All Good Things Come With A Price
It’s Friday desk clearing time for this blogger. “Randall Guerra, a veteran of the housing industry, (and) executive director of the Community Housing Council in Fresno, has resigned, saying he lost faith in the Obama administration’s loan-modification program. ‘Making Home Affordable is not working,’ said Guerra. ‘I had a lot of hope and expectations that it would deliver, but it didn’t deliver anything but more bad news.’”
“‘They underestimated it,’ he said. ‘No one anticipated how far prices would fall. You can’t help states where [homeowners] are 50% or 60% underwater. People are making a business decision to walk away from the house.’”
“‘People still need to call us and ask for assistance,’ said Elias Del Gado of ClearPoint Credit Counseling Solutions in Fresno. ‘It’s a tedious process, but all good things come with a price. You may be part of that 7% [that get a modified loan]. If you don’t try, you’ll be part of the 93% that don’t.’”
“Erlinda Trujillo says she is helping her daughter, a single mother of two children in Fresno, pay an extra $500 a month that her lender tacked on to her regular payment. Her daughter fell behind after she was deluged with medical bills. The bank initially rejected her loan-modification request, but then reconsidered and tacked on the $500 to help capture $10,000 in back payments.”
“Trujillo said her daughter agreed to the deal because she didn’t want to lose her house of 2 1/2 years, but now the lender — saying she missed more payments — wants her to sign another agreement to pay $5,000 for some of the overdue amount or they will foreclose. ‘She was struggling before this new agreement, and now is struggling more,’ Trujillo said.”
“Tishman Speyer Properties walks away from 11,232 Manhattan apartments because it can’t pay its mortgage. Tishman and its partner, investment firm BlackRock, paid $5.4 billion to buy the property from MetLife in late 2006 — right at the market’s peak. They hoped to make money by converting rent-regulated apartments into luxury condos and raising rents. Then the housing crash hit. The value now: $1.8 billion. That’s good business.”
“Rick Gilson, a college custodial supervisor in South Dakota, wants to walk away from the mortgage on his mobile home. If he does, he’ll be a deadbeat. Gilson is too scared to dump the mortgage on his mobile home. He owes $31,973, but the home is only worth about $14,000. ‘I have 12 years of money put into this property that I will never get out,’ said the 50-year-old Gilson, from Rapid City, S.D. ‘But I am still paying because this is what I have been told to do. That’s what I think is right.’”
“Christy Nameche moved with her family to Kendall County, Ill., in 2007, joining thousands of other hope-filled newcomers who made the county No. 1 in population growth in the nation that year. Like so many other families, their timing was off. Just two years later, the developer of Nameche’s new neighborhood has gone bankrupt, some neighbors face foreclosure, many lots sit empty and the long-awaited conversion of an adjacent field into a town park is stalled. Kendall County is struggling, another once-booming American locale gone bust.”
“For those who kept moving to Kendall County in the second half of the decade, ‘it was just bad luck. They didn’t know this thing was going to crash,’ said Dennis Stone, vice president of Pilmer Real Estate Inc. in Plano, Ill. ‘If they bought in the last five years, most of the people, particularly the people who went for all the mortgage bait that was out there … they’re upside down.’”
“Nameche is still happy she made the move, despite the fact that the 2,400-square-foot house that she paid almost $240,000 for in 2007 is now worth $20,000 to $30,000 less. ‘We’re a very young subdivision with a lot of young children, and we have a lot of people who have a lot of things in common,’ said Nameche. ‘I like how peaceful it is.’”
“The good news is that Central Virginia’s housing market is likely to change in the next year, which is also the bad news. ‘The challenge is to bring buyers and sellers together to determine what a house is worth. What it sells for may not be related to how much money you owe on it,’ said Ray Caddell, of Ray Caddell Century 21.”
“‘We’re seeing a big change in that people are buying for a reason: They want a shelter for their family,’ Caddell said. ‘They’re looking at what they need and are planning on staying for some time. They want a home rather than an investment.’”
“Your house is worth shit. Get used to it. The shit value of homes in Washoe County since the real estate bubble burst is not news to anyone. Here’s the part that’s hard to swallow: Your house may never be worth what it was worth when you bought it. In all likelihood, particularly if you bought at the height of the bubble, your life savings are gone.”
“There’s a simple formula disillusioned home owners are using to break it down. It looks like this (M+D-d)at=U. In other words, M is mortgage, D equals down payment, d is devaluation, a equals appreciation, t equals time, and U is f*cked. It’s that simple.”
“Mark Shulman, a service industry worker, and his wife refinanced their home in April 2008 for $319,000. In May 2009, it was appraised at $159,000. Their 30-year fixed at 6.25 loan was through GMAC. ‘I went to HUD counseling because they recommend that as one of the steps you take,’ Shulman said. ‘The first HUD counseling session, they told me to let the property go into foreclosure. … That was unacceptable counsel to me. It makes sense financially, but it didn’t set right in our hearts.’”
“‘When we finally negotiated our Home Affordable in September of ’09, the house was appraised at $157,000, and they refinanced it for $253,000 for 2.75 percent for five years, 3.75 for the sixth year, and the seventh year it was 4.75 in which it would finish out the life of the loan. ‘The program is just misnamed; it should be Making Payments Affordable,’ Shulman said. ‘It did not make my home affordable. It did not sell my home. It still is a negative, toxic asset for me.’”
“These government programs may only be delaying the inevitable by offering too little too late. Even though some people have been able to delay foreclosure, ‘the actual success rate of these mediation programs is very, very low,’ says Brian Kaiser, housing and real estate analyst for the Center for Regional Studies at the University of Nevada.”
“When Kaiser says ‘very, very low,’ he’s primarily talking about California, for which he has seen solid numbers, but he says there’s a 60-70 percent redefault rate. ‘Even on a renegotiated loan, the default rate is astronomically high because the rest of the economy is still in shambles. If you can’t afford the home, you can’t afford the home. You can renegotiate the loan all you want, but if you don’t have a job, it’s not going to help…Having seen two years of economic devastation, if I was sitting in a home that was worth half of what I owed on it, I’m not sure I wouldn’t economically say, ‘Enough is enough,’ and walk away.’”
“Reno lawyer Mark Mausert has litigated several cases related to this very matter. ‘Is it immoral? It depends. In this situation, for the average person, the answer is a definitive no. … I had a lady from Countrywide say to me, months ago, ‘You signed a contract.’ My response to that is, ‘Precisely, I did. And so did you.’ The essence of contract is mutuality of obligations. Both parties are bound. And while I was putting down a hefty down payment and making my payments every month, what was Countrywide doing? Countrywide was out writing predatory loans, loans which were intended to result in foreclosures. They wanted them to end in foreclosures because they had them backed up by credit-default swaps, up to 30 to 1. It was a giant insurance scam.’”
“But, fundamentally, does the borrower have a moral obligation to stay in an upside down house? Two wrongs don’t make a right. ‘You’re asking the wrong f*cking question,’ said the heated attorney. ‘The real question is, should we hang these f*ckers or just put them in prison at hard labor for the rest of their f*cking lives?’”
“It is probably best to leave the gods out of discussions of economic policy, but this barrier was breached in November when the CEO of Goldman Sachs, Lloyd Blankfein, told an interviewer that Goldman Sachs was doing God’s work. Most people will never have the opportunity to join Goldman Sachs’s gang of multi-millionaire bankers. However, by Blankfein’s logic, tens of millions of people will have the opportunity to do something at least as heavenly: walk away from their mortgage.”
“As many as 20 million people owe more than the current value of their homes. In most cases they have little hope of ever accruing equity in their home. There continues to be an enormous glut of housing. Nationwide, vacancy rates are at record highs. Rents are actually falling for the first time since we have reliable data.”
“Also, temporary government supports in the form of extraordinarily low interest rates and the first time buyers’ tax credit are about to end. It is virtually certain that house prices will soon resume their decline and will remain low for many years to come. This means that people who are underwater today are likely to be even further underwater five or 10 years from now when they plan to sell their homes.”
“We did calculations recently that showed that homeowners who bought near the peak in many bubble markets could easily save themselves more than $1,000 a month by renting equivalent units. This means that these underwater homeowners could be throwing out more than $12,000 a year in a desperate effort to keep up on their mortgages. Since most of these homeowners will never have any equity in their home, the mortgage check they send to the bank is money thrown in the garbage.”
“Not only would it benefit millions of homeowners to send the keys back to the bank, it would also benefit the economy. The money that homeowners save by not paying their mortgage is money that could instead be used to support consumption and boost the economy. If 5 million underwater homeowners saved an average of $10,000 each by becoming renters, this would free up $50bn a year for additional spending. This would have the same impact on the economy as a $50bn tax cut. If we assume a multiplier of 1.5 on these savings, the 5 million walk-aways will generate close to 750,000 jobs.”
“Unfortunately, the current policy from the Obama administration goes in the opposite direction. Rather than realistically assessing what is best for homeowners, the policy seems intended to do everything possible to persuade people to keep sending checks to the banks, even using taxpayer dollars as an inducement.”
“In short, homeowners who are seriously underwater in their mortgages should check the numbers. Walking away from a home may well be the best economic choice, and in such cases, it is also likely to be the best choice from the standpoint of the economy as a whole. This may not be advancing God’s work, but if millions of people walked away it might educate Goldman Sachs and the rest of Wall Street bankers about what happens when everyone plays by their rules.”
“At the Columbia Forum in Astoria, economist Joe Cortright explained to a group of around 40 people why the usual methods of revitalizing the U.S. economy aren’t going to work this time around. After a recession, Cortright said, ‘we don’t really recover the economy we lost - especially in this one. Recovery doesn’t mean we’ll get back the same jobs and industries we had before. … It’s time to lay the foundation for the new economy we’ll have in the future.’”
“And he said economists don’t know what the future economy will look like. In fact, he said, listening to an economist about what will happen next is ‘like getting driving directions from someone who’s looking in the rear-view mirror.’”
“Although in the past, the country has always added more jobs decade over decade, ‘that won’t be the case this time,’ Cortright said. ‘We’ve given up all the jobs we gained in the last 10 years. … What we saw as growth in markets was actually ephemeral; it was a bubble economy.’”
“The recession that started in December 2007 worsened with the collapse of the housing market and ensuing financial meltdown, driven largely by mortgage defaults. In September 2008, he said, when the recession should have been bottoming out, there was that one moment - the ‘Wiley Coyote’ moment - ‘when we looked down and found nothing to support our set of values.’”
“Traditional monetary policy has been rendered inept. The Federal Reserve had high interest rates traditionally and could lower them to stimulate lending and boost the housing market. ‘But as we all know interest rates are very low,’ he said. ‘We used all the economic ammunition - we already shot the bullets we usually use to stimulate the economy - and as a result we don’t have them to use now.’”
“‘We’re at a point now where we need to think about whether we have the right set of institutions for the road ahead,’ he said.”
“Economic leaders ‘put too much stock in subsidizing and encouraging people to own homes,’ he said. ‘The problem was clearly been exacerbated by financial market manipulation. … We simply let financial speculation play far too high a role in our economy.’”
“Cortright said the U.S. built a lot more houses than it needed, and now ‘we have 50 million extra bedrooms.’”
“But overall, Cortright said he is optimistic about the future under the ‘new normal,’ where people spend their time differently, buy less ‘imported crap’ and build better relationships and experiences. ‘We have a big opportunity to do things differently,’ he said. ‘To create a new good life.’”
“Fresno, has resigned, saying he lost faith in the Obama administration’s loan-modification program. ‘Making Home Affordable is not working,’ said Guerra. ‘I had a lot of hope and expectations that it would deliver, but it didn’t deliver anything but more bad news.”
Being cut from a different bolt of cloth, I imagine I will always be amazed at the number of people that actually think, that government can reverse gravity. Like it or not, corrections will occur. This one is far from over!
To play the devil’s advocate, doesn’t it look to you like the govt’s housing price supports succeeded in stopping the crash in mid air? I don’t mean to suggest the plateau is permanently high, just that there appears to be one.
“stopping the crash in mid air?”
Now that’d be trick now wouldn’t it! In fairness, the whole Non-Solution solution position thing on loan mod’s started under Hank’s “Hope Now” and the current administration simply picked up the ball from there.
Taking any path other than Extend & Pretend would have seemed “radical left”.
I see it as more like an open parachute. Slowly drifting down to earth.
I see it more as What Color is Your Parachute?, at least for many formerly-employed Americans who unfortunately have mortgages to pay but no incomes out of which to pay them.
I am a formerly employed American, and after being laid off from a software engineer position October of 2008 after the crash, I started a computer repair biz. We have worked hard and at this point have replaced 50% of my former income, but the best? I have lost 20lbs, been cubicle free for over a year, love what I do and have a future that CANNOT easily be taken away and plenty of room for growth.
I really believe that Americans have got used to the idea of a cushy job and benefits for doing next to nothing in return. We ARE the land of opportunity, and are built by creative inventive people, not entitlement seekers.
MY $0.02 on the whole state of affairs.
GH —
Many thanks for your uplifting story. I lost my day job in the early 1990s bust, and never looked back. I was playing a free lance music gig a week after my (corporate) job loss, and my former boss spotted me scoping out the audience during the intermission. The look of shock on his face to see me out working just after he thought he had terminated me was quite an uplifting experience. As your post suggests, losing a job need not be a death sentence, and in fact can be a very liberating experience if you dust yourself off and get on with your life in the aftermath. If I had had the opportunity to trade places with my (then working) boss at the point he set me free, there is no way I would have taken the offer.
With a whole host of REIC and gov blowhards turning red trying everything in their power to keep that parachute from sinking further.
The parachute analogy is a good one. As many said around here in the beginning, government may be capable of altering the rate of economic decline (or improvement) but not its magnitude.
I like the piece about Washoe County from newsreview.com, saying “Your home may never be worth what it was worth when you bought it.”
I would amend this just slightly, “Your home may never be worth what you paid for it.”
Note that they don’t even talk about real vs. nominal, inflation-adjustments, etc., they just flat out admit that your home may NEVER be worth what you paid for it. Yaaaaaaaaaayyyyyyy!
I hate to bust in on this thread but I just saw something about Olygal passing away. I am in total shock. Could somebody direct me to where this was covered? I have been busy the past few days.
This is unbelievable.
Go to January 29 posting “A Very Lively Part of Our Lives”.
I agree it is unbelievable.
Thank you. I just checked out the obituary. I can’t believe this. She used to joke about my love affair with that Jack Daniels fellow. I really missed her and her jokes around here. It was a joy to have her call me a grump or some other name.
I’m sitting here and I just feel numb. In a world full of $hit-heads Olygal goes too early? It just isn’t right.
Wherever you are, Olygal, I will miss you and remember your posts forever. You certainly were inspirational.
I looked up her obituary. Thank you for that link. The guestbook link was evidently disabled so I couldn’t add to it. She looks beautiful and alive in her picture. I am even more devastated knowing that she left a little son behind, as well has her grieving husband. Rest In Peace, Nature’s Angel.
*jaw drops*
That’s just not right, that OlyGal is no longer among us.
I’m nominating Ray Caddell, Century 21, as “Realtor® of the Year 2010.”
Your home is worth what???!!!!
Priceless…..move over Jim the Realtor®
And here I was just wondering whatever happened to nnvmtgbrkr…(or whatever his screen name was)
I’m working from home and can see a few snow flakes dropping past my window. It is SNOWING in DC. Run. Panic. Yell. Go buy toilet paper!!!
I have no idea why people in the DC area buy toilet paper before snow storms. Milk I understand. Bread I understand. Back in New England, we bought ice melting chemical and snow shovels (in case the mess in the garage or basement had come to lifew and sacrificed the old shovels to the boiler since the last storm). But toilet paper? Don’t you have enough of that for a week or two already in the house? Do you really think you are going to be kept from accessing a supermarket for over a week?
I have never understood, milk,bread and eggs. That’s what they hoard down here in S.Carolina when there is even a slight threat of snow. What the hell… do people chow down on french toast when foul weather hits? How come they don’t buy syrup to go with it?
I go for beer, booze, wine and steaks.
I, the mighty Coloradoan, laugh at you puny southerners who cower at the sight of snow.
Kidding aside, I’ve never seen anyone here ever hoard anything, no matter how foul the weather.
it’s not just southerners who cringe at the sight of snow…
I do have a theory/explanation…
I have friends who grew up in Colorado, who I met when they moved to Kansas City for college. At first they commented on the “bunker” mentality we had over winter, until they lived through their first one. We lived in a city where we didn’t get enough snow every winter to justify a big fleet of snowplows and other equipment, so many streets were never plowed or salted and relied on “solar” cleaning. People who lived there never got a lot of experience driving in the snow and certainly never got the “winter driving” instruction my friends claimed was a standard part of their drivers ed classes.
They claimed that everyone in the mountain areas of Colorado looked forward to winter because it was play time. I didn’t believe them until I went out there one winter.
At their parents house in Golden, it snowed heavily in the afternoons and evenings, but before we got up in the morning ALL the streets were plowed and the sky was cloudless and blue, not the overcast gray I was used to. Then I got it.
Here in New York, no one cooks much and have little pantry space. A pre-storm panic grocery runn seems standard.
Not everyplace gets plowed. Our neighborhood streets sure don’t. Only the main streets get plowed in Loveland, and that’s just “sorta” as the usually have plenty of snow pack on them when I head out to work. Now the Interstate is kept nice and clean.
As for snow melting right away, it depends. It’s not unusual for the day after a snowfall to be sunny and warm the low 50’s, but that doesn’t always happen.
Lived in Denver for many a year and here is the skinny:
From Oct to late April and sometimes in Sept and May it snows and gets mighty cold then a couple of days it melts then it happens all over again, and again, and again you get the big picture about 60 to 75 inches every year.
Then comes the summer hail storms that ruin your roof and car etc every summer without fail.
This my friends gets mighy old afterawhile.
I now live where it is 71 degrees today and 10 days later it is 79 and 10 days later it is 82 then back down to 72.
It might get down to a rare 55 during winter or as high as 90 summer (very dry) and precip about 8 to 12 inches of rain, saw hail pellets twice in 11 years.
Guess why I left and why I never want to go back?
IMO Denver almost never gets “mighty cold”. Maybe a couple of days a year on average. I’ve never had any hail damage. A bit lucky I admit, but more typical that the damage every year you’re describing.
If I had to live in one place and never leave, it would definitely be the Rocky Mountains. An occasional winter trip to somewhere warmer is just icing on the cake.
Carl:
Denver is a nice town don’t get me wrong, but when I moved to such a climate I live in now with red mountains and a freedom to drive our conv any day of the year believe me there is nothing like it.
Also we can drive back to Denver since we live in the Southwest in a short period of time. If you like the winters and a few other problems then I agree Denver for a snow town is very tolerable indeed.
Yes Denver gets about 10 days of below 0 weather not a whole lot and it can see above 40 degree days many times but the constant change in weather hour and day by day just wasn’t our cup of tea for retirement take care
And if you have a car you park on the LEFT side of the street because the snow plows are aimed to the RIGHT side of the street.
—————-
Here in New York, no one cooks much and have little pantry space. A pre-storm panic grocery runn seems standard.
When I first moved to Boise, I went out and bought a snow shovel the night before the first forecast snowfall. The checker at Home Despot said “you must be new to the area”. My reply was “is it that obvious?”
Locals know that the snow generally melts on the roads and sidewalks by late morning. People tend to stock up on may things but never on the basis of a weather forecast. You should see the piles of firewood stacked neatly by the farmhouses around here.
When I lived in Northern New Jersey, before the first winter I went to Home Depot. Bought a shovel (round point, not a snowshovel), a large storage box, bungee cords, and 150 lbs of sand. This was in mid-October. The clerk said I must be preparing for a snowy winter. I said “well yes!”
I had a rear wheel drive truck and lived up on a hill. The box was bungeed to the rear of my truck. 100 to 150 lbs of sand in the box. And it helped me on icy / snowy days to drive up that dang hill!
The only mistake was buying a roundpoint and not a snowshovel. The 20 inches of snow that year in one storm caused my back to ache the entire day the next day. I had to dig out my truck and it took a few hours. Even dug a path from the apartment building’s door to the sidewalk.
Al Packer never hoarded anything when he moved to winter quarters with three buddys. hahahahahaha
Ridin’ the storm out,
Waitin’ for the thaw out
On a full moon night in the Rocky Mountain winter.
My wine bottle’s low,
Watching for the snow
I’ve been thinking lately of what I’m missing in the city.
And I’m not missing a thing
Watchin’ the full moon crossing the range
Ridin’ the storm out
Ridin’ the storm out.
My lady’s beside me,
She’s there to guide me.
She says that alone we’ve finally found home.
The wind outside is frightening,
But it’s kinder than the lightning life in the city.
It’s a hard life to live
But it gives back what you give
Ridin’ the storm out
Ridin’ the storm out.
–REO Speedwagon–
“I go for beer, booze, wine and steaks.”
Sounds like my hurricane prep kit!
I have lived through Minnesota and Wisconsin blizzards and whiteouts. I have my priorities.
The only thing that would have me send my girlfriend to venture out in a snowstorm is if a burglar broke in and raided my ample stockpile of coffee and Bailey’s Irish Creame.
Don’t waste your money on steaks.
Really. To me (if I were the drinking type) a blizzard would be the perfect excuse to stay home and get $heet-faced.
It is our stupid media, consumer obsessed culture and BLOCKBUSTER NEW Horror/SCI FI feature movie that energizes stupid Americans who are easily hyped over a snowflake, a raindrop, any hype over idiot elected officials and their bad behavior aimed at destroying you and I.
IMHO.
Buy some toilet paper and duct tape quick..rush rush rush. And for godsake get a generator Just In Case… hurrry.
Yep Polly, snowing steady in Loudoun Co since 10:00am
Polly, be glad you’re not out there with all the crazies who are now in full panic mode.
Spoke to my parents in eastern PA. Mom was just at the grocery store, where panic shopping was in full swing. Snow hadn’t come yet, but it’s only supposed to be 8-10 inches.
Mom found the grocery store scene to be quite amusing, because she’s from where it really snows — Buffalo, NY. And, yes, she walked to and from school during the blizzards.
I told my wife that she should be expecting 4 - 6 inches tonight and she was wildly ecstatic. You should have seen how disappointed she was when I mentioned the word snow.
I remember the first time it was forecast to snow when I lived in Charlotte. I stopped at Harris Teeter for beer and chips since it was football Sunday. I figured that they had had delivery problems since the shelves seemed so bare. When I was told that it was because they had forecast snow I just laughed. We didn’t do that stupid stuff in Minnesota. But like you have said if you ever saw them drive in the snow down south you would want to stay off the roads.
That day we didn’t get a single flake. I bet those bread and milk sandwiches were just divine.
You admitted that she’s ecstatic at four inches?
What can I say? She loves snow.
I’m off to the Capitals game soon. You all should come out. I’m sure there will be plenty of available seating.
My daughter said that her school district cancelled all classes (Maryland). She went out and got some BOOTs because she didn’t have any, and she was going to need them.
Polly- hurry! Ruuunnn!!!
If there is any hint of snow heading towards Santa Cruz on Highway 17, the CHP will close down the highway.
hint of snow heading towards Santa Cruz on Highway 17,
I saw it once but heading towards San Jose. I stopped and got out of my car at Summit Road and enjoyed it for awhile. Having been a kid in the mid-west, I really liked it.
I’m not sure but I think we had enough toilet paper at home.
Well, that’s because 17 is dangerous even on a sunny, dry day! It was really a nightmare 15-20 years ago before that policy, when you’d hit a large patch of black ice on a downhill curve doing 35 mph.
When I was growing up in San Jose in the 1960’s, Hwy. 17 was POSTED 70 MPH much of the way. You felt like you were in the Indy 500 driving to Santa Cruz.
Oh man. I got to drive it after dark last November. And then I got to drive another 200 miles to get home. I was TIRED.
But lunch at Phil’s Fish Shack in Moss Landing was quite nice, and little man LOVES the penguin we picked up at the Monterey Bay Aquarium, even if he wasn’t too sure about the aquarium itself. (He’s not yet two.)
Early in my career we relocated from Minnesota to Virginia. Our first Virginia snowstorm was an eye-opener. There was less than six inches of snow and people abandoned their cars on the Beltway. In MN we considered that amount of snow to be a “dusting”.
i hate to admit, I bought toilet paper. WHy? I was out of it.
The tone of some of these articles has taken a harsh turn.
Does that mean we have moved from Denial to Anger based on the Kübler-Ross model?
Check out my proposed timeline in today’s bits bucket…
Walking away is certainly a numbers game. If you are under water by lets say 20K on a home and you still can make the payments then hang in there and watch carefully further drop because of short sales and lender owned in your neighborhood.
Now comes the ultimate scenario we are seeing in the bubble states where people paid insane prices for housing in 2006 especially. In these places people have seen drops of 25 to 50% in value that is where walking away or strategic default probably makes a lot of sense.
Please don’t worry about the so called i feel bad that i have to walk, nobody felt bad when the builder and appraiser set these over inflated prices.
Yes everyone wants to say a contract must be paid in full but when you face a huge up to 50% deficit on your home with a huge payment and maybe 10 years just to break even ( and that may never happen) then maybe you should put a big bow and warp those keys in nice paper and mail them back to the bank, you know the ones with all the trap money who gives us 1% in the bank and 21.9% on your credit card?
We saw 2 Shorts yesterday that were still owner-occupied (both over a Mill. in ‘05, now in the 600K’s)
Both sets of owners were professionals that could obviously afford these homes
They appear to be taking the short-sale hit on their credit to get rid of the loss of being upsidedown on their homes
I guess they decided it was worth it, so they can actually retire one day!
This is in NoVA
shelby:
This is playing out in every corner of this country. Does a person have a moral obligation to pay the mortgage note or just fiqure the hand has been dealt and I can’t stay in the game anymore so i will just fold my hand.
I never thought I would see forclosure as a good option in my lifetime wasn’t raised that way, but things in 2010 are a whole lot different.
The banks already got their money from the government, and we’ll all be paying on that for the rest of our lives. I didn’t participate in the upside, but if I’m going to pay to fix all this, I don’t want to see the banks get paid twice.
I wouldn’t suggest mailing in the keys so much as applying them to your banker in a similar manner to the way Joshua trees are routinely applied in this forum.
I’m going to pay dearly to liberate these people from their debt traps, and they damn well better have the sense to seize their freedom.
There was a story today on CNNMoney.com about the banks going after people for the deficits owed after their houses went into foreclosure and were sold at lower than what the former owners owed ( of course ). Many banks, including B of A, are really playing hardball. No off the hook for you, you lucky foreclosed-on duck. Our state is a recourse state, so if we have to move, this place gets renters. Luckily, my husband bought this house 10 years ago, and the mortgage is reasonable. That being said, we’re still about 40% underwater, due to the depression in Michigan.
In the end, morals “aren’t going to have anything to do with it”
It’s going to depend more on how much hurt the bank can inflict if you walk away, vs. the hurt you will get if you stay, the laws of the state (re: recourse), and how hard the banks pursue people for judgements if they walk away.
Having the IRS forgive taxes on “gifts”/short sales will be seen to be a big mistake in retrospect (at least if they want to “keep people in their homes”).
Expect to hear a lot of stories soon about how the banks are going after people for losses on short sales. Need to stop this “walking away” stuff before it gets real traction with the sheeple.
X-GS,
I recently spoke w/ an atty. out on the OR coast and from what he shared, the banks are going after these people.
But he took pains to ‘qualify’ that and when he gave his explanation, I was reasonably satisfied. He said, if you got a credit card, went to Vegas, ran it to the limit in a single week, and they declared BK, you’d expect for there to be repercussions!
Same thing where the RE loans are concerned. Some guy that ‘used’ to work at Freightliner, in the same house home for 20 yrs. takes out home improvement loan, does repairs etc., gets laid off, no problems.
As we scrolled down the list together, he showed me some really, really obvious Strategic Defaulters. Husband got home loan in ‘his’ name, wife got one in ‘hers’ and… they have a loan together! The (2) loans not held jointly ( and not even within commute to their employers, not surprisingly? ) are in Default. Equity skimming ( as seen by -major- cash-outs ) and almost NO history of payments!
When you ‘have’ access to the right information, they just jump out at you.
That’s what I hope happens.
But the track record of government and business doing what’s “right”, vs. what is “expedient” is not very good.
Finding this stuff should be like shooting fish in a barrel, with all the documentation computerized the way it is. It all depends on the motivation/incentives for someone/some organization to actually do it.
I wonder if, going forward, houses will be bought by one spouse. That way, if he/she has to take a hit on credit due to foreclosing, then the other spouse can then buy?
potential buyer,
Couples are going to do what couples ‘do’ and having segregated finances wouldn’t be a first? I just can’t emphasize enough just how blatant the abuses were when you’re looking at them!
Particularly when you’re a local and you full well realize that many of the addresses involved ( really would have been on the fringe of pricier n’hoods )
The Bubble was all about “gettin’ paid!” and… apparently many of these folks elected to get paid ” up front” by bleeding the property dry of any possible equity and then letting the economy/market take care of the rest? Or not.
Well that’s what Tischman did on 11,000 apartments walked away…what is their penalty?
People are not going to hand them over Billions to invest for them anymore. And that is a good thing!
————————————————-
Does a person have a moral obligation to pay the mortgage note or just fiqure the hand has been dealt and I can’t stay in the game anymore so i will just fold my hand.
If they refied to live the ‘Good Life’ I hope the bank sends them a 1099, unless it was ‘purchase money’ (california). I don’t want to pay their bills. Tough.
$20K is doable for most people…especially if rents are still higher than the cost of your mortgage. It’s when that number gets near $100K that people really start to look at the cost of staying vs. walking away.
When we walked it was because the mortgage was eating up 100% of our income. There was less than $400 in the bank each month to pay for food, gasoline to drive to and from work, and utilities. While we probably could have cut to the bare bone and scraped by, paying $2,000 per month for a house we could rent for $1,000 (or less) didn’t seem to make a whole lot of sense.
“‘They underestimated it,’ he said. ‘No one anticipated how far prices would fall. You can’t help states where [homeowners] are 50% or 60% underwater. People are making a business decision to walk away from the house’
Lions and tigers and…a business decision, Oh My !
Bad Andy,
Yeah, when -any- expense in your budget takes up 100% of your income, doesn’t leave room for much else? Normally when I see 100% of a person’s income ‘dedicated’ to (1) thing ( it’s usually drugs! )
What I’ll need to weigh going forward is having to bring a check to our closing at some undefined point in the future just to get out from under shoddy, bubbletime workmanship!
My problem is, I have to ‘live’ here. Unlike Bubble-aholics that don’t give a rosy rip about the mess ‘others’ are left with, I’ll want to make Full Disclosure on the const. issues we’ve already contended with and leave open the possibility there could well be more! I won’t feel right about it until the potential buyer has had THEIR inspector do a thorough tour of the property. Still… want to make an offer?
He owes $31,973, but the home is only worth about $14,000.
During the bubble that was the price of a “cheap” car.
Oh how the mighty USA has fallen!
The bank initially rejected her loan-modification request, but then reconsidered and tacked on the $500 to help capture $10,000 in back payments.”
Cause banks are your friends!!!
Look at the bright side - only 19 more payments to go!
Perhaps shenanigans like this is why there are so many modified mortgages are re-defaulting.
“‘When we finally negotiated our Home Affordable in September of ’09, the house was appraised at $157,000, and they refinanced it for $253,000 for 2.75 percent for five years, 3.75 for the sixth year, and the seventh year it was 4.75 in which it would finish out the life of the loan.
This is an AWESOME rate and deal. Where can I get something like it? Oh, I can’t, cause I am NOT a deadbeat. I did not buy something I could not afford, then take out an home equity loan, get $66,000 (spent on who knows what) of debt forgiven and then get a rate well under the best rates for credit worthy customers.
When we reward deadbeats and fools, soon the people playing by the rules see that the rules mean sh_t and start playing by the new rules…
I am so glad 0bama is helping these people out with his stash.
Oh please,
The rules were broken years ago when this whole fiasco started.
The Shumans in Reno have a big problem. On one hand they say that going into foreclosure “didn’t set right in our hearts.” Just a while later they are going on about the bank sharing the loss on their joint investment.
You can’t have it both ways. Either you are going to follow your heart or make a business decision. The bank has no heart to follow. They are not going to change anything unless you show them that they are going to lose more money by not seeing things your way. Why would they change anything while they are still getting their money?
It ain’t about heart….Show me the money.
When I read that quote - “didn’t set right in our hearts” - I found it hard to believe that people actually talk. It sounds like the way that characters in old Western movies spoke. After they were through speaking to the reporter did they go off to brand some cattle with Hoss and Little Joe?
I meant to write that I found it hard to believe that people actually talk like that.
Banks have no hearts and no morals to follow. Yet somehow, the American householder is supposed to reciprocate asymetrically with strict observance of traditional mores regarding debt repayment.
What’s good for the goose is good for the gander, and what goes around comes around again. Sorry, Mr Banker, sir — live by the sword, die by the sword.
“But overall, Cortright said he is optimistic about the future under the ‘new normal,’ where people spend their time differently, buy less ‘imported crap’ and build better relationships and experiences. ‘We have a big opportunity to do things differently,’ he said. ‘To create a new good life.’”
Given our assets and advantages, if Americans were prepared to stop acting like idiots and endure a tough decade for the sake of the future, we could turn everything around no problem. But I am not optimistic at this point. It will take worse than this to change our culture.
What’s this about a new good life? The life described above sounds a lot like the life my parents provided while they were raising me.
“Traditional monetary policy has been rendered inept. The Federal Reserve had high interest rates traditionally and could lower them to stimulate lending and boost the housing market. ‘But as we all know interest rates are very low,’ he said. ‘We used all the economic ammunition - we already shot the bullets we usually use to stimulate the economy - and as a result we don’t have them to use now.’”
Plus RAISING taxes in a recession
Plus hammering small businesses in a recession
Plus massively growing government in a recession
Plus massively adding onto debt of government in a recession
Plus no one trusts the government will let business keep profits so why invest?
Plus punishing people who take risks to grow their business or profession
equals no ammo
equals no recovery
“Plus RAISING taxes in a recession
Plus hammering small businesses in a recession
Plus massively growing government in a recession
Plus massively adding onto debt of government in a recession
Plus no one trusts the government will let business keep profits so why invest?
Plus punishing people who take risks to grow their business or profession”
Trust me…Suzanne researched this !
“‘They underestimated it,’ he said. ‘No one anticipated how far prices would fall. You can’t help states where [homeowners] are 50% or 60% underwater. People are making a business decision to walk away from the house.’”
Is he talking about any state in particular?
- The state of desperation?
- The state of hopelessness?
- The state of household bankruptcy?
- Other?
…of the Union…2012?
“Unfortunately, the current policy from the Obama administration goes in the opposite direction. Rather than realistically assessing what is best for homeowners, the policy seems intended to do everything possible to persuade people to keep sending checks to the banks, even using taxpayer dollars as an inducement.”
Isn’t this exactly the point: Encourage loanowners to work their behinds off to continue making crushingly high payments, in order to avoid an outright collapse of the banking system? This is Megabank, Inc’s new aged share cropper system of milking the FB labor pool for all it’s worth until their health or their spirits break, whichever happens first…
‘Encourage loanowners to work their behinds off to continue making crushingly high payments, in order to avoid an outright collapse of the banking system’
I wonder if is there is any one answer to why these things are being done. Certainly there is a population that thinks prices can be manipulated indefinitely. Whatever their motivation, it is doomed to fail. Every bubble in history has met the same fate.
Here’s a tip for DC; these programs you are trying will end up being resented and I doubt your wall street buddies can vote enough times to put you back in office. But for any aspiring representative out there, if you could get on the right side of these issues, in the end you’ll look like a genius compared to those around you.
“…if you could get on the right side of these issues, in the end you’ll look like a genius compared to those around you.”
I’m going to pass this advice up the chain to politicians in my circle. It sounds like a surefire recipe for throwing the bums out who are perpetuating the current mess…
“I wonder if is there is any one answer to why these things are being done.”
I think there are two big ones:
1) Home “owners” outnumber renters
2) Wall Street is the 800 LB gorilla sitting on top of gov’t.
Both of these constituencies want home prices to re-inflate.
3) Most likely, a higher proportion of home “owners” vote than do renters
+1 Exactly!
Ben, any politician who proposes this will never make it to office, much less stay there. Yes, it’s better in the end, but you can’t get over the initial hump.
I’m still in favor of the limited draconian cramdown; i.e partially discharge principal in BK, only for primary residence full doc income etc, and only if the new principal is recorded as a comp. That’s starting to look like the best way to go. And I know it would work because the bankers were so hell-bent against it that they shut it down in the Senate in a microsecond. The only news coverage was Sen. Durbin’s famous “the banks own this place” remark.
That’s one of the best arguments against trying to reflate the bubble — if Americans weren’t significantly overpaying for residential real estate and thereby diverting a portion of their incomes to banks in the form of interest, that money could be used for some other spending that might result in jobs. I do have strong doubts, though, that there can be any large-scale job creation in this country as long as global labor arbitrage exists.
I will concede being surprised at the all-out effort being made preserve or restore pricing which does not match incomes. Our leaders have bet everything we have, and then some, on the belief that the debts and obligations incurred in the process will be paid off by phenomenal economic growth in the future.
That’s not going to happen.
“Our leaders have bet everything we have, and then some, on the belief that the debts and obligations incurred in the process will be paid off by phenomenal economic growth in the future.”
I was guessing the plan was to use seigniorage creation to get ‘er done?
P.S. The printing press technology can also stimulate exports, as long as our trading partners don’t play “beggar thy neighbor’s export industry” tit-for-tat.
Isn’t this exactly the point: Encourage loanowners to work their behinds off to continue making crushingly high payments, in order to avoid an outright collapse of the banking system?
Except, we seem to be getting much closer to the day when a critical mass of people will finally realize:
- Their jobs aren’t coming back
- The one-time value of their house isn’t coming back
This should speed up the rate of a wide range of debt defaults and lead the next leg down in housing prices and the economy.
There’s going to be a lot of anger if these borrowers realize to the extent they were used. And in the end, the banks may well sink anyway, just later.
The lack of success of loan modifications proves that you can’t make a bad loan good,or a unemployed person can’t make a payment if they aren’t reemployed .
Liar loan borrowers were gamblers and equity extractors were living high on false appreciation equity . These borrowers didn’t buy a house to live in , it was a investment that went wrong.
I have thought a lot about how the Lenders thought their Credit Default
Swaps would cover their folly with loans . Maybe the issue is the Insurance Companies didn’t underwrite their Insurance Policies on loan bundles and its clear the reserve requirements were lacking . The media never talks about the Insurance Company factor in the meltdown .Who got the biggest bail-out ,,,,AIG the insurance Company ..180 billion or more in a bogus rescue loans . Course the Banks/Investment firms have got billions in Fed loans they haven’t paid back . What is it about the financial systems that
were based on a whole lot of game playing that would result in BK if
entities actually collected on the bets ? Somehow I think that the proper new regulations should be clear ,yet we get all this BS about what the answers are . You hear the Cheerleader say that they can’t bring back
Glass-Steagall because the Globalism of the financial systems won’t
work. Just because they took the Casino games global doesn’t make them any less risky ,in fact more so risky .
The insurance companies figured they would make enough on investing the premiums plain and simple. That’s what happens in a soft insurance market, underwriting gets thrown by the wayside and anything goes. Then we have the exact opposite for a number of years, then wash, rinse, repeat.
“we have 50 million extra bedrooms”
HOOK ME UP
Reminds me of the book “House of Leaves.”
“It is probably best to leave the gods out of discussions of economic policy, but this barrier was breached in November when the CEO of Goldman Sachs, Lloyd Blankfein, told an interviewer that Goldman Sachs was doing God’s work.”
Lloyd Blankfein should be imprisoned, if not executed. The damage he, and all of his evil, narcissistic friends have wrought is unfathomable. The contempt he has for the citizens of this country oozes from every sentence which spills forth from his razor lips. The great tragedy in all of this is that NOTHING was done to the people who orchestrated this whole meltdown. They were REWARDED.
Reading quotes like this makes me feel like we are repeating history again with the robber barons of the late 1800s.
Reading quotes like this makes me feel like we are repeating history again with the robber barons of the late 1800s.
The robber barons of the 1800’s would be jealous.
I guess if God is Satan in his deluded world then yeah he’s doing God’s work.
Dow 10,000! Yee-hah!
Let’s see, when have I heard that one before.
That was my “forecast” (pulled out of the nether regions of my corpus) as of the pre-coffee hour this morning…
“And he said economists don’t know what the future economy will look like. In fact, he said, listening to an economist about what will happen next is ‘like getting driving directions from someone who’s looking in the rear-view mirror.’”
Doesn’t the Fed pretty much conduct their operations while looking through the lens of the rear view mirror?
I can’t help but wonder what became of less-than-outstanding consumer debt as of late?
Consumer credit drops
Outstanding debt held by consumers falls for a record 11th consecutive month.
Key point from the story:
After decades of steady increases, debts are falling because consumers are paying down balances and because lenders are writing off bad debts as uncollectable.
WE GOT ONE!
First American State Bank of Minnesota!
(All they need to do is add “Community” to their name and they would have had the holy trifecta of bank names in their name)!
Come on FDIC, don’t let the weather and the Super Bowl slow you down, Georgia, Florida, and California are feeling left out!
(I’ve switched from coffee to beer…so apologies in advance for the irrational exuberance.)
OK, Mr FPSS — given that you are back on the board for the moment, can you comment on this recent development? Is some really big S about to HTF that we don’t know about just yet? Enquiring minds want to know…
The Financial Times
Haven demand pushes dollar to 7-month high
By Peter Garnham
Published: February 5 2010 12:17 | Last updated: February 5 2010 22:45
The dollar surged to its highest level in seven months on a trade-weighted basis this week as worries over fiscal problems in Europe boosted haven demand for the US currency.
Concerns over the size of Greece’s budget deficit have dogged the euro during the past month, but those fears spilled over into a broad-based flight from risk that saw global equity markets tumble and the dollar push higher across the board.
Equity markets slumped as investor concerns not only heightened about Greece but switched to focus on other countries on the periphery of the eurozone, such as Portugal and Spain, which also sport large fiscal deficits and high labour costs.
The dollar index, which tracks its progress against a basket of currencies, rose 1 per cent over the week to a high of 80.256, its strongest level since July 13.
Some analysts said the price action on financial markets was reminiscent of that at the height of the financial crisis sparked by the collapse of Lehman Brothers in September 2008.
…
I wonder how much mischief those old school Greek reds can make? I can almost hear Uncle Buck faintly whistling the Internationale.
“Your house is worth shit. Get used to it. The shit value of homes in Washoe County since the real estate bubble burst is not news to anyone. Here’s the part that’s hard to swallow: Your house may never be worth what it was worth when you bought it. In all likelihood, particularly if you bought at the height of the bubble, your life savings are gone.”
“There’s a simple formula disillusioned home owners are using to break it down. It looks like this (M+D-d)at=U. In other words, M is mortgage, D equals down payment, d is devaluation, a equals appreciation, t equals time, and U is f*cked. It’s that simple.”
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Now this post brings me joy to the point of crying.
Take a look…. all of you…. lying realtors, deluded mcmansion debt slaves, chronically underemployed morons riding the collapse all the way to the bottom, retire in shangri-la losers…. every single one of you. READ IT.
Your house was SHIT then, it’s SHIT now, and will always be SHIT. Why? Because it’s a manufactured item and manufactured items end up right back in the ground right where it came from……. Just like SHIT. But as combotechie asserts, stay with it…. keep paying!!! And don’t let go!!! Ride all the way to the bottom….. Only then you’ll figured out just how royally f_cked you are.
I don’t know much but I see the pain is going to be bad and I think that most don’t deserve what’s happening.
Policies messing with housing were a bad thing to do to us.
One part of me agrees with you. But it wasn’t that long ago that I was derided by the snobbish howmuchamonthers. I know it’s been overstated on this blog but how many times did you hear “get it now… hurry”, BS from twenty and thirty something real estate tycoons like “I’m going to retire early” or worse yet, “I’m semi-retired”. And don’t forget the local wood butchers who fancied themselves as the next Bob Toll and Frank Lloyd Wright. Where are they now? Where’s that bold, brash confidence? What’s up with that??
I can comfortably say that I have no empathy for these people. By 2006, if they had no idea the outlandishness of the mania, they just weren’t on the same planet as the rest of us. What could they have possibly been thinking in 2006, 2007, 2008??? Roughly 15 million sales combined took place those years and even today, prices are still grossly inflated.
The fact that there were 15 million sales subsequent to the point when it was blatantly obvious that prices were grossly inflated, tells me this was a cultural phenomenon. 15 million morons…. it’s a huge number of people who had to have some clue that they were committing financial suicide but jump into the cesspool of corruption anyways. Screw’em. And further to the point, jail every single lying realtor(most of them) who colluded with mortgage salesmen to pressure appraisers to “meet the number”. I know for a fact it happened frequently.
I guess I kinda do remember that stuff now. They weren’t much fun at parties that’s for sure.
“local wood butchers”
I love this.
But the public keeps crying “do something - you’re not helping us.” What it seems like they all want is a cram down and then a new loan based on the new so-called value. And when the big bad government is done fixing that, it should get out of everyone’s lives and stop trying to run everything.
Among the people I know here in AZ, strategically defaulting seems to be getting more popular every day. There are no fewer than 5 short sales currently listed on my street (out of approximately 20 houses) that are strategic defaulters.
Since Arizona is classified as a non-recourse state, I recently spent some time digging into the law to see exactly what it actually says. Back in the early 1970’s, two anti-deficiency statutes were passed. Basically, as long as your home meets the following criteria, banks are unable to pursue a deficiency balance after foreclosure:
1. The home is situated on 2.5 acres or fewer
2. The home is occupied (including occupied by renters)
3. The loan is “purchase money”
The law is pretty black and white until you get to the concept of “purchase money”. Apparently that does NOT mean it has to be the original loan used to purchase the property as it does in California. In Arizona, that simpy means that as long as you don’t take out cash when you refinance, the purchase money nature of the loan is maintained.
So homeowners in Arizona that purchased between 2005 and 2007 are 50% underwater (on average) and are likely almost all protected by the state’s anti-deficiency statutes. Unless we get dramatic appreciation in the very near future, it seems pretty likely that the vast majority of these people will default.
Even though prices have already dropped dramatically in Arizona, we have a long way to go.
If you have refied in California you are F’d.
Any lender doing business in a non-recourse state who doesn’t demand a 20% down payment should not qualify for government support programs; they gambled and lost.
How can you tell when your blogdiction is getting out of hand?
- You have just finished a long week of hard work, and your body tells you it is time to go to sleep, but your mind is craving yet another Schadenfreude fix… I can’t hardly stand this craven feeling!!!
Meanwhile, in frothy bay area Callyfotress areas they still drinkin’ that super delicious koolaid and telling the poor misguided wannabe houseslaves that the prices are the best ever for buyers and buy now before they go up - and what is so disheartening is that they are - I truly have to button my mouth listening to some who are estactic that a house near theirs is up for sale for 1.2 mil - which means theirs is worth more coz theirs is better - which is great coz they were upset when their house dropped in value from 1.3 to barely 1.1. To which I think let’s see you sell it first….please if anybody is listening up there - get the housing bubble to pop here now - like lightning - anytime now…….
Please…….
Pride - probably the worst of sins.