This is mny first day reafing on your site and it is as if you are writing my very thoughts out of my brain.
Your ideas and writing are fantabulous. Keep us informed!

What an idiotic idea to think it would be a good idea to give people principal write-offs. Every single person in America with a mortgage will start defaulting on their loans so they can get a piece of the pie. It would cause complete chaos and havoc in the housing industry and economy.

Then on top of it, the idea of giving homes away for free because of possible loan fraud? Shit, people have to take some responsibility when it comes to signing loan docs! Many knew exactly what they were getting into, they wanted to be part of the housing bubble gravy train. They are gamblers and must now pay for their risk!

Come on folks, it’s absolutely ridiculous to propagate this type of plan, especially when it’s all of us (the taxpayers) that would have to foot the bill for this type of bailout…

Bullshit MM!

We are now seeing a trend however where prices on distressed sales have come down enough that people are starting to buy again. The problem is that it doesn’t alleviate inventory. The homeowners that need to sell to get out from under can’t sell for the prices the distressed properties are selling for. Hence they get foreclosed on as a result. The foreclosure or shadow inventory is not what people who own need to sell as it is REO.

This trend will continue, but keep in mind the northeast has yet to feel the full affects of this downturn. Our time has not yet come as of yet in full. Sure we saw the subprime and lower income areas get hit, but without the new build like other areas of the country it was minimal at best.

We are now at the beggining of the ALT-A and Prime defaults increasing ever so quickly. The older 2/28 subprimes have mostly reset, but the 5/25 are now coming due. These loans were much more typical in major but older cities like NY and Boston for example. They are bigger in value and will have a bigger impact as a result. I suspect we will see the Northeast and Northwest take it on the chin here soon enough.

Back to your question (sorry) it would seem that supply has far out paced demand. With 17 + Million empty homes I think we have rentals available. More and more people are rooming up as well leaving even more supply and new build is still relatively high for drastically slowing sales so inventory is being added while used inventory is increasing. Supply my friend… lot’s of supply. Go visit the website Craig’s List and look at rentals. They are everywhere…

I don’t know where you are from, but you can get an apartment in downtown Boston now for just slighly over $1,000.00 per month. That has not happened since the 80’s at the sheer numbers available.

I don’t have an exact answer for you but in my area there are several large projects nearing completion that are going to be in serious trouble when they come on the market. I have also heard that the number of unoccupied homes in the US is 18 million. Cramer recommended bulldozing them. Homes I have seen on the market have started as for sale, turned into for sale or lease, then to sale lease rent…

But we still have all that property coming on line that was started in the boom.

While the oxygen is going out of the room in Sacramento, Californians can act on an individual basis and take the bull by the horns here.

The problem is simply this, the banks have taken more than their fair share of disposable income, which now has the economy of California in an anaconda strangulation choke hold. The only way to remove the strangulation of other businesses in the CA economy is for Californians to dump their underwater property and rent for less, bringing the disposable income levels back up.

This Susan is the fix. You say you are concerned about your property value. What you should be concerned about is whether or not your neighbor is going to have a job. Let’s examine what is likely to happen in the current situation.

Sales tax likely to go to 9.5%
Unemployment insurance tax for employers to get jacked up.
Personal income tax hike likely.
Government employees laid off, cut back, wage freezes etc.
Tax anything else that moves including a French fry tax.

What are all these taxes and assessments going to do for the business environment? These higher costs of doing business are going to cause businesses to close, move or not to consider California.

During the boom, California had the highest dollar benefit of Mortgage Equity Withdrawals (MEW’s). This means that the economy had a high level of artificial support which works out into a temporary increase of disposable income. Once the MEW’s were obliterated from the landscape however, we are left with the opposite effect of a disproportionate levels of households with low disposable incomes. The drop in disposable incomes was not visible while MEW’s were in play but they certainly are now and Sacramento is freaking out.

The other problem with your plan is that it is more traceable and will show a disproportionate amount of aid going to California verses other states. Now what do you think our people in Congress are going to have to do to have this giant California aid package passed? We did not think about that one now did we? You can present it as a national plan, but we all know where the bulk of the money is going.

My plan is like the silent majority plan. Quiet, independent and California ends up capturing all the Federal money without a shot being fired and without our congressional representatives having to give up anything on capital hill.

So maybe it is like flipping the bird at the rest of the nation but hey, they already hate Californians anyway. First thing you do when you leave CA is dump your licence plate and get a new drivers licence and tell them your Canadian or something.

What is going to happen on the Federal end? They are going to issue more treasuries to cover the bank losses. So we own more stock in the banks and perhaps place some downward pressure on the dollar. Is downward pressure on the dollar a good thing? Let me leave you with a best of my recollection quotation.

“The ONLY bright spot in the US economy was increasing exports due to the lower dollar but this was wiped out with the recent rise in the demand for dollars.”

My loan is an 80/20 with 0% down. The 80 is a fixed rate at 5.5% for 5 years (then variable) and the 20 has a balloon payment (100k) due at the 5 year point (Jan 2012). The home was bought for $512k and is now worth ~ 275k. I offered to take a fixed rate at 6% for 300k. I told them that they can work out the distribution of the 300k with the 2nd lien holder as they see fit. This should not be too difficult as the 2nd stands to get absolutely nothing if they foreclose. I also provided them with a list of all homes in my subdivision which have closed in 2008 to prove my value assessment. I further indicated that I will not pay my property taxes (which will not be attached to me, but to the house in the event of foreclosure) until I hear back from them and we have a written agreement. All told, they stand to clear ~ 220k (optimistically) if they foreclose. That would a loss of ~ 189k for the 1st and ~ 103k for the 2nd. The thing that I wanted to stress to them is that I will not continue to rent my home for 3 more years at 150% of what I could rent it for simply to lose it to foreclosure at that time. It just makes too much sense to pocket cash now, let the credit damage happen, and start the recovery process now instead of 3-4 years from now. The total lack of communication from the bank indicates that they will not take any action and I am fine with that. They just seem to be a few months behind in their offers when they really need to be a few months ahead to make a difference. The offers they are putting forth now may have seemed reasonable to someone a few months ago and the offers they will make in a few months would probably be acceptable now. But until they catch up with the times and use a lot more forward-thinking and cost-benefit analysis, they are going to continue to get slammed.

Well I am glad you liked that, it seemed like a good negotiation move that would increase the chances of considering your offer and place you outside the general form letter category.

I forgot to add Meridith Whitney as a recipient of one of your letters. Meridith can then get on CNBC and explain how not only are they missing two quarters of payments, but they are having to take a larger write down than they otherwise would have. While the banks may save posting a write down one or two quarters, the cost of hiding reality is long term detrimental to the balance sheet. Meridith will then have to factor dumb management into the future share price target.

So at this point, you have made the bank a fair market offer. You have already lost your skin in the game, your right arm and your left nut. They created this situation and now you are offering them their best deal.

The fact remains though, that today’s price will very likely be there in 2015-19. If we follow the Japanese model we are looking at a lower price. Now here is something to take into consideration. The Japanese model did not take place through a severe worldwide recession/depression. Why then, would we kindle a better outcome?

Now here is the most recent spin being placed in front of the masses. Paulson will save 350 billion for Obama and unemployment will top out at 7.5%.