Report shows strategic defaults increasing

[SD Realtor]

No scaredy the price of credit has nothing to do with the expectation of housing prices. The price of credit drives housing prices.

The price of credit is ultimately, when you trace it back up the chain, is driven by the bond market. Yes risk is inherent in the price of credit but if credit were really determined by risk then in 2007 when we first started seeing spiraling defaults credit should have skyrocketed but it did not because the dominoes would have all fallen, rightfully so I might add.

So we have punted the risk from the consumer past the lenders, and now it is at the federal level. One would think it stops there because our creditors are foreign govts now. It should and we will see.

[scaredyclassic]

i don’t know; it seems like a system that gives feedback in both direction.

if you asked me for a loan, I might be inclined to lend you money, based on how risky I thought the loan was. I find you less risky if you have lots of assets.

with lower valued assets, i find you a riskier bet.

If your house is depreciating, you have less assets.

You need to pay more interest.

if your house is going up up up, I’d know you’re not going to default on the loan, because there’s no reason to, you can sell the asset, and so i’d charge you tiny interest.

I mean, the banks are going to be tighter with credit when housing prices drop, right? How do we know whether interest prices are causing home values to change or whether the change in home values is affecting the interest rates banks want on home loans?

[scaredyclassic]

i don’t know; it seems like a system that gives feedback in both direction.

if you asked me for a loan, I might be inclined to lend you money, based on how risky I thought the loan was. I find you less risky if you have lots of assets.

with lower valued assets, i find you a riskier bet.

If your house is depreciating, you have less assets.

You need to pay more interest.

if your house is going up up up, I’d know you’re not going to default on the loan, because there’s no reason to, you can sell the asset, and so i’d charge you tiny interest.

I mean, the banks are going to be tighter with credit when housing prices drop, right? How do we know whether interest prices are causing home values to change or whether the change in home values is affecting the interest rates banks want on home loans?

[scaredyclassic]

i don’t know; it seems like a system that gives feedback in both direction.

if you asked me for a loan, I might be inclined to lend you money, based on how risky I thought the loan was. I find you less risky if you have lots of assets.

with lower valued assets, i find you a riskier bet.

If your house is depreciating, you have less assets.

You need to pay more interest.

if your house is going up up up, I’d know you’re not going to default on the loan, because there’s no reason to, you can sell the asset, and so i’d charge you tiny interest.

I mean, the banks are going to be tighter with credit when housing prices drop, right? How do we know whether interest prices are causing home values to change or whether the change in home values is affecting the interest rates banks want on home loans?

[scaredyclassic]

i don’t know; it seems like a system that gives feedback in both direction.

if you asked me for a loan, I might be inclined to lend you money, based on how risky I thought the loan was. I find you less risky if you have lots of assets.

with lower valued assets, i find you a riskier bet.

If your house is depreciating, you have less assets.

You need to pay more interest.

if your house is going up up up, I’d know you’re not going to default on the loan, because there’s no reason to, you can sell the asset, and so i’d charge you tiny interest.

I mean, the banks are going to be tighter with credit when housing prices drop, right? How do we know whether interest prices are causing home values to change or whether the change in home values is affecting the interest rates banks want on home loans?

[scaredyclassic]

i don’t know; it seems like a system that gives feedback in both direction.

if you asked me for a loan, I might be inclined to lend you money, based on how risky I thought the loan was. I find you less risky if you have lots of assets.

with lower valued assets, i find you a riskier bet.

If your house is depreciating, you have less assets.

You need to pay more interest.

if your house is going up up up, I’d know you’re not going to default on the loan, because there’s no reason to, you can sell the asset, and so i’d charge you tiny interest.

I mean, the banks are going to be tighter with credit when housing prices drop, right? How do we know whether interest prices are causing home values to change or whether the change in home values is affecting the interest rates banks want on home loans?

[scaredyclassic]

i dont know about 2007, im not saying interest rates will automatically adjust to risk, I’m sure there’s lots of games TPTB can play, but ultimately, if the system adjusts to market conditions, fallling (not just lower, but persistently falling) home prices should probably cause banks to charge more itnerest. It’s basically an unsecured loan at that point, right?

[scaredyclassic]

i dont know about 2007, im not saying interest rates will automatically adjust to risk, I’m sure there’s lots of games TPTB can play, but ultimately, if the system adjusts to market conditions, fallling (not just lower, but persistently falling) home prices should probably cause banks to charge more itnerest. It’s basically an unsecured loan at that point, right?

[scaredyclassic]

i dont know about 2007, im not saying interest rates will automatically adjust to risk, I’m sure there’s lots of games TPTB can play, but ultimately, if the system adjusts to market conditions, fallling (not just lower, but persistently falling) home prices should probably cause banks to charge more itnerest. It’s basically an unsecured loan at that point, right?

[scaredyclassic]

i dont know about 2007, im not saying interest rates will automatically adjust to risk, I’m sure there’s lots of games TPTB can play, but ultimately, if the system adjusts to market conditions, fallling (not just lower, but persistently falling) home prices should probably cause banks to charge more itnerest. It’s basically an unsecured loan at that point, right?

[scaredyclassic]

i dont know about 2007, im not saying interest rates will automatically adjust to risk, I’m sure there’s lots of games TPTB can play, but ultimately, if the system adjusts to market conditions, fallling (not just lower, but persistently falling) home prices should probably cause banks to charge more itnerest. It’s basically an unsecured loan at that point, right?

[Arraya]

[quote=SD Realtor]Okay I can see that, however wouldn’t you agree that the fundamental problem lies in the consumerism right? Upside down in the house, walk from the house, upside down in the car walk from car. Obviously carrying your strategy to a logical conclusion is that nobody should purchase an asset with borrowed funds correct? Obviously free market valuations will cross the “upside down enough” threshold that you spoke of.

Carrying the strategy further the extension of credit should be eliminated because perpetual appreciation of any asset is impossible right?[/quote]

Oh boy. It’s not quite that simple. It’s not that I think credit needs to be eliminated per se but I don’t think the government should be in the business either. And certainly not encouraging more debt dependency to the degree that they have. Frankly, as the day go by, it all becomes more and more absurd. What’s next, forced debt for people that can afford it. I would not be surprised if the were slipping people into recourse loans. Using loan officer tactics to slip them into an even shittier situation all while calling it “help”.

honestly, it’s offensive that they are positioning these programs as “helping” homeowners. Somebody that has a job is the last person that needs help. In the one write up that I read described the people that were not going to get help as “too far gone”. If I wanted to give help to anybody it would be the too far gones. Really, it’s the homeowners helping the whole system from collapsing into a deflationary spiral as well as all the new buyers that are buying, by many measures, over priced assets. Wall Street spent a good part of the bubble selling “AAA” MBSs to pensions around the world with guaranteed returns. So, there is a huge amount of systemic dependancy on high asset prices.

It’s just not a situation that ends well either way. All those FBs that are getting “help” better read the fine print and realize that this is a big hail mary pass of delusional bankers, of which I put a very low percentage of working out for anyone except the well-connected.

here is a scenario. They go through the next year and “help” several hundred thousand FBs. The help included lowering principle to current market value and slipping them into recourse loans. The “plan” doesn’t work as anticipated and home prices fall another 20% and many of the “helped” lose their job.

All actions taken are to stop deflation. We’ll see if that is possible.

[Arraya]

[quote=SD Realtor]Okay I can see that, however wouldn’t you agree that the fundamental problem lies in the consumerism right? Upside down in the house, walk from the house, upside down in the car walk from car. Obviously carrying your strategy to a logical conclusion is that nobody should purchase an asset with borrowed funds correct? Obviously free market valuations will cross the “upside down enough” threshold that you spoke of.

Carrying the strategy further the extension of credit should be eliminated because perpetual appreciation of any asset is impossible right?[/quote]

Oh boy. It’s not quite that simple. It’s not that I think credit needs to be eliminated per se but I don’t think the government should be in the business either. And certainly not encouraging more debt dependency to the degree that they have. Frankly, as the day go by, it all becomes more and more absurd. What’s next, forced debt for people that can afford it. I would not be surprised if the were slipping people into recourse loans. Using loan officer tactics to slip them into an even shittier situation all while calling it “help”.

honestly, it’s offensive that they are positioning these programs as “helping” homeowners. Somebody that has a job is the last person that needs help. In the one write up that I read described the people that were not going to get help as “too far gone”. If I wanted to give help to anybody it would be the too far gones. Really, it’s the homeowners helping the whole system from collapsing into a deflationary spiral as well as all the new buyers that are buying, by many measures, over priced assets. Wall Street spent a good part of the bubble selling “AAA” MBSs to pensions around the world with guaranteed returns. So, there is a huge amount of systemic dependancy on high asset prices.

It’s just not a situation that ends well either way. All those FBs that are getting “help” better read the fine print and realize that this is a big hail mary pass of delusional bankers, of which I put a very low percentage of working out for anyone except the well-connected.

here is a scenario. They go through the next year and “help” several hundred thousand FBs. The help included lowering principle to current market value and slipping them into recourse loans. The “plan” doesn’t work as anticipated and home prices fall another 20% and many of the “helped” lose their job.

All actions taken are to stop deflation. We’ll see if that is possible.

[Arraya]

[quote=SD Realtor]Okay I can see that, however wouldn’t you agree that the fundamental problem lies in the consumerism right? Upside down in the house, walk from the house, upside down in the car walk from car. Obviously carrying your strategy to a logical conclusion is that nobody should purchase an asset with borrowed funds correct? Obviously free market valuations will cross the “upside down enough” threshold that you spoke of.

Carrying the strategy further the extension of credit should be eliminated because perpetual appreciation of any asset is impossible right?[/quote]

Oh boy. It’s not quite that simple. It’s not that I think credit needs to be eliminated per se but I don’t think the government should be in the business either. And certainly not encouraging more debt dependency to the degree that they have. Frankly, as the day go by, it all becomes more and more absurd. What’s next, forced debt for people that can afford it. I would not be surprised if the were slipping people into recourse loans. Using loan officer tactics to slip them into an even shittier situation all while calling it “help”.

honestly, it’s offensive that they are positioning these programs as “helping” homeowners. Somebody that has a job is the last person that needs help. In the one write up that I read described the people that were not going to get help as “too far gone”. If I wanted to give help to anybody it would be the too far gones. Really, it’s the homeowners helping the whole system from collapsing into a deflationary spiral as well as all the new buyers that are buying, by many measures, over priced assets. Wall Street spent a good part of the bubble selling “AAA” MBSs to pensions around the world with guaranteed returns. So, there is a huge amount of systemic dependancy on high asset prices.

It’s just not a situation that ends well either way. All those FBs that are getting “help” better read the fine print and realize that this is a big hail mary pass of delusional bankers, of which I put a very low percentage of working out for anyone except the well-connected.

here is a scenario. They go through the next year and “help” several hundred thousand FBs. The help included lowering principle to current market value and slipping them into recourse loans. The “plan” doesn’t work as anticipated and home prices fall another 20% and many of the “helped” lose their job.

All actions taken are to stop deflation. We’ll see if that is possible.

[Arraya]

[quote=SD Realtor]Okay I can see that, however wouldn’t you agree that the fundamental problem lies in the consumerism right? Upside down in the house, walk from the house, upside down in the car walk from car. Obviously carrying your strategy to a logical conclusion is that nobody should purchase an asset with borrowed funds correct? Obviously free market valuations will cross the “upside down enough” threshold that you spoke of.

Carrying the strategy further the extension of credit should be eliminated because perpetual appreciation of any asset is impossible right?[/quote]

Oh boy. It’s not quite that simple. It’s not that I think credit needs to be eliminated per se but I don’t think the government should be in the business either. And certainly not encouraging more debt dependency to the degree that they have. Frankly, as the day go by, it all becomes more and more absurd. What’s next, forced debt for people that can afford it. I would not be surprised if the were slipping people into recourse loans. Using loan officer tactics to slip them into an even shittier situation all while calling it “help”.

honestly, it’s offensive that they are positioning these programs as “helping” homeowners. Somebody that has a job is the last person that needs help. In the one write up that I read described the people that were not going to get help as “too far gone”. If I wanted to give help to anybody it would be the too far gones. Really, it’s the homeowners helping the whole system from collapsing into a deflationary spiral as well as all the new buyers that are buying, by many measures, over priced assets. Wall Street spent a good part of the bubble selling “AAA” MBSs to pensions around the world with guaranteed returns. So, there is a huge amount of systemic dependancy on high asset prices.

It’s just not a situation that ends well either way. All those FBs that are getting “help” better read the fine print and realize that this is a big hail mary pass of delusional bankers, of which I put a very low percentage of working out for anyone except the well-connected.

here is a scenario. They go through the next year and “help” several hundred thousand FBs. The help included lowering principle to current market value and slipping them into recourse loans. The “plan” doesn’t work as anticipated and home prices fall another 20% and many of the “helped” lose their job.

All actions taken are to stop deflation. We’ll see if that is possible.

[Author]

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