Posted on 09/25/2008 5:33:24 PM PDT by Checkers
If you want to get a good handle on the kind of toxic waste Hank Paulson and Congress think we need to buy, read “Behind the Housing Crash: Confessions from an Insider” by Aaron Clarey (better known as “Captain Capitalism”). Clarey was an analyst for several banks in Minnesota from 1998 to 2007 and he witnessed the utter destruction of lending standards over the last decade.
Clarey makes an important point — there would be no crisis if individuals and businesses who had promised to pay back their loans were doing so. The vast majority of those who are not paying back their loans are not victims – they are irresponsible. There are also a lot of careless banks, lenders, politicians and investors who enabled unworthy borrowers to get these loans. Why American taxpayers must pay for this nonsense still has not been adequately explained by the White House, the Treasury or leaders on Capitol Hill.
(Excerpt) Read more at corner.nationalreview.com ...
Depends on the state. Here you just walk away. Just talking to a realtor yesterday and she said part of the situation in Virginia is that if the bank resists letting the borrower off the hook (when he hands them over the surety he pledged, namely the house) is that it can cost $40,000 or more to “push back”, so the banks add up the costs, the effort, time on market for the recovered property, etc. and about 99% of the time they don’t go after the rest of the debt after the property is sold.
You’re not making any sense. That was last year’s news. Now we have properties that were half a mil or more 4 or 5 years ago, yet they are now worth half that, and the owners have lost all their equity AND still owe on a mortgage which is more than the current value of the home.
To compensate, they start living of the charge cards. When the charges get too high, they borrow against their 401(k) to reduce the charge loan. Now they have a 401(k) loan to repay which only makes their financial situation worse, so they start to live off the charges again (after all one must keep up with the Jonses). Eventually, they have run up their charges to the point they cannot make the monthly payments.
Now they have nowhere else to turn and reality sets in. Their upside down on their house, up to their ears in charge account balances and have spent their savings for the future - they file bankruptcy, give back the house, walk away from the charge account debt and get a "fresh start."
Incredibly, most of these debtors have new charge cards in less than 12 months.
Also, even if the bank never tries to collect the debt, it still shows up on the credit report as a balance due, making a new loan very difficult to obtain.
Some banks, however, have been accepting deeds in lieu of foreclosure and short sales and forgiving the balance.
Plus, if you are dealing with someone who was a good customer and then the drop in prices destroys his once substantial equity, and the tightening of credit leaves him unable to replace his aged automobile, or put shoes on the kids' feet, and now his mortgage is worth more than the house, an element of fear creeps in.
If you do your job well they will have new credit cards in 6 months.
Yes, yes, and yes.
This whole mess galls me to no end. My wife and I are struggling to make our payments, but we continue to make them month after month. Meanwhile, the government is going to reward all those people who decided not to make their payments anymore and spend their money on other things? No way in hell !!! If this bailout passes, it will be the end of America.
good article in the NY post today about the majority of default loans being “liar loans” where people paid a higher rate in exchange for not having to prove income - and then there were the professional house flippers who never lived in the homes.
The market value of my house has dropped considerably over the last two years, yet the valuation for property taxes continues to increase. I told the county they can buy my house today for what they claim it's worth.
it MIGHT make sense for banks to be proactive in order to protect their mortgage portfolio.
it MIGHT make sense to see if default prevention is less expensive than forclosure costs, legal fees, and carrying property.
Any chance your property tax will be lowered accordingly?
That’s it! I’m not paying my mortgage any more! Now pay my way turkey!
In most areas there is a formal complaint procedure if your house is unfairly valued. When this happened to me once I wrote to the "board of equalization", giving details of the sales prices of similar nearby houses and they agreed to drop my assessment to a much more reasonable value. I was surprised it was so easy.
That's why I like the small town atmosphere of Pocatello and Bannock county. The assessor is elected and generally very responsible.
“I can’t speak for Virginia, but in most states it is a piece of cake to obtain a judgment for the balance due.
Also, even if the bank never tries to collect the debt, it still shows up on the credit report as a balance due, making a new loan very difficult to obtain.
Some banks, however, have been accepting deeds in lieu of foreclosure and short sales and forgiving the balance.”
Correct. And, if the bank doesn’t want to hound you for the deficiency balance, they simply sell the legal obligation to a collection agency. Even with a “deed in lieu” procedure, your credit is still wacked.
The current crisis will change everything. Lenders are going to be very gun-shy for a while about granting you a loan again. Just walking away is a bad option.
Much better to negotiate seriously with the bank to get them to forgive part of the loan and rewrite the sucker in terms the borrower can handle.
It was these individuals who didn't have the means to afford the houses on the terms that they signed for, that created the housing bubble.
More people entered the housing market because of these questionable mortgages, chasing the available housing stock, jacking up the prices. Then the terms of their exotic mortages came due and they couldn't pay up, went into foreclosure, putting housing stock on the market, driving down the values.
Not true. The decline in home values across the board, not in default, are effecting the valuation of real estate derivatives.
The decline of home values does have its origins in people and businesses that borrowed money that they didn't repay. They caused the bubble by increasing the demand for owner-occupied housing, as opposed to rental units.
Part of the engine driving this was the extension of questionable credit and morgages to illegal aliens who have flooded California, Florida, Nevada and Arizona, where the highest rates of foreclosure are occuring.
Like preventive maintenance on your car. Fix the minor problem now or get stuck in the middle of nowhere with a major problem.
But here, the government was essentially requiring lenders not to protect themselves.
I remember when they were screaming about "red-lining." The banks were protecting themselves. Take away the right to protect, then wait for the disaster to hit.
Sure, it would be nice if everyone could own a home. But don't make me buy it for them.
Nope.
Nope. The city recently annexed me into the city without my requesting it and in fact ignoring my desire to not be annexed. My taxes doubled, with county staying the same level and city adding an equal level, to in effect double my taxes for zero added value. BUT, for those in high tax areas, my doubled taxes amount to $160 per month for the privilege of living here. To put it in perspective, I have a condo in Dalton, GA which has 1200 less square feet and no lot/yard, and my property tax in Dalton is the same as here in Johnson City, 1800+ per year. At least Dalton offers services for the taxes.
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