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Tuesday, July 5, 2011
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21 comments:
http://www.irvinehousingblog.com/blog/comments/big-banks-foster-false-hope-with-lottery-style-principal-forgiveness/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+IrvineHousingBlog+Irvine+Housing+Blog
http://www.irvinehousingblog.com/blog/comments/big-banks-foster-false-hope-with-lottery-style-principal-forgiveness
"Banks have a problem, a riddle they must solve. Twenty-five percent of their borrowers are underwater, and when you factor in second mortgages and sales commissions, more than half can't sell their homes without writing a check for the shortfall. And house prices are still going down. When homeowners have no equity interest, they are no longer homeowners, they are loan owners. If a loan owner's payments are less than the cost of a comparable rental, they have an incentive to stay and pay, but when the payment exceeds a comparable rental -- and the huge mortgage balances of the bubble make this common -- loan owners have an incentive to keep their money and strategically default on their mortgage."
So what happens to the 25% of DC Area mortgages that are underwater?
people have been paying for 4 years on U/W mortgages, even if the local trend keeps up, will they pay for another 6 years to break even?
This is a really stupid idea. I'll bet the banks have found a way to make taxpayers eat these losses, because it makes no sense for them to voluntarily reduce the principal for a house that might not go into foreclosure.
Exactly Kevin. Those of us trying to do things the right way and have a dp are the ones who are losing out in this whole mess.
This is quickly becoming a deadbeat country. Much like how the RE industry actively encourages liars and cheats to become realtors while ushering out the honest, hard-working ones, the lesson that kids growing up today will carry into their adulthood is "if you do the right thing and live within your means, you will be screwed. Do whatever it takes to f*ck over other people, because they'll do it to you."
Govt encourages this. Banks encourage this. Lenders encourage this. realtors encourage this. Lawyers encourage this. Notice the people who are pushing for this new societal shift are all sociopathic crooks themselves, and should be burned at the stake.
Kevin,
"Notice the people who are pushing for this new societal shift are all sociopathic crooks themselves, and should be burned at the stake."
I would not go so far as to say this. Not all of those individuals are seedy and underhanded. Plus, blame needs to be placed on the people that owe these mortgages. I am not seeing that at all in the media or society. It is always someone else's fault.
Anyone have experiencing finishing a basement? How much did you pay per square foot?
We are getting some estimates this week on finishing a 600 sq foot basement to include a family room, full bath, bedroom and laundry area in N. Arlington.
The family room already has recessed lighting, drywall ceiling and heat/air conditioning. Painted wood paneling on the walls will come down and will be replaced with drywall.
This will be a mid-tier renovation - nothing fancy. Ceramic tile in the bathroom\laundry room and carpet elsewhere.
Bedroom already has egress via a door to the backyard.
Thanks!
Sorry, small typo, my above post should have read "experience finishing"...
Jewel,
I'd totally be interested in what results you get. I want to do the same with my basement which is probably a tad smaller than 600 sq ft. For me, I need to have the plumbing added to accomodate a shower, and I don't have an egress point from my basement so I probably won't put in a legal bedroom, just a nice family room. Good enough for guests to have a private space is my thought.
My $0.02
jewel
it's too small to use a Rule of thumb,
so you need a stick estimate.
get the contractor to break out each task by cost, then you will have a much better feel.
but if you want to save money,
just do the bathroom and laundry.
later finish out the rest.
Plus, blame needs to be placed on the people that owe these mortgages. I am not seeing that at all in the media or society. It is always someone else's fault.
Agreed. They enjoy victimhood status while waiting for handouts so they can milk the equity ATM again. Disgusting.
Regarding how long folks will keep paying on UW mortgages, I've been paying for 4 years since I went UW, and anticipate another 5 till I am back to zero. I don't see any choice but to keep paying, given that in VA there are no consumer protections from deficiency judgements on homes. I feel sorry for strategic defaulters, because they'll be 80 years old on their deathbed getting hounded by creditors on their home default from 30 years prior.
We seem to be having a "mini-bubble" at the moment, so my property is momentary at 85% of my mortgage value (70% of original purchase price), so in theory I could take all my cash and sell. It's tempting, because I think it's about to pop in the fall. But I'm loath to give my hard-earned next egg to the bank just for the privilege of getting out of my condo. We'll just suck it up till our kids are about 5 and 3 and we have the mortgage paid down to a point where we can sell or refi and rent it out.
Thanks for the input. I'm getting a few estimates this week and will let everyone know what I find out.
Steve
Thank you for the honest heartfelt truth.
So you have 2 kids in a 3 BR Condo?
Now if we had bankruptcy and cramdown we could get people like you out of their mortgages at less cost and let you move on with your life.
a decent bankruptcy and 7 years of bad credit is that any worse then where you are for the next 5 years?
Good luck buddy and just love your kids.
I feel sorry for strategic defaulters, because they'll be 80 years old on their deathbed getting hounded by creditors on their home default from 30 years prior.
A slap on the wrist for dumping their debt on others... can't say I feel sorry for them. They're choosing to do this because it's obviously in their best financial interests. Would I take a credit hit for $200k in cash, tax-free? Of course.
Kevin and Steve,
Bankruptcy is the logical route if you have no assets or have protected assets (retirement accounts(?).
Responsible people take their lumps and pay their debts. Virginia is a recourse state and this will affect those with other assets or a job subject to garnishment. Many employers do an annual credit report and, since this is an at-will state, can terminate people if they see an reo, etc. Others have security clearances that may be lost.
For those people and the rest of us who have to pay for the greed/stupidity/malfeasance of others (homeowners, lenders, realtors, Big Banks, etc.) it is "unfair". Such is life.
There are many people in Steve's situation. This happened to people who bought at the last peak (1989-1991) to a lesser extent.
I don't know if we are witnessing a "mini bubble" or not. We may have over-corrected. Only time will tell. If our unemployment rate, job creation and population increases hold it's hard to make the argument that significant drops will occur.
cheryl says
"Only time will tell. If our unemployment rate, job creation and population increases hold it's hard to make the argument that significant drops will occur."
All true and on the other side of the equation is Interest rates, reduction in Jumbo Mortgage caps and federal spending.
The cynic in me says there is nothing but more federal spending, the Jumbo mortgage caps is iffier and interest rates? Well if i could predict them, i'd be Bill Gross.
Now what's the general thing in M2M?
Hard to say, certainly we do see vacant property coming out of inventory, slowly.
Will the consumers begin to get a revulsion for housing? Hard to say.
Certainly the phrase "Safe as Houses" now has a cynical ring to it.
New household creation? Hard to say. Certainly the population growth rate is down. Will we see a japan where the middle aged are buried in house debt, combined with America, where the young are buried in debt?
It's messy. But, you can never go wrong betting on cash flows.
Appreciation is a iffy story, cash flow is a reality.
clever of trump.
but was it titled separately?
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