Refinance Bill Drastically Alters Market

[Huckleberry]

“Cardoza’s idea would ignore income, credit history or loan-to-value ratios”.

My thoughts? Is this guy retarded!?!?!

Piggs thoughts? Chances this will get passed?

http://www.thestreet.com/story/10873598/1/refinance-bill-drastically-alters-market.html

[Anonymous]

Put yourself in the place of a lender (or FNMA):

Someone with shoddy credit owes you $300K and the property is worth $200K. Let’s say their payments are $2000/month, but they can rent a comparable house today for $1500/month.

What are the chances they are going to pay back any of the loan?

Almost zero.

The borrower is going to walk because they have nothing to lose by doing so.

So you are down $100K.

But what if you lower their balance to $250K and lower their payment to $1500/month?

They may actually decide to stay put and continue making the payments. Even if they eventually default after the making the modification, you really aren’t any worse off.

(Of course you could try to find another buyer with good credit, but there aren’t many of them around these days…)

So by doing the loan mod, you are down at most $100K, and likely less than that.

If you look at the cold, hard, objective financial reality, these refi’s make perfect sense.

– Does this suck for those who have good credit (like me)? Yup.

– Does it suck for those who paid fees to refinance recently (like me)? Yup.

– Does it suck for those made large downpayments and have equity in their homes, and therefore no bargaining power (like me)? Yup.

But the only reason *not* to do the loan mods is based on an ethical argument – that those who made poor decisions should not be “rewarded” or even that they should be “punished.”

Is it the government’s job to decide who should win and lose in the marketplace, or is the government’s job to use taxpayer money optimally?

We are in a situation where the financially optimal alternative is not the most “fair.” What sucks about it is that it is impossible to do anything to make it fair – the damage is already done. But that’s where we are, and we have to make the tough decisions.

[And this is *not* a left/right D/R thing. It’s about making the right decisions based upon objective facts.]

[Anonymous]

Put yourself in the place of a lender (or FNMA):

Someone with shoddy credit owes you $300K and the property is worth $200K. Let’s say their payments are $2000/month, but they can rent a comparable house today for $1500/month.

What are the chances they are going to pay back any of the loan?

Almost zero.

The borrower is going to walk because they have nothing to lose by doing so.

So you are down $100K.

But what if you lower their balance to $250K and lower their payment to $1500/month?

They may actually decide to stay put and continue making the payments. Even if they eventually default after the making the modification, you really aren’t any worse off.

(Of course you could try to find another buyer with good credit, but there aren’t many of them around these days…)

So by doing the loan mod, you are down at most $100K, and likely less than that.

If you look at the cold, hard, objective financial reality, these refi’s make perfect sense.

– Does this suck for those who have good credit (like me)? Yup.

– Does it suck for those who paid fees to refinance recently (like me)? Yup.

– Does it suck for those made large downpayments and have equity in their homes, and therefore no bargaining power (like me)? Yup.

But the only reason *not* to do the loan mods is based on an ethical argument – that those who made poor decisions should not be “rewarded” or even that they should be “punished.”

Is it the government’s job to decide who should win and lose in the marketplace, or is the government’s job to use taxpayer money optimally?

We are in a situation where the financially optimal alternative is not the most “fair.” What sucks about it is that it is impossible to do anything to make it fair – the damage is already done. But that’s where we are, and we have to make the tough decisions.

[And this is *not* a left/right D/R thing. It’s about making the right decisions based upon objective facts.]

[Anonymous]

Put yourself in the place of a lender (or FNMA):

Someone with shoddy credit owes you $300K and the property is worth $200K. Let’s say their payments are $2000/month, but they can rent a comparable house today for $1500/month.

What are the chances they are going to pay back any of the loan?

Almost zero.

The borrower is going to walk because they have nothing to lose by doing so.

So you are down $100K.

But what if you lower their balance to $250K and lower their payment to $1500/month?

They may actually decide to stay put and continue making the payments. Even if they eventually default after the making the modification, you really aren’t any worse off.

(Of course you could try to find another buyer with good credit, but there aren’t many of them around these days…)

So by doing the loan mod, you are down at most $100K, and likely less than that.

If you look at the cold, hard, objective financial reality, these refi’s make perfect sense.

– Does this suck for those who have good credit (like me)? Yup.

– Does it suck for those who paid fees to refinance recently (like me)? Yup.

– Does it suck for those made large downpayments and have equity in their homes, and therefore no bargaining power (like me)? Yup.

But the only reason *not* to do the loan mods is based on an ethical argument – that those who made poor decisions should not be “rewarded” or even that they should be “punished.”

Is it the government’s job to decide who should win and lose in the marketplace, or is the government’s job to use taxpayer money optimally?

We are in a situation where the financially optimal alternative is not the most “fair.” What sucks about it is that it is impossible to do anything to make it fair – the damage is already done. But that’s where we are, and we have to make the tough decisions.

[And this is *not* a left/right D/R thing. It’s about making the right decisions based upon objective facts.]

[Anonymous]

Put yourself in the place of a lender (or FNMA):

Someone with shoddy credit owes you $300K and the property is worth $200K. Let’s say their payments are $2000/month, but they can rent a comparable house today for $1500/month.

What are the chances they are going to pay back any of the loan?

Almost zero.

The borrower is going to walk because they have nothing to lose by doing so.

So you are down $100K.

But what if you lower their balance to $250K and lower their payment to $1500/month?

They may actually decide to stay put and continue making the payments. Even if they eventually default after the making the modification, you really aren’t any worse off.

(Of course you could try to find another buyer with good credit, but there aren’t many of them around these days…)

So by doing the loan mod, you are down at most $100K, and likely less than that.

If you look at the cold, hard, objective financial reality, these refi’s make perfect sense.

– Does this suck for those who have good credit (like me)? Yup.

– Does it suck for those who paid fees to refinance recently (like me)? Yup.

– Does it suck for those made large downpayments and have equity in their homes, and therefore no bargaining power (like me)? Yup.

But the only reason *not* to do the loan mods is based on an ethical argument – that those who made poor decisions should not be “rewarded” or even that they should be “punished.”

Is it the government’s job to decide who should win and lose in the marketplace, or is the government’s job to use taxpayer money optimally?

We are in a situation where the financially optimal alternative is not the most “fair.” What sucks about it is that it is impossible to do anything to make it fair – the damage is already done. But that’s where we are, and we have to make the tough decisions.

[And this is *not* a left/right D/R thing. It’s about making the right decisions based upon objective facts.]

[Anonymous]

Put yourself in the place of a lender (or FNMA):

Someone with shoddy credit owes you $300K and the property is worth $200K. Let’s say their payments are $2000/month, but they can rent a comparable house today for $1500/month.

What are the chances they are going to pay back any of the loan?

Almost zero.

The borrower is going to walk because they have nothing to lose by doing so.

So you are down $100K.

But what if you lower their balance to $250K and lower their payment to $1500/month?

They may actually decide to stay put and continue making the payments. Even if they eventually default after the making the modification, you really aren’t any worse off.

(Of course you could try to find another buyer with good credit, but there aren’t many of them around these days…)

So by doing the loan mod, you are down at most $100K, and likely less than that.

If you look at the cold, hard, objective financial reality, these refi’s make perfect sense.

– Does this suck for those who have good credit (like me)? Yup.

– Does it suck for those who paid fees to refinance recently (like me)? Yup.

– Does it suck for those made large downpayments and have equity in their homes, and therefore no bargaining power (like me)? Yup.

But the only reason *not* to do the loan mods is based on an ethical argument – that those who made poor decisions should not be “rewarded” or even that they should be “punished.”

Is it the government’s job to decide who should win and lose in the marketplace, or is the government’s job to use taxpayer money optimally?

We are in a situation where the financially optimal alternative is not the most “fair.” What sucks about it is that it is impossible to do anything to make it fair – the damage is already done. But that’s where we are, and we have to make the tough decisions.

[And this is *not* a left/right D/R thing. It’s about making the right decisions based upon objective facts.]

[UCGal]

I look at a coworker of mine. Bought in 4S in 2006, put 20% down. Wants to refi to a lower rate but can’t get the LTV to work for a typical 80% loan/value. The house has lost too much value. So he’s stuck paying the extra cost of FHA or doing a loan with a 90% LTV that is a higher rate. He still will save money over his current rate – but not nearly as much.

He’s got great credit. He just bought at a crappy time. He does not plan to sell – even though the house has dropped in value almost $200k since he bought. It’s his family home.

I can see something that would help someone like him – good credit but screwed by the LTV because of depreciation… He tried working with Sheldon – but he couldn’t come up with *enough* cash to bring to the table without borrowing against his 401k. He was unwilling to do that.

Folks with bad credit shouldn’t qualify for prime mortgages. We did that before… it’s called sub-prime for a reason.

[UCGal]

I look at a coworker of mine. Bought in 4S in 2006, put 20% down. Wants to refi to a lower rate but can’t get the LTV to work for a typical 80% loan/value. The house has lost too much value. So he’s stuck paying the extra cost of FHA or doing a loan with a 90% LTV that is a higher rate. He still will save money over his current rate – but not nearly as much.

He’s got great credit. He just bought at a crappy time. He does not plan to sell – even though the house has dropped in value almost $200k since he bought. It’s his family home.

I can see something that would help someone like him – good credit but screwed by the LTV because of depreciation… He tried working with Sheldon – but he couldn’t come up with *enough* cash to bring to the table without borrowing against his 401k. He was unwilling to do that.

Folks with bad credit shouldn’t qualify for prime mortgages. We did that before… it’s called sub-prime for a reason.

[UCGal]

I look at a coworker of mine. Bought in 4S in 2006, put 20% down. Wants to refi to a lower rate but can’t get the LTV to work for a typical 80% loan/value. The house has lost too much value. So he’s stuck paying the extra cost of FHA or doing a loan with a 90% LTV that is a higher rate. He still will save money over his current rate – but not nearly as much.

He’s got great credit. He just bought at a crappy time. He does not plan to sell – even though the house has dropped in value almost $200k since he bought. It’s his family home.

I can see something that would help someone like him – good credit but screwed by the LTV because of depreciation… He tried working with Sheldon – but he couldn’t come up with *enough* cash to bring to the table without borrowing against his 401k. He was unwilling to do that.

Folks with bad credit shouldn’t qualify for prime mortgages. We did that before… it’s called sub-prime for a reason.

[UCGal]

I look at a coworker of mine. Bought in 4S in 2006, put 20% down. Wants to refi to a lower rate but can’t get the LTV to work for a typical 80% loan/value. The house has lost too much value. So he’s stuck paying the extra cost of FHA or doing a loan with a 90% LTV that is a higher rate. He still will save money over his current rate – but not nearly as much.

He’s got great credit. He just bought at a crappy time. He does not plan to sell – even though the house has dropped in value almost $200k since he bought. It’s his family home.

I can see something that would help someone like him – good credit but screwed by the LTV because of depreciation… He tried working with Sheldon – but he couldn’t come up with *enough* cash to bring to the table without borrowing against his 401k. He was unwilling to do that.

Folks with bad credit shouldn’t qualify for prime mortgages. We did that before… it’s called sub-prime for a reason.

[UCGal]

I look at a coworker of mine. Bought in 4S in 2006, put 20% down. Wants to refi to a lower rate but can’t get the LTV to work for a typical 80% loan/value. The house has lost too much value. So he’s stuck paying the extra cost of FHA or doing a loan with a 90% LTV that is a higher rate. He still will save money over his current rate – but not nearly as much.

He’s got great credit. He just bought at a crappy time. He does not plan to sell – even though the house has dropped in value almost $200k since he bought. It’s his family home.

I can see something that would help someone like him – good credit but screwed by the LTV because of depreciation… He tried working with Sheldon – but he couldn’t come up with *enough* cash to bring to the table without borrowing against his 401k. He was unwilling to do that.

Folks with bad credit shouldn’t qualify for prime mortgages. We did that before… it’s called sub-prime for a reason.

[Huckleberry]

pri_dk,

Seriously!?!?! Ignore income and credit history!?!?!

Give me a break!

[Huckleberry]

pri_dk,

Seriously!?!?! Ignore income and credit history!?!?!

Give me a break!

[Huckleberry]

pri_dk,

Seriously!?!?! Ignore income and credit history!?!?!

Give me a break!

[Huckleberry]

pri_dk,

Seriously!?!?! Ignore income and credit history!?!?!

Give me a break!

[Author]

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