ArnoldCountry

Foreclosure Moratoriums: It's Time to Get Real

I somewhat agree but I do take exception to the personal responsibility statements. What about corporate responsibility? I equate many of these products to the wares of "snake oil salesmen". We have all lost sight of the old statements "a sucker is born every minute", "if it is too good to be true, it most likely is." These statement have not come about by the housing crisis, they have existed as long as there have been salepeople. The public, for the most part, have been snookered again by salespeople. A combination of wall street, lenders, loans officers, real estate salespeople all have played a part in taking advantage of suckers. Did they sign the loan documents? Yes. Did they read them? No. Every salesperson and corporate officer of those entities knew they would not. Are there abusers? Sure. Are there stupid people who beleived they could own a McMansion while having an average job? Sure. But do not lose sight... corporate greed created the products and sales peoples (snake oil salesmen) peddled them to people who were suckered. This is a time tested process.

Proposed Homeowner Bailout Plans are Loaded With Problems

While the McCain proposal may be wrong, underlying, he is the first one to accurately understand the core of solution, you need to stop the falling prices of real estate. His approach to achieve this solution is flawed.

The Obama approach is alive and well in California which has temporarily slowed foreclosures while lenders must comply with new notice requirements and delays... but we will see soon the flood of foreclosures.

Truth is, lenders are not really working out loans with consumers. They are churning out paper and making a lot of noise but consumers are being misled, loan mods and short sales are more focused on helping the lenders and not helping the consumer. Note: Persons who refi'ed and are in trouble really need to have their loan documents evaluated for TILA violations as they may be able to rescind as the best remedy.

With all that being said, a method of implementing a solution to stop housing prices from falling is quite simple:

1. Government provide financing to a new entity whose only purpose is to make new loans for the purchase of homes and NOT purchase any old loans or allow refis with the money. This would create plenty of money for sales. I would even ease up on criteria and try to make it inexpensive.

2. Tax credit for anyone who buys in the next 18 months.

3. Allow bankruptcy judges to cramdown on principal residences. If lenders know that a judge can, they will have more motivation to work out loans with consumers.

4. A moratorium on credit reporting of derogatory credit reporting, except in cases of fraud, to bring consumers who lost homes back into the market to stimulate sales. Let them buy the type of house they paid 400k for now at 200k like the rest.

All of this will lead to hitting a bottom in real estate and start the slow recovery process. As for the old loans, well, all made a bad investment, its the American way to take your losses as well as profits. That should be left alone.

California Signaling A Housing Bottom? [Housing Tracker]

Well, it does not seem to me a bottom is yet in sight. Any information coming from a real estate firm is not generally too trustworthy, they have been calling the bottom since the beginning. I know in my community here in Elk Grove, just down the road from the Stockton area, in a pocket of about 50 homes, I see 14 REO's that are not on the market. These are newer homes, built in 2005, front yards are dead, have key boxes on the doors, papers all over the porch, red tagged for no power. That is 14! I think what we have is homeowners who have given up and lenders who are overwhelmed and the data is skewed. That coupled with the Option ARM reset wave is going to make for a very hurting winter. P.S. Investors buying property does not define a market. Oops... maybe it does... arent they the ones who created the bubble? Oh well, let them eat cake.

Prime Mortgage Trouble Could Accelerate Bank Failures [Housing Tracker]

To this comment I say: "I absolutely do believe that there will be more principal reductions," Michael Gross, Bank of America

B.S. They will do it here and there so they can so they did it but truth is, they cannot afford the losses. If 50% of the loans made since 2005 have lost 20% of their value (more than that is likely) and then they right that off in a refiance, these guys will collapse. More important, unless they are a portfolio lender, the secondary market with its complex traunches used for the securities will never buy into that kind of loss in which some investors will be 100% under water by the thought. More important, people forget the disparate impact of helping a few by writing down their loan balances and then the rest who were not so fortunate. The lawsuits are coming over these kinds of issues.

Just Think Positive!

P.S. Boy those rebate checks sure jump started the economy well.

Just Think Positive!

Tim:


You missed your calling. Comedy is really line of work. I think we all miss the point even further, when I was at Disneyland recently with my kids I was given the opportunity to rub Alladins lamp and was granted 3 wishes. The first was for the housing crisis to go away. Poof it was gone. The second wish involved some money... and finally, I wished that life was wonderful and normal. Poof, the housing crisis came back. Sorry, I ran out of wishes. Maybe someone else can go to Disneyland and get their wishes.

All kidding aside. Your point is well taken. Who knows with any certainty where the bottom of prices will hit. I would agree that the "shock" of the bubble bursting is now over and anyone with half a brain acknowledges we are in deep doo doo... but we are still in the spin spin where she stops no body knows phase. All data points to increasing inventory based on rapidly accelerating foreclosures caused by resetting option arms with homeowners who are under water.

Financial institutions could stop that increase in foreclosure inventory right now by not resetting all of those option arms for the next two years by freezing the loan balances and rates and stopping the negative amortization.

But... that wont happen.

"Pick-a-Pay" Defaults Deepen - Housing Tracker

Pick a payment loans will most likely be worse. I have seen persons have a 460k loan with payments going along for 2 years at 1800.00/month all of sudden hit the 115% cap, recast and the new amortized payment jumps to 3600.00/month. Net income for the family is 4600.00/month. That leaves them $1,000.00 per month to pay utilities, cars, gas, food, etc. Cannot be done. Many families with these loans go one day from comfortably living in their homes to instant bankruptcy and having to make real choices about living. The lenders merely send them a notice saying here is your new payment next month. Its shameful that lenders expect that consumers can afford that type of payment shock. As these hit, given many of those some homeowners are under water on their values in the home already, the only decision will be to walk. Especially since there are plenty of rentals available in most markets for half their payment. Some lenders are being "generous" and lowering their rates by 2% for a couple of years but the payment still recasts and that savings is only a couple hundred per month at best. This type of shock is well beyond the shock experienced by many sub-prime borrowers.