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Time to take out a really BIG mortgage

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From: Get out of jail free

<div class="ubbcode-block"><div class="ubbcode-header">Quote:]"This situation calls for a vigorous response," Bernanke said in a speech to the Independent Community Bankers of America. The only way to avoid millions of foreclosures is to figure out how to reduce the principal amount the homeowner owes.

In other words, face up to the fact that home prices have plunged and won't go back to lofty levels for a long, long time.

Because foreclosure is so expensive (taking 50% of the principal in legal fees, missed payments and other expenses), it probably makes more sense (and dollars) for the lender to simply write down the value of the mortgage to what the home is actually worth on the market. Writing down the principal would allow the borrower to refinance into an affordable mortgage in many cases. [/QUOTE]

I feel sick.
I should have bought a bigger house not made payments and spent all the money on cars.
I'd be a lot better off...
 
I am in the process of buying some property right now...looks like I have a plan!
 
Yes it sucks.

But I'm in buying mode too. Made an offer on a bank owned short sale a couple of weeks ago and am still waiting for a response. God their slooooowwwwww!
:wall:

"Short Sale" what an oxymoron if there ever was one.
 
I do try very hard to be sympathetic to folks that might loose their house, but I'd have to agree with you on this one. Rewarding folks for poor financial choices seems, well, not right. I can fully appreciate that there may be good financial reasons for the banks to do this, but still...

We only bought what we could afford -- would the bank write down my principal if my house value falls?
 
I don't see how they could do this for just those who are in financial difficulty. It would have to be applied evenly across the board to all property owners (with mortages), or not at all. Otherwise there would be mayhem across the country.
 
BIG SECRET FOR THOSE WHO ARE IN MORTGAGE TROUBLE: Real estate markets are historically (and somewhat predictably) <span style="font-weight: bold">cyclical</span>! :sick: Face it: there's nowhere for real estate values to go but DOWN! :cryin:

I love all the hype about the real estate value "plunge" that's occurring. Really, there was nowhere else for valuation to go! Real estate values have been rising for many years now, increasing more than 100 percent in the past decade for some areas (the value of my home has nearly <span style="font-style: italic"><span style="font-weight: bold">tripled</span></span> in the past ten years)!

Wouldn't the casual observer/buyer notice this trend and plan for it when purchasing??? It's difficult to have sympathy for some of these folks who purchased McMansions on variable rate credit. In simple terms, it's just plain <span style="text-decoration: underline">stoopid</span> to purchase a home that you cannot afford.

Looks like the good ole' taxpayers are gonna bail some of them out. We're great, aren't we??

Us hard workin', practical, law-abidin' types are the pack mules, once again! :wall:
 
Its funny how things are stated, real estate values by me have actually held or gone up.

Supply and Demand :wink:
 
now my brain gears are spinning ...

How would the taxpayers "bail them out"?

Tom
 
"All the debt counseling, foreclosure freezing, HOPE alliancing, and interest-rate reducing haven't made a dent in the problem yet. So far, he said, <span style="font-weight: bold"><span style="text-decoration: underline">you haven't done nothing</span></span>." Well, all I have to say is that not only does Bernanke not have command of the English language, he doesn't have a clear picture of the problem - Greed and the "I want it all now" attitude of the under 40 generation. I think I'll go out and overbuy a McMansion now! Writing down the principal makes about as much sense as the foreclosure act itself. Perhaps the lenders just need to allow the borrowers to refinance allowing an increase in the life of their mortgage to lower their payments and come in at a fair rate of interest - certainly not today's prime.

Wow am I ever going to hear it now!
 
There are SO Many ways that we, the taxpayers, are footing the bill that my head is reeling!!! How can we afford all these great works we are paying for (current war and past wars, AIDS, aid to emerging nations etc.) and still complain about taking care of our domestic problems?? We complain about bailing out our neighbors while we waste billions on those whose alliegence to us is questionable! :crazyeyes:
 
<div class="ubbcode-block"><div class="ubbcode-header">Quote:] historically (and somewhat predictably) cyclical[/QUOTE]
I'm treading lightly on this one but apparently all forget the major bank closings of the 80's by the FDIC...the government was trying to absorb all the bad loans and processing collections then in one swoop stepped in and allowed the banks to write off all their billions in bad debt....someone pays for it...been there before...we're there now and will be there again...
 
I guess in theory it sounds like "the taxpayers" pay for it. I'm afraid that running out to buy another McMansion may not be as easy as it seems. Lenders are *real* tight with money nowadays - so unless you have cash in hand ....

But look at the 2008-2009 federal budget - $4 trillion. That will produce a huge deficit for just that one year. But that deficit will be added to the already huge federal debt. Oh, and don't forget the current military action in the middle east is "off budget". Also off budget is the contracted "private defense forces" we're paying with money that doesn't really exist. And of course I have to keep in mind the obligations we're making for future payments for death and disabilities. None of which is in any budget.

To be honest, I'm glad we're discussing "taxpayers footing the bills", but I'm afraid in reality the bills just get added to the debt. We're not really paying for all that's going on - we're only paying for part of it.

It's our future generations who will be paying for it all.

Tom
 
NutmegCT said:
I guess in theory it sounds like "the taxpayers" pay for it. I'm afraid that running out to buy another McMansion may not be as easy as it seems. Lenders are *real* tight with money nowadays - so unless you have cash in hand ....
Click to expand...

That is true. I'm just buying land and putting 40% down and I'm getting a financial colonoscopy. The last mortgage I got was 9 years ago and there is more than twice the paperwork now there was then and most of it is disclosures to try to "ensure" that the borrower knows what they are getting into.

However, the idea of knocking the loan amount down rather than foreclose is nothing new. It's been going on forever. That, in and of itself, costs the taxpayer nothing.

One problem that there seems no end to is the total lack of ability of many people to separate their wants from their needs. If I see another family with two relatively new cars, a big house and 150 channels complain about how they would love to have a parent home with the kids, but can't afford it....
 
alana said:
From: Get out of jail free

<div class="ubbcode-block"><div class="ubbcode-header">Quote:]"...it probably makes more sense (and dollars) for the lender to simply write down the value of the mortgage to what the home is actually worth on the market. Writing down the principal would allow the borrower to refinance into an affordable mortgage in many cases.
Click to expand...

[/QUOTE]

Well, I'm all in favor of an over-eager and/or greedy lender eating his loss.

The wonderfulness of capitalism supposes that big profits are compensation for risk taking and big losses, if and when they happen. The impecunious buyers aren't the only culprits in this mess, imho.
 
hmmm - most mortgages are insured: the PMI (or MIP) in your monthly payment insures the lender against loss in a default.

So how does that work in reality? If the borrower walks away, or stops payments and loses title, doesn't the lender still get all the money (from the private mortgage insuror or the federal housing admin)?

If the lender "writes down" the principal, isn't the lender then guaranteeing to lose money, instead of getting it "all" from the mortgage insurance?

T.
 
PMI does not insure the full amount of the loan. It insures between 10 and 20% plus some fees which would be related to foreclosure so that the bank does not have to eat the costs of foreclosure and selling its collateral.

The problem is that when a loan is made on an inflated purchase price with little or nothing down (or in fact loaning more than the property value), then the collateral goes down in value, even with PMI and floreclosure, the lender will not recover the loan amount. What they will get is the reduced value of the property, PMI reducing some costs of foreclosure, and an excess judgment against the borrower...which is next to worthless.

By bargaining down the loan amount, the cost of foreclosure is avoided and you likely end up getting the same amount from the property you would had there been a foreclosure, without the delay.

Also, don't forget that PMI is generally present only on properties where there was less than 20% paid down. Imagine this scenario- and overinflated house is bought for $400,000 with 5% down (not too unusual these days), leaving a principle amount of $380,000, and there is PMI. At some point, the homeowner is convinced to refinance...and the refinance company has "approved" appraisers and lo and behold, the property appraises for $500,000. Homeowners decide to use some of their new found "wealth" and refinance their $380,000 for $400,000 and take $20,000 for that dream vacation they always wanted and now they've "earned". Now they have a property "valued" at $500,000 with a loan of $400,000 on it- meaning there is 20% equity, and PMI is dropped during the refi. Now a couple of years later, the adjustable rate mortgage has stabbed them in the back and they have to sell the house- lo and behold, the property cannot be sold for $500,000...let alone the $600,000 they thought they would get from watching HGTV- and foreclosure looms...you know the rest.
 
Lawguy - that is excellent. I never knew how that all worked. Thanks.

Foreclosure pushes a family out of what used to be their home. Terrible. Foreclosure brings more and more (unwanted) homes into bank ownership. Terrible. But it purges the system of much irresponsibility and hyper-valuation. Not terrible. The system isn't dead. (Remember Monty Python and the Holy Grail? bodies piled in cart, and one manages to stammer "I'm not dead yet!" - but quickly gets whacked on the head.)

I digress.

It seems there are so many people wanting to point fingers, and blame others, that it just may turn into a firing squad where all the participants are in a circle. People did some really stupid (dare I say irresponsible and selfish?) things, both home buyers and lenders. But walking away from the mortgage isn't going to look very good on the credit report. And that credit report lasts a long long time.

By the way, I've been trying for several days to read your blog (in your signature). Is it still online?

Onward through the fog!
T.
 
Well, the way I see it is that the Banksters are supposed to be the professionals. They should have known what the REAL value of the properties that they were providing loans for, AND they should have vetted the buyers by the standards that have been in practice forever. They didn't. Why?? Greed, plain and simple. Have you ever thought about just what happens when you get a loan?? The bank does not really "loan" you anything. You fill out a bunch of paperwork, that binds you to a "promise to pay". They move some digits in a computer, and then they bank your promise to pay. The digits have no value, they are just digits. Your promise to pay has actual value.So, the banksters lobbied congress for de- regulation. Then they "bundled " a piece of your promise to pay, with a whole bunch of other promises to pay, and sold them to other people as if they were securities.Some of the loans were good, some not so good. So, the not so good loans defaulted, and then the securities became worthless. Then the collateralised security market has crashed, taking some of the "better" loans with it.Now, the banks are in trouble. They were processing loans that they knew were bad, and selling them off, just to make more dough for them. The chickens have come home to roost, and you can bet that anything that is done to "protect homeowners" will in fact REALLY bail out the banksters. There was something in the news a few weeks ago, where "Deutsche Bank"tried to foreclose on 15(?) houses in Ohio. The Judge asked for proof that DB actually held the title. They could not prove that... Foreclosure over.That little scenario is gonna be repeated over and over because they bundled and sold off little chunks of morgages to a bunch of different people. The banksters made this mess, and they should be the ones punished by it.I realize that this is a reaaly simplified version of what is going on, but it IS the nuts and bolts of the matter. Couple this with the devaluation of the dollar... better buy a little gold, just in case.
 
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