CA Shadow Inventory

[analyst]

[quote=sdrealtor]
Oops there goes another shadow inventory house, oops there goes another…….[/quote]

I agree that the federal government strategy is preventing the shadow inventory from becoming real inventory, and will continue to do so as long as the federal government can continue the policy.

The only reason for trying to understand the size of the shadow inventory is to predict what might happen if the federal government cannot continue its current policy.

The policy has effects away from the housing market, affecting the value of the dollar and the willingness of people, domestic and foreign, to lend to the federal government, and to U. S. banks and quasi-banks.

There is no guarantee that the current policy can be continued indefinitely.

If the government returned to monetary discipline (soon), the assistance to the housing market would end precipitously, and values would return to levels determined by a normally functioning real estate market. This would be somewhere in the vicinity of 150% of 1998 values (for San Diego mid-market), perhaps overshooting low for a while (due to lots of foreclosures) before settling in.

If the government does not return to monetary discipline, the real estate market will avoid the decline, but others will be harmed to an equal or greater degree.

[sdrealtor]

That could be the most authoritative and concise “I dont know what the…. is gonna happen!” post I’ve ever read.

[sdrealtor]

That could be the most authoritative and concise “I dont know what the…. is gonna happen!” post I’ve ever read.

[sdrealtor]

That could be the most authoritative and concise “I dont know what the…. is gonna happen!” post I’ve ever read.

[sdrealtor]

That could be the most authoritative and concise “I dont know what the…. is gonna happen!” post I’ve ever read.

[sdrealtor]

That could be the most authoritative and concise “I dont know what the…. is gonna happen!” post I’ve ever read.

[temeculaguy]

This is gonna hurt but I have agree with analyst on the loan mod. The fine print in all the mods I’ve seen, the principal write down is a mirage. That 250k is more than likely dormant, but comes out of hibernation of you try to sell or refi and sometimes has a clause where it comes back after a set amount of years or if appreciation kicks in. Sometimes those missed payments are dormant as well.

It makes sense for the bank, the loss is less than a repo, in a mod, at least they have the possibility of recovering all of their money, just not right now, in a repo, the money is gone forever.

Where I depart from analyst, I don’t think it’s the government’s fault or kicking the can down the road or anything to do with responsibility. It’s just a business decision on the lenders part, one that has more upsides in some situations than a repo for them. The guy will stay, keep up the place, make a payment (albeit a smaller one) and he will feel good about it, even brag about it. In time, they have a decent chance of getting all of their money back. You can envy that guy, i feel bad for him a little, if his value returns in the future, he won’t get the benefit of it that his neighbors will (like a renter), but then again, his other option is be kicked out and to rent for probably a similar price and this way he doesn’t have a landlord. Don’t do a loan mod as a strategy, do it if it is your last resort.

[temeculaguy]

This is gonna hurt but I have agree with analyst on the loan mod. The fine print in all the mods I’ve seen, the principal write down is a mirage. That 250k is more than likely dormant, but comes out of hibernation of you try to sell or refi and sometimes has a clause where it comes back after a set amount of years or if appreciation kicks in. Sometimes those missed payments are dormant as well.

It makes sense for the bank, the loss is less than a repo, in a mod, at least they have the possibility of recovering all of their money, just not right now, in a repo, the money is gone forever.

Where I depart from analyst, I don’t think it’s the government’s fault or kicking the can down the road or anything to do with responsibility. It’s just a business decision on the lenders part, one that has more upsides in some situations than a repo for them. The guy will stay, keep up the place, make a payment (albeit a smaller one) and he will feel good about it, even brag about it. In time, they have a decent chance of getting all of their money back. You can envy that guy, i feel bad for him a little, if his value returns in the future, he won’t get the benefit of it that his neighbors will (like a renter), but then again, his other option is be kicked out and to rent for probably a similar price and this way he doesn’t have a landlord. Don’t do a loan mod as a strategy, do it if it is your last resort.

[temeculaguy]

This is gonna hurt but I have agree with analyst on the loan mod. The fine print in all the mods I’ve seen, the principal write down is a mirage. That 250k is more than likely dormant, but comes out of hibernation of you try to sell or refi and sometimes has a clause where it comes back after a set amount of years or if appreciation kicks in. Sometimes those missed payments are dormant as well.

It makes sense for the bank, the loss is less than a repo, in a mod, at least they have the possibility of recovering all of their money, just not right now, in a repo, the money is gone forever.

Where I depart from analyst, I don’t think it’s the government’s fault or kicking the can down the road or anything to do with responsibility. It’s just a business decision on the lenders part, one that has more upsides in some situations than a repo for them. The guy will stay, keep up the place, make a payment (albeit a smaller one) and he will feel good about it, even brag about it. In time, they have a decent chance of getting all of their money back. You can envy that guy, i feel bad for him a little, if his value returns in the future, he won’t get the benefit of it that his neighbors will (like a renter), but then again, his other option is be kicked out and to rent for probably a similar price and this way he doesn’t have a landlord. Don’t do a loan mod as a strategy, do it if it is your last resort.

[temeculaguy]

This is gonna hurt but I have agree with analyst on the loan mod. The fine print in all the mods I’ve seen, the principal write down is a mirage. That 250k is more than likely dormant, but comes out of hibernation of you try to sell or refi and sometimes has a clause where it comes back after a set amount of years or if appreciation kicks in. Sometimes those missed payments are dormant as well.

It makes sense for the bank, the loss is less than a repo, in a mod, at least they have the possibility of recovering all of their money, just not right now, in a repo, the money is gone forever.

Where I depart from analyst, I don’t think it’s the government’s fault or kicking the can down the road or anything to do with responsibility. It’s just a business decision on the lenders part, one that has more upsides in some situations than a repo for them. The guy will stay, keep up the place, make a payment (albeit a smaller one) and he will feel good about it, even brag about it. In time, they have a decent chance of getting all of their money back. You can envy that guy, i feel bad for him a little, if his value returns in the future, he won’t get the benefit of it that his neighbors will (like a renter), but then again, his other option is be kicked out and to rent for probably a similar price and this way he doesn’t have a landlord. Don’t do a loan mod as a strategy, do it if it is your last resort.

[temeculaguy]

This is gonna hurt but I have agree with analyst on the loan mod. The fine print in all the mods I’ve seen, the principal write down is a mirage. That 250k is more than likely dormant, but comes out of hibernation of you try to sell or refi and sometimes has a clause where it comes back after a set amount of years or if appreciation kicks in. Sometimes those missed payments are dormant as well.

It makes sense for the bank, the loss is less than a repo, in a mod, at least they have the possibility of recovering all of their money, just not right now, in a repo, the money is gone forever.

Where I depart from analyst, I don’t think it’s the government’s fault or kicking the can down the road or anything to do with responsibility. It’s just a business decision on the lenders part, one that has more upsides in some situations than a repo for them. The guy will stay, keep up the place, make a payment (albeit a smaller one) and he will feel good about it, even brag about it. In time, they have a decent chance of getting all of their money back. You can envy that guy, i feel bad for him a little, if his value returns in the future, he won’t get the benefit of it that his neighbors will (like a renter), but then again, his other option is be kicked out and to rent for probably a similar price and this way he doesn’t have a landlord. Don’t do a loan mod as a strategy, do it if it is your last resort.

[gn]

[quote=analyst]The typical situation would be that the new terms do not include a principle reduction. Usually some amount of principle is set to an interest rate of zero and a payment rate of zero, but is still due, hopefully to be collected in the future after values rise again.

The lender will now collect a substantial payment instead of zero. The gutted mark-to-market rules allow the lender to avoid writing down the asset value and capital value.[/quote]

I’m with analyst. That 200k was just set aside by the lender, not completely forgiven.

sdrealtor, why don’t you read the loan docs.

[gn]

[quote=analyst]The typical situation would be that the new terms do not include a principle reduction. Usually some amount of principle is set to an interest rate of zero and a payment rate of zero, but is still due, hopefully to be collected in the future after values rise again.

The lender will now collect a substantial payment instead of zero. The gutted mark-to-market rules allow the lender to avoid writing down the asset value and capital value.[/quote]

I’m with analyst. That 200k was just set aside by the lender, not completely forgiven.

sdrealtor, why don’t you read the loan docs.

[gn]

[quote=analyst]The typical situation would be that the new terms do not include a principle reduction. Usually some amount of principle is set to an interest rate of zero and a payment rate of zero, but is still due, hopefully to be collected in the future after values rise again.

The lender will now collect a substantial payment instead of zero. The gutted mark-to-market rules allow the lender to avoid writing down the asset value and capital value.[/quote]

I’m with analyst. That 200k was just set aside by the lender, not completely forgiven.

sdrealtor, why don’t you read the loan docs.

[gn]

[quote=analyst]The typical situation would be that the new terms do not include a principle reduction. Usually some amount of principle is set to an interest rate of zero and a payment rate of zero, but is still due, hopefully to be collected in the future after values rise again.

The lender will now collect a substantial payment instead of zero. The gutted mark-to-market rules allow the lender to avoid writing down the asset value and capital value.[/quote]

I’m with analyst. That 200k was just set aside by the lender, not completely forgiven.

sdrealtor, why don’t you read the loan docs.

[Author]

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