Reducing Principal

[gdcox]

Do you object to reducing principal on principle?

Bernanke wants all lenders to reduce principal to avoid foreclosure. Apart from the fact that servicers can’t legally do that for securitised mortgages, is it acceptable for say a 100% borrower to get his principal cut by $50 K on his larger house and the person who bought at the same time with 20% gets to watch the person with the larger house get the extra free.

If the mortgage principal reduction puts a black mark on the credit record (somewhere halfway between perfect and default), maybe it would be acceptable(?).

[Anonymous]

I have a problem with this idea because it punishes those who didn’t over buy. Interest rate freezes on ARMs is about as far as I think it should go. That should allow people to stay in their homes. I bought my place when prices were on the rise, not at the top, but close enough, but I bought knowing that I could afford it long term. If I knew I could have $100,000 in principal erased, I’d be in a much nicer house.

[bsrsharma]

Principle and moral hazard aside, a lender should do whatever possible to maximize his net receivable on the loan. If the foreclosure route causes greater losses than principal reduction, the lender will be a fool to go that way. Keep in mind that foreclosure of a large fraction of a community is not the same as foreclosure on a few individual homes. If Detroit and its surrounds are replicated on all large cities, this country will resemble Afghanistan pretty quickly. Everybody has an interest in preventing that.

[bsrsharma]

Principle and moral hazard aside, a lender should do whatever possible to maximize his net receivable on the loan. If the foreclosure route causes greater losses than principal reduction, the lender will be a fool to go that way. Keep in mind that foreclosure of a large fraction of a community is not the same as foreclosure on a few individual homes. If Detroit and its surrounds are replicated on all large cities, this country will resemble Afghanistan pretty quickly. Everybody has an interest in preventing that.

[bsrsharma]

Principle and moral hazard aside, a lender should do whatever possible to maximize his net receivable on the loan. If the foreclosure route causes greater losses than principal reduction, the lender will be a fool to go that way. Keep in mind that foreclosure of a large fraction of a community is not the same as foreclosure on a few individual homes. If Detroit and its surrounds are replicated on all large cities, this country will resemble Afghanistan pretty quickly. Everybody has an interest in preventing that.

[bsrsharma]

Principle and moral hazard aside, a lender should do whatever possible to maximize his net receivable on the loan. If the foreclosure route causes greater losses than principal reduction, the lender will be a fool to go that way. Keep in mind that foreclosure of a large fraction of a community is not the same as foreclosure on a few individual homes. If Detroit and its surrounds are replicated on all large cities, this country will resemble Afghanistan pretty quickly. Everybody has an interest in preventing that.

[bsrsharma]

Principle and moral hazard aside, a lender should do whatever possible to maximize his net receivable on the loan. If the foreclosure route causes greater losses than principal reduction, the lender will be a fool to go that way. Keep in mind that foreclosure of a large fraction of a community is not the same as foreclosure on a few individual homes. If Detroit and its surrounds are replicated on all large cities, this country will resemble Afghanistan pretty quickly. Everybody has an interest in preventing that.

[Anonymous]

I have a problem with this idea because it punishes those who didn’t over buy. Interest rate freezes on ARMs is about as far as I think it should go. That should allow people to stay in their homes. I bought my place when prices were on the rise, not at the top, but close enough, but I bought knowing that I could afford it long term. If I knew I could have $100,000 in principal erased, I’d be in a much nicer house.

[Anonymous]

I have a problem with this idea because it punishes those who didn’t over buy. Interest rate freezes on ARMs is about as far as I think it should go. That should allow people to stay in their homes. I bought my place when prices were on the rise, not at the top, but close enough, but I bought knowing that I could afford it long term. If I knew I could have $100,000 in principal erased, I’d be in a much nicer house.

[Anonymous]

I have a problem with this idea because it punishes those who didn’t over buy. Interest rate freezes on ARMs is about as far as I think it should go. That should allow people to stay in their homes. I bought my place when prices were on the rise, not at the top, but close enough, but I bought knowing that I could afford it long term. If I knew I could have $100,000 in principal erased, I’d be in a much nicer house.

[Anonymous]

I have a problem with this idea because it punishes those who didn’t over buy. Interest rate freezes on ARMs is about as far as I think it should go. That should allow people to stay in their homes. I bought my place when prices were on the rise, not at the top, but close enough, but I bought knowing that I could afford it long term. If I knew I could have $100,000 in principal erased, I’d be in a much nicer house.

[JWM in SD]

JWM in SD

Okay, so do you guys understand the implication of this??????

Helicopter Ben just told the banks and investors to go F themselves, they are not getting a bailout by the FED.

No Monetization for you Mr Banker!!!!!

To all the fools here thinking that the FED was going to bailout the Housing Market and save your HPA…..SUCKERS!!!!!

[JWM in SD]

JWM in SD
Oh yeah, and here is the money quote from old Ben:
“A recent estimate based on subprime mortgages foreclosed in the fourth quarter of 2007 indicated that total losses exceeded 50 percent of the principal balance, with legal, sales, and maintenance expenses alone amounting to more than 10 percent of principal. With the time period between the last mortgage payment and REO liquidation lengthening in recent months, this loss rate will likely grow even larger. Moreover, as the time to liquidation increases, the uncertainty about the losses increases as well.”

50%……50%. You really still think that areas like Carmel Valley and 4S and RSF are going to weather this storm??? Wait until the second wave or resets hit and we all become “SUBPRIME”.

[vagabondo]

As a taxpayer, I applaud the fact that BB is implying that the market (banks) should resolve their own problems. As Paulson said today, there is the incentive.

As an investor/shareholder, I agree that at the end on the day, minimizing losses is desired. If reducing principle pans out to cost the least, do it.

I am curious though. I find it somewhat hard to believe that reducing principle is going to significantly reduce the number of foreclosures. Given the level of the “average” persons debt and tightened lending standards, I would guess that most of those in trouble are facing financial issues on a number of fronts.

[vagabondo]

As a taxpayer, I applaud the fact that BB is implying that the market (banks) should resolve their own problems. As Paulson said today, there is the incentive.

As an investor/shareholder, I agree that at the end on the day, minimizing losses is desired. If reducing principle pans out to cost the least, do it.

I am curious though. I find it somewhat hard to believe that reducing principle is going to significantly reduce the number of foreclosures. Given the level of the “average” persons debt and tightened lending standards, I would guess that most of those in trouble are facing financial issues on a number of fronts.

[vagabondo]

As a taxpayer, I applaud the fact that BB is implying that the market (banks) should resolve their own problems. As Paulson said today, there is the incentive.

As an investor/shareholder, I agree that at the end on the day, minimizing losses is desired. If reducing principle pans out to cost the least, do it.

I am curious though. I find it somewhat hard to believe that reducing principle is going to significantly reduce the number of foreclosures. Given the level of the “average” persons debt and tightened lending standards, I would guess that most of those in trouble are facing financial issues on a number of fronts.

[vagabondo]

As a taxpayer, I applaud the fact that BB is implying that the market (banks) should resolve their own problems. As Paulson said today, there is the incentive.

As an investor/shareholder, I agree that at the end on the day, minimizing losses is desired. If reducing principle pans out to cost the least, do it.

I am curious though. I find it somewhat hard to believe that reducing principle is going to significantly reduce the number of foreclosures. Given the level of the “average” persons debt and tightened lending standards, I would guess that most of those in trouble are facing financial issues on a number of fronts.

[vagabondo]

As a taxpayer, I applaud the fact that BB is implying that the market (banks) should resolve their own problems. As Paulson said today, there is the incentive.

As an investor/shareholder, I agree that at the end on the day, minimizing losses is desired. If reducing principle pans out to cost the least, do it.

I am curious though. I find it somewhat hard to believe that reducing principle is going to significantly reduce the number of foreclosures. Given the level of the “average” persons debt and tightened lending standards, I would guess that most of those in trouble are facing financial issues on a number of fronts.

[JWM in SD]

JWM in SD
Oh yeah, and here is the money quote from old Ben:
“A recent estimate based on subprime mortgages foreclosed in the fourth quarter of 2007 indicated that total losses exceeded 50 percent of the principal balance, with legal, sales, and maintenance expenses alone amounting to more than 10 percent of principal. With the time period between the last mortgage payment and REO liquidation lengthening in recent months, this loss rate will likely grow even larger. Moreover, as the time to liquidation increases, the uncertainty about the losses increases as well.”

50%……50%. You really still think that areas like Carmel Valley and 4S and RSF are going to weather this storm??? Wait until the second wave or resets hit and we all become “SUBPRIME”.

[JWM in SD]

JWM in SD
Oh yeah, and here is the money quote from old Ben:
“A recent estimate based on subprime mortgages foreclosed in the fourth quarter of 2007 indicated that total losses exceeded 50 percent of the principal balance, with legal, sales, and maintenance expenses alone amounting to more than 10 percent of principal. With the time period between the last mortgage payment and REO liquidation lengthening in recent months, this loss rate will likely grow even larger. Moreover, as the time to liquidation increases, the uncertainty about the losses increases as well.”

50%……50%. You really still think that areas like Carmel Valley and 4S and RSF are going to weather this storm??? Wait until the second wave or resets hit and we all become “SUBPRIME”.

[JWM in SD]

JWM in SD
Oh yeah, and here is the money quote from old Ben:
“A recent estimate based on subprime mortgages foreclosed in the fourth quarter of 2007 indicated that total losses exceeded 50 percent of the principal balance, with legal, sales, and maintenance expenses alone amounting to more than 10 percent of principal. With the time period between the last mortgage payment and REO liquidation lengthening in recent months, this loss rate will likely grow even larger. Moreover, as the time to liquidation increases, the uncertainty about the losses increases as well.”

50%……50%. You really still think that areas like Carmel Valley and 4S and RSF are going to weather this storm??? Wait until the second wave or resets hit and we all become “SUBPRIME”.

[JWM in SD]

JWM in SD
Oh yeah, and here is the money quote from old Ben:
“A recent estimate based on subprime mortgages foreclosed in the fourth quarter of 2007 indicated that total losses exceeded 50 percent of the principal balance, with legal, sales, and maintenance expenses alone amounting to more than 10 percent of principal. With the time period between the last mortgage payment and REO liquidation lengthening in recent months, this loss rate will likely grow even larger. Moreover, as the time to liquidation increases, the uncertainty about the losses increases as well.”

50%……50%. You really still think that areas like Carmel Valley and 4S and RSF are going to weather this storm??? Wait until the second wave or resets hit and we all become “SUBPRIME”.

[JWM in SD]

JWM in SD

Okay, so do you guys understand the implication of this??????

Helicopter Ben just told the banks and investors to go F themselves, they are not getting a bailout by the FED.

No Monetization for you Mr Banker!!!!!

To all the fools here thinking that the FED was going to bailout the Housing Market and save your HPA…..SUCKERS!!!!!

[JWM in SD]

JWM in SD

Okay, so do you guys understand the implication of this??????

Helicopter Ben just told the banks and investors to go F themselves, they are not getting a bailout by the FED.

No Monetization for you Mr Banker!!!!!

To all the fools here thinking that the FED was going to bailout the Housing Market and save your HPA…..SUCKERS!!!!!

[JWM in SD]

JWM in SD

Okay, so do you guys understand the implication of this??????

Helicopter Ben just told the banks and investors to go F themselves, they are not getting a bailout by the FED.

No Monetization for you Mr Banker!!!!!

To all the fools here thinking that the FED was going to bailout the Housing Market and save your HPA…..SUCKERS!!!!!

[JWM in SD]

JWM in SD

Okay, so do you guys understand the implication of this??????

Helicopter Ben just told the banks and investors to go F themselves, they are not getting a bailout by the FED.

No Monetization for you Mr Banker!!!!!

To all the fools here thinking that the FED was going to bailout the Housing Market and save your HPA…..SUCKERS!!!!!

[bubble_contagion]

I just called US Bank and explained that my car is not worth tha same as new. They checked the Kelly Blue book and agreed to adjust the principal on the loan to it’s net present value. My payments are now almost half. If you or anybody you know could benefit from a similar arrangement call the bank, they are literaly giving money away.

This is what B.B. is telling the banks to do with home loans. Yeah right.

[bubble_contagion]

I just called US Bank and explained that my car is not worth tha same as new. They checked the Kelly Blue book and agreed to adjust the principal on the loan to it’s net present value. My payments are now almost half. If you or anybody you know could benefit from a similar arrangement call the bank, they are literaly giving money away.

This is what B.B. is telling the banks to do with home loans. Yeah right.

[bubble_contagion]

I just called US Bank and explained that my car is not worth tha same as new. They checked the Kelly Blue book and agreed to adjust the principal on the loan to it’s net present value. My payments are now almost half. If you or anybody you know could benefit from a similar arrangement call the bank, they are literaly giving money away.

This is what B.B. is telling the banks to do with home loans. Yeah right.

[bubble_contagion]

I just called US Bank and explained that my car is not worth tha same as new. They checked the Kelly Blue book and agreed to adjust the principal on the loan to it’s net present value. My payments are now almost half. If you or anybody you know could benefit from a similar arrangement call the bank, they are literaly giving money away.

This is what B.B. is telling the banks to do with home loans. Yeah right.

[bubble_contagion]

I just called US Bank and explained that my car is not worth tha same as new. They checked the Kelly Blue book and agreed to adjust the principal on the loan to it’s net present value. My payments are now almost half. If you or anybody you know could benefit from a similar arrangement call the bank, they are literaly giving money away.

This is what B.B. is telling the banks to do with home loans. Yeah right.

[tangouniform]

As long as the cram-down is recorded (new lien with corresponding deed recording of the new amount) I don’t have a problem with this. It’ll kill the comps and bring some sense back to the market. The contract is between the lender and the borrower, after all, and if it makes sense then there’s little we can do. We’re already seeing the lenders clenching up like they got the travelin’ trots and they’re 300 yards from the nearest head. Cram-downs will make the underwriters positively paranoid.

The moral hazard to all this happened when back when the insane lending standards were in effect. A lot of us bubble sitters knew better and held onto our moral convictions that the money was too easy. Yes, we’ll suffer even if we didn’t surrender our fiscal virtue. That’s OK because we know we were right and we’ll be able to move when others can merely suffer with their just-barely affordable (even after the cram-down) debt load.

We’re past the “I told you so” phase…

[pnilesh]

Maybe we should reduce Bernanke of his position. He deserves it. He is too genius for this position and his acts are driving my savings crazy…

[cr]

The irony is the FED can’t force banks to do anything. This may be socialism, but it’s not a FED-led dictatorship.

This is probably just a ploy by Ben to appear to want to help those facing foreclsoure.

You try forcing banks to write down mortgages, you think they will acquiesce quietly? Then what, credit card companies, lay-aways and IOUs?

If they do go forward with it, then I want a $50,000 credit towards my home purchase. What’s the difference?

[cr]

The irony is the FED can’t force banks to do anything. This may be socialism, but it’s not a FED-led dictatorship.

This is probably just a ploy by Ben to appear to want to help those facing foreclsoure.

You try forcing banks to write down mortgages, you think they will acquiesce quietly? Then what, credit card companies, lay-aways and IOUs?

If they do go forward with it, then I want a $50,000 credit towards my home purchase. What’s the difference?

[cr]

The irony is the FED can’t force banks to do anything. This may be socialism, but it’s not a FED-led dictatorship.

This is probably just a ploy by Ben to appear to want to help those facing foreclsoure.

You try forcing banks to write down mortgages, you think they will acquiesce quietly? Then what, credit card companies, lay-aways and IOUs?

If they do go forward with it, then I want a $50,000 credit towards my home purchase. What’s the difference?

[cr]

The irony is the FED can’t force banks to do anything. This may be socialism, but it’s not a FED-led dictatorship.

This is probably just a ploy by Ben to appear to want to help those facing foreclsoure.

You try forcing banks to write down mortgages, you think they will acquiesce quietly? Then what, credit card companies, lay-aways and IOUs?

If they do go forward with it, then I want a $50,000 credit towards my home purchase. What’s the difference?

[cr]

The irony is the FED can’t force banks to do anything. This may be socialism, but it’s not a FED-led dictatorship.

This is probably just a ploy by Ben to appear to want to help those facing foreclsoure.

You try forcing banks to write down mortgages, you think they will acquiesce quietly? Then what, credit card companies, lay-aways and IOUs?

If they do go forward with it, then I want a $50,000 credit towards my home purchase. What’s the difference?

[pnilesh]

Maybe we should reduce Bernanke of his position. He deserves it. He is too genius for this position and his acts are driving my savings crazy…

[pnilesh]

Maybe we should reduce Bernanke of his position. He deserves it. He is too genius for this position and his acts are driving my savings crazy…

[pnilesh]

Maybe we should reduce Bernanke of his position. He deserves it. He is too genius for this position and his acts are driving my savings crazy…

[pnilesh]

Maybe we should reduce Bernanke of his position. He deserves it. He is too genius for this position and his acts are driving my savings crazy…

[tangouniform]

As long as the cram-down is recorded (new lien with corresponding deed recording of the new amount) I don’t have a problem with this. It’ll kill the comps and bring some sense back to the market. The contract is between the lender and the borrower, after all, and if it makes sense then there’s little we can do. We’re already seeing the lenders clenching up like they got the travelin’ trots and they’re 300 yards from the nearest head. Cram-downs will make the underwriters positively paranoid.

The moral hazard to all this happened when back when the insane lending standards were in effect. A lot of us bubble sitters knew better and held onto our moral convictions that the money was too easy. Yes, we’ll suffer even if we didn’t surrender our fiscal virtue. That’s OK because we know we were right and we’ll be able to move when others can merely suffer with their just-barely affordable (even after the cram-down) debt load.

We’re past the “I told you so” phase…

[tangouniform]

As long as the cram-down is recorded (new lien with corresponding deed recording of the new amount) I don’t have a problem with this. It’ll kill the comps and bring some sense back to the market. The contract is between the lender and the borrower, after all, and if it makes sense then there’s little we can do. We’re already seeing the lenders clenching up like they got the travelin’ trots and they’re 300 yards from the nearest head. Cram-downs will make the underwriters positively paranoid.

The moral hazard to all this happened when back when the insane lending standards were in effect. A lot of us bubble sitters knew better and held onto our moral convictions that the money was too easy. Yes, we’ll suffer even if we didn’t surrender our fiscal virtue. That’s OK because we know we were right and we’ll be able to move when others can merely suffer with their just-barely affordable (even after the cram-down) debt load.

We’re past the “I told you so” phase…

[tangouniform]

As long as the cram-down is recorded (new lien with corresponding deed recording of the new amount) I don’t have a problem with this. It’ll kill the comps and bring some sense back to the market. The contract is between the lender and the borrower, after all, and if it makes sense then there’s little we can do. We’re already seeing the lenders clenching up like they got the travelin’ trots and they’re 300 yards from the nearest head. Cram-downs will make the underwriters positively paranoid.

The moral hazard to all this happened when back when the insane lending standards were in effect. A lot of us bubble sitters knew better and held onto our moral convictions that the money was too easy. Yes, we’ll suffer even if we didn’t surrender our fiscal virtue. That’s OK because we know we were right and we’ll be able to move when others can merely suffer with their just-barely affordable (even after the cram-down) debt load.

We’re past the “I told you so” phase…

[tangouniform]

As long as the cram-down is recorded (new lien with corresponding deed recording of the new amount) I don’t have a problem with this. It’ll kill the comps and bring some sense back to the market. The contract is between the lender and the borrower, after all, and if it makes sense then there’s little we can do. We’re already seeing the lenders clenching up like they got the travelin’ trots and they’re 300 yards from the nearest head. Cram-downs will make the underwriters positively paranoid.

The moral hazard to all this happened when back when the insane lending standards were in effect. A lot of us bubble sitters knew better and held onto our moral convictions that the money was too easy. Yes, we’ll suffer even if we didn’t surrender our fiscal virtue. That’s OK because we know we were right and we’ll be able to move when others can merely suffer with their just-barely affordable (even after the cram-down) debt load.

We’re past the “I told you so” phase…

[Author]

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