10 Million Homeowners Have Incentives to Walk

[DaCounselor]

“Banks would essentially be forced to write down every loan made between 2000 and now for it to be fair, and that still doesn’t address the fact that I knew I couldn’t afford a house, so I didn’t buy. What compensation should I get to make it fair? Should I get $100,000 check from the government?”
______________________________

I certainly don’t have the numbers at my fingertips but my best guess is that nowhere near every loan made since 2000 is upside down in relation to the home value. Not even close. So there’s that.

As for what is fair for you, trust me that is the furthest thing from anyone’s mind but your own. Addressing what is fair for you is not going to solve the problem. If you feel like it is unfair that other people are going to get bailed out and you are going to get a big fat 0 my advice is to get used to it because life is just not fair.

What we have here is a truly global economic crisis that has been triggered by defaulting loans. There is plenty of blame to go around but make no mistake, if the powers that be do not address the coming wave of future defaults then things are get to get much much worse. I continue to maintain the mindset that the best solution is to stop the defaults to the greatest extent possible via mods. What’s “fair” to everyone is really out the window at this point.

[Huckleberry]

[quote=mike92104][quote=DaCounselor]I think the only way to stop the walk-aways is to modify the loans into very good fixed rates and write down the principal balances. I understand the moral hazard argument but at this point in time my response is “so what?” Even if a homeowner has the ability to pay the existing mortgage, it’s going to come down to WILL he pay, not CAN he pay. If he ruthlessly defaults, the end result is the same. Who cares at this point?

I cannot imagine that it will be more cost-effective to go through the foreclosure process just to end up selling the house as a discounted REO for the same price that you could have written down the balance to and kept the homeowner in the home. It’s a bad business decision to forego the mod. I understand the complications due to the securitization of these loans, but the govt’s purchase of this paper may resolve the issues. They do give a nod to this in Sections 109 & 110 of the new bill. We’ll see I guess.[/quote]

Banks would essentially be forced to write down every loan made between 2000 and now for it to be fair, and that still doesn’t address the fact that I knew I couldn’t afford a house, so I didn’t buy. What compensation should I get to make it fair? Should I get $100,000 check from the government? [/quote]

Agreed. All of us that were fiscally responsible should receive some average “model” amount based on what zip code we live in.

Then, for every single person that wants to stay in their house, at a minimum they should pay interest (12%) on the loan write down amount.

And, what about all those people that got loans fraudulently? Should we just let them stay in their homes on our tax dollars? Bad idea…

[Huckleberry]

[quote=mike92104][quote=DaCounselor]I think the only way to stop the walk-aways is to modify the loans into very good fixed rates and write down the principal balances. I understand the moral hazard argument but at this point in time my response is “so what?” Even if a homeowner has the ability to pay the existing mortgage, it’s going to come down to WILL he pay, not CAN he pay. If he ruthlessly defaults, the end result is the same. Who cares at this point?

I cannot imagine that it will be more cost-effective to go through the foreclosure process just to end up selling the house as a discounted REO for the same price that you could have written down the balance to and kept the homeowner in the home. It’s a bad business decision to forego the mod. I understand the complications due to the securitization of these loans, but the govt’s purchase of this paper may resolve the issues. They do give a nod to this in Sections 109 & 110 of the new bill. We’ll see I guess.[/quote]

Banks would essentially be forced to write down every loan made between 2000 and now for it to be fair, and that still doesn’t address the fact that I knew I couldn’t afford a house, so I didn’t buy. What compensation should I get to make it fair? Should I get $100,000 check from the government? [/quote]

Agreed. All of us that were fiscally responsible should receive some average “model” amount based on what zip code we live in.

Then, for every single person that wants to stay in their house, at a minimum they should pay interest (12%) on the loan write down amount.

And, what about all those people that got loans fraudulently? Should we just let them stay in their homes on our tax dollars? Bad idea…

[Huckleberry]

[quote=mike92104][quote=DaCounselor]I think the only way to stop the walk-aways is to modify the loans into very good fixed rates and write down the principal balances. I understand the moral hazard argument but at this point in time my response is “so what?” Even if a homeowner has the ability to pay the existing mortgage, it’s going to come down to WILL he pay, not CAN he pay. If he ruthlessly defaults, the end result is the same. Who cares at this point?

I cannot imagine that it will be more cost-effective to go through the foreclosure process just to end up selling the house as a discounted REO for the same price that you could have written down the balance to and kept the homeowner in the home. It’s a bad business decision to forego the mod. I understand the complications due to the securitization of these loans, but the govt’s purchase of this paper may resolve the issues. They do give a nod to this in Sections 109 & 110 of the new bill. We’ll see I guess.[/quote]

Banks would essentially be forced to write down every loan made between 2000 and now for it to be fair, and that still doesn’t address the fact that I knew I couldn’t afford a house, so I didn’t buy. What compensation should I get to make it fair? Should I get $100,000 check from the government? [/quote]

Agreed. All of us that were fiscally responsible should receive some average “model” amount based on what zip code we live in.

Then, for every single person that wants to stay in their house, at a minimum they should pay interest (12%) on the loan write down amount.

And, what about all those people that got loans fraudulently? Should we just let them stay in their homes on our tax dollars? Bad idea…

[Huckleberry]

[quote=mike92104][quote=DaCounselor]I think the only way to stop the walk-aways is to modify the loans into very good fixed rates and write down the principal balances. I understand the moral hazard argument but at this point in time my response is “so what?” Even if a homeowner has the ability to pay the existing mortgage, it’s going to come down to WILL he pay, not CAN he pay. If he ruthlessly defaults, the end result is the same. Who cares at this point?

I cannot imagine that it will be more cost-effective to go through the foreclosure process just to end up selling the house as a discounted REO for the same price that you could have written down the balance to and kept the homeowner in the home. It’s a bad business decision to forego the mod. I understand the complications due to the securitization of these loans, but the govt’s purchase of this paper may resolve the issues. They do give a nod to this in Sections 109 & 110 of the new bill. We’ll see I guess.[/quote]

Banks would essentially be forced to write down every loan made between 2000 and now for it to be fair, and that still doesn’t address the fact that I knew I couldn’t afford a house, so I didn’t buy. What compensation should I get to make it fair? Should I get $100,000 check from the government? [/quote]

Agreed. All of us that were fiscally responsible should receive some average “model” amount based on what zip code we live in.

Then, for every single person that wants to stay in their house, at a minimum they should pay interest (12%) on the loan write down amount.

And, what about all those people that got loans fraudulently? Should we just let them stay in their homes on our tax dollars? Bad idea…

[Huckleberry]

[quote=mike92104][quote=DaCounselor]I think the only way to stop the walk-aways is to modify the loans into very good fixed rates and write down the principal balances. I understand the moral hazard argument but at this point in time my response is “so what?” Even if a homeowner has the ability to pay the existing mortgage, it’s going to come down to WILL he pay, not CAN he pay. If he ruthlessly defaults, the end result is the same. Who cares at this point?

I cannot imagine that it will be more cost-effective to go through the foreclosure process just to end up selling the house as a discounted REO for the same price that you could have written down the balance to and kept the homeowner in the home. It’s a bad business decision to forego the mod. I understand the complications due to the securitization of these loans, but the govt’s purchase of this paper may resolve the issues. They do give a nod to this in Sections 109 & 110 of the new bill. We’ll see I guess.[/quote]

Banks would essentially be forced to write down every loan made between 2000 and now for it to be fair, and that still doesn’t address the fact that I knew I couldn’t afford a house, so I didn’t buy. What compensation should I get to make it fair? Should I get $100,000 check from the government? [/quote]

Agreed. All of us that were fiscally responsible should receive some average “model” amount based on what zip code we live in.

Then, for every single person that wants to stay in their house, at a minimum they should pay interest (12%) on the loan write down amount.

And, what about all those people that got loans fraudulently? Should we just let them stay in their homes on our tax dollars? Bad idea…

[CA renter]

What we have here is a truly global economic crisis that has been triggered by defaulting loans. There is plenty of blame to go around but make no mistake, if the powers that be do not address the coming wave of future defaults then things are get to get much much worse.
—————–

The “crisis” was not triggered by defaulting loans, but by the origination of those guaranteed-to-fail loans in the first place. Falling housing prices are NOT the problem; falling prices are the solution to too much debt and the resultant artificially-inflated prices.

Perhaps you consider falling asset prices a bad thing, but many of us think it’s the best thing that could ever happen to this country.

We’ve been trying to fake our way through the falling wages/inflated prices stagflation for too long. Best to have debt destruction (via foreclosures and bankruptcies) and deflation so we can get back to REAL growth, not this credit-driven, artificial eCONomy where we just pass paper back and forth.

Jobs will be lost and asset prices will tumble, but that is the pain we deserve for allowing Greenspan to paper over and inflate our way out of every recession that would have kept the economy in check.

[CA renter]

What we have here is a truly global economic crisis that has been triggered by defaulting loans. There is plenty of blame to go around but make no mistake, if the powers that be do not address the coming wave of future defaults then things are get to get much much worse.
—————–

The “crisis” was not triggered by defaulting loans, but by the origination of those guaranteed-to-fail loans in the first place. Falling housing prices are NOT the problem; falling prices are the solution to too much debt and the resultant artificially-inflated prices.

Perhaps you consider falling asset prices a bad thing, but many of us think it’s the best thing that could ever happen to this country.

We’ve been trying to fake our way through the falling wages/inflated prices stagflation for too long. Best to have debt destruction (via foreclosures and bankruptcies) and deflation so we can get back to REAL growth, not this credit-driven, artificial eCONomy where we just pass paper back and forth.

Jobs will be lost and asset prices will tumble, but that is the pain we deserve for allowing Greenspan to paper over and inflate our way out of every recession that would have kept the economy in check.

[CA renter]

What we have here is a truly global economic crisis that has been triggered by defaulting loans. There is plenty of blame to go around but make no mistake, if the powers that be do not address the coming wave of future defaults then things are get to get much much worse.
—————–

The “crisis” was not triggered by defaulting loans, but by the origination of those guaranteed-to-fail loans in the first place. Falling housing prices are NOT the problem; falling prices are the solution to too much debt and the resultant artificially-inflated prices.

Perhaps you consider falling asset prices a bad thing, but many of us think it’s the best thing that could ever happen to this country.

We’ve been trying to fake our way through the falling wages/inflated prices stagflation for too long. Best to have debt destruction (via foreclosures and bankruptcies) and deflation so we can get back to REAL growth, not this credit-driven, artificial eCONomy where we just pass paper back and forth.

Jobs will be lost and asset prices will tumble, but that is the pain we deserve for allowing Greenspan to paper over and inflate our way out of every recession that would have kept the economy in check.

[CA renter]

What we have here is a truly global economic crisis that has been triggered by defaulting loans. There is plenty of blame to go around but make no mistake, if the powers that be do not address the coming wave of future defaults then things are get to get much much worse.
—————–

The “crisis” was not triggered by defaulting loans, but by the origination of those guaranteed-to-fail loans in the first place. Falling housing prices are NOT the problem; falling prices are the solution to too much debt and the resultant artificially-inflated prices.

Perhaps you consider falling asset prices a bad thing, but many of us think it’s the best thing that could ever happen to this country.

We’ve been trying to fake our way through the falling wages/inflated prices stagflation for too long. Best to have debt destruction (via foreclosures and bankruptcies) and deflation so we can get back to REAL growth, not this credit-driven, artificial eCONomy where we just pass paper back and forth.

Jobs will be lost and asset prices will tumble, but that is the pain we deserve for allowing Greenspan to paper over and inflate our way out of every recession that would have kept the economy in check.

[CA renter]

What we have here is a truly global economic crisis that has been triggered by defaulting loans. There is plenty of blame to go around but make no mistake, if the powers that be do not address the coming wave of future defaults then things are get to get much much worse.
—————–

The “crisis” was not triggered by defaulting loans, but by the origination of those guaranteed-to-fail loans in the first place. Falling housing prices are NOT the problem; falling prices are the solution to too much debt and the resultant artificially-inflated prices.

Perhaps you consider falling asset prices a bad thing, but many of us think it’s the best thing that could ever happen to this country.

We’ve been trying to fake our way through the falling wages/inflated prices stagflation for too long. Best to have debt destruction (via foreclosures and bankruptcies) and deflation so we can get back to REAL growth, not this credit-driven, artificial eCONomy where we just pass paper back and forth.

Jobs will be lost and asset prices will tumble, but that is the pain we deserve for allowing Greenspan to paper over and inflate our way out of every recession that would have kept the economy in check.

[DaCounselor]

How I feel about asset devaluation is irrelevant. Home values are going to drop until they are done dropping. The issue is how to minimize the collateral damage of loan defaults. These properties are going to get marked to market one way or another. The creditors can mark to market asap with the current borrower staying put and get a performing modified loan working, or the creditors can endure zero cash flow on a defaulting loan for 6-9 months, incur foreclosure expenses, and carry the property (mello-roos, taxes, etc) until they eventually dump it in an REO fire sale (probably for less than what they could have re-written the original loan for).

[DaCounselor]

How I feel about asset devaluation is irrelevant. Home values are going to drop until they are done dropping. The issue is how to minimize the collateral damage of loan defaults. These properties are going to get marked to market one way or another. The creditors can mark to market asap with the current borrower staying put and get a performing modified loan working, or the creditors can endure zero cash flow on a defaulting loan for 6-9 months, incur foreclosure expenses, and carry the property (mello-roos, taxes, etc) until they eventually dump it in an REO fire sale (probably for less than what they could have re-written the original loan for).

[DaCounselor]

How I feel about asset devaluation is irrelevant. Home values are going to drop until they are done dropping. The issue is how to minimize the collateral damage of loan defaults. These properties are going to get marked to market one way or another. The creditors can mark to market asap with the current borrower staying put and get a performing modified loan working, or the creditors can endure zero cash flow on a defaulting loan for 6-9 months, incur foreclosure expenses, and carry the property (mello-roos, taxes, etc) until they eventually dump it in an REO fire sale (probably for less than what they could have re-written the original loan for).

[DaCounselor]

How I feel about asset devaluation is irrelevant. Home values are going to drop until they are done dropping. The issue is how to minimize the collateral damage of loan defaults. These properties are going to get marked to market one way or another. The creditors can mark to market asap with the current borrower staying put and get a performing modified loan working, or the creditors can endure zero cash flow on a defaulting loan for 6-9 months, incur foreclosure expenses, and carry the property (mello-roos, taxes, etc) until they eventually dump it in an REO fire sale (probably for less than what they could have re-written the original loan for).

[Author]

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