“A downward spiral thats tough 2 stop; it feeds on itself. 4closures encourage new 4closures & falling prices discourage buying”

[Lyra]

With principal reductions, price discovery occurs with greater latency than via foreclosures. But it occurs, nonetheless. Suppose a borrower bought a house for 500K at the peak, gets a writedown to today’s market value at say, 250K. When they go to sell the house at some point in the future, they can sell the house for 275K, pocket a small profit, and still contribute to the decimation of the neighborhood comps. Now contrast that a clearly inflationary bailout tactic: the Government’s targetted monetization of agency debt with the goal of reducing mortgage rates to an artificially low level (say 4%). This is clearly inflationary. So is reducing a borrower’s interest rate, in a loan workout, to 2% (or whatever).

Look, I’m not saying principal reductions are a good thing. If I ruled the land, I would let foreclosures run their natural course and let house prices fall unimpeded until they reached the level where Mr. Market says they should rationally be. I’m just saying that the flavor of the bailout matters. Principal reductions do not, generally speaking, reinflate house prices. They are hideously unfair, I’ll grant you that.

As to your questions about how I’d feel if half my neighbors got writedowns… I’d be pretty pissed (I thought that was pretty clear from my original post). However, like many on this board, I’m currently a member of the greatest underclass in the land: I’m a renter. From a practical standpoint, I just see principal reduction lottery winners as just another category of home sellers (along with bank REOs, shortsellers, and equity rich downsizers) who can now afford to sell me a house at 2001 prices.

[cr]

I think maybe what SDR means is for the house that has a loan reworked that property becomes artificially propped up, not necessarily re-inflated. In reality it should be worth even less by going to foreclosure, and hurt comp values the same if not more.

I rent too and we’d be better off getting that home 6 months or a year after foreclosure.

Assuming the “owners” don’t cement the toilet, steal the copper (pipes and wire) and uninstall the cabinets upon exodus.

[cr]

I think maybe what SDR means is for the house that has a loan reworked that property becomes artificially propped up, not necessarily re-inflated. In reality it should be worth even less by going to foreclosure, and hurt comp values the same if not more.

I rent too and we’d be better off getting that home 6 months or a year after foreclosure.

Assuming the “owners” don’t cement the toilet, steal the copper (pipes and wire) and uninstall the cabinets upon exodus.

[cr]

I think maybe what SDR means is for the house that has a loan reworked that property becomes artificially propped up, not necessarily re-inflated. In reality it should be worth even less by going to foreclosure, and hurt comp values the same if not more.

I rent too and we’d be better off getting that home 6 months or a year after foreclosure.

Assuming the “owners” don’t cement the toilet, steal the copper (pipes and wire) and uninstall the cabinets upon exodus.

[cr]

I think maybe what SDR means is for the house that has a loan reworked that property becomes artificially propped up, not necessarily re-inflated. In reality it should be worth even less by going to foreclosure, and hurt comp values the same if not more.

I rent too and we’d be better off getting that home 6 months or a year after foreclosure.

Assuming the “owners” don’t cement the toilet, steal the copper (pipes and wire) and uninstall the cabinets upon exodus.

[cr]

I think maybe what SDR means is for the house that has a loan reworked that property becomes artificially propped up, not necessarily re-inflated. In reality it should be worth even less by going to foreclosure, and hurt comp values the same if not more.

I rent too and we’d be better off getting that home 6 months or a year after foreclosure.

Assuming the “owners” don’t cement the toilet, steal the copper (pipes and wire) and uninstall the cabinets upon exodus.

[SD Realtor]

Lyra you are missing the point completely.

It is fraud. There is not really any method of explaining it away.

Currently valuations of homes is 100%, and I will repeat, 100% dependent on appraisals (and or BPO’s if the home is a foreclosure). If your home does not appraise you don’t get the loan. Sometimes even if your home appraises the lender may gaurdband the appraised value in a depreciating neighborhood.

So your statement about latent price discovery is totally useless. The fact of the matter is that when the house sells, that is the ONLY time the valuation of the home is used in a proper manner. Period.

Basically then what we have with principal reductions is a reduction of information such that the basis of valuations for resale inventory is FALSE. Not only does this defraud the buyer, it also defrauds the lender. It also perpetuates the ignorance of price strategies of sellers. Furthermore a skew is introduced between the true valuation of the home by the appraiser and those that have had principal reductions. In fact, let me ask, “What does the government or the lender use to recalculate the new principal value?” Do they call an appraiser? Do they look at comps?

So not only is this tantamount to fraud BUT by concealing the true valuations of ALL homes the de facto valuation is done on a limited supply. In a depreciating market this clearly is an INFLATIONARY tactic because lack of data will then cause older comps to be used. This then represents a false valuation and the house will be valued artificially higher then it should be.

*********

Loan modifications stink as well. In my opinion they are just as bad.

*********

Here is the bottom line. There is nothing good about loan mods, principal reductions or anything like that. It is a perpetuation of fraud. It binds to the current homeowner to own an asset they cannot afford. It covers up true valuations of neighborhoods.

Furthermore, by letting every property revert to the mean value and GET PURCHASED WITH NEW MONEY you will then get people buying homes, fixing homes up and spending more money. By binding an already strapped homeowner you do not get any reinvestment in the home, you get no economic benefit, and you will more then 50% of the time, see that same homeowner fall into default yet again.

If you think that the you will see an escalation of depreciation with policies like this all I can say is that you could not be more wrong if you tried to.

[SD Realtor]

Lyra you are missing the point completely.

It is fraud. There is not really any method of explaining it away.

Currently valuations of homes is 100%, and I will repeat, 100% dependent on appraisals (and or BPO’s if the home is a foreclosure). If your home does not appraise you don’t get the loan. Sometimes even if your home appraises the lender may gaurdband the appraised value in a depreciating neighborhood.

So your statement about latent price discovery is totally useless. The fact of the matter is that when the house sells, that is the ONLY time the valuation of the home is used in a proper manner. Period.

Basically then what we have with principal reductions is a reduction of information such that the basis of valuations for resale inventory is FALSE. Not only does this defraud the buyer, it also defrauds the lender. It also perpetuates the ignorance of price strategies of sellers. Furthermore a skew is introduced between the true valuation of the home by the appraiser and those that have had principal reductions. In fact, let me ask, “What does the government or the lender use to recalculate the new principal value?” Do they call an appraiser? Do they look at comps?

So not only is this tantamount to fraud BUT by concealing the true valuations of ALL homes the de facto valuation is done on a limited supply. In a depreciating market this clearly is an INFLATIONARY tactic because lack of data will then cause older comps to be used. This then represents a false valuation and the house will be valued artificially higher then it should be.

*********

Loan modifications stink as well. In my opinion they are just as bad.

*********

Here is the bottom line. There is nothing good about loan mods, principal reductions or anything like that. It is a perpetuation of fraud. It binds to the current homeowner to own an asset they cannot afford. It covers up true valuations of neighborhoods.

Furthermore, by letting every property revert to the mean value and GET PURCHASED WITH NEW MONEY you will then get people buying homes, fixing homes up and spending more money. By binding an already strapped homeowner you do not get any reinvestment in the home, you get no economic benefit, and you will more then 50% of the time, see that same homeowner fall into default yet again.

If you think that the you will see an escalation of depreciation with policies like this all I can say is that you could not be more wrong if you tried to.

[SD Realtor]

Lyra you are missing the point completely.

It is fraud. There is not really any method of explaining it away.

Currently valuations of homes is 100%, and I will repeat, 100% dependent on appraisals (and or BPO’s if the home is a foreclosure). If your home does not appraise you don’t get the loan. Sometimes even if your home appraises the lender may gaurdband the appraised value in a depreciating neighborhood.

So your statement about latent price discovery is totally useless. The fact of the matter is that when the house sells, that is the ONLY time the valuation of the home is used in a proper manner. Period.

Basically then what we have with principal reductions is a reduction of information such that the basis of valuations for resale inventory is FALSE. Not only does this defraud the buyer, it also defrauds the lender. It also perpetuates the ignorance of price strategies of sellers. Furthermore a skew is introduced between the true valuation of the home by the appraiser and those that have had principal reductions. In fact, let me ask, “What does the government or the lender use to recalculate the new principal value?” Do they call an appraiser? Do they look at comps?

So not only is this tantamount to fraud BUT by concealing the true valuations of ALL homes the de facto valuation is done on a limited supply. In a depreciating market this clearly is an INFLATIONARY tactic because lack of data will then cause older comps to be used. This then represents a false valuation and the house will be valued artificially higher then it should be.

*********

Loan modifications stink as well. In my opinion they are just as bad.

*********

Here is the bottom line. There is nothing good about loan mods, principal reductions or anything like that. It is a perpetuation of fraud. It binds to the current homeowner to own an asset they cannot afford. It covers up true valuations of neighborhoods.

Furthermore, by letting every property revert to the mean value and GET PURCHASED WITH NEW MONEY you will then get people buying homes, fixing homes up and spending more money. By binding an already strapped homeowner you do not get any reinvestment in the home, you get no economic benefit, and you will more then 50% of the time, see that same homeowner fall into default yet again.

If you think that the you will see an escalation of depreciation with policies like this all I can say is that you could not be more wrong if you tried to.

[SD Realtor]

Lyra you are missing the point completely.

It is fraud. There is not really any method of explaining it away.

Currently valuations of homes is 100%, and I will repeat, 100% dependent on appraisals (and or BPO’s if the home is a foreclosure). If your home does not appraise you don’t get the loan. Sometimes even if your home appraises the lender may gaurdband the appraised value in a depreciating neighborhood.

So your statement about latent price discovery is totally useless. The fact of the matter is that when the house sells, that is the ONLY time the valuation of the home is used in a proper manner. Period.

Basically then what we have with principal reductions is a reduction of information such that the basis of valuations for resale inventory is FALSE. Not only does this defraud the buyer, it also defrauds the lender. It also perpetuates the ignorance of price strategies of sellers. Furthermore a skew is introduced between the true valuation of the home by the appraiser and those that have had principal reductions. In fact, let me ask, “What does the government or the lender use to recalculate the new principal value?” Do they call an appraiser? Do they look at comps?

So not only is this tantamount to fraud BUT by concealing the true valuations of ALL homes the de facto valuation is done on a limited supply. In a depreciating market this clearly is an INFLATIONARY tactic because lack of data will then cause older comps to be used. This then represents a false valuation and the house will be valued artificially higher then it should be.

*********

Loan modifications stink as well. In my opinion they are just as bad.

*********

Here is the bottom line. There is nothing good about loan mods, principal reductions or anything like that. It is a perpetuation of fraud. It binds to the current homeowner to own an asset they cannot afford. It covers up true valuations of neighborhoods.

Furthermore, by letting every property revert to the mean value and GET PURCHASED WITH NEW MONEY you will then get people buying homes, fixing homes up and spending more money. By binding an already strapped homeowner you do not get any reinvestment in the home, you get no economic benefit, and you will more then 50% of the time, see that same homeowner fall into default yet again.

If you think that the you will see an escalation of depreciation with policies like this all I can say is that you could not be more wrong if you tried to.

[SD Realtor]

Lyra you are missing the point completely.

It is fraud. There is not really any method of explaining it away.

Currently valuations of homes is 100%, and I will repeat, 100% dependent on appraisals (and or BPO’s if the home is a foreclosure). If your home does not appraise you don’t get the loan. Sometimes even if your home appraises the lender may gaurdband the appraised value in a depreciating neighborhood.

So your statement about latent price discovery is totally useless. The fact of the matter is that when the house sells, that is the ONLY time the valuation of the home is used in a proper manner. Period.

Basically then what we have with principal reductions is a reduction of information such that the basis of valuations for resale inventory is FALSE. Not only does this defraud the buyer, it also defrauds the lender. It also perpetuates the ignorance of price strategies of sellers. Furthermore a skew is introduced between the true valuation of the home by the appraiser and those that have had principal reductions. In fact, let me ask, “What does the government or the lender use to recalculate the new principal value?” Do they call an appraiser? Do they look at comps?

So not only is this tantamount to fraud BUT by concealing the true valuations of ALL homes the de facto valuation is done on a limited supply. In a depreciating market this clearly is an INFLATIONARY tactic because lack of data will then cause older comps to be used. This then represents a false valuation and the house will be valued artificially higher then it should be.

*********

Loan modifications stink as well. In my opinion they are just as bad.

*********

Here is the bottom line. There is nothing good about loan mods, principal reductions or anything like that. It is a perpetuation of fraud. It binds to the current homeowner to own an asset they cannot afford. It covers up true valuations of neighborhoods.

Furthermore, by letting every property revert to the mean value and GET PURCHASED WITH NEW MONEY you will then get people buying homes, fixing homes up and spending more money. By binding an already strapped homeowner you do not get any reinvestment in the home, you get no economic benefit, and you will more then 50% of the time, see that same homeowner fall into default yet again.

If you think that the you will see an escalation of depreciation with policies like this all I can say is that you could not be more wrong if you tried to.

[CA renter]

SDR wrote:

Furthermore, by letting every property revert to the mean value and GET PURCHASED WITH NEW MONEY you will then get people buying homes, fixing homes up and spending more money. By binding an already strapped homeowner you do not get any reinvestment in the home, you get no economic benefit, and you will more then 50% of the time, see that same homeowner fall into default yet again.

———————–

Very well said, SD Realtor!!!

The sooner we allow prices to fall to their true market value (no govt loans or guarantees, no suppressed interest rates, no “tax credits,” etc.), the sooner we can get on with rebuilding the economy.

As it stands, all the money the govt is throwing at the financial system, including trying to artificially prop up housing prices, is money that cannot be spent on the real economy.

[CA renter]

SDR wrote:

Furthermore, by letting every property revert to the mean value and GET PURCHASED WITH NEW MONEY you will then get people buying homes, fixing homes up and spending more money. By binding an already strapped homeowner you do not get any reinvestment in the home, you get no economic benefit, and you will more then 50% of the time, see that same homeowner fall into default yet again.

———————–

Very well said, SD Realtor!!!

The sooner we allow prices to fall to their true market value (no govt loans or guarantees, no suppressed interest rates, no “tax credits,” etc.), the sooner we can get on with rebuilding the economy.

As it stands, all the money the govt is throwing at the financial system, including trying to artificially prop up housing prices, is money that cannot be spent on the real economy.

[CA renter]

SDR wrote:

Furthermore, by letting every property revert to the mean value and GET PURCHASED WITH NEW MONEY you will then get people buying homes, fixing homes up and spending more money. By binding an already strapped homeowner you do not get any reinvestment in the home, you get no economic benefit, and you will more then 50% of the time, see that same homeowner fall into default yet again.

———————–

Very well said, SD Realtor!!!

The sooner we allow prices to fall to their true market value (no govt loans or guarantees, no suppressed interest rates, no “tax credits,” etc.), the sooner we can get on with rebuilding the economy.

As it stands, all the money the govt is throwing at the financial system, including trying to artificially prop up housing prices, is money that cannot be spent on the real economy.

[CA renter]

SDR wrote:

Furthermore, by letting every property revert to the mean value and GET PURCHASED WITH NEW MONEY you will then get people buying homes, fixing homes up and spending more money. By binding an already strapped homeowner you do not get any reinvestment in the home, you get no economic benefit, and you will more then 50% of the time, see that same homeowner fall into default yet again.

———————–

Very well said, SD Realtor!!!

The sooner we allow prices to fall to their true market value (no govt loans or guarantees, no suppressed interest rates, no “tax credits,” etc.), the sooner we can get on with rebuilding the economy.

As it stands, all the money the govt is throwing at the financial system, including trying to artificially prop up housing prices, is money that cannot be spent on the real economy.

[Author]

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