You do not have to look very far...
Posted on 01/24/2009 8:36:36 AM PST by Mr Rogers
Case 1: "They want to stay in the house; they've lived there for 15 years and, well, it's home. They're way underwater, owing about $510,000 on a property not worth much more than $350,000 right now..."
Case 2: "She has been in the home for 23 years, but family health problems, divorce and economic factors have conspired against her and she's never been able to substantially pay down the loan."
(Excerpt) Read more at finance.yahoo.com ...
How do you own a home for 23 years without paying down the loan any?
The story of modern America - people borrowing money they don't have to buy what they don't need, then whining when the bills come due.
Exactly.....and now those of us who bought homes we could afford, saved and paid off our mortgages early are now going to pick up the tax bill.
The first politicial that figures this out and goes public with it in protest will be the next president.
Good post there Mr. Parker!! So, the most powerful man in the world gets a do-over on the oaf of office, however, homeowners will never get a second look for shiester loans.
There was an excellent article on the banks in India. They are the few banks in the world untouched by the financial meltdown. Banks in India are nationalized and the head of the banks is a political appointee. If he screws up he brings the ruling party down because it reflects the competence of the party. The person name is Redy. For years Indian bankers hated him because he would cut off loans for land or real estate if he detects bubble buying and speculating. For years the Indian bankers were at awe that US banks were able to leverage and do highly profitable loans that were considered high risk. The Indians assumed the Americans found a way to do these loans and eliminated the risk, and thought they were the dumb ones for not figuring how the Americans banks can do it. The bankers felt Redy was too restrictive and out of touch with 21st Century style finance. Redy was not popular amongst Indian bankers until Sept 2008 when the US financial system melted down. When Redy was interviewed by US reporter on why India did not go down the road that the US and Europe on home loans and consumer debt, Redy made two important points. One - in India it was not culturally acceptable to use loans to buy things if you did not have the income for it, TWO - the government understood that IF BANKERS HAD A CHANCE TO SIN, THEY WOULD SIN.
Actually, it’s not that hard... I have a good friend in Modesto, CA. He bought his house 12 years ago for $285,000 and got a 6.25% 30 year fixed mortgage. He owes about $220,000 on the house now, and it’s worth $175,000 (based upon the latest appraisal). A 30 year mortgage shows little principal payment for the first 15-16 years or so.
He happened to buy in a new development that is now a ghost town of foreclosures, and in a city with a 14% unemployment. The property values have dropped 75% since their peak (in 2005 his house was appraised at $595,000).
It’s not all excess spending - but I will give you that most of the time it is! The issue is that so many people don’t look at a house as a long-term low-yield investment. Being underwater now is ONLY on paper! If you sold, you realize that loss. But if you hold for another 10 years, it will right itself...
Just like a lot of folks sweating out their 401K losses this year; if you’re not drawing on your 401K now, it shouldn’t be a cause for jumping out a window. Give it a few more years, it will come back UNLESS you get panicky and start moving funds and cash around without seriously considering the long-term implications.
If it's a non-recourse loan, they have considerable leverage since the bank stands to lose a great deal if they default, while their loss would be limited to their house. But if it's a recourse loan, they owe the money no matter what the house is worth unless they declare bankruptcy and give up the house. Obviously this is not a particularly desirable option, so there's no reason the bank needs to negotiate with them.
Great graphics.
Good call
http://www.nytimes.com/2008/12/20/business/20nocera.html?_r=2&ref=business
“In India, we never had anything close to the subprime loan,” said Chandra Kochhar, the chief financial officer of India’s largest private bank, Icici. (A few days after I spoke to her, Ms. Kochhar was named the bank’s new chief executive, in a move that had long been anticipated.) “All lending to individuals is based on their income. That is a big difference between your banking system and ours.” She continued: “Indian banks are not levered like American banks. Capital ratios are 12 and 13 percent, instead of 7 or 8 percent. All those exotic structures like C.D.O. and securitizations are a very tiny part of our banking system. So a lot of the temptations didn’t exist.”
Question now is will the US adopt Indian standards, which violate freepers’ free market and gov regulation principles. I think the lessons of the past few months is free market assumption that bankers will not act stupid out of self interest is simple and incorrect. In the age where a worker or banker spends nearly his entire working career in one bank or two, he will not act recklessly because he will put his bank out of business (and himself of a job). Today workers do not expect to stay in a job for more than 3 to 4 years before he is forced to move on. Thus he intends to make as much money as possible in those short years and not worry about the long term health of the company. Consequences no one fights stupid money making schemes because no one has a long term stake in the company they work in. This is what happens when society/workplace/economy becomes too dynamic. People who control the game will make tons of money, but the workers will not give a damn about the long term health of the workplace. Sooner or later the system will break down and collapse with severe consequences to the security and stability of the country.
In Las Vegas, where the woman lives, housing values have dropped about 50% from their 2006 high - they are now at the level they were in 2003.
http://www.trulia.com/real_estate/Las_Vegas-Nevada/market-trends/
I understand new developments racked by foreclosures. That describes where I live. I bought in 2004, and my house has probably held value, after booming and busting. I have, on multiple occasions, rented instead of buying because the area was too expensive. Now I get to bail out those who simply bought...
You are going to be disappointed on that. The takers, irresponsible, leaches and parasites that want the handouts and the gov't to take care of them now out number the ones that are going to support them.
We paid cash for our castle. I don’t understand how people can sleep in a mortgaged home. Bad enough you have to pay property taxes the size of rent.
Yes, what they’re not telling you is that they bought the home for 250k then took out the equity as the value increased. For all we know they used that equity to buy investment property but all they want you to now is they’re upside down on the original plus second and third mortgages.
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