10 Million Homeowners Have Incentives to Walk

[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).

[peterb]

In a free market, it matters very much what the buyers feel is appropriate or fair. As they are the people that make the part of the market that matters. They spend the money. If the govt screws with the loans or makes it so the lenders screw with the loans, they better keep the potential buyers in mind. Because if buyers feel it’s a lousy deal, there goes your market. It will hang in limbo. And will still eventually come down.

Lenders are avoiding any changes right now because it’s all bad for them to recognize any of it. So delaying tactics are the order of the day. Looking the other way until a bailout or something changes things for the better. Or perhaps until management can leave the positions.But nothing except a market correction will do this. They may somehow inflate out of it, but that’s still a correction in real money.

[peterb]

In a free market, it matters very much what the buyers feel is appropriate or fair. As they are the people that make the part of the market that matters. They spend the money. If the govt screws with the loans or makes it so the lenders screw with the loans, they better keep the potential buyers in mind. Because if buyers feel it’s a lousy deal, there goes your market. It will hang in limbo. And will still eventually come down.

Lenders are avoiding any changes right now because it’s all bad for them to recognize any of it. So delaying tactics are the order of the day. Looking the other way until a bailout or something changes things for the better. Or perhaps until management can leave the positions.But nothing except a market correction will do this. They may somehow inflate out of it, but that’s still a correction in real money.

[peterb]

In a free market, it matters very much what the buyers feel is appropriate or fair. As they are the people that make the part of the market that matters. They spend the money. If the govt screws with the loans or makes it so the lenders screw with the loans, they better keep the potential buyers in mind. Because if buyers feel it’s a lousy deal, there goes your market. It will hang in limbo. And will still eventually come down.

Lenders are avoiding any changes right now because it’s all bad for them to recognize any of it. So delaying tactics are the order of the day. Looking the other way until a bailout or something changes things for the better. Or perhaps until management can leave the positions.But nothing except a market correction will do this. They may somehow inflate out of it, but that’s still a correction in real money.

[peterb]

In a free market, it matters very much what the buyers feel is appropriate or fair. As they are the people that make the part of the market that matters. They spend the money. If the govt screws with the loans or makes it so the lenders screw with the loans, they better keep the potential buyers in mind. Because if buyers feel it’s a lousy deal, there goes your market. It will hang in limbo. And will still eventually come down.

Lenders are avoiding any changes right now because it’s all bad for them to recognize any of it. So delaying tactics are the order of the day. Looking the other way until a bailout or something changes things for the better. Or perhaps until management can leave the positions.But nothing except a market correction will do this. They may somehow inflate out of it, but that’s still a correction in real money.

[peterb]

In a free market, it matters very much what the buyers feel is appropriate or fair. As they are the people that make the part of the market that matters. They spend the money. If the govt screws with the loans or makes it so the lenders screw with the loans, they better keep the potential buyers in mind. Because if buyers feel it’s a lousy deal, there goes your market. It will hang in limbo. And will still eventually come down.

Lenders are avoiding any changes right now because it’s all bad for them to recognize any of it. So delaying tactics are the order of the day. Looking the other way until a bailout or something changes things for the better. Or perhaps until management can leave the positions.But nothing except a market correction will do this. They may somehow inflate out of it, but that’s still a correction in real money.

[Daniel]

DaCounselor,

I can certainly understand your argument. It’s too late at this stage to worry about fairness and moral hazard. But some people are going to fume over this. I’m not even talking about “responsible renters”. I’m talking about those homeowners who bought at the top and put sizable downpayments. They will see their neighbors’ loans written off, while their downpayments vanish.

In this bizarro world we’re living in, zero-down buyers have the upper hand; 30% down buyers are screwed.

[Daniel]

DaCounselor,

I can certainly understand your argument. It’s too late at this stage to worry about fairness and moral hazard. But some people are going to fume over this. I’m not even talking about “responsible renters”. I’m talking about those homeowners who bought at the top and put sizable downpayments. They will see their neighbors’ loans written off, while their downpayments vanish.

In this bizarro world we’re living in, zero-down buyers have the upper hand; 30% down buyers are screwed.

[Daniel]

DaCounselor,

I can certainly understand your argument. It’s too late at this stage to worry about fairness and moral hazard. But some people are going to fume over this. I’m not even talking about “responsible renters”. I’m talking about those homeowners who bought at the top and put sizable downpayments. They will see their neighbors’ loans written off, while their downpayments vanish.

In this bizarro world we’re living in, zero-down buyers have the upper hand; 30% down buyers are screwed.

[Daniel]

DaCounselor,

I can certainly understand your argument. It’s too late at this stage to worry about fairness and moral hazard. But some people are going to fume over this. I’m not even talking about “responsible renters”. I’m talking about those homeowners who bought at the top and put sizable downpayments. They will see their neighbors’ loans written off, while their downpayments vanish.

In this bizarro world we’re living in, zero-down buyers have the upper hand; 30% down buyers are screwed.

[Daniel]

DaCounselor,

I can certainly understand your argument. It’s too late at this stage to worry about fairness and moral hazard. But some people are going to fume over this. I’m not even talking about “responsible renters”. I’m talking about those homeowners who bought at the top and put sizable downpayments. They will see their neighbors’ loans written off, while their downpayments vanish.

In this bizarro world we’re living in, zero-down buyers have the upper hand; 30% down buyers are screwed.

[larrylujack]

[quote=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.
[/quote]

DA makes a good point in the sense there is a snowball rolling downhill and accelerating. The only way to stop the snowball as DA points out is to stop the defaults via mods now, or at least reduce them. Otherwise, there is no doubt that the snowball rolling downhill will accelerate the downward spiral turning into an avalanche of defaults and foreclosures, with alot of collateral damage. It is too bad that the Senate passed the bailout without addressing this fundamental issue, but then again, wall street rules the senate so no surprise with that.
thanks for your insight, DA.

[larrylujack]

[quote=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.
[/quote]

DA makes a good point in the sense there is a snowball rolling downhill and accelerating. The only way to stop the snowball as DA points out is to stop the defaults via mods now, or at least reduce them. Otherwise, there is no doubt that the snowball rolling downhill will accelerate the downward spiral turning into an avalanche of defaults and foreclosures, with alot of collateral damage. It is too bad that the Senate passed the bailout without addressing this fundamental issue, but then again, wall street rules the senate so no surprise with that.
thanks for your insight, DA.

[larrylujack]

[quote=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.
[/quote]

DA makes a good point in the sense there is a snowball rolling downhill and accelerating. The only way to stop the snowball as DA points out is to stop the defaults via mods now, or at least reduce them. Otherwise, there is no doubt that the snowball rolling downhill will accelerate the downward spiral turning into an avalanche of defaults and foreclosures, with alot of collateral damage. It is too bad that the Senate passed the bailout without addressing this fundamental issue, but then again, wall street rules the senate so no surprise with that.
thanks for your insight, DA.

[larrylujack]

[quote=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.
[/quote]

DA makes a good point in the sense there is a snowball rolling downhill and accelerating. The only way to stop the snowball as DA points out is to stop the defaults via mods now, or at least reduce them. Otherwise, there is no doubt that the snowball rolling downhill will accelerate the downward spiral turning into an avalanche of defaults and foreclosures, with alot of collateral damage. It is too bad that the Senate passed the bailout without addressing this fundamental issue, but then again, wall street rules the senate so no surprise with that.
thanks for your insight, DA.

[Author]

Posts