Mortgage Defaults Already at $50bb Per Month…$700bb Won’t Go Too Far!
Posted on September 23rd, 2008 in Daily Mortgage/Housing News - The Real Story, Mr Mortgage's Personal Opinions/Research
$700bb will not go too far. Below is a custom chart of loan defaults from all lenders for the State of CA from Jan 2007 to present. CA represents about 40% of the total dollar volume in the nation.
As you can see defaults have leveled off in the summer at record high levels, which is not surprising due to seasonality, hope and the transition out of Subprime into other grades of paper. What you see below is primarily only the ‘Subprime Implosion’. However, the numbers are still near $20bb per month. This means the numbers are closer to $40-$50bb on a national level.
As we exit the Summer season and housing demand falls (surprisingly fell sharply in Aug - See Aug CA Home Sales Report), defaults should pick back up again as values fall. Early signs indicate a severe fall going into Winter. Subprime defaults will continue for much longer given the number of new defaults we are seeing and the 50% recidivism rate amongst modified subprime loans. This is mostly due to negative equity and borrowers simply finding it cheaper to rent.
But the new waive of housing defaults will come from the Alt-A (includes Pay Options), Jumbo Prime and the Second Mortgage universes. This is also due to values being down so much in the bubble states and the negative equity effect. CA prices are off 30-60% depending in the region in the past 16-months.
Compared to the size of the Alt-A, Pay Option ARM, Second Mortgage and Jumbo Prime universes, Subprime is miniscule. With prices down so much in such a short period of time, most that bought, refinanced with cash out, or put a second mortgage on their property since 2002-03 in these ‘higher’ paper grades suddenly find themselves stuck in their homes without the ability to refinance or sell.
When home owners are stuck where do the buyers come from? Move-up buyers have always been the dominant force in the market. However, now that most homeowners who purchased between 2003-2007 are stuck or can’t afford to re-buy the home in which they currently live given new lending guidelines and the lack of exotic loan programs, move-up buyers are all but non-existent. That leaves investors, first time home owners and renters to carry the real estate market going forward and they have always been the weakest market participants.
As with Subprimes, much of the Alt-A (especially Pay Option ARMs) and Jumbo Prime universes have severe recasts or resets typically after the first 5-10 years. With respect to these loan types, we have simply not got here yet. Most subprime loans reset after two to three years. We are seeing the exact same thing happening to these higher grade exotics as what happened to subprime when resets begin in earnest. It may not happen at such a large percentage of total loans but the universes are so much larger than Subprime it won’t have to and the effects will still be far worse. Also remember, when the larger loans reset the borrowers are in a much deeper negative equity position than most of the Subprimes ever were.
I have been told recently by a Green Credit Solutions, the nation’s leading mortgage modification firm with which I work closely, that ‘being upside down in the property is the single worst thing on the home owner…they tell us either to get the principal balance brought down through the modification to a level where there is equity or they will walk’. This has changed in the past 4-5 months from ‘better rates’ being what was asked for the most.
If defaults remain at roughly $20bb per month in CA and $50bb nationally and this new $700bb bailout is suppose to clean up banks past troubles, what is left for the potential $1tt in current defaults coming over the next two years? This plan is being debated today in Washington as if mortgage and housing crisis was over and they are trying to clean up the aftermath. I am sure many there really think this is about the real estate market.
Perhaps this program will grease the wheels, everyone will begin lending again and home values will soar making it so home owners can freely sell or refinance. But given the data I see daily, I am betting against that. The problem is, anything short of physical real estate being a liquid asset once again or an across the board principal balance reduction and new terms on every loan in America, and the housing crisis remain front pages indefinitely as the negative equity feedback loop continues and more borrowers are forced into loan default each month.
Chart courtesy of my research firm, Field Check Group - Real Estate & Finance
I was just sent this by a read that was pretty interesting…
Increasingly, sellers seeking short sales are encountering a new twist. Lenders are agreeing to let some short sales go through, but they want the home owners to sign a note promising to pay some or all of the balance due - debts that could burden borrowers for the rest of their lives. Moody’s Economy.com estimates that about 10 million homeowners have negative equity, a condition known colloquially as being upside down or underwater. By next June, the forecasting company expects the total to rise to 12.7 million-a quarter of all homeowners who have mortgages.
“The first wave of foreclosures involved a lot of investors who just disappeared,” says Lance Churchill of Frontline Seminars, which teaches real estate practitioners how to negotiate with lenders on short sales. “Now, homeowners with jobs and assets are underwater and want to sell. The banks want as much as they can get, today or in the future, and the owners want to get away clean.”
If the lender does a short sale without extracting anything from the seller, everyone in the country who is upside down could try to wiggle out from under and banks will take a fresh wave of hits. But if the lender pushes too hard, the borrower will default, leaving the bank in worse shape.
Source: The New York Times, David Streitfeld (09/18/08)
Recent Mr Mortgage Posts
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September 23rd, 2008 3:15 pm
this is like throwing a quarter to a trillion dollar problem,
we are only in the 7th inning of a 15 inning game
FDIC needs to be bailed out and NOT A DAMN MENTION ABOUT THAT
two large investment banks becoming banks means that the people invested there were protected to 500 thousand and now only get 100,000 protection, NO MENTION AT ALL OF THAT, and they can’t pass the bank regulation smell test
the ABSOLUTE CLOWNS FRANK, DODD, SCHUMER, CLINTON, RANGLE, ETC., are all going down and this is blood on their hands and
THE INVESTMENT BANKS GOING POOF IN THE NIGHT, DUST,
WELL THEY WERE THE MAINSTAYS OF NEW YORK AND ALL THOSE BOYS ARE FROM NEW YORK AND THEY ARE MUD
INVESTMENT BANKING PAID FOR THE RESTAURANTS, LIMOS, CLUBS, HOUSING AND EVERYTING IN NY
NOW THAT THEY ARE INVITED TO THE LENDERS PARTY WATCH THEM CRY LIKE BABIES WHILE THEY WATCHED US SINK FOR THE LAST TWO YEARS
JUST BEGINNING HERE, POPCORN, PLEASE
September 23rd, 2008 3:25 pm
Speaking of default:
We’ve finally come to the conclusion that despite a 20% down payment, we are hopelessly underwater on our mortgage. Balance is $944K. FMV is $770-830K(if all stars aligned just right), and falling. If we walk away, we can limit our loss to approx $300K.
Chances of an acceptable mod are slim, as I doubt our lender would agree to a mtg we are willing to live with, as I fully expect the value will drop another $130K, at minimum.
We would prefer to arrange a deed-in-lieu, rather than simply foreclosure. A short-sale is a non-starter, as there are no buyers and already 5 homes in some stage of foreclosure in our neighborhood of 100-ish homes.
Anybody have any advice on this process? The lender is Wells Fargo.
September 23rd, 2008 3:27 pm
And please, no lectures. We are heartsick as it is.
September 23rd, 2008 3:33 pm
This implosion is massive, across all socio-economic boarders, business lines and industries. I don’t think that the “average” american (general public) really, truly has good grasp of the gravity of this situation. I am by no means above “average,” I am not an expert in economics, finance or advanced anything. I just happen to work in the finance industry so I am exposed to housing, finance, economic #’s, etc. on a daily basis and I have become a self proclaimed “junkie” to this information. When I speak to friends and family about the current economic state (macro and micro), they are citing articles by “Cramer” calling the housing bottom right now and the “talking heads” and cheerleading gov’t officials on the nightly news continuing to describe the current state of the economy and world markets a “subprime crisis.” I am livid about this. This is not a subprime crisis - this is a world economic crisis. They don’t realize how it will affect them today or how it is going to affect them for years to come. The mass of this implosion is beyond scope. The misinformation (sloppy & irresponsible journalism, spin, intentional mis-truth’s) by the main stream media, public company executives, “experts” and government officials is blasphemous. Currently, I am not worried at this point about paying increased taxes to cover this mess. I am worried about being homeless, standing in a soup kitchen line and uable to provide for my family’s most basic needs due to the economic state of the US. I am not all doom and gloom, but seriously how can we wake up the “average american (general public)? I am at a loss……
September 23rd, 2008 3:33 pm
Oh Brother… you haven’t said what your hardship is. If you cannot pay your mortgage - and I mean really cannot - or if you are moving then let the house go. A short sale and a foreclosure result in the same problem: rough credit and an inability to buy with an “a” paper loan for 5 years.
If you simply don’t want to watch your investment shrink and see this as a loser deal - make your payments. Plain and simple.
Why do I say this? I purchased in 1990 at the very peak, lost 50% value in 2 years, but recovered all of it and more in the following 8 (total 10 years in the home). Look beyond the “right now” and if you can make your payment, man up and honor your commitment.
September 23rd, 2008 3:35 pm
oh brother,
Seriously,just walk away!
September 23rd, 2008 3:36 pm
Oh brother… I may be able to provide you with some information based on experience. What state do you live in, was is an owner occ purchase, is it your primary residence, original purchase money 1 and 2, types of loan(s), etc.
September 23rd, 2008 3:42 pm
Even $50 bil / month of defaulted loans does not equal $50 bil of losses. It might be $20bil of losses/mo after what’s recouped through foreclosure. Arguably, $700 billion could buy up all of the bad loans for 2-3 years. And theoretically they could sell them for, perhaps, not much of a loss. I’m still against this buyout package, since I think banks that could otherwise survive just fine will be able to pawn off their losses on the government. And no one’s proven to me that the failure to enact this buyout will be so catastrophic. And even if it is, so what? Thank goodness the democrats are slowing passage of this proposal with such things as a proposal to limit executive compensation for any institution that sells devalued loans to the treasury. If the dems keep attaching such poison pills (like letting bankruptcy judges alter mortgage terms), maybe the whole bailout proposal wil go down in flames. We should be so lucky.
September 23rd, 2008 3:44 pm
ya know, I’m not even sold on the whole ’subprime is done imploding’ thing. MrM’s chart seems to follow the front end of the IMF chart decently well. begin default in late 07 when the recast/reset hits … then on MrM’s chart the default takes place 5mo later (no longer 3mo since banks are so back logged)
http://bp3.blogger.com/_pMscxxELHEg/RxzD0s_7EYI/AAAAAAAABB4/ljDSXZhMG3o/s1600-h/IMFresets.jpg
September 23rd, 2008 3:48 pm
Oh brother,
A short sale may not be out of the question. Fair Market Value is what someone will pay for the house. Maybe you should list it for $699.9k and then start dropping the price until you get a buyer. If after 4 months on the market, you don’t get a buyer offering any more than, say, $650k, you’d have established pretty clearly for Wells that $650k is a decent offer. Then the choice is theirs. I’d bet they OK the short-sale.
September 23rd, 2008 3:49 pm
Carrie,
California. 1st mortgage only. Jumbo Prime. 20% down payment. 30-year fixed at 6%. Purchased Nov 2005. Price $1,220,000. 20% down ($242K), plus costs. $60K in improvements all paid in cash. Never refinanced. No second mortgages.
Thnx
September 23rd, 2008 3:53 pm
Carrie,
Sorry, forgot: yes, primary residence. So as far as I know, it’s non-recourse.
I’ve been watching what I knew would be a global financial implosion. I had hoped to be able to ride it out. I no longer believe that to be in our own best interest
September 23rd, 2008 3:56 pm
oh bros,
I assume you bought the house because you loved it and could afford it.
You place sounds really nice. You got a 30yrfixed at a low rate. Everybody buys at the wrong time eventually.
I wouldn’t worry about how much equity you have lost. Be happy you can afford it. Everyone is underwater.
Heck, you buy a new car, as soon as you drive off the lot you are technically “underwater”. LOL.
September 23rd, 2008 4:01 pm
Dan,
Based on the experiences of the other foreclosures-in-process & completed foreclosures in this neighborhood and nearby, I don’t think there is a prayer of a short-sale.
And quite honestly, the local agents have had it up to “here” with working their butts off trying to sell these properties only to be thwarted time and again by uncooperative lenders.
I believe this so-called “bail-out” will cause the lenders to be even less cooperative. They will no longer have an incentive to work it out in order to cut their losses.
September 23rd, 2008 4:13 pm
I am not an attorney or CPA. I am purely providing you with information that I highly suggest your research on your own. I also am not promoting or condoning “walking.” I just am tired of the “little” guy getting blown out of the water by mis-information and lies…. That said, it appears you may have a non recourse loan based on the information you provided. And, with the Forclosure Relief Act 2007 - From 2007 through 2009 the mortgage debt forgiven in connection with a foreclosure on your primary residence may not have any tax consequences. Here is a good place to begin your research:
California Civil Procedure Codes 580a, 580b, 580d, 725a and 726
http://www.irs.gov/newsroom/article/0,,id=174034,00.html
http://www.loansafe.org
Also, be sure to send your lender a Qualified Written - RESPA Section 6 - request now. Look up this info at loansafe.org as well. Keep the request along with their response and the loan summary they provide with copies of your HUD 1 from the purchase and any other purchase documentation.
Best of luck.
September 23rd, 2008 4:22 pm
Thank you, Carrie.
September 23rd, 2008 4:23 pm
And if you “mod” this loan - non recourse goes out the window. I am sure you saw MM’s rant on this a few weeks ago. Just know… they are in business to save themselves, not you. They lie, cheat and steal… Do not sign anything from your lender without consulting a “EXPERT” in real estate law. Seriously
September 23rd, 2008 4:30 pm
Carrie,
Yes, I agree about the mod. I understand that accepting a mod traps me. Which I why I said I doubt they could come up with a mod I was willing to live with
I’ve been researching this for awhile. Hoping that it wouldn’t come to this, but preparing myself all the same.
So the advice/info you offer is greatly appreciated
September 23rd, 2008 4:36 pm
>>California. 1st mortgage only. Jumbo Prime. 20% down payment. 30-year >>fixed at 6%. Purchased Nov 2005. Price $1,220,000. 20% down ($242K), plus >>costs. $60K in improvements all paid in cash. Never refinanced. No second >>mortgages.
You realize at some point in time you will have equity again? Fluctuations are almost always (New Orleans will probably be an exception) short term. Before your 30 term is up, you will have a considerable amount of value in your home.
The fact that your “heartbroken” doesn’t sit well with me. You bought your house, now live in it…
September 23rd, 2008 4:43 pm
OD,
I know you’re being an optimist, and trying to be encouraging, and that’s really sweet
But to be honest, we’re talking about a very large amount of money here - at least it is to me.
$242Kdown + $60K improvements + $114K minimum negative equity so far (not even counting the cost to sell) = $416,000 LOSS so far, and GROWING. I’m falling further into the red each month, despite almost $6K/mo in mortgage payments.
Meanwhile, as is the case with many other families right now, our income has declined each year for the past three years, our 401K has declined, our index funds have declined (they’ve stopped declining now cuz it’s all been put into cash), and our taxes keep going up.
And yes, cars lose their value. But we EXPECT them to lose value. That is why I only pay cash, and drive them until they’re almost dead. My cars have never been a part of my long-term retirement planning
September 23rd, 2008 4:51 pm
Amen Carrie! re: getting the average american to wake up - they do not want to - I have been trying to explain to anyone who would listen, to be careful for over a year, and all I have to show for it is side long glances, being called doom and gloom, etc. the average american cannot believe the party is over, and still believe there is a magic pill to fix it. I shut up about it about 3 or 4 months ago. I wonder what these people I tried to warn are thinking now? I understand no one likes a buzz kill, but jeeze if a friend sees a speeding train coming should you not give a shout out? We have become such a selfish and greedy society we simply ignore what we do not like and then blame someone for not fixing it for us. We do need to wake people up, to stop accepting this crap from Washington, Wall st. and the media that loves to promote the “bottom”! I am at a loss too…
September 23rd, 2008 5:09 pm
How about this? Everyone who can: Make one double payment on each credit account and loan. If all that money goes to principal, haven’t we bailed out the financial system? Gosh! Maybe we can even get a tax deduction for the payment!!
September 23rd, 2008 5:19 pm
anyone consider the recent drastic move in the LIBOR index due to banks not wanting to lend to each other? Weren’t most of the 2 and 3 year non-conforming arms tied to libor? It was low for a long time keeping those adjustable rates stable, but now…….watch those adjustments of 1.5 - 2% cap every 6 months kick in. More foreclosures ya think?? Not good.
September 23rd, 2008 5:41 pm
Thanks “evil-A”…. I am so mad right now. The root of all this appears to be de-regulation of the credit markets and greed. Have the regulatory organizations, FASB, Government and Fed Reserve been asleep at the wheel or were they just in someone’s back pocket for way too long?
September 23rd, 2008 5:49 pm
I was just sent this by a read that was pretty interesting…
Increasingly, sellers seeking short sales are encountering a new twist. Lenders are agreeing to let some short sales go through, but they want the home owners to sign a note promising to pay some or all of the balance due - debts that could burden borrowers for the rest of their lives. Moody’s Economy.com estimates that about 10 million homeowners have negative equity, a condition known colloquially as being upside down or underwater. By next June, the forecasting company expects the total to rise to 12.7 million-a quarter of all homeowners who have mortgages.
“The first wave of foreclosures involved a lot of investors who just disappeared,” says Lance Churchill of Frontline Seminars, which teaches real estate practitioners how to negotiate with lenders on short sales. “Now, homeowners with jobs and assets are underwater and want to sell. The banks want as much as they can get, today or in the future, and the owners want to get away clean.”
If the lender does a short sale without extracting anything from the seller, everyone in the country who is upside down could try to wiggle out from under and banks will take a fresh wave of hits. But if the lender pushes too hard, the borrower will default, leaving the bank in worse shape.
Source: The New York Times, David Streitfeld (09/18/08)
September 23rd, 2008 5:50 pm
You can negotaite NON RECOURSE into all loan mods guys. Everything is up in the air. And in most non-judicial states, they are non-recouse by default such as CA. Not that they will never come after you but they just don’t do stuff like that.
September 23rd, 2008 6:50 pm
Regarding Democratic proposals for principal reductions: I don’t see how these can ever work. As soon as the cat is out of the bag on defaulting borrowers getting a principal reduction, everyone is going to have their hands out. Sure, if you have $ in the bank they might be able to deny you, but if all it took was being jobless, I’m sure you would see people give up their jobs temporarily to get $10’s of thousands lopped off the principal!
My guess is this is simply lip service to make it sound like they are helping out the little guy.
Any comments?
September 23rd, 2008 6:52 pm
What you forget Dan is that $50bb in defaulted loans may be of the same type as $1 trillion out there on other balance sheets in the market triggering all sorts of mark to market implications.
September 23rd, 2008 7:29 pm
Credit is tight because asset prices continue to fall. Home prices fell 5% in CA last month alone! If Paulson had a million dollars to invest do you think he’d loan it to someone so they could buy a home or start a business in southern California? Not on your life! He wouldn’t loan it at all, which is exactly what the banks are doing. Banks are sitting tight until the correction is over by necessity. If they loaned heavily into this economy we’d have to bail them out in another year or two because prices for everything continue to fall.
This bailout won’t stabilize anything and it’s not designed to. It’s a scam payoff to Wall Street. That’s why they want it done fast. If Paulson/Bernanke don’t get it done within a couple of weeks people will figure this out and it will never happen.
September 23rd, 2008 7:42 pm
If this bailout doesn’t go through will the stock market crash?
I want to know “how bad” it will be if this doesn’t go through. Is Paulson trying to scare us? As long as there are no bank runs I don’t care what happens.
The credit market needs to work itself out. It will take time, loans will be rare, but that is the cost for the insane lending practices that took place over the past 5 years.
It would be a site to see, if businesses and people actually bought or invested in things they could only afford.
What a concept.
September 23rd, 2008 8:03 pm
I was just thinking, hypothetically; IF it was impossible to get a loan, I wonder if people would realize how broke we truly are? Ideally, we should only buy what we can afford, right? Fundamentally, if you need a loan you can’t afford it.
Ofcourse this would never happen. As long as we stay dependent upon loans and debt, we will never realize how screwed we truly are.
September 23rd, 2008 8:11 pm
od,
The stock market is going to continue to decline and the credit market will continue to tighten and the housing market will continue to fall, with or without this bailout.
The recession they warned would come if the bailout were not passed quickly is already here. That train has left the station.
Further, this is not just a U.S. issue. Europe, Australia, Asia, etc. are all screwed also.
Very rough times are ahead.
September 23rd, 2008 8:17 pm
oh bros,
I guess an optimistic view would be this is a once in a lifetime opportunity also. Things are going to be cheap!! - right before the dollar loses all it’s value. ; P
September 23rd, 2008 8:26 pm
od,
Yes, that’s one way of looking at things
September 23rd, 2008 8:56 pm
If this ripoff goes through i think the dollar will be toast blackened burnt toast Treasuries will be valuable as toilet paper in train stations (might be better than std Amtrak offering) massive inflation coupled with massive depression; why? we have no industrial base or savings in this country worth the name (thank you wall St and congress) investors want a good chance of getting their cash back what are the odds of a bankrupt country that cant even go a day with out massive capitol in flows doing that?
September 23rd, 2008 9:01 pm
Their will be pain without a “bail out” a 2-5 year recession but far far worse if those corporate monsters are allowed to destroy the dollar
September 23rd, 2008 9:01 pm
Jim Kunstler and co have been going on for quite some time about the end of suburbia as we know it.
If this bill passes, and the estimated cost is around 1.8 trillion according to CNBC (they included all the other losses and guarantees the FED has taken). So that should devalue the dollar, meaning oil will spike further. If gas hits 6.50, prices will further plummet. Suburbia simply wasn’t built for high gas prices. And replacing 240 million cars with electric or hybrid isn’t the answer.
The average recession sees stocks decline by 34%, this seems like a depression IMO, we could see stocks tumble 50-60% from peak or more. House prices still have a LONG, LONG, LONG way to fall. 101.2 is the target on the Case-Shiller.
September 23rd, 2008 9:13 pm
I’ve got to admit - I’m scared to death right now. Deep down I want someone to step in and magically make this all better. But I realize that no one has a financial magic wand and I am just being childish. I have instead been emailing my senators and congressman daily asking them to (if not block this bailout altogether) at least put some oversight on it, make sure the courts can review it and do things to make sure that any Wall Street company participating in it feels some pain along with the taxpayer.
I did not vote for Paulson - I absolutely do NOT want him to have this much power. I hope my elected officials are listening!!!
September 23rd, 2008 9:33 pm
By Anthonty Freed:
Liars, and the Lying Lies They Are Telling YouLike a lot of folks who are completely flabbergasted by the Government’s repeated efforts to whitewash and gloss-over the all of the gross negligence, malpractice and criminality of this - The Worst Financial and Constitutional Crisis in Our Nation’s History - I decided last night I would look up some of what the guys and gals at the Federal Reserve, Treasury, SEC, and FDIC were up to between 1997 and 2007, and how it is they could not have seen any of this coming until apparently this week.
I say apparently because the bureaucrats and sycophants are all maintaining that this whole fiasco is as big a surprise to them as it is to poor Mom-and-Pop getting foreclosed upon in their Golden Years.
I know they are lying, and you know they are lying.
So once again we will play the cat and mouse game of “who knew what and when” as the Crooks all disappear into retirement with their $Trillions of stolen loot, the Politicians will blowhard and achieve little or nothing, and the whole thing will fade away from the headlines with time and the advantage of a short American attention span
BRILLIANT!!!
September 23rd, 2008 9:50 pm
Credit is tight because banks can’t find a solid place to loan their money. Banks are going to sit tight until prices stop falling and things settle down.
It doesn’t matter how many losses the government absorbs for the banks. Prices are falling and banks won’t lend. Neither would Paulson, Bernanke or you.
Everybody knows a Shizz storm is coming so how many of you are loaning money to your friends? Nobody. If you’re smart you are hoarding your capital. Why would banks be different?
September 23rd, 2008 9:54 pm
Yeah, there’s definitely no way the price tag will remain at $700b. Even if the CEOs accept the pay caps (which Pelosi is essentially promising will be part of the bill ) and the banks can handle the price discovery that will occur, the $700b figure is still only 5% of outstanding assets (according to Bernanke at the Senate Banking Committee hearing today).
In my humble opinion, this “mother of all bailouts” will NOT address the root issue, which is the supply/demand of US housing. Lending will not increase, loan guidelines will not relax and a large percentage of the US population will continue to be shut out of the mortgage/housing market. The world has been burned by 21st century mortgage lending and it will be decades until a new generation will have forgotten about our generation’s “irrational exuberance”.
Meredith Whitney has it right when she said on CNBC (Aug.4) that the home prices will drop well below the 2003 levels. When we had nearly 70% homeownership and the world was pouring money into the US mortgage market.
http://www.cnbc.com/id/15840232?video=812131553&play=1
Damn, another depressing post.
September 23rd, 2008 11:45 pm
Stu - That is brilliant. Sums up exactly what I was thinking but could not articulate. If I had half of the enlightening and knowledge that I have now 2 years ago, I could have seen this coming like a freight train - and I am by no means any sort of genius like the individuals that run Wall Street, the US Central Bank or the Government. Maybe there is a reason why a large portion of our society is mathmatically “challanged.” Keep the masses stupid and blame us for the disaster because we are so stupid - darn sub-prime borrowers and speculators! They are the one’s who caused this whole mess. Isn’t that what Paulson was saying a few months ago? Or better, Bernanke saying that the sub-prime crisis was “contained” in June 07. There were only a “few” deliquent home loan issues by deadbeat average “joes” that got loans they could not afford. I think borrower “fraud” was used a lot during that time. You know it was all the “borrower” and not the lenders or the banks.
September 24th, 2008 12:34 am
Mr M. You need to calculate the rough secondary value of defaulted mortgages and then see how much the 700bn will buy
If you don’t trust Bernanke, you are beyond reason in my view. He has no friends on Wall St. He is a professor steeped in the issue of the great depression. He knows that the RE situation is so serious that without support, banks share prices will fall to the point at which the majority of banks have to be nationalised (since no one will give them capital) and the FDIC doesn’t have enough money anyway. The collapse in availability of credit for non-housing lending would be enormous and potentially send the US into depression.
Remember this is NOT a bail-out. These are not loans or gifts.
It is investment by the ‘ the investor of last resort’ wrt mortgage backed assets.
Sure this investor is not looking for a profit and may make a serious loss, but that is a long way from a ‘bail-out’.
By the way , on another subject, I am not sure if Krugman (big respect please note) is exactly right in saying that Paulson is lying over oversight. Legalese need to be read with a cold towel on the head. Just because it gives Paulson the right to irreversible decisions, it does not seem to rule out review. In other words, they do some deals and then the oversight reviews progress and may steer the managers for the next set of deals: for after all the 700bn cannot be invested all at once and Paulson is an employee of government and subject to all the usual influences and chain of command. What you cannot have is oversight affecting deliberations on each transaction.
My wake up in the middle of the night fear is the terrible size of the REO inventory. In my view, as an economist, the government needs to centrally guide the pooling of much of this stock and its rental , since in most places , the prices have fallen so much that rental yields will cover costs: though the repair cost of some REO stock is worrying of course. in other words, force REO rental if it is commercially remunerative to do so.. Right now no banks seems to be doing this and as a result is making the price spiral worse even in places where price at at or even below long term norms. There are not enough mortgages to absorb all the REO coming without prices having fallen a great deal more I fear. Hopefully Paulson will do this for new foreclosures rental to the mortgages assets he buys: rental to the current owners or others.
September 24th, 2008 1:01 am
Graham Cox
The problem isn’t that banks are going bust. The problem is that asset prices are dropping which is causing the banks to go bust.
This bailout does nothing but pay off the last round of bank losses. Prices will continue to fall and this time banks aren’t going to lend into the storm. Credit markets are going to remain tight until prices stabilize.
If prices stabilized banks wouldn’t need a bailout. They’d start loaning cash to earn profits.
September 24th, 2008 1:52 am
Well Stu and folks thanks for all the reads here. I did some extra reading last night as I wanted to find out who was responsible for what. I read some of the long winded papers,studies by the economists at the Fed. These guys were studying how to, Mortgage Market Innovation. Since the 30’s to 94 graphs things were flat on loans but with these studies after that, up and up, unreal. What it looks like is the fed, for all their banks, the white house, and then wall street got these system Innovations really going. http://research.stlouisfed.org/econ/ Of course the white house was preaching the, ownership society with all these new loans. The real crooks are gone?
September 24th, 2008 1:59 am
Hey Graham. The banks are not going bust but their clients and their country is. Anyways this country has ceased to exist. The new name is now Goldman Sachs States of America. Save the banksters are the hell with the rest.
September 24th, 2008 2:05 am
As MrM points out, there are 50.8 million people who have a mortgage in the U.S., so instead of gov’t. bailout to Wall St., why not payoff every mortgage in U.S. up to 1 million per homeowner, which would be 508 billion, far less than the proposed $700 billion, then most Americans are free and clear, then the gov’t can start their investigation into how we got here in the 1st place, make all necessary arrests and convictions, oh yea, they could also make the hearings all pay-per view and all proceeds go back to the gov’t for the home owner bailout therefore paying it off and we are all home free while we get to watch the likes of Mozilo crying like a bitch and apologizing to the American people for cashing in 120 million worth of stock while the people in the trenches were still making decisions on approving new loans and ultimately losing their entire worth while trying to stay dedicated to this falling empire. Just my .02
September 24th, 2008 2:05 am
Aid package. I like the word. Not one cent is going to the elector or the taxpayer. You can see how these politicians are fascists. They are about to load 10,000$, hell I don’t know 30,000$ maybe ?, on the back of each citizen to erase the banks fiascos and Paulson’s buddies. A couple of days before Lehman went bust, the key employees paid themselves 2,5 billion in bonuses. Bastards.
http://www.reuters.com/article/marketsNews/idUSN2341833920080924
Fannie/Freddie/AIG/Lehman under investigation by the FBI.
September 24th, 2008 3:13 am
Graham,
great idea for the government to be involved in renting out the oversupply of homes and chase out one of the last pools of potential investors in the housing market via oversupply of rentals. This is even more likely to put investors upside down by pushing rents through the floor. Can we stop asking the government to “fix” everything. The fix is to take our medicine and allow prices to come back in line with incomes but I guess then we’d all have to admit that we aren’t nearly as wealthy or, in my case, as close to early retirement as we thought.
September 24th, 2008 3:48 am
Stu said “I know they are lying, and you know they are lying.”
That pretty much sums it up Stu. Paulson worked for GS before he got this job and I was told he received a fat compensation package (many millions) when he left GS..
The truth is, he is looking after his wall street/banker friends and could care less about the average tax payer.
Greedy, lying SOB.
Hope M.M doesn’t mind me posting a link here from Karl D.
This is a must read…his whole website is a must read.
http://market-ticker.denninger.net/archives/588-Rescue-plan,-Bailout,-How-About-Den-of-Liars.html
September 24th, 2008 10:44 am
Where is Andrew Jackson when oyu need him? Our new president needs to take on the bank cartel. Or else the people of this coutry need to march to the Fed and take it over. Take OUR MONEY BACK.
September 24th, 2008 11:39 am
Mr. Cox the economist thinks rentals are the way out without understanding that being a landlord requires its own set of skills banks do not have. Renters can be extremely destructive to a property.
September 24th, 2008 11:47 am
Economists: Mostly unemployable as such except in government service or by academia. They tend to applaud the existence and use of the power of government to do good even though the opposite is usually the result. When this opposite happens the want more help from the government saying capitalism has once again failed. When the government is absolutely bankrupt and the currency destroyed they’ll end up advocating outright fascism.
September 24th, 2008 1:26 pm
Sigh.
OK. I line in Nevada and owe $252k on a house that is now worth about $180k.
I have a pay-option-arm with IndyMac (now Federal) Bank. We recast in July from a payment of $1100/mo to $1988/mo. We became delinquent in August after being able to make only one payment of that high amount.
IndyMac made us an offer, in light of their new “streamlined modification program” (which we still cannot afford - $1580/mo). We retained Green Credit Solutions at the end of July to help us obtain a modification, to the tune of $3400. Green Credit Solutions has yet to submit any “plan” to the bank/investors - or presented any plan to me.
I feel so discouraged. Time is running out.
September 24th, 2008 1:33 pm
I mean I LIVE in Nevada.
September 24th, 2008 1:42 pm
What really frustrates me is the fact that they all STILL DON’T GET IT!!!
The problem is not subprime housing or liquidating the system or capital being raised. The subprime issue is nearly behind us and nearly 2 million homes have been foreclosed on as a result. This will not help them as they are already past any help and have already for the most part lost their homes. The system has been getting liquid for months now by the Fed and all of their lending window acronyms and that has not done a damn thing to alleviate anything or anyone for that matter. As far as Capital is concerned, if the lenders just sold some of the crap they want to sell us tax payers to the street, and slowly, then they could unwind this themselves. They want a “Bail Out” like everyone else to date however because they know that they will make more money in a “Bail Out” and some are smart enough to know they will be able to stay in business as well.
The problem is and always has been about the COST OF HOUSING!!! The run up saw homes get sold to millions of Americans that couldn’t afford them when they bought them and still cannot afford them today. Hence the rate of record setting foreclosures that has come to pass. Until homes get adjusted back down to 3X income ratios or even lower, until a homes mortgage is the same or even lower than the cost to rent, and until a lot of people go bankrupt, companies fail and a recession occurs nothing will change… NOTHING!!!
You can throw all the money you want at it, but that is not going to fix the problem. We keep trying that with our educational system and how is that working out for us? You cannot make homes worth more than the market is willing to pay, you can’t force people to buy homes they don’t want, and you cannot ever force a financial system to do anything the masses are not in agreement with no matter what you do or how you do it. This is just going to add a lot of debt to an already crumbling economy and cause an outright depression in the end.
I have a couple of questions for Mr. Bernanke and Mr. Paulson as well…
1. What exactly is the problem with a recession anyway? We have them all of the time in this country. It is a product of a society. It is a natural unwinding of a situation gone awry. It is how economies learn to bounce back and flourish again. It keeps the strong and smart alive and kills of the weak and reckless. That is what we need isn’t it?
2. What is wrong with only 60% or so of the population being able to afford their own home? This is also a product of society. It stimulates the economy too. It creates all sorts of jobs and allows more disposable income to be spent throughout the economy in many cases. It is a way of life for many and most don’t mind at all. In fact the ones that do will usually do something about it. The ones that don’t do something are just bitter and would never be happy anyway.
3. How on earth does this do anything to stimulate the economy? Where is the job creation? How exactly does this assist the tax payer out? Why is this even remotely being considered again? Is it because a bunch of millionaires gambled and lost and need to be “Bail Out” now because they have powerful influential friends on the hill? Is it because the speculation went wrong and now they are all stuck only making 10’s of millions instead of hundreds? Is it because of the enormous amounts of money this industry pours into the state and city coffers by the way of taxes? Is it because of the hundreds of millions of losses the folks on the hill have invested in these companies is at risk? Is it because they are too big to fail? Is it because these companies over leveraged themselves 20 to 1 or even 30 to 1 and got caught short a s a result.
4. What exactly does this do to assure that not only does this help, but we the tax payers are protected against any losses?
5. Are you seriously going to do this and watch America and its people get crushed as a result? What will you have to say for yourself when, not if, that happens?
Just some minor stupid little questions that I would like answered please…
September 24th, 2008 2:26 pm
It looks increasingly like the 700B isn’t supposed to go far. It’s just supposed to go far enough, to the major financial institutions that are sufficiently politically connected to push through the bailout.
This discussion reminds me of well intentioned military policy analysts who will tell you that Rumsfeld’s policy of expanding the use of private military contractors failed in Iraq. Well, it depends upon how you define success. If you mean whether or not it helped pacify Iraq, it was obviously a catastrophe, but, if you mean whether or not it enriched politically connected business enterprises that received these no bid contracts, then, it was an overwhelming success, and continues to be.
Likewise here, you are assuming that the proponents of the policy, Paulson and Barnanke, are defining success in terms of stabilizing the financial markets. Maybe, they are much more limited in their aspirations, such as helping Goldman Sachs and related entities survive so as to have the opportunity to enrich themselves again in the future.
September 24th, 2008 2:42 pm
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September 24th, 2008 3:15 pm
[...] Guide to the TRUTH! » FedUpUSA.com Makes a Stand Against ‘Bank Bailout’ on Mortgage Defaults Already at $50bb Per Month…$700bb Won’t Go Too Far!Richard Estes on Mortgage Defaults Already at $50bb Per Month…$700bb Won’t Go Too [...]
September 24th, 2008 7:15 pm
Just Another Number, I am in the same situation as you… can you email me?
September 25th, 2008 11:39 am
Simple math,
When you owe the bank $100,000, the bank owns you
When you owe the bank $100,000,000,000 you OWN the bank,
actually you have poned the bank.
Bottom line the US taxpayer is the bank. The biggest ass bank on the planet baby. They just have lower lending standards than most for profit institutions. So this is a 700b sub-prime loan. Hopefully GS and the lot can make the payments…
I would let it go. No bailout. Fear of the unknown, which Paulson is preaching, is kinda like WMD. Have we not seen this act before.
The only thing we have to fear is fear itself.
That’s American…not this garbage.
September 25th, 2008 12:28 pm
Oh brother,
I’m not lecturing, but give me a fucking break! I was in the market for a home when my family relocated to SoCal in 2004. They told me I qual’d for way more than I was comfortable with using an exotic I/O adjusting mortgage. I ran the amortization tables myself and to steal a line from that shill Sarah Palin, said “Thanks, but no thanks.” So glad I decided not to buy.
You are part of the problem, big boy. You need to suck it up, have some fucking integrity and pay your bills. God, you people piss me off.
David
September 25th, 2008 1:24 pm
David,
You missed the point. I behaved responsibly. I bought a house I could afford. Got a fixed-rate mortgage I could afford - NOT a “crazy exotic ARM”. Put $242k down. Cash. Spent $60+ in improvements. Cash. Never refinanced, never took out a HELOC. Never missed a payment. Owe ZERO debt except the mortgage.
Yet I’m more than $400K in the hole, and going deeper each month. By Christmas, if not sooner, it will be $500K. Any net worth I USED to have is quickly disappearing.
This started with sub-prime and irresponsible buyer and lenders and investors. This is NOT a sub-prime problem anymore. This has trickled up into the ENTIRE housing market and the ENTIRE economy.
If as you say, in 2004, you were considering an exotic mortgage, you must not have been in a strong enough financial position to put 20% down and get a good fixed-rate mortgage. You couldn’t afford it, and therefore decided not to buy. Wise move. But if your position had been stronger, your decision may have been different. In that case, you would most likely have found yourself today in the exact same position as me - having lost your entire 20% down payment plus any improvements that you made, AND be underwater on your mortgage. Through no fault of your own - except that you made the mistaking of buying a home for your family in CA during the bubble of the 2000s.
You can scream all you want about integrity, but if the money I had lost was money YOU had earned and saved and lost, you might feel differently.
And that’s the situation for millions of Americans. Not just the idiots who work at McDonalds but thought they needed granite countertops.
September 25th, 2008 1:41 pm
And one more point.
I KNEW the rate of increases in home values was unsustainable. That’s OK. I wasn’t going to flip. It wasn’t a get-rich-quick scheme.
I KNEW values fluctuate, and I fully EXPECTED adjustments here and there. 10%-ish. Been there twice with previous homes, recovered, lived through it. No biggie.
I did NOT forsee a 34% and growing drop in the value of my home.
I’m not alone.
September 25th, 2008 1:42 pm
And the average family is going to have a VERY difficult time trying to recover from that kind of loss.
September 25th, 2008 6:04 pm
Hmm, I don’t agree. The 50 billion a month number means the amount of the default. It doesn’t mean that the bank loses that much. I have been working in the REO area, purchasing foreclosures for a while now. For example, a bank hands over a loan for 400,000.00 for a house that is worth 350,000.00 (happened quite a lot in 2005-2007). The bank forecloses in 2008. The bank does not lose, i.e. write off the entire 420,000.00 It sells the house for whatever it can get, often in the %50 to %80 range. So, even though the total foreclosure number looks large, there are not that many in foreclosure (only half million or so, which is small compared to the size of the US housing market), and the banks *will* get on average %50 to %80 back, when the re-sell the house. of course, this causes RE markets prices to fall, but they were in a ridiculous bubble mode too long anyway.
If you add up all of teh foreclosures in 2007, something like 400,000, and even if you double that for 2008 (an absurd outside estimate), and if the banks wrote down each and every single house to 1/3 of their original loan amount, the TOTAL for all of that writing down would be about 150 billion. That’s it! So, why are we handing over 4 times that to the investment bankers so that “they can provide liquidity to the markets”? Sounds like a great scam to me, doesn’t it? And Congress is falling over each other like the 400 stooges to sign this thing. Think about Canada or Australia, if they’ll take you.
September 25th, 2008 6:07 pm
oh brother ,
You picked a house, you decided that you can afford it, you planned to live in it, you agreed on the terms of your contract - property you getting vs. money paid. What have changed? The house is still the same, the terms of your mortgage are still the same. What are you complaining about?
Unless you bought the house to make a quick profit…
September 26th, 2008 5:19 am
Oh Brother,
You are making the classic mistake most simple-minded Americans make: That their home is an “investment”! It’s not. It never has been. And it never will be unless you rent rooms out. It is and always has been a LIABILITY! Regardless of loan type, rate, balance, equity, etc.
Oh Brother let me ask you…have you ever rented an apartment? And if you have, when you rented it, did you ask the Property Manager on the day you were signing your lease “Say, by the way, what is the current market value of the apartment building?” Of COURSE you didn’t…it doesn’t matter because you are merely RENTING the property. It’s an EXPENSE! you could live there for DECADES and the value of that apartment building would mean the same to you on the last day as it did on the first day…NADA! So, if you are in a home you CAN afford….that you NEVER planned on leaving…and that which ULTIMATELY you WILL have something in value from even after this catastrophic loss in non-investible “equity” you seem so concerned with…what are you squealing about? I ask people all the time: “So, if your home hadn’t gone up or down in value and you planned on living there for years AND you can easily aford it…what’s your problem with keeping it now?” They “feel” poorer is all that I usually get as an answer.
Right now, you like everyone in the country has lost “equity” value…the thing about equity is, you can’t spend it…for instance you never could take a copy of your mortgage statement showing a balance of $950k and an appraisal showing value of $2 million to the local Am-PM to buy even a stick of gum with that “equity” yet because you “feel” poorer you are going to wreck your credit, lose the home of your dreams, and contribute to Fu*%^@ng over your neighbors, your bank, and ultimately as we see playing out, your nations economy? Great! Good thinkin’ man! I REEEEALLY feel sorry for you! Congratulations on being a selfish myopic tool! I agree with David. You people piss me off!
September 26th, 2008 11:05 am
Oh brother,
ST substantiates my point. I don’t know how anyone with a grain of brain matter could have thought that buying a home in 2004-2007 in Southern California was a prudent move.
First, home prices had inflated 200-300% in the previous 5-6 years. Deciding a market adjustment of -10% would be the worst case scenario was absolutely foolish. How many people in america make the kind of money necessary to qualify for that kind of mortgage. Maybe 5%, at the most (in a properly vetted loan process). You were and apparently are still able to make the payments, but you’re whining because the “value” of your investments has gone down. Boo fucking hoo to you. You don’t have a shred of integrity if you walk away, and you are exacerbating this economic downturn if you either walk away or try a short sale on a home you can still seemingly afford to make payments on.
Wake up, America. I see all of those people on the freeways driving their leased luxury cars and HMMWV’s that were being paid with housing ATM money. Now that well has dried up, you’re crying in your beer because you aren’t as rich as you thought you were. There are plenty of great places to live in America at a fraction of the cost of these bubble markets, yet people either got caught up in the “coolness” of their new found wealth or thought they’d flip houses quickly and get rich. I hope all of them burn in hell and go bankrupt, personally. It’s what they deserve for being foolish and running the damn housing market into the ground.
The SoCal market needs to drop 30-40% more from where it is today before a prudent buyer sticks their money back in the game.
Face it “Oh Brother,” you got caught being a fool and you don’t want to suffer the consequences. I’d rather you just admit it than try to take some kind of higher moral ground. You’re greedy and that’s the bottom line.
You people piss me off.
David
September 26th, 2008 11:15 am
Oh, and one more thing “Oh Brother,”
Don’t you dare make the assumption that I would make the same foolish decision you did. I am not in the same position you are today because I was prudent. You could not foresee a steeper decline than 10%? Are you kidding me? Never invest or gamble with money you cannot afford to lose.
One other thing. Do you know what the equity you once had in your home WAS called. It WAS called an “unrealized gain” because it only existed on paper. You never would have made that money unless you sold your home or used it like an ATM like these other fools. You haven’t lost a cent until you sell, but if you’re truthful in your assumptions, you’re gonna lose your ass if you sell, so you better keep making those payments. If it’s near the coast at all I’ll give you $350K for it today.
You people piss me off.
September 26th, 2008 11:50 am
David, why did you re-locate to so cal in 2004 when the sh@# started to hit the fan-everything in so cal is over priced. No one in thier right mind would have come here unless to vulture off the market.
Brother- don’t listen to those a-holes, they are lumping you with the wrong people. And since they are watching thier world collapse they want someone to blame-the deal is everyone it to blame- houses would not have inflated 200%-300% if the lenders didn’t make it so easy-artifically raising prices by creating a false demand. Everyone is in this together, realtors, buyers, sellers, appraisers, underwriters, lenders, investers, etc. The deal is that everyone but the buyer made money and a lot of it.
BTW Simps- why do they call it “investing in real estate” if it’s not an investment ? Sure you can love your home and wait this out- but you’ll probably be the only one on your block that does so.
This whole thing sucks but by being “pissed” at the wrong people you are just spinning your wheels- Bro will have to pay the taxes on the bail out just like you, and he’ll have a home thats underwater.
September 26th, 2008 12:06 pm
[...] Comments bought at the wrong time on Mortgage Defaults Already at $50bb Per Month…$700bb Won’t Go Too Far!Ed on WaMu Fails - Bigger News Than You May ThinkDavid on WaMu Fails - Bigger News Than You May [...]
September 26th, 2008 3:29 pm
Two choices Oh Brother:
Continue to make payments into an asset that is losing value or
cut your loses and move on(apparently you have a conditionally bid of 350K) The market will always establish a price. You may find it hard to swallow but…at least you could start re-directing your monies into something that could provide a return (start recouping your losses)or at a minimum stop the bleeding. (i.e. a semi-detached home, live on one side rent out the other)
I struggle to understand why someone expressing their disappointment in seeing the value of their home decline should piss some folks off? What difference does it matter to you? I can see if the individual with the declining value was seeking compensation for their bad timing or was contemplating walking away from their obligation however from what I read the poster appears to be looking for suggestions on what to do.
(BTW walking away or asking for compensation would be “getting pissed” worthy. You made the deal, signed your name, deal with the results.)
Does it make good fiscal sense to continue to put money into an asset that is losing value? Seems like a reasonable question.
Bottomline, what happens with the bailout bill and how that relates to foreclosures could have an impact on current pricing. I think what Mr.M has pointed out so well over the many posts is that the fundamentals of supply and demand is what affects the price.
.
September 26th, 2008 8:57 pm
Bought at the wrong time -
FWIW, I moved to So Cal because I was in the military and had an assignment here. It wasn’t really by choice.
For Your Consideration -
Because he should have had the FORESIGHT to understand he may lose considerable value buying during an asset bubble. Instead, he whines like a little bitch when his “investment” goes down in value.
Boo hoo!
You people piss me off.
September 26th, 2008 10:39 pm
I’m angry when those who perpetuated the problem are the first to cry foul when things don’t work out for them. I’m angry when everyone wants to point fingers at someone else, nobody wants to take responsibility for their own personal actions.
Manning up means Wall Street take the big hit, those who lose value in their assets take their hit, and those who are capable of continuing to meet their financial obligations do just that. It’s integrity, sir, that is the fundamental fiber that is currently missing in our country and that is making our situation what it is today. It is the premise that this country was founded on, our word was our bond, a handshake was as good as a written agreement, and we took care of each other. Now our nation is a playground for those who prey on the more vulnerable (banks and wall street), and those who complain when they play the game and lose (speculators and those who will not honor their committments). I’m sorry, but I’m from the school where not every kid made the baseball team, those who didn’t either practiced harder for next season or took up basketball or applied themselves academically.
I’m the first person in my family to graduate high school, graduate college with not just a Bachelors degree but two Masters degrees, and nobody handed it to me. I rolled up my sleeves and worked for it. I’ve taken losses on homes before, and you simply chalk it up to experience. But today, we have a mentality of entitlement prevailing in this country that I’ve quite frankly grown weary of. I’m not an apologist for any particular faction of our society that have helped bring this country to its knees. I want people held accountable for their actions, not bailed out. I am mad, I express my anger, and damn it, I served my country for 24 years to be able to do so.
Have a good evening, sir.
September 27th, 2008 10:15 am
Oh Brother………….do not let any of these RE agents hiding as real humans on this blog lie to you. unless your home is around 4000 sq ft or bigger and you live near the ocean or on the beach that home will never see 1.2 million ever again. new rules, new economy, new everything. why do I beleive it it? because I am not in the RE business and know alot about the nature of these beasts.
September 27th, 2008 11:33 am
Look David, the bottom line is that in 20 years Bro’s house will be worth the same as the house next door who got the write down, got assistance because the gov. tried to stop this from happening.
When they both go to sell- who will take away more? Not Bro. So when he puts pretty pictures online can he get more because of integrity?
A lot of people worked hard to get where thier at- to see it all crumble because of the invester/lender crooks is really sad.
September 28th, 2008 10:06 am
Oh Brother -
You have no integrity and no acceptance of responsibility. You are simply looking out for yourself and your family.
Nothing wrong with that, right? But yet that is exactly why we are in this mess. Everyone looks out for number one and doesn’t give a rats ass about anyone or anything else.
Sorry buddy. But you are part of the problem.
September 28th, 2008 11:17 am
Patience- you are correct, however those greedy MF’s made millions and are going to get a bailout- Bro gets nada-
“Everyone looks out for number one and doesn’t give a rats ass about anyone or anything else” including the people in the industry- agents, brokers, and underwriters, appraisers etc.
If the bailout goes through he should just walk- let the bank eat that house too and many more- Why should anyone have to pay for both.
The investers and lenders and those in the mortgage industry should all be held accountable for this- yet you want the 1 person who did the right thing to eat sh@# - well guess what boys- if the bailout goes through you’ll see more people walking to save what they can for their families- all done here
September 28th, 2008 12:55 pm
Bought at the wrong time -
The bailout is wrong. Wether it is for the banks or for the homeowner.
So what is your point? If the banks get a bailout, so should the homeowner?
2 wrongs don’t make a right.
September 28th, 2008 1:45 pm
My point is no one should get a bailout-But,
If Bro’s nieghbor gets a bailout in a write down of principal, and a lower intrest rate, Just because the shady industry allowed the wrong people in the market- then why shouldn’t bro?
Bro’s house isn’t going to be worth more in 15 years than the neighbors- he gets screwed- this is not the normal fluctuation in the market, he could handle that- this is a crime.
Don’t use “2 wrongs don’t make a right” on me- I watched how many wrongs were perpetrated in the market and apparently many wrongs made it alright to do bad things soley for money.
We’re fighting for the same cause here no bailout- leave Bro alone and direct your comments to where they belong.
September 29th, 2008 12:33 am
Bought at the wrong time -
Yes, I agree, no bailout.
But you say you watched how many wrongs were perpetrated in the market and apparently many wrongs made it alright to do bad things soley for money? See, right there you have it incorrect. Just because they got away with those wrongs did not make it alright. Maybe in your book, but not in mine.
It seems you stand to keep perpetuating the wrong down the line in hopes to make it right? Because it’s not just Bro that gets screwed. Isn’t it every homeowner? Including those that have their mortgages paid in full? So what should they get?
Your post seems to have the tone of “they have one, I want one too.” Funny, I heard my toddler say the same thing today.
My point is, the bailout is wrong. No if’s and’s or but’s.
September 29th, 2008 1:53 am
[...] Defaults Already at $50bb Per Month…$700bb Won’t Go Too Far! (82) Posted on September 23, 2008 2:43 [...]
September 29th, 2008 10:19 am
The funny thing is, if he walks, he will screw himself in that his losses will be realized. If he stays the course, he only feel poorer (which seems to be his biggest problem).
Unrealized gains are the same as unrealized losses, they are unrealized. If he wasn’t going to flip, and presumably not going to use his house as an ATM, there shouldn’t be a problem.
I think Bro was being disingenuous in his purpose of buying. He obviously felt the home was worth it when he signed on the bottom line…I don’t see how he has any room to complain here.
David
September 29th, 2008 12:25 pm
David-He wasn’t complaining - he asked for advice- only to be attacked. What does feeling poorer have to do with this he never said that-you just assume it-
Patience- you want to bring this to the level of your toddler- you can’t it is a million dollars not a new bike - His home will never be worth what he bought at- ever. I am sure that he was never told the market was artifically inflated- only the industry knew that and just kept on doing it.
Settle down you 2 I am on your side- no bailout-for anyone!
I just don’t think kicking someone when they have already been kicked enough is where you should spend your energy.
September 29th, 2008 7:40 pm
Well, my goodness, just look at all the fuss going on here on my behalf. I had no idea my posts would become such a lightning rod.
The assumptions made about me, my position, and my motivations are stunning - not to mention wrong.
Where in the hell did I ask for a bail-out?
Perhaps I did not state my position clearly enough. Perhaps it makes no difference if I do. Whatever.
I stated that my income has declined. My savings has declined. The CASH I put into this house is GONE. The mortgage is deeply underwater, and sinking further, faster than I can make the payments. Like most people, I have many responsibilities besides this mortgage, including the support of my family, college tuition (1 now, another soon) and the support of my elderly parents-in-law (unexpected health problems).
In a normal situation, I would simply sell the house and downsize. A simple no-brainer. However, in the current environment, that is IMPOSSIBLE. Period.
Up to this point I have made each and every payment, on time, hoping that the market will recover and that I can sell the house for what I owe. But it has become clear to me that this is NOT a simple housing market downturn, it is a CRASH, and this CRASH will last FAR LONGER than my savings (you all don’t seem to understand this yet, but believe me, you WILL). Before long, my savings and 401k will be gone - all to hold onto this house. But when my money is gone, this mortgage will STILL be underwater, and I will have drowned right along with it.
So am I just STUPID, as many of you claim? Perhaps.
I “deserve” what I got, so I should just take my medicine? OK. Well, if my “medicine” is financial devastation, I’m definitely taking it.
So when my mortgage payment comes due on Oct 1, I am not going to pay it. I hope the lender will work with me to arrange a deed-in-lieu. I will continue to pay the real estate taxes so there are no liens or encumbrances on the title, I will continue to pay the utilities and insurance, and maintain the home and the landscaping, and when the time comes I will happily turn over the keys.
If the lender will not work with me, I will have to let the bank foreclose. I will find a home to rent, and start over and rebuild my life: try to rebuild my savings and my credit and put my kids through school and take care of my spouse’s parents and hopefully stop working sometime before I’m dead.
I’m not asking for a bail-out and I’m not getting a bail-out. I walk away with nothing, several hundred thousand dollars more poor than when I walked in. How in the hell is that a bail-out? (BTW, David: I do not “feel” poorer. I AM poorer.)
The bank gets my $242K down, plus 3 years of p&i (another $220), plus the benefit of the improvements, plus the house itself. When all is said and done, the loss they take will probably be much less than mine.
Oh, that’s right, I forgot: The “taxpayers” are bailing me out. Well, guess what? I AM a taxpayer, and my annual IRS obligation has been very high for many, many years. My income may have declined these past three years, but it seems my taxes never do. Believe me, I have paid and will continue to pay FAR MORE than the amount of any “bailout” on my behalf.
My initial post was a simple request for advice on arranging a deed-in-lieu. My subsequent posts were simply an attempt to clarify my position, and also to point out the FACT that there are many, many homeowners (make that “home debtors”) who are in similar situations.
I am not whining. I am not asking for sympathy. I could not possibly care less if you “understand.”
I will, however, point out that your anger toward me is misdirected. It is also an indication that you lack a clear understanding of the severity of the current economic situation here in the U.S. and around the globe - a situation over which I have no control.
I’m done now. Feel free to continue to flame me.
September 30th, 2008 12:02 pm
Oh brother, bad timing and bad luck. Lesson learned.If you stuck that much $$ into bank stocks you would have lost it too. Do what is best for your family. The days of “Doing the right thing” have long passed. If you had the capacity to pay and could simply adjust your lifestyle accordingly then you should stay and pay, doesnt sound like an option. Your home is an asset and assets are investments. If a business is costing more to operate than it brings in and there is no equity to sell or money to borrow you shut it down, simple. You are no different than Lehman Brothers, just on a smaller scale.
Agian I say, anyone watching LIBOR? Is this the same LIBOR used to calculate arm adjustments on the lovely 2 and 3 year subprime loans?? I know there is a 1 mo, 3 mo, etc LIBOR but which one affects those loans? At it’s peak in 2006 subprime lenders were doing over 20B a month in 2 and 3 year arms tied to LIBOR, index was relatively low so minimal adjustments up till now. Average margin something like 6% plus index now of 6% equals fully indexed rates of over 12% on those loans that haven’t refinanced, sold, or already gone into foreclosure.
Libor at all-time high
Posted: September 30, 2008, 8:11 AM by Jonathan Ratner
Market Call
The rate banks charge each other for overnight loans surged to an all-time high of 6.88% on Tuesday after the U.S. government voted to reject a US$700-billion bailout plan for financial firms.
The London interbank offered rate, or Libor, which is set by 16 banks, rose the most ever, jumping 431 basis points. The Libor-OIS spread, which is considered a gauge of the scarcity of cash, also hit a record, widening to 246 basis points
“The money markets have completely broken down, with no trading taking place at all,” Christoph Rieger, a fixed- income strategist at Dresdner Kleinwort told Bloomberg. “There is no market any more. Central banks are the only providers of cash to the market, no-one else is lending.”
September 30th, 2008 1:17 pm
Bruce,
Yes, I am watching the LIBOR, and I am also watching the TED - which was 3.52 last time I checked. Extremely high.
It sounds like you understand what the LIBOR is, but for those on this board who do not: LIBOR stands for London Interbank Offered Rate. It is the interest rate at which large international banks are willing to lend each other money on a short-term basis. The LIBOR is calculated once per day. There are different LIBOR rates for periods which range from overnight to one year.
ARMs are typically tied to the 6-mo LIBOR, plus 2-3 percentage points. A 6-mo LIBOR of 6.5%, for example, would mean the interest rate on the ARM would be 8.5-9.5%.
Many HELOCS, student loans, and small business loans are also tied to LIBOR rates. ie, LIBOR plus anywhere from 4 to 9 points.
Long story short: Credit is extremely tight, and punitively expensive.
September 30th, 2008 1:21 pm
Of course, there were ARMs tied to the LIBOR which were written for higher “plus” rates than the rates in my example.
September 30th, 2008 6:15 pm
Libor is probably the best tool to use as an indication of how tight credit has become. This I still say is not entirely a bad thing. We need to unwind this mess and the sooner we start the better for everyone. Will thier be pain… Yes and lot’s of it! It is what happens when you have such high excesses for a decade. The Fed needs to stay out of things and let this thing come to an ugly close. Then and only then will we be able to start to heal properly.
October 6th, 2008 6:31 pm
Well there are some pretty strong opinions here.
Just curious what does everyone think now that the bill has passed?
Good luck Oh Brother!
October 20th, 2008 1:07 pm
[...] between subprime and Alt A do not begin and end with their underwriting guidelines, either. An Alt-a default wave that began in 2008, is not expected to peak until 2011. Although combined Alt-A defaults is not [...]
December 9th, 2008 9:23 pm
[...] Mr. Mortgage writes that “If defaults remain at roughly $20 billion per month in CA and $50 billion nationally [...]
December 11th, 2008 11:04 am
[...] Mr. Mortgage writes that “If defaults remain at roughly $20 billion per month in CA and $50 billion nationally [...]
December 23rd, 2008 12:08 am
[...] Mr. Mortgage writes that “If defaults remain at roughly $20 billion per month in CA and $50 billion nationally [...]
January 7th, 2009 5:51 pm
[...] Mr. Mortgage writes that “If defaults remain at roughly $20 billion per month in CA and $50 billion nationally [...]
January 9th, 2009 12:47 pm
[...] Mr. Mortgage writes that “If defaults remain at roughly $20 billion per month in CA and $50 billion nationally [...]