‘We’re in the Middle of a Crash’: Black Swan

[XBoxBoy]

[quote=equalizer]However flawed the part ownership, it is better than outright principal reduction. [/quote]

While I’m not exactly sure of the details of Taleb’s plan I think it’s straightforward principal reduction in exchange for a part ownership that has little if any value and potentially lots of administrative headaches. If that’s better than outright principal reduction it is only a very small amount better.

[quote=equalizer] Do you have any better ideas short of foreclosure? [/quote]

Back up a second. The problem is that the banks hold loans that due to falling prices are no longer sufficiently collateralized. If the borrower continues to pay the mortgage, the bank does not have a problem. However, if the borrower stops paying the mortgage, the bank has three choices:

1) Take their losses either with a foreclosure or short sale.

2) Outright principal reduction. This is a particularly bad option because doing this for one person only encourages others to go into default hoping to get their principal reduced.

3) Try some scheme that kicks the payments down the road, hoping that some time in the future somehow the borrower coughs up more money. My perspective is that virtually all the schemes put forward, including this one from Mr. Taleb, are nothing more than a fancy cover for this option. They are not a fix, just a postponement of the problem.

Notice that before I listed the bank’s options, I made clear that if the borrower continued to make payments there was no problem. So, if the bank was thinking things through they would realize that a very high priority is to make sure that people keep paying in full at the agreed upon terms. Option 2 and 3 undermine that. (As we’ve discussed in a number of threads here on piggington)

So, regardless of the area I think it’s pretty clear foreclosure and/or short sales are the best answer.

In regards to your comments about areas where the economy is collapsing. (Modesto, Bakersfield, Detroit) In these areas, it’s the broad economic issues that need to be addressed first before housing can be addressed. (ie, what are people in these areas going to produce/sell that will generate the cash coming into the community so that it can grow) Since these issues are not being addressed seriously, I doubt that any kicking the problem down the road will work, only postpone the problem.

XBoxBoy

[moneymaker]

The trick is to make it not to attractive to do a workout/remod. Would you trash your credit in exchange for a lien that brings your house out from under water? Most people would not,I think. So the only people that really would benefit would be the ones that a)have income source b)want to stay in their homes c)are willing to take the credit hit. It is a logical solution where the newly appraised value would determine the lien amount. People normally want their house to appraise high,in this case the lien would be smaller though,so if one was greedy and tried to get it to appraise low(for a higher lien) then it would depress the neighborhood values making it harder to sell in the near future(flip) thus keeping people honest with this system of checks and balances.

[moneymaker]

The trick is to make it not to attractive to do a workout/remod. Would you trash your credit in exchange for a lien that brings your house out from under water? Most people would not,I think. So the only people that really would benefit would be the ones that a)have income source b)want to stay in their homes c)are willing to take the credit hit. It is a logical solution where the newly appraised value would determine the lien amount. People normally want their house to appraise high,in this case the lien would be smaller though,so if one was greedy and tried to get it to appraise low(for a higher lien) then it would depress the neighborhood values making it harder to sell in the near future(flip) thus keeping people honest with this system of checks and balances.

[moneymaker]

The trick is to make it not to attractive to do a workout/remod. Would you trash your credit in exchange for a lien that brings your house out from under water? Most people would not,I think. So the only people that really would benefit would be the ones that a)have income source b)want to stay in their homes c)are willing to take the credit hit. It is a logical solution where the newly appraised value would determine the lien amount. People normally want their house to appraise high,in this case the lien would be smaller though,so if one was greedy and tried to get it to appraise low(for a higher lien) then it would depress the neighborhood values making it harder to sell in the near future(flip) thus keeping people honest with this system of checks and balances.

[moneymaker]

The trick is to make it not to attractive to do a workout/remod. Would you trash your credit in exchange for a lien that brings your house out from under water? Most people would not,I think. So the only people that really would benefit would be the ones that a)have income source b)want to stay in their homes c)are willing to take the credit hit. It is a logical solution where the newly appraised value would determine the lien amount. People normally want their house to appraise high,in this case the lien would be smaller though,so if one was greedy and tried to get it to appraise low(for a higher lien) then it would depress the neighborhood values making it harder to sell in the near future(flip) thus keeping people honest with this system of checks and balances.

[moneymaker]

The trick is to make it not to attractive to do a workout/remod. Would you trash your credit in exchange for a lien that brings your house out from under water? Most people would not,I think. So the only people that really would benefit would be the ones that a)have income source b)want to stay in their homes c)are willing to take the credit hit. It is a logical solution where the newly appraised value would determine the lien amount. People normally want their house to appraise high,in this case the lien would be smaller though,so if one was greedy and tried to get it to appraise low(for a higher lien) then it would depress the neighborhood values making it harder to sell in the near future(flip) thus keeping people honest with this system of checks and balances.

[peterb]

There’s a reason the foreclosure process exists! It’s because it’s a clean way to get accounts settled and move on. It needs to happen. All this talk about modifications and renogiations etc, is just stalling the inevitable. The methodical process of highly leveraged assets unwinding is hard enough as it is. Throwing this into the mix only screws it up more and prolongs the pain. If you think it through, foreclosure needs to be allowed to run its course.

[peterb]

There’s a reason the foreclosure process exists! It’s because it’s a clean way to get accounts settled and move on. It needs to happen. All this talk about modifications and renogiations etc, is just stalling the inevitable. The methodical process of highly leveraged assets unwinding is hard enough as it is. Throwing this into the mix only screws it up more and prolongs the pain. If you think it through, foreclosure needs to be allowed to run its course.

[peterb]

There’s a reason the foreclosure process exists! It’s because it’s a clean way to get accounts settled and move on. It needs to happen. All this talk about modifications and renogiations etc, is just stalling the inevitable. The methodical process of highly leveraged assets unwinding is hard enough as it is. Throwing this into the mix only screws it up more and prolongs the pain. If you think it through, foreclosure needs to be allowed to run its course.

[peterb]

There’s a reason the foreclosure process exists! It’s because it’s a clean way to get accounts settled and move on. It needs to happen. All this talk about modifications and renogiations etc, is just stalling the inevitable. The methodical process of highly leveraged assets unwinding is hard enough as it is. Throwing this into the mix only screws it up more and prolongs the pain. If you think it through, foreclosure needs to be allowed to run its course.

[peterb]

There’s a reason the foreclosure process exists! It’s because it’s a clean way to get accounts settled and move on. It needs to happen. All this talk about modifications and renogiations etc, is just stalling the inevitable. The methodical process of highly leveraged assets unwinding is hard enough as it is. Throwing this into the mix only screws it up more and prolongs the pain. If you think it through, foreclosure needs to be allowed to run its course.

[equalizer]

[quote=XBoxBoy][quote=equalizer]However flawed the part ownership, it is better than outright principal reduction. [/quote]

While I’m not exactly sure of the details of Taleb’s plan I think it’s straightforward principal reduction in exchange for a part ownership that has little if any value and potentially lots of administrative headaches. If that’s better than outright principal reduction it is only a very small amount better.

[quote=equalizer] Do you have any better ideas short of foreclosure? [/quote]

Back up a second. The problem is that the banks hold loans that due to falling prices are no longer sufficiently collateralized. If the borrower continues to pay the mortgage, the bank does not have a problem. However, if the borrower stops paying the mortgage, the bank has three choices:

1) Take their losses either with a foreclosure or short sale.

2) Outright principal reduction. This is a particularly bad option because doing this for one person only encourages others to go into default hoping to get their principal reduced.

3) Try some scheme that kicks the payments down the road, hoping that some time in the future somehow the borrower coughs up more money. My perspective is that virtually all the schemes put forward, including this one from Mr. Taleb, are nothing more than a fancy cover for this option. They are not a fix, just a postponement of the problem.

Notice that before I listed the bank’s options, I made clear that if the borrower continued to make payments there was no problem. So, if the bank was thinking things through they would realize that a very high priority is to make sure that people keep paying in full at the agreed upon terms. Option 2 and 3 undermine that. (As we’ve discussed in a number of threads here on piggington)

So, regardless of the area I think it’s pretty clear foreclosure and/or short sales are the best answer.

In regards to your comments about areas where the economy is collapsing. (Modesto, Bakersfield, Detroit) In these areas, it’s the broad economic issues that need to be addressed first before housing can be addressed. (ie, what are people in these areas going to produce/sell that will generate the cash coming into the community so that it can grow) Since these issues are not being addressed seriously, I doubt that any kicking the problem down the road will work, only postpone the problem.

XBoxBoy[/quote]
Thanks for insightful reply.
In the blighted communities there may be a case made for alternatives, pushing the can if you will. Banks, Feds, the towns can’t handle a crush of foreclosures at the same time. If they ideally spread out over several years the pain could be reduced. That’s me and Wishful thinking.

[equalizer]

[quote=XBoxBoy][quote=equalizer]However flawed the part ownership, it is better than outright principal reduction. [/quote]

While I’m not exactly sure of the details of Taleb’s plan I think it’s straightforward principal reduction in exchange for a part ownership that has little if any value and potentially lots of administrative headaches. If that’s better than outright principal reduction it is only a very small amount better.

[quote=equalizer] Do you have any better ideas short of foreclosure? [/quote]

Back up a second. The problem is that the banks hold loans that due to falling prices are no longer sufficiently collateralized. If the borrower continues to pay the mortgage, the bank does not have a problem. However, if the borrower stops paying the mortgage, the bank has three choices:

1) Take their losses either with a foreclosure or short sale.

2) Outright principal reduction. This is a particularly bad option because doing this for one person only encourages others to go into default hoping to get their principal reduced.

3) Try some scheme that kicks the payments down the road, hoping that some time in the future somehow the borrower coughs up more money. My perspective is that virtually all the schemes put forward, including this one from Mr. Taleb, are nothing more than a fancy cover for this option. They are not a fix, just a postponement of the problem.

Notice that before I listed the bank’s options, I made clear that if the borrower continued to make payments there was no problem. So, if the bank was thinking things through they would realize that a very high priority is to make sure that people keep paying in full at the agreed upon terms. Option 2 and 3 undermine that. (As we’ve discussed in a number of threads here on piggington)

So, regardless of the area I think it’s pretty clear foreclosure and/or short sales are the best answer.

In regards to your comments about areas where the economy is collapsing. (Modesto, Bakersfield, Detroit) In these areas, it’s the broad economic issues that need to be addressed first before housing can be addressed. (ie, what are people in these areas going to produce/sell that will generate the cash coming into the community so that it can grow) Since these issues are not being addressed seriously, I doubt that any kicking the problem down the road will work, only postpone the problem.

XBoxBoy[/quote]
Thanks for insightful reply.
In the blighted communities there may be a case made for alternatives, pushing the can if you will. Banks, Feds, the towns can’t handle a crush of foreclosures at the same time. If they ideally spread out over several years the pain could be reduced. That’s me and Wishful thinking.

[equalizer]

[quote=XBoxBoy][quote=equalizer]However flawed the part ownership, it is better than outright principal reduction. [/quote]

While I’m not exactly sure of the details of Taleb’s plan I think it’s straightforward principal reduction in exchange for a part ownership that has little if any value and potentially lots of administrative headaches. If that’s better than outright principal reduction it is only a very small amount better.

[quote=equalizer] Do you have any better ideas short of foreclosure? [/quote]

Back up a second. The problem is that the banks hold loans that due to falling prices are no longer sufficiently collateralized. If the borrower continues to pay the mortgage, the bank does not have a problem. However, if the borrower stops paying the mortgage, the bank has three choices:

1) Take their losses either with a foreclosure or short sale.

2) Outright principal reduction. This is a particularly bad option because doing this for one person only encourages others to go into default hoping to get their principal reduced.

3) Try some scheme that kicks the payments down the road, hoping that some time in the future somehow the borrower coughs up more money. My perspective is that virtually all the schemes put forward, including this one from Mr. Taleb, are nothing more than a fancy cover for this option. They are not a fix, just a postponement of the problem.

Notice that before I listed the bank’s options, I made clear that if the borrower continued to make payments there was no problem. So, if the bank was thinking things through they would realize that a very high priority is to make sure that people keep paying in full at the agreed upon terms. Option 2 and 3 undermine that. (As we’ve discussed in a number of threads here on piggington)

So, regardless of the area I think it’s pretty clear foreclosure and/or short sales are the best answer.

In regards to your comments about areas where the economy is collapsing. (Modesto, Bakersfield, Detroit) In these areas, it’s the broad economic issues that need to be addressed first before housing can be addressed. (ie, what are people in these areas going to produce/sell that will generate the cash coming into the community so that it can grow) Since these issues are not being addressed seriously, I doubt that any kicking the problem down the road will work, only postpone the problem.

XBoxBoy[/quote]
Thanks for insightful reply.
In the blighted communities there may be a case made for alternatives, pushing the can if you will. Banks, Feds, the towns can’t handle a crush of foreclosures at the same time. If they ideally spread out over several years the pain could be reduced. That’s me and Wishful thinking.

[equalizer]

[quote=XBoxBoy][quote=equalizer]However flawed the part ownership, it is better than outright principal reduction. [/quote]

While I’m not exactly sure of the details of Taleb’s plan I think it’s straightforward principal reduction in exchange for a part ownership that has little if any value and potentially lots of administrative headaches. If that’s better than outright principal reduction it is only a very small amount better.

[quote=equalizer] Do you have any better ideas short of foreclosure? [/quote]

Back up a second. The problem is that the banks hold loans that due to falling prices are no longer sufficiently collateralized. If the borrower continues to pay the mortgage, the bank does not have a problem. However, if the borrower stops paying the mortgage, the bank has three choices:

1) Take their losses either with a foreclosure or short sale.

2) Outright principal reduction. This is a particularly bad option because doing this for one person only encourages others to go into default hoping to get their principal reduced.

3) Try some scheme that kicks the payments down the road, hoping that some time in the future somehow the borrower coughs up more money. My perspective is that virtually all the schemes put forward, including this one from Mr. Taleb, are nothing more than a fancy cover for this option. They are not a fix, just a postponement of the problem.

Notice that before I listed the bank’s options, I made clear that if the borrower continued to make payments there was no problem. So, if the bank was thinking things through they would realize that a very high priority is to make sure that people keep paying in full at the agreed upon terms. Option 2 and 3 undermine that. (As we’ve discussed in a number of threads here on piggington)

So, regardless of the area I think it’s pretty clear foreclosure and/or short sales are the best answer.

In regards to your comments about areas where the economy is collapsing. (Modesto, Bakersfield, Detroit) In these areas, it’s the broad economic issues that need to be addressed first before housing can be addressed. (ie, what are people in these areas going to produce/sell that will generate the cash coming into the community so that it can grow) Since these issues are not being addressed seriously, I doubt that any kicking the problem down the road will work, only postpone the problem.

XBoxBoy[/quote]
Thanks for insightful reply.
In the blighted communities there may be a case made for alternatives, pushing the can if you will. Banks, Feds, the towns can’t handle a crush of foreclosures at the same time. If they ideally spread out over several years the pain could be reduced. That’s me and Wishful thinking.

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