Can buyers in default 365 days or longer be saved?

[Anonymous]

Small nit: You can’t just count the late payments and add them to the total due.

You have to calculate interest on the outstanding balance. For $480K at 6%, that would be $2400/month accrued interest due per month. So after missing payments for 24 months, the total due would *roughly* be a little more than $480,000K + $57,600 = $537,600.

The reason I say “roughly” is because we really should calculate interest on the accrued interest as well (compounding), but I’m not going to bother because it doesn’t change the conclusion.

So your $552 number may even be a little high.

Calculations aside, it makes sense that two years of missed payments would not make a big difference on a 30 year loan that is refinanced to a another, full 30 year term at a 2% lower rate.

Of course this all this ignores late fees and the tax collector, but throw in another 3-5% onto the loan amount and the numbers are still close.

But it only works for people who, for some reason, can afford $2700/month now when they couldn’t afford $3000/month two years ago. Might be a small population.

[sdrealtor]

I guess we could nit pick all we want and we really dont know the details of each and every case. My point was some people with a year or 2 of missed payments can recover if given reasonable terms. How many? I have no clue, but to declare them all DOA is folly IMO. Extend, pretend, kick the can, stabilize values, stimulate the economy, roll missed payments into the loans and refinance them into today’s historically low rates. It will and has worked for some. Who is to say how many more but certainly that number is not zero.

[sdrealtor]

I guess we could nit pick all we want and we really dont know the details of each and every case. My point was some people with a year or 2 of missed payments can recover if given reasonable terms. How many? I have no clue, but to declare them all DOA is folly IMO. Extend, pretend, kick the can, stabilize values, stimulate the economy, roll missed payments into the loans and refinance them into today’s historically low rates. It will and has worked for some. Who is to say how many more but certainly that number is not zero.

[sdrealtor]

I guess we could nit pick all we want and we really dont know the details of each and every case. My point was some people with a year or 2 of missed payments can recover if given reasonable terms. How many? I have no clue, but to declare them all DOA is folly IMO. Extend, pretend, kick the can, stabilize values, stimulate the economy, roll missed payments into the loans and refinance them into today’s historically low rates. It will and has worked for some. Who is to say how many more but certainly that number is not zero.

[briansd1]

I heard that’s the kind of rework they’ve been quietly doing in commercial real estate. That’s why we haven’t been the dramatic drops (relatively speaking) we saw back during the S&L crisis.

[briansd1]

I heard that’s the kind of rework they’ve been quietly doing in commercial real estate. That’s why we haven’t been the dramatic drops (relatively speaking) we saw back during the S&L crisis.

[briansd1]

I heard that’s the kind of rework they’ve been quietly doing in commercial real estate. That’s why we haven’t been the dramatic drops (relatively speaking) we saw back during the S&L crisis.

[Coronita]

[quote=sdrealtor]I guess we could nit pick all we want and we really dont know the details of each and every case. My point was some people with a year or 2 of missed payments can recover if given reasonable terms. How many? I have no clue, but to declare them all DOA is folly IMO. Extend, pretend, kick the can, stabilize values, stimulate the economy, roll missed payments into the loans and refinance them into today’s historically low rates. It will and has worked for some. Who is to say how many more but certainly that number is not zero.[/quote]

I think I agree with your point that the number is not zero.
Interesting.

I guess the question for me (which I don’t know) is is there or is there not an unemployment or underemployment problem in San Diego? ,I’m not seeing massive hiring, but I’m not seeing massive layoffs either (at least not in tech). We lost of a few people recently because they decided to pursue startups. So things can’t look that bad… I don’t know really at this point.

What’s other’s people’s employment experience here? Is there a jobs problem in SD?

[Coronita]

[quote=sdrealtor]I guess we could nit pick all we want and we really dont know the details of each and every case. My point was some people with a year or 2 of missed payments can recover if given reasonable terms. How many? I have no clue, but to declare them all DOA is folly IMO. Extend, pretend, kick the can, stabilize values, stimulate the economy, roll missed payments into the loans and refinance them into today’s historically low rates. It will and has worked for some. Who is to say how many more but certainly that number is not zero.[/quote]

I think I agree with your point that the number is not zero.
Interesting.

I guess the question for me (which I don’t know) is is there or is there not an unemployment or underemployment problem in San Diego? ,I’m not seeing massive hiring, but I’m not seeing massive layoffs either (at least not in tech). We lost of a few people recently because they decided to pursue startups. So things can’t look that bad… I don’t know really at this point.

What’s other’s people’s employment experience here? Is there a jobs problem in SD?

[UCGal]

[quote=flu]

I guess the question for me (which I don’t know) is is there or is there not an unemployment or underemployment problem in San Diego? ,I’m not seeing massive hiring, but I’m not seeing massive layoffs either (at least not in tech). We lost of a few people recently because they decided to pursue startups. So things can’t look that bad… I don’t know really at this point.

What’s other’s people’s employment experience here? Is there a jobs problem in SD?[/quote]
My employer did layoffs pretty heavily last year and the year before. I’m still in touch with a few effected folks. One is back in school because he couldn’t find work, and 2 are doing contract work, less than full time.

My husband continues to be part time because there isn’t quite enough work for full time. Architecture continues to be less than booming on the commercial side.

All of this suggests underemployment is an issue.

[UCGal]

[quote=flu]

I guess the question for me (which I don’t know) is is there or is there not an unemployment or underemployment problem in San Diego? ,I’m not seeing massive hiring, but I’m not seeing massive layoffs either (at least not in tech). We lost of a few people recently because they decided to pursue startups. So things can’t look that bad… I don’t know really at this point.

What’s other’s people’s employment experience here? Is there a jobs problem in SD?[/quote]
My employer did layoffs pretty heavily last year and the year before. I’m still in touch with a few effected folks. One is back in school because he couldn’t find work, and 2 are doing contract work, less than full time.

My husband continues to be part time because there isn’t quite enough work for full time. Architecture continues to be less than booming on the commercial side.

All of this suggests underemployment is an issue.

[Anonymous]

[quote=sdrealtor]I guess we could nit pick all we want and we really dont know the details of each and every case. My point was some people with a year or 2 of missed payments can recover if given reasonable terms. How many? [/quote]

You asked for feedback and I give you some – which actually supported one point of your argument.

[quote]I have no clue, but to declare them all DOA is folly IMO.[/quote]

If people missed payments because of strategic default (from your OP) then they were underwater before and still underwater now. The reason for defaulting has not gone away.

If people missed payments because of a change in income, then they might have a chance to recover IF they somehow managed to rise back to their prior level of income during a period of high unemployment. The reason for their inability to pay has likely not gone away.

Also, your example doesn’t mention the decline of value of the home. True, this doesn’t matter for loan payment calculations but it does matter in determining if the buyer is underwater. If they are underwater, they don’t have the incentive make any payment.

[quote]It will and has worked for some. Who is to say how many more but certainly that number is not zero.[/quote]

No it’s not zero, but it’s close enough to zero that it is negligible.

Your observation that the reduced interest rates effectively offsets two years of missed payments is interesting, but it cannot be used to address the crux of the problem: Almost all homeowners in default are either underwater or they still can’t afford their monthly payment.

For the small few that are in the situation you describe, yeah, perhaps they can work something out with the bank and keep their homes (if they want them.)

But simply refinancing at reduced rates cannot fix the national housing problem.

[scaredyclassic]

If the rate is low enough and the payments better than rent why not stay? 4 percent is kind of high. The govt should subsidize a .1 perc interest rate on every single mortgage in the country immediately.

[sdrealtor]

I agree it cannot fix the entire problem. Its just an attempt to get people to open their eyes to possibilities and the power of what is being done. Here are a couple counters:

If the payment is low enough it can be comparable to rent so why not stay?

When prices were in freefall some people strategically defaulted because they thought they were going even lower. Now that things have stabilized there is more to be hopeful about.

Some people had temporary and possibly continuing loss of income. Living mortgage free for 2 years cvan heal wounds and allow people to build reserves back up. I have seen it many times on short sales I have completed.

The declines vary everywhere. If I’m not mistaken you are up in Temecula where declines are typically 50%+. Where I am, declines are under 20% in most cases so a buyer that put 20% down can be in a zero equity situation (i.e. cant cover selling costs without coming to the table) but isnt far underwater.

These are just a few and there are plenty more. What got me here was challenging the assumption that anyone who hasnt paid is DOA after a couple months. Looking at the actual numbers, I found that a buyer could be saved after 2 full years under some circumstances. I like to challenege the status quo and I did. The results surprised me too.

[Coronita]

[quote=UCGal][quote=flu]

I guess the question for me (which I don’t know) is is there or is there not an unemployment or underemployment problem in San Diego? ,I’m not seeing massive hiring, but I’m not seeing massive layoffs either (at least not in tech). We lost of a few people recently because they decided to pursue startups. So things can’t look that bad… I don’t know really at this point.

What’s other’s people’s employment experience here? Is there a jobs problem in SD?[/quote]
My employer did layoffs pretty heavily last year and the year before. I’m still in touch with a few effected folks. One is back in school because he couldn’t find work, and 2 are doing contract work, less than full time.

My husband continues to be part time because there isn’t quite enough work for full time. Architecture continues to be less than booming on the commercial side.

All of this suggests underemployment is an issue.[/quote]

UG, if you don’t mind me asking, how much do you think your friends/colleagues that are in this situation are underemployed by in terms of % off from full time income.

Also, out of the people you know, what percentage of people are in this category versus at a full time gig with relatively same salary (+- 10% lets say)….

We know that two years ago, it was pretty bad, expecially for MOT/MMI people. Have most of these people recovered already, or are most of these people still underemployed/unemployed? And it’s about people here in SD, right? Not at other MOT/MMI locations… I’m mainly interested in the “pulse” here in SD… I’ve been kinda out of touch lately, so I haven’t been following as closely…

[Author]

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