is actually nothing but filtered tap water.

People can get small filters for about $25 or could invest way less than $100 in a whole house filter system, and get an endless supply at any tap for virtually nothing, and not have to drive to the store… but they don’t.
That initial $100 outlay stops them. They won’t pay $100 for “water”. They would much rather pay 3 bucks for 24 pints at WalMart, day in and day out, ad infinitum.

You are leaving out a few issues:

1. Pepsi advertises much better than the filter companies.
2. People don’t actually know that Aquafina is just tap water.
3. People trust Pepsi to filter the tap water more than the filter companies.
4. It is cooler to hold a plastic bottle with Aquafina printed on it than some no-name plastic bottle.
5. Having to go to WalMart gives you a reason to drive your SUV, and maybe you’ll get some ice cream.

Buy the Brita jug system and fill it with tap water - sold at Safeway, etc. I refill an old water bottle with it for my exercise classes.

thanks Jon.. more reasons people often don’t calculate with their brains..

How about that foreclosure.. does the wife look forward to telling her mother in law about it? Who’s idea was it to buy that big house, anyway. Who felt smug about that great investment. Just how bad is the money situation?
BTW, if you guys need a place to stay, sorry.. but i really need my sewing room.. and the garage.

Most people who bought on the way up certainly spouted lots of things they will have to eat. How long before work finds out? Is the boss expecting you might quit when you relocate?

There are lots of reasons (besides money) to avoid foreclosure. If the subject weren’t such a downer I might make a list.

Agree… total BS… I have little respect for people who whine like that… I have more respect if they said; “Hey, we see this house as an asset and an investment. Our investment went south, so we’re trying to mitigate our losses, just like the bank would do. We plan on handing the house back to the bank when we are eventually foreclosed on and will save our mortgage payment until then to mitigate our loss.”…

no problem with that… especially since the bank and Wall Street (esp) will take the hit …

My beef was with the reporter than the “victims”.

..no problem with that… especially since the bank and Wall Street (esp) will take the hit …

yeah.. well.. a whole lot of “wall street” is just average people.. some portion of who’s pensions, IRAs, 401k’s (and similar) is invested in mortgage securities through all sorts of mechanisms.
I do see some small problem with walking away from an obligation when it hits people who cannot afford to take that hit.

If walking was totally a neutral business decision ,than you wouldn’t get penalized on your credit for walking . My neighborhood is down 100k ,but I can’t imagine walking because I can pay the obligation . Now ,if I loss my income ,than that’s another matter . People who are gaming the system by buying another place at a reduced price and letting the first house go are making a business decision to take advantage of bank underwriting that wasn’t screening for that possible scam . The bottom line is that those borrower had to lie about their intention with the property they let go on their new loan
application . So,isn’t it a form of fraud when you make a business decision like that ?

It’s been a popular notion that walking is a business
decision ,rather than a new attempt to game the system
after being a party in a ponzi-scheme to begin with . If you didn’t lie on your original loan application ,and you didn’t lose your job or suffer some misfortune ,than you should be asking for a loan modification to compensate for being sold a toxic loan in a mania . The problem is that the government has made it the problem of the taxpayers that the lenders and borrowers entered into loan contracts that were conceived in fraud .

How can anyone say that this fraudulent ponzi-scheme market was normal and than follow up by saying its just a normal business decision to walk, regardless of the original fraud that took place . The industry should be doing everything they can to modify those contracts ,but the industry is actually encouraging walking and it makes a commission or salary for some salesperson or lawyer. The business model for home loans being the last a person will walk on is no longer valid in this aftermath from the biggest fraudulent loan scam ponzi-scheme in modern history .

“If walking was totally a neutral business decision ,than you wouldn’t get penalized on your credit for walking .”

Why can’t the penalty get rolled into the analysis which underlies the business decision?

The banks expect the government to pay for their losses. The underwater loan owners expect the government to pay for their losses. Because of this, none of the decisions being made, by either party, are rational and won’t be until the government stops interfering….which will happen, oh never.

PB…First ,Congress took away the penalty for borrowers to walk in that they don’t have to pay taxes on the write off on the loss . This law was put into affect after the fact and is another form of taxpayers taking the hit .

Second ,when we talk about fraudulent parties (borrowers and lenders ) making a analysis of their current situation ,it’s
laughable . The analysis is how to make someone else pay and not suffer for any decisions .I can’t blame anyone for making a analysis like that and it’s human nature to do so .
It’s understanable that people are pissed at their property values going down . But,the analysis that is not being made is all the other ways in which all people will suffer for these personal decisions of the borrowers in the future ,including the people making the decision to walk ,

Many people are making the analysis that if they buy another house at post mania prices, and than let the mania house go ,they are making a good decision and they will be secure in the lower price before their credit takes a hit . While this might be fashionable ,some form of fraud took place on the loan application with this switch-a-roo house swap scheme .

The problem is that the Politicians set the stage for the worse possible behavior from the borrowers and lenders
when they sought to bail-out parties to the real estate loan contract .

Just like during the Great Depression of 1929 ,everybody suffered in spite of not being a gambler in the stock market at the time . Since the acts of your fellow man can end up affecting you ,I think we can’t consider these individual acts
as not affecting the whole .

“If walking was totally a neutral business decision ,than you wouldn’t get penalized on your credit for walking .”

Why can’t the penalty get rolled into the analysis which underlies the business decision?

Yep. Any good businessman knows you can’t make business decision solely - or even primarily - based on numbers on a spreadsheet.

First ,Congress took away the penalty for borrowers to walk in that they don’t have to pay taxes on the write off on the loss . This law was put into affect after the fact and is another form of taxpayers taking the hit .

Can you say what act this was a part of? I remember some discussion about it, but I wasn’t aware of it happening.

Can that scam be done these days? You would have to keep your payments current on your 1st home and then put down a 20% downpayment on your 2nd home (since supposedly we have gone back to the ‘old’ way of lending). Would they be allowed an FHA loan using a 3.5% downpayment since it would show as a 2nd home?

A woman at an office I visit regularly walked-away from an Arizona home that she HELOC’d, but she kept the $40k SUV that was purchased with the money. I passively asked about it, and the brusk response: “It’s mine!”

packman, from IRS.gov:

Home Foreclosure and Debt Cancellation

Update Dec. 11, 2008 — The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

I would like to add that the taxpayers can’t afford to pay for all this walking either . I grant you that a party who has a 50k income who bought a 500k house can’t afford it . But my question is ……wasn’t the original loan fraudulent ? Didn’t that poor sap commit fraud in order to get in on the housing
gamble ? Why should their be no penalty for being a jerk who was willing to commit fraud for future gain ? The moral hazard is that innocent people are going to pay for the crimes of jerk banks and jerk borrowers . But again I say ,nobody can throw the law at me and say its a business decision on a non-recourse loan ,when the loan was fraudulent to begin with ,and that is the little elephant in the room .

Better they suffer for three decades for one VERY stupid decision than the taxpayers picking up the tab.

Shareholders and bond holders and insiders / officers of the banks and institutions should suffer… they hired and paid the fools (crooks) who made the loans, so let them live with their decisions…

that’s how it is suppose to work as opposed to the US taxpayers suffering.. not even a nickel …

I just think that all this “mania” surrounding the foreclosure mitigation/rescue for homeowners is mis-placed. People see it as the “banks are trying to help”. That’s not it at all, the banks are trying to keep you paying, because, otherwise, they are the ones with the huge loss, not you!

+1.

It’s loss mitigation on the part of the financial industry. Why play into their hands? Unless you’re a masochist, that is.

Having said that, attempts at loss mitigation by lenders has thusfar seemed arbitrary, ill-conceived, half-hearted, and half-assed.

Aanon …No, I think that the bank should try to work out a loan modification with that mania borrower so that the loss is more livable ,after all it was just one big fraudulent market . What do you do with the aftermath of a fraudulent market ? At least the banks should be calling the borrowers and working with payments so that they can be lowered until the market actually recovers from the fraud market that crashed .

it’s not surprising that the mania borrowers, who were either greedy or fear based, are now gaming the system to let someone else pay for their folly ,and we all know the lenders want someone else to pay for their folly . That’s the big problem ,these contract makers want everyone but themselves to pay for the gambling .

From day one ,the only way to handle this was to let the lender and the borrower work out their fraudulently conceived contracts between themselves ,and penalty should of fallen in both those camps .
But,my point is that you can’t throw the law at me when the contracts were not lawful to begin with ,and the real estate market was based on bogus appraisals .

Almost every business transaction affects people outside of the transaction in some way or another. People will walk away from unmanageable debt. They have to. Its been going on forever, which is why debtor’s prisons are outlawed in this country. And people will make stupid loans with other people’s money. And taxpayer’s will bail them out because the losses the population faces when the financial infrastructure comes tumbling down is less than the bail-out money. That’s what we learned by GD1.

That’s why we must insist on honest government with honest and well managed regulatory regimes.

Any input welcome ??

You both sound like responsible people (teacher & store clerk)…At the end of the day, it comes down to “self preservation”…I would contact a local “Real Estate Attorney” (emphasis on real estate)…He/She may be able to shed some light on any “mine fields” (recourse etc.) that lay in your path if you choose to go this direction…After that, you can make a educated decision…Good Luck…

A part time supermarket cashier got a loan for $307K? Yaouza.

You could take the 150k in savings and pay down the loan on your house ,but that would not get you the max in future value
on your money no doubt . In that you are unemployed ,why are you wanting to buy a new house for cash,while you default on your current home? How do you know that you won’t need to transfer to a different state or location to get a job ?

Have you thought about asking the lender to modify your loan
because of a hardship of loss of income ?

The fact that you are nervous about buying a house for cash ,while letting another house go ,tells me ,that you are afraid of the lender busting you on this business decision and enacting some penalty against you . I guess you need a lawyer to find out .

Mike in Bend,

It is a mistake to think that what your wife does with her credit will not affect yours. It will.

And since that $150K is in a joint account, your wife’s lender would likely have a claim to it, possibly to the extent of being able to put a lein on your new house (assuming you are in a recourse state and the lender was agressive in persuing your wife).

You absolutely must get professional legal help before making this decisison.

Mike, I am an attorney. Get a great Real estate attorney in your area. go to “Martindale Hubell” and research the Real Estate attorney. It is not hard. Good luck. My guess is, I don’t know. Sounds shakey though, involving very gray areas, at best.

Something else I don’t get. How can a married couple buy a house and it only be in one of them’s name? For 50/50 states, don’t they have to be in both spouses name?

How can a married couple buy a house and it only be in one of them’s name ??

Happens all the time…Vesting as follows;

“Shirley Temple, a married woman, as her sole and separate property”…

Thanks for the input and advice! Not too different than what I thought, but I respect the people on this blog, as I have read faithfully for the last year.

I am actually going back to college to get an AS degree in another field, so buying another house is on a “wait and see basis”, as prices may drop a whole bunch more this year, and we can still buy a albeit lesser home next year. Or we may have to move.

Asking lender for hardship may be difficult as the financials of my wife have not changed, the bank issued her a no doc loan irregardless of what I did for a living, I could have been a bum on the street and she would have received the loan anyway.

We will also be distancing our cash from the joint account and into my name, just got the money last month from a used home sale, a dream house that was paid for, but in a socially bad neighborhood for us; our mistake to try and assimilate into a culture we did not know would not be welcoming to our children without a certain faith. We are not LDS, but the neighborhood in Utah where the house was; that’s a different story. We really wanted to live there until we actually did. Luckily we sold at not too much of a loss, as home prices in Bend have dropped like a stone, including our condo which had appraised at 440k, and now is worth 250k or 300k if we are lucky. A realtor is trying to get us to short sale it, after we don’t have the funds to sell it “whole”.

We may move to where the next job is for me. I have purchased a 1 yr CD which is in only my name, for instance, to put some of the joint funds into my name only (she loves me, trusts me, allows me some leeway as it was my real estate investing that allowed us first a home free and clear, and now 150k savings, that we would not have had without flipping a few houses). But now the hot potato is in our hands again.

We by no means “want” to default, so we will keep paying on our home as long as we have funds, could be we are stuck doing so anyway. We will be talking to a real estate lawyer, we do know that Oregon is a non-recourse state, and a non community property state. Not going to do anything rash, just yet.

I don’t want to ruin my wife’s credit, if for its value all by itself. We are a little upset that we fell into the “housing only goes up” mantra that allowed my wife to buy her own home with a 8,000/year income. But we had a free and clear house(made from housing bubble gains, not teaching) and 20% down on this home that she got the financing for. Thanks all!

She could have bought before marrying though?

“How can a married couple buy a house and it only be in one of them’s name? For 50/50 states, don’t they have to be in both spouses name?”

There is no such thing as a “50/50 state”. I think you are referring to “community property states”.

In a community-property state, all earnings are assumed to be held in common by a married couple. But that does not preclude either of them having separate assets that were earned prior to marriage, or inherited at any point.

For separate assets to remain separate, they must be held separately under clear separate ownership. In other words, if they are commingled in a joint account, their original “separateness” is lost and they are assumed to be community property.

Regarding the original question, definitely consult an attorney armed with details in your case. But I would guess (e.g. this is not legal advice) that if the house bought for cash was bought with the husbands legally-separate assets, and the house it titled as separate property owned only by the husband, then it might well protect the funds against the bank that owns the loan of the other house that the wife is considering handing back to the bank.

If the funds are joint, and you are in a recourse state, then you probably would not be able to protect them from the bank should they attempt to pursue them. YMMV if you are in a state that has a very strong homestead-protection of the house the funds are invested in; this varies by state.

So the answer is a very definite “it depends.”

Update from real estate lawyer. My wife needs to stay here until trustee’s sale, or basically until she gets kicked out, and does not need to be paying another cent on the mortgage, AND our funds are safe to buy another house.

According to the lawyer, its all good as long as she stays put thru the foreclosure process, and our money is safe to do whatever we want with it.

We are in Oregon, which allows for one spouse to purchase a home without other spouse on deed.

but I say, what if the real estate market comes back, we are flushing that 20% down payment away. Any chance we should hold on, and our home value will be 500k in 2 years, according to the UHS that sold us this place in 2006?

At least our little nest egg is safe(150 k today, shrinking by the moment) if we decide to quit paying our $2100/month mortgage, which will drain it at a frightening pace! Unless I get a better job, or at least another teaching job(10% of workforce was laid off last year which included me)

p.s. My personal take on your situation is that you will be “safer” if you get out from under the house that is bleeding you dry before it sucks all of your cash away.

I would consider hanging onto your cash, and NOT investing it all in another house, unless you are really sure that prices have bottomed in your area. I expect them to continue to slide for several years where I live.

In your situation, I would think about holding onto my cash, staying in the house that my wife was planning to give back for as long as I could rent-free (heck, I’d be doing the note-holder a favor by preventing squaters from moving in and trashing the place), then move to a rental when I actually got forced out, and buy for cash in a few years.

Again, consult an attorney since the jointness/separateness of the cash matters in the analysis, as well as whether your state is recourse, and the strength of its home/homestead protection under the state BK laws.

ATE_UP …You are so right that this is a gray area ,to say the least .
Basically this man is proposing that the taxpayers of this nation
treat a person with 150k in the bank as a charity case ,when they were the gamblers along with the bank on this loan . This couple is willing to even go so far as to contort their ownership status and let one party to the marriage take a credit fall ,while the other buys a house for cash in their name alone in order for both to prosper in the future ,at the loss of someone else .

The problem starts with this couple having considerable assets in the bank ,which means they are not a charity case in the normal sense of the normal FB who doesn’t have a pot to piss in. The intent of the law was to relieve parties that are broke and unable ,and I don’t think the intent of the law was unlawful contortions to max gains after faulty investment decisions were made . This proposal is fraudulent
any way you look at it ,but maybe a attorney will tell them to take the risk because the banks are all screwed up right now .

Just as I suspected ,that 150k was a gain from easy money from appreciation from the real estate market ,yet the down side someone else should pay for by you defaulting on the current property .
Apparently you are saying in your State you are allowed to do what you plan to do . I would just like to say that I don’t want to pay for your loss in the form of some future penalty to all taxpayers ,especially since you gained the 150k from easy money appreciation . I can’t blame you however for doing something that is allowed legally ,but I just find it a little hard to believe that it’s really allowed .

And the question becomes ….. Is it lawful to transfer funds that were joint to one of the joint parties in order to protect
the other joint party that entered into a contract ,to avoid liability .
The bottom line is that the law doesn’t mean anything
anymore . The Lenders/Wall Street created this mess .
I have a friend that has a attorney who is advising him to take the risk of this sort of contortions on the lawful intend of the law because the banks are all screwed up right now because
of being flooded with foreclosures .
This black swan event of a massive housing crash is creating a
new morality of a gaming of the laws by bail-outs and contortions of the law to address loss and to transfer it to a new bag-holder . The original moral hazard of bail-outs are going to create more loss in the final analysis . Oh well .

“This couple is willing to even go so far as to contort their ownership status and let one party to the marriage take a credit fall ,while the other buys a house for cash in their name alone in order for both to prosper in the future ,at the loss of someone else.”

Since he says they are in a non-recourse state, there is no reason for them to go through any contortions to protect their other assets (cash). The bank accepted just the house as collateral, so that is all they get in the case of default. The bank knew the score when they (pretended to) underwrote the loan.

“This proposal is fraudulent any way you look at it ,”

I see nothing the least bit fraudulent about it.

Where is the fraud of which you speak?

Mike in Bend,

Sounds like another situation where the tax-paying savers will BEND over to EAT the losses of stupid real estate speculation.

YuCKKKKK!!! Anyhow - sounds like the toilet is just beginning to flush on your finances…and life.

I’m shocked that you would drag this kind of Serin wannabe crap to this site after having supposedly followed this blog for a year. Good luck - good riddance. At least I didn’t hear the mention of children. Please don’t reproduce.

Thank you, to the flamers, I was expecting more! But we can’t pay this loan forever. We made this money fair and square, by buying low and selling high. I could not get a loan on this current house, but my wife could, so she did.
This is a non-recourse state, so we are legally protected on the downside since I am not on the deed or loan to this house(according to the attorney). She can hand the house back to the lender, with no threat to cash assets held.
Not a swindler, or a fraud. Trying to protect any assets we can for children

Watching the Carnage
When you assume you make an ass of u and me! We’s alreddy reproduxed! And our ASSets are protected so our ill gotten gains are protected for now. Why is a stock market playa/gambler’s gains considered work while real estate gains not?

Are we not taught at our mother’s knees to protect the upside while minimizing the downside? I would have been on the deed of this house if the bank would have financed me, but they liked my wife fico better, so she got the loan, not me. This was not planned, being left off the deed and loan was NOT MY FAULT, it was the only way to buy, with no reason to believe any bath would be taken by anyone. Now, 4 surgeries later, its a little hard for me to work hard, so you are right about the finances going down the toilet.

Should we let them all go down when our downside happens to be legally protected. There’s the chillen to consider! Also, you know nothing of our circumstances other than what I have laid out hoping for sound advice, seeing how the BANK issued a loan to my wife when I did not qualify, with the first deed of trust being solely guaranteed by the house and only the house. We will get to a point to not be able to service this loan! How is this possible, it appraised at 440k, and now we can’t sell it for 250k! Go hose someone else with your rapier wit.
Mike from Bend’OR

” Not a swindler, or a fraud. Trying to protect any assets we can for children”

Come on now, you know what you are proposing is not real honest. Not that a give a hoot, but it is much better to hear someone honestly recognize and communicate the dishonestly rather than pronouce that it is ‘for children’ and therefore completely on the up and up!

Fecaltime!

May be legal, Mike, but it sure ain’t right.

You know this, or you wouldn’t have asked for our benediction.

So the right thing to do is pay the mortgage until we are penniless? How will that help us, the taxpayers, or our children? Really, we are not fraudsters. We will go belly up due to a recently acquired disability on my part whether we pay the mortgage for the next two years max or buy a cheaper home with our cash.
I know what I am going to do(go to school and see if I can get a job that I can do for the future, teaching 30 heads is not good for cervical fusion recipients, I have found), so I am not looking for benediction, maldicion, nada. Thought this matter may contribute to the thread, and I at least am happy it did.

How is it wrong to give a house back when the writing is on the wall, to the lender, in ACCORDANCE with all rules and regulations of the contract, in order to protect what assets are left for ourselves which includes my medical care and our young children. Sorry, no hardship exists with my disability as I am not on the note/title!

Given, we have tried to sell it, what else can we do? Go after the lying UHS who promised us it would be worth .5 mil in one year’s time?

Somebody asked “where is the fraud ?”. i suspect that the fraud started with the loan to the wife on the current house . Her income could not qualify for a loan of that amount ,so no doubt fraud was committed on the loan application in order to get that no doc. loan . So don’t ever say you earned your money fair and square to me Mr investor
unless you can prove that your wife was honest on her loan application ,that you now what to walk on .

IMHO … The right thing to do is pay down the note on your wifes house ,or bring money to the table in order to get a sale .
Than if you have any money left over ,than buy a cheap house
or foreclosure ,or rent until you are soundly on the up and up again . You won on one of your real estate investment and you loss on the other . Be a man and pay for your game playing instead of a thief who morally has rationalized your your ill-gotten gain and loss that you expect to pass to others now.

Even for diesels?

From what i’ve seen i agree that 45K is significant.. about 6K a year.

But these vans are often second (or maybe the only) family vehicles, get parked in the driveway and driven around a lot more than just on vacations..

I’m not too concerned with condition. I think I’d like to get something that’s in bad enough shape for me to rip out cabinets and whatnot and customize things without feeling guilty.

new transmission.. new engine if need be.. bigger shower.. build an office space. Who uses those 4-burners or the ovens?
Since this is my first, and I don’t intend on committing myself to something overly expensive that i may not enjoy, some repairs and reconditioning have been in the plan all along.

The drive train on a pusher is pretty much bullet proof even if you don’t maintain it to manufacturer standards…If you start getting into the luxury category then 45k is probably okay (with some reservations)…And when I mean luxury, I am talking $250,000. and up…Based on Joey’s post I don’t think he is looking anywhere near this category…

And I might add, its really not as much about the drive train as it is the rest of the coach…Systems in particular do not have much longevity in these things and are VERY EXPENSIVE to get fixed…And if you want to have the “Vacation From Hell”, try breaking down in one of these things in the middle of nowhere on a national holiday weekend or loosing your refrigerator, heating or A/C on the same particularly if you have kids…I have

I don’t foresee that happening under the current monetary policy regime.

Doesn’t the answer depend on the reason for the low rates?

“And that assumes there are people with adequate incomes because they have decent jobs. With wholesale deflation, that isn’t necessarily true.”

Nope. There is no assumption that people have decent jobs. Indecent jobs with low pay will do just fine…

If no buyers are forthcoming at levels the owner (seller) is willing to accept, then it is the current owner’s prerogative to hang on until a buyer willing to pay what the seller requires is forthcoming, or they have to sell, or their children have to sell (in case the home stays on the market until the owners all die). You don’t even really need lenders in the picture here…

I have never heard of or seen a Telegram tabloid newspaper while in the UK, where I read lots of papers - of different wings - thanks to the “luxury” of public transportation.

The Telegraph, UK paper, is not left-wing. It was owned by Conrad Black until his “troubles” and is now owned by the Barclays.

If it is a website “on the level with the Huffington Post or Daily Kos” it is more obscure than they are, as I can’t find it.

Yeah, that’s exactly how insurance works. The people not using it subsidize the people using it. Without the people who pay and don’t use it, it would fail to work. The people who refuse to get health insurance are doing the same thing the too-big-to-fail banks were doing. Gambling, because they know, at the end of the day, they won’t be allowed to die. We (the taxpayers) will bail them out.

Why aren’t you guys worked up about the goldmansucks and others taking over the life insurance policy programs?

It seems frightening how easily this is slipping by the msm and both sides.

Yeah, that’s exactly how insurance works. The people not using it subsidize the people using it. Without the people who pay and don’t use it, it would fail to work. The people who refuse to get health insurance are doing the same thing the too-big-to-fail banks were doing. Gambling, because they know, at the end of the day, they won’t be allowed to die. We (the taxpayers) will bail them out.

Umm… close but not quite.

In a true banking / health insurance analogy people with no health insurance would be getting boob jobs and facelifts (the equivalent of the TARP recipients’ bonuses).

Plus there’s a big difference between physical survival and corporate survival. If a corporation dies it doesn’t fill up a plot at the cemetery - people just get jobs elsewhere, and perhaps a few people lose their fortunes. When a person dies their pieces aren’t sold off and live on to become part of another person.

In other words - a person is a lot more important than a corporation, which is why “life” is one of the three inalienable rights spelled out in the Declaration of Independence, and “corporate survival” is not.

Emperor Joseph to Mozart: “Too many notes.”

Professor Bear to PTB: “Too much debt.”