The Redistribution of Housing? (Million dollar homes next wave of foreclosures? 'heartbeat loans')

CALLER: Hey, listen, you've been talking about the market. I'm in real estate, and I've been doing market evaluations for about 32 different banks over the last 14 years, and, you know, we've just gone through the first phase of these foreclosures, which I call the "heartbeat loans." You know, if you had a heartbeat you could get a loan. Those have been pretty much absorbed now by the investors coming back in and buying them up but we have a whole second phase of foreclosures coming in that the banks aren't really talking about, and these are the-million-dollar homes, and there's a lot of them out there.

CALLER: Yeah, million dollar homes. These are people that have lost their job that are struggling to try and stay ahead of the game but what's going to end up happening is, you know, they just passed this law now where a lot of people who aren't going to sell their homes are trying to get out from underneath them because of the tax ramifications, because whatever they would have lost they woulda got back as a 1099. And so what's happening now is they've waived that, and they're now doing what's called a "deed in lieu of foreclosure." So now they don't even have to sell their homes; they can just walk in and say, "I'm outta here." So the banks are going to get back a tremendous amount of these properties that they're not talking about right now. And we're talking about where they lost maybe a couple hundred thousand dollars before, they're gonna lose a lot more; maybe three times or five times greater than what we just went through. That's the next phase that we're going to come into, and I think Obama's going to end up owning these banks eventually because they're not going to be able recover from this one, I don't think.

RUSH: Oh, please, no! God, say that's not so. Jeez. See, that's why all of this... (stammering)

CALLER: That's why Fannie Mae and Freddie Mac are asking for the trillion dollars.

CALLER: Oh, yeah, absolutely. These are the white-collar workers, Rush. You're not going to hear too much about them because they're more sophisticated. These are the kinds of people that pick themselves up, dust themselves off and start all over again. But it's coming. I do several hundred evaluations a month for 32 different banks, and I'm telling you, I see a lot of this. They try to do the loan modifications and stuff but they're not going to pay interest on equity that doesn't exist anymore and they would just as soon buy the short sale down the street than try to pay interest on equity that doesn't exist anymore. But the banks are going to get these back no matter what they do. Even if they negotiate, they're still going to get them back. The best thing they can do is do the deed in lieu of foreclosure, take the property back, get it back before it gets damaged or vandalized. But they're going to have to drop down to market evaluation. And that's why they're calling us right now.

RUSH: Yeah, but then what do they do? What are they going to do with all these houses that they get back?

CALLER: Well, probably what they're doing in Detroit. They're bulldozing 10,000 of them right now. So, I mean, that's a possibility.

RUSH: Well, now, wait a minute. I know they're bulldozing houses, 10,000, but those are not all foreclosed, are they?

CALLER: No, no, no. What they're gonna do is they're gonna have to come down to market value. They're going to have to come down.

CALLER: Well, I did a house the other day. It was $8.2 million what the guy paid for it. It's worth about two-six. [$2.6 million] Who's going to eat that $6 million? The bank is. 'Cause that guy is just going to walk away from his house and say, "Yeah, I can't afford it. The value is two-six, I paid eight. I'm outta here."

RUSH: Well, you know, in the old days when you walked out on something, you paid a consequence for it, but today --

RUSH: -- you can find stories in the State-Controlled Media instructing you how to walk out on a mortgage or walk out on a loan commitment as a virtuous thing to do.

CALLER: Well, they're waiving it now. The IRS is waiving the difference between what you would get in the difference in a 1099. They've been waiving those now so that people don't... That's what stopped this big market from happening right away is that people are going, "Look, if I got a $400,000 difference so I'm going to eat that as a 1099, I don't want to sell my house right now because you can't afford to pay taxes on 400 grand," but if they waive these things what they're talking about, waive this discrepancy, that's going to happen and there's no ramifications now. They just walk away. The bank gets all these properties back and you're getting them back by the zillions.

RUSH: All right. I'm going to make you a prediction. This is an "if." This is a contingency prediction based on what you've said. If what you said happens and there literally are thousands and thousands of homes repossessed by banks that they don't want and they can't afford to carry, then, yeah: Either the government is gonna buy the homes and put poor people in them, or they're gonna buy the banks.

RUSH: Remember, now, everybody is entitled to a home. We're gonna return the nation's wealth to its rightful owners. Don't doubt me, folks. It's a big "if," but it's possible.

RUSH: I checked the e-mail during the break. A lot of people didn't understand what this last call was about. The guy was talking fast, talking about 1099s and where it comes into play. Now, let me see if I can explain, 'cause we're up against it on time, going into the break there. It is truly an agenda item of ACORN to put poor people in foreclosed homes. In fact, it's called "deed in lieu of foreclosure." Have you heard of that, Snerdley? (interruption) You've heard of this. You just give 'em the deed. You don't foreclose on the property at all. You just give them the deed. Now, here's how it works. Best as I can tell, it looks like the only requirement to get a deed in lieu of foreclosure is that the outstanding amount owed is equal to the value of the house on the market.

In other words, you couldn't give a deed in lieu of foreclosure if what's owed is far more than what the value of the house is. And that's going to be the case in a lot of instances because a lot of homeowners and houses are underwater. But if that circumstance is met, then the banks, theoretically, can do it. But it's a voluntary thing on both sides. There's no federal law requiring it. It's just an idea that's been put forth by ACORN and other community organizer groups oriented around the notion that it's just not fair that some people have million-dollar (or more expensive) houses and other people don't, and the way to take care of this is when these rich people walk out on their houses because they can't afford them anymore it's only fair to give them to poor people, give them a deed in lieu of foreclosure.

Certain specifics have to be met, but it is voluntary. I think now -- I think -- the 1099 comes into play because the borrower has to pay taxes on the remaining debt on the mortgage and the government has to get their cut, and a 1099 is a tax form. It's like a W-2 where nothing's been deducted. It's just a report of income and you have to pay the tax on it. The 1099 gets sent to the IRS and it's sent to you. The actual title of the form is "Acquisition or Abandonment of Secured Property." The bank gets the deed in lieu of foreclosure but then they can throw somebody in there if they want. The important thing to remember about this is that there is an agenda item on the part of the radical left for this to happen. You shoulda seen Snerdley's face when I was talking to the guy on the phone and I said, "Well, no, no, no. They're just going to give the houses to the poor."

Snerdley rolled his eyes. "Yeah, you're just going again. You're exaggerating again." No, no, no. When it comes to this administration and the radical left, it's really hard to exaggerate who they are. It's really hard to exaggerate what they believe, unless you know what a liberal and a leftist really is today. If you understand the anger that motivates them, if you understand the frustration and the genuine range that animates these people -- and the rage and the anger is at capitalism, at America as founded, and at the people in this country who have achieved in the capitalist system because the leftist believes that the game is rigged and that the achievers are part of a club, that they protect each other and take care of each other and they keep everybody else out.

And "the people they keep out" are minorities and people of color and certain sexual orientations and genders and so forth. They genuinely believe this, and they have told their people as they've been born and raised, "If you're female, if you're a minority, if you're a person of color, if you're gay, that club over there is not going to let you in, and look at what they have! They have Wall Street and they have the corporate jets and look at the houses they have. They got four or five houses. You're never going to get in there," and then they've got their race-baiters to come along with the Reverend Jackson and Reverend Sharpton tell 'em this and reinforce it. You've got La Raza that says the same thing, and you have ACORN, which tells its charges the same thing.

So the objective becomes to get even, to get even with this outrage called capitalism. These people are not taught that the game is open to anybody and all that's required is industriousness. You know, the usual things that accompany achievement and success: Passion, devotion, knowing what you want, knowing what you love, and working hard for it. These people are told, "None of that's going to get you anywhere. That's all a lie. Even if you do all of that they're not going to pay you as they pay each other. Even if you do every bit of work and you work as hard as them, the only people are going to let in are going to be Uncle Toms. The only people are going to let in are people just to make it look like they're diverse."

This is what they really think, folks. It's what they truly believe, and they follow that by saying, "The only way to make everything equal in terms of outcome here is to give these people in the capitalist club a kick in the teeth and a taste of their own medicine." So, hello, crumbling economy. As far as the left is concerned, it's already bad for everybody but the rich. It's already bad for the middle class. It's already bad. In America as it normally is, it's bad for everybody who's not in the capitalist club. It just isn't fair! So all of this economic damage being done now, it's not any worse than what the downtrodden feel every day, in their view. What they're doing now is trying to bring the misery and the suffering that they think exists throughout this country to the precious few who have gamed the system. That's why Goldman Sachs, Wall Street, AIG are the enemy.

That's why conservatives are the enemy. That's why people who are oriented toward the founding of the country and freedom and liberty are the enemy, because they stand in the way of this balancing that the radical left thinks must happen. Now, you're saying to yourself, "But, Rush, can't they look around the world and see this has never worked?" Yeah, they can. They do. What they tell themselves is, "The right people have never been in charge of it with the right amount of money." But now the right guy's in charge finally! "We're the ones we've been waiting for." Obama and his crew finally now! This is the way. This is the way the world has been waiting for! This is the moment the world's been waiting for.

This is the guy who is going to show the world how socialism and communism can be made to work, how there will be happiness and unity and joy. "But, Rush, everybody's miserable. There's no happiness at all, there's more. Look at Arizona. It's threatening to cut off Los Angeles power supply, because Los Angeles is boycotting Arizona." Yeah, that's part of the plan, too. Because, remember, the purpose is to bring misery to the achievers. In the view of the leftist, there is misery everywhere but, say, ten to 20% of the population. Eighty percent in capitalism is oppressed, downtrodden, poor, denied rights, opportunity, and so forth. So can't get any worse for them. But it's gotta get worse in order to make "the rich," quote, unquote, suffer and be in pain. And that's what's going on. So Obama can go into Ohio yesterday where there's 15% unemployment and tell the people there they don't know how good they've got it with him in charge.

He can sit here with double-digit unemployment nationwide with no effort -- an oil spill -- and what does Obama do? He convenes a bunch of meetings while other people are trying to stanch the flow of oil. Everything's in a crisis opportunity for these people. I guarantee you, and I'm not making it up. I may make it sound funny when I talk about it. This tar ball business in the Keys is a great illustration. These people were so happy! I'm telling you the media last night, it was orgasmic. They didn't need any edible underwear to get their jollies last night. There were tar balls in the Keys. That meant that this oil spill was finally spreading in the ocean currents exactly like they had said. They're going to have a real disaster now! Remember yesterday told you that a Democrat in Louisiana doesn't want Bobby Jindal to take action to fix this or to protect the shoreline because they don't want Jindal to get the credit for doing anything.

Because Jindal believes in limited government. So they're trying to say, "Well, you don't have any right to be doing this! You believe in limited government. Limited government would not do something like this." So the disaster must happen, and it must be bad. Katrina was a godsend. Katrina, for the leftist, was a godsend. Look at what it allowed them to do! Blame every enemy they've got, blame capitalism, blame a government not run by them. The pain and suffering? The pictures of people on their rooftops desperately asking to be rescued? Perfect! Perfect picture. They think that you see them in anxiety and sorrow over these people. No, no, no. They don't have compassion. Everybody is a prop to the leftist. Everybody's a prop. Even a second grader at a grade school in Maryland. "Mrs. Obama, my mom says that your husband, Barack Obama wants to kick people out that don't have papers." They'll use anybody, even their own kids.

RUSH: -- you can find stories in the State-Controlled Media instructing you how to walk out on a mortgage or walk out on a loan commitment as a virtuous thing to do.

I have seen this discussed or written about in many places and not just the MSM as part of some tin foil hat conspiracy theory. The honest ones tell you to go talk to a lawyer and see what your rights are. If banks are willing to write loans on inflated property values then they own the risk too.

If people are trying to get “out of” their underwater loans, they are ending a contract that had their house up as collateral in the first place. If the banks were irresponsible enough to loan money to people for MILLION DOLLAR houses, then the banks should eat it ... and fail. Why are the banks being propped up? Certainly more competent people will rush in and take over.

I am not surprised by this, since it has long been obvious.

These “million dollar homes”, probably had an actual cost to the builder of perhaps $300k. With a $700k markup. This is just the high end of what is seen in the rest of the housing market.

People who bought homes in the early 1960s have had their homes increase in price by literally 10 times. Back then, a home that cost $100k would theoretically be “worth” $1m today.

But that is all illusion. Back then, that same home would have cost the home builder perhaps $95k to build. He would earn $5k.

It’s interesting that the total rate of inflation in the US economy from 1960 to today is something like 650%. In real terms, if something cost $1 in 1960, it costs $7.50 today.

So the real value of a $100k home in 1960, with ordinary inflation, should be about $750k today. So why does it have a price tag of $1m? Simple, because of speculation.

In the 1960s, if a bank was to give you a loan on your owned house, they would not assess its value at $100k, but the $95k that the house cost the builder to build. But at some point, the banks decided to loan and mortgage, not based on what the house was *worth*, but what the market said the price of the home should be.

And this was a bad idea. The banks thought they were being very crafty, to only sell mortgages based on the highly inflated price of properties, not its real value. They got greedy.

In the process, they managed to “create” money out of thin air, as least as far as their exposure to that mortgage went. Money that they are still responsible for.

but what's going to end up happening is, you know, they just passed this law now where a lot of people who aren't going to sell their homes are trying to get out from underneath them because of the tax ramifications, because whatever they would have lost they woulda got back as a 1099. And so what's happening now is they've waived that, and they're now doing what's called a "deed in lieu of foreclosure."

I'm surprised that some company hasn't tried to use the theory that the 1099 risk for the loanees was an implicit part of the risk calculation for the loaner. Therefore, changing the rules and incentivizing walk-away defaults was a "taking" by the government.

It’s interesting that the total rate of inflation in the US economy from 1960 to today is something like 650%. In real terms, if something cost $1 in 1960, it costs $7.50 today.
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That is the official line but one hundred dollars a week in 1960 would support a family at a reasonable standard of living much more easily than seven hundred and fifty a week will now. You would have had a hard time hauling a hundred dollars worth of groceries in a pickup truck back then, now I can easily carry a hundred dollars worth into the house in one trip all by myself. My parents’ electric bill in 1960 was about seven dollars a month, gasoline averaged less than thirty cents a gallon. In truth a thousand dollars now is not equal to a hundred in 1960 if you compare the same lifestyle. Of course there are all kinds of things that didn’t exist then so you cannot really make an accurate comparison.

One thing to consider is that in 1960 a public high school graduate was better educated than almost any recipient of a Bachelor of Arts or Science in recent years and that education cost very little indeed back then. Most public high school graduates actually knew such complicated things as the difference between to, two and too, the difference between there, their, and they’re, the difference between loose and lose, the difference between it’s and its and that is not even the start of the vast knowledge that seems to have been lost since then. Many even understood the proper usage of I and me, something that seems to be beyond the ability of journalists today. Any one of them knew more about history and government than ninety nine percent of university graduates do now.

“Greatest, most liberating feeling in the world.”
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Me too, we have 1850 square feet on 8 acres but I would rather live in 600 square feet of mortgage free bliss than have a huge McMansion that costs every penny I can rake and scrape just to pay the mortgage with nothing left for maintenance.

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