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analyst
Participant[quote=temeculaguy]
Where I depart from analyst, I don’t think it’s the government’s fault or kicking the can down the road or anything to do with responsibility. It’s just a business decision on the lenders part, one that has more upsides in some situations than a repo for them. The guy will stay, keep up the place, make a payment (albeit a smaller one) and he will feel good about it, even brag about it. In time, they have a decent chance of getting all of their money back. You can envy that guy, i feel bad for him a little, if his value returns in the future, he won’t get the benefit of it that his neighbors will (like a renter), but then again, his other option is be kicked out and to rent for probably a similar price and this way he doesn’t have a landlord. Don’t do a loan mod as a strategy, do it if it is your last resort.[/quote]
I agree that the lenders may be doing what’s logical given the rules as recently amended. What many are failing to acknowledge is that, until recent changes, the rules did not allow the lenders that choice. And the rule change was forced upon the Financial Accounting Standards Board by the federal government (Congress threatening to legislate FASB into irrelevance).
Until mark-to-market was suspended, the lender was required to value its loans at market value, not face value. For government-insured institutions (all the traditional banks, and the investment banks which changed their status to get government help to avoid going under), the markdowns of loan values to market would have lowered the asset side of the balance sheet, and, therefore, equity/capital, to a level that REQUIRED regulatory takeover and liquidation. The lender would cease to exist, therefore not making any business decisions, good or bad.
Whoever bought the marked-down loans during the liquidation process would then have the choice of foreclosing on them, or going into the business of lending to borrowers in distress. The attractiveness of either course would be determined by the price paid relative to the predicted recovery value. It would be pure speculation to guess which path might be taken in any given case. There would probably be some of both, since new corporations would be created to replace the ones whose irresponsibility led to their own destruction.
Participant[quote=temeculaguy]
Where I depart from analyst, I don’t think it’s the government’s fault or kicking the can down the road or anything to do with responsibility. It’s just a business decision on the lenders part, one that has more upsides in some situations than a repo for them. The guy will stay, keep up the place, make a payment (albeit a smaller one) and he will feel good about it, even brag about it. In time, they have a decent chance of getting all of their money back. You can envy that guy, i feel bad for him a little, if his value returns in the future, he won’t get the benefit of it that his neighbors will (like a renter), but then again, his other option is be kicked out and to rent for probably a similar price and this way he doesn’t have a landlord. Don’t do a loan mod as a strategy, do it if it is your last resort.[/quote]
I agree that the lenders may be doing what’s logical given the rules as recently amended. What many are failing to acknowledge is that, until recent changes, the rules did not allow the lenders that choice. And the rule change was forced upon the Financial Accounting Standards Board by the federal government (Congress threatening to legislate FASB into irrelevance).
Until mark-to-market was suspended, the lender was required to value its loans at market value, not face value. For government-insured institutions (all the traditional banks, and the investment banks which changed their status to get government help to avoid going under), the markdowns of loan values to market would have lowered the asset side of the balance sheet, and, therefore, equity/capital, to a level that REQUIRED regulatory takeover and liquidation. The lender would cease to exist, therefore not making any business decisions, good or bad.
Whoever bought the marked-down loans during the liquidation process would then have the choice of foreclosing on them, or going into the business of lending to borrowers in distress. The attractiveness of either course would be determined by the price paid relative to the predicted recovery value. It would be pure speculation to guess which path might be taken in any given case. There would probably be some of both, since new corporations would be created to replace the ones whose irresponsibility led to their own destruction.
Participant[quote=temeculaguy]
Where I depart from analyst, I don’t think it’s the government’s fault or kicking the can down the road or anything to do with responsibility. It’s just a business decision on the lenders part, one that has more upsides in some situations than a repo for them. The guy will stay, keep up the place, make a payment (albeit a smaller one) and he will feel good about it, even brag about it. In time, they have a decent chance of getting all of their money back. You can envy that guy, i feel bad for him a little, if his value returns in the future, he won’t get the benefit of it that his neighbors will (like a renter), but then again, his other option is be kicked out and to rent for probably a similar price and this way he doesn’t have a landlord. Don’t do a loan mod as a strategy, do it if it is your last resort.[/quote]
I agree that the lenders may be doing what’s logical given the rules as recently amended. What many are failing to acknowledge is that, until recent changes, the rules did not allow the lenders that choice. And the rule change was forced upon the Financial Accounting Standards Board by the federal government (Congress threatening to legislate FASB into irrelevance).
Until mark-to-market was suspended, the lender was required to value its loans at market value, not face value. For government-insured institutions (all the traditional banks, and the investment banks which changed their status to get government help to avoid going under), the markdowns of loan values to market would have lowered the asset side of the balance sheet, and, therefore, equity/capital, to a level that REQUIRED regulatory takeover and liquidation. The lender would cease to exist, therefore not making any business decisions, good or bad.
Whoever bought the marked-down loans during the liquidation process would then have the choice of foreclosing on them, or going into the business of lending to borrowers in distress. The attractiveness of either course would be determined by the price paid relative to the predicted recovery value. It would be pure speculation to guess which path might be taken in any given case. There would probably be some of both, since new corporations would be created to replace the ones whose irresponsibility led to their own destruction.
Participant[quote=temeculaguy]
Where I depart from analyst, I don’t think it’s the government’s fault or kicking the can down the road or anything to do with responsibility. It’s just a business decision on the lenders part, one that has more upsides in some situations than a repo for them. The guy will stay, keep up the place, make a payment (albeit a smaller one) and he will feel good about it, even brag about it. In time, they have a decent chance of getting all of their money back. You can envy that guy, i feel bad for him a little, if his value returns in the future, he won’t get the benefit of it that his neighbors will (like a renter), but then again, his other option is be kicked out and to rent for probably a similar price and this way he doesn’t have a landlord. Don’t do a loan mod as a strategy, do it if it is your last resort.[/quote]
I agree that the lenders may be doing what’s logical given the rules as recently amended. What many are failing to acknowledge is that, until recent changes, the rules did not allow the lenders that choice. And the rule change was forced upon the Financial Accounting Standards Board by the federal government (Congress threatening to legislate FASB into irrelevance).
Until mark-to-market was suspended, the lender was required to value its loans at market value, not face value. For government-insured institutions (all the traditional banks, and the investment banks which changed their status to get government help to avoid going under), the markdowns of loan values to market would have lowered the asset side of the balance sheet, and, therefore, equity/capital, to a level that REQUIRED regulatory takeover and liquidation. The lender would cease to exist, therefore not making any business decisions, good or bad.
Whoever bought the marked-down loans during the liquidation process would then have the choice of foreclosing on them, or going into the business of lending to borrowers in distress. The attractiveness of either course would be determined by the price paid relative to the predicted recovery value. It would be pure speculation to guess which path might be taken in any given case. There would probably be some of both, since new corporations would be created to replace the ones whose irresponsibility led to their own destruction.
Participant[quote=sdrealtor]
Oops there goes another shadow inventory house, oops there goes another…….[/quote]I agree that the federal government strategy is preventing the shadow inventory from becoming real inventory, and will continue to do so as long as the federal government can continue the policy.
The only reason for trying to understand the size of the shadow inventory is to predict what might happen if the federal government cannot continue its current policy.
The policy has effects away from the housing market, affecting the value of the dollar and the willingness of people, domestic and foreign, to lend to the federal government, and to U. S. banks and quasi-banks.
There is no guarantee that the current policy can be continued indefinitely.
If the government returned to monetary discipline (soon), the assistance to the housing market would end precipitously, and values would return to levels determined by a normally functioning real estate market. This would be somewhere in the vicinity of 150% of 1998 values (for San Diego mid-market), perhaps overshooting low for a while (due to lots of foreclosures) before settling in.
If the government does not return to monetary discipline, the real estate market will avoid the decline, but others will be harmed to an equal or greater degree.
Participant[quote=sdrealtor]
Oops there goes another shadow inventory house, oops there goes another…….[/quote]I agree that the federal government strategy is preventing the shadow inventory from becoming real inventory, and will continue to do so as long as the federal government can continue the policy.
The only reason for trying to understand the size of the shadow inventory is to predict what might happen if the federal government cannot continue its current policy.
The policy has effects away from the housing market, affecting the value of the dollar and the willingness of people, domestic and foreign, to lend to the federal government, and to U. S. banks and quasi-banks.
There is no guarantee that the current policy can be continued indefinitely.
If the government returned to monetary discipline (soon), the assistance to the housing market would end precipitously, and values would return to levels determined by a normally functioning real estate market. This would be somewhere in the vicinity of 150% of 1998 values (for San Diego mid-market), perhaps overshooting low for a while (due to lots of foreclosures) before settling in.
If the government does not return to monetary discipline, the real estate market will avoid the decline, but others will be harmed to an equal or greater degree.
Participant[quote=sdrealtor]
Oops there goes another shadow inventory house, oops there goes another…….[/quote]I agree that the federal government strategy is preventing the shadow inventory from becoming real inventory, and will continue to do so as long as the federal government can continue the policy.
The only reason for trying to understand the size of the shadow inventory is to predict what might happen if the federal government cannot continue its current policy.
The policy has effects away from the housing market, affecting the value of the dollar and the willingness of people, domestic and foreign, to lend to the federal government, and to U. S. banks and quasi-banks.
There is no guarantee that the current policy can be continued indefinitely.
If the government returned to monetary discipline (soon), the assistance to the housing market would end precipitously, and values would return to levels determined by a normally functioning real estate market. This would be somewhere in the vicinity of 150% of 1998 values (for San Diego mid-market), perhaps overshooting low for a while (due to lots of foreclosures) before settling in.
If the government does not return to monetary discipline, the real estate market will avoid the decline, but others will be harmed to an equal or greater degree.
Participant[quote=sdrealtor]
Oops there goes another shadow inventory house, oops there goes another…….[/quote]I agree that the federal government strategy is preventing the shadow inventory from becoming real inventory, and will continue to do so as long as the federal government can continue the policy.
The only reason for trying to understand the size of the shadow inventory is to predict what might happen if the federal government cannot continue its current policy.
The policy has effects away from the housing market, affecting the value of the dollar and the willingness of people, domestic and foreign, to lend to the federal government, and to U. S. banks and quasi-banks.
There is no guarantee that the current policy can be continued indefinitely.
If the government returned to monetary discipline (soon), the assistance to the housing market would end precipitously, and values would return to levels determined by a normally functioning real estate market. This would be somewhere in the vicinity of 150% of 1998 values (for San Diego mid-market), perhaps overshooting low for a while (due to lots of foreclosures) before settling in.
If the government does not return to monetary discipline, the real estate market will avoid the decline, but others will be harmed to an equal or greater degree.
Participant[quote=sdrealtor]
Oops there goes another shadow inventory house, oops there goes another…….[/quote]I agree that the federal government strategy is preventing the shadow inventory from becoming real inventory, and will continue to do so as long as the federal government can continue the policy.
The only reason for trying to understand the size of the shadow inventory is to predict what might happen if the federal government cannot continue its current policy.
The policy has effects away from the housing market, affecting the value of the dollar and the willingness of people, domestic and foreign, to lend to the federal government, and to U. S. banks and quasi-banks.
There is no guarantee that the current policy can be continued indefinitely.
If the government returned to monetary discipline (soon), the assistance to the housing market would end precipitously, and values would return to levels determined by a normally functioning real estate market. This would be somewhere in the vicinity of 150% of 1998 values (for San Diego mid-market), perhaps overshooting low for a while (due to lots of foreclosures) before settling in.
If the government does not return to monetary discipline, the real estate market will avoid the decline, but others will be harmed to an equal or greater degree.
Participant[quote=sdrealtor]Here’s a new story from the field about a shadow inventory house. I have never heard one like this but when I hear one I gotta beleive there are others. It’s a true story and some posters will write it off as a realtor fabrication but its not. I do not have the exact details but what i have is close enough. I was floored and still am. I was actually out partying last nite with a regular Pigg poster who can cooberate it.
I bumped into an old client who tried but failed to sell his house a couple years ago because he couldnt get what he wanted/needed. He had an extended period of unemployment and refi’d into a neg am Option ARM just under 600K about a year before he tried to sell. He neg am’d up to around 700K and it recast. He couldnt afford the payments so he stopped paying. He approached the bank for a loan mod and went back and forth for about a year. He owed almost 700K plus another $50K in missed payments. He was willing and ready to walk if the bank foreclosed. Out of nowhere he got contacted by the bank with an offer. New loan for about $490K and a sub 5% 30 yr fixed rate. Thats a principle reduction of about $200K plus forgiving a years worth of interest payments.
Oops there goes another shadow inventory house, oops there goes another…….[/quote]
Ask him to let you read the loan documents.
Until you read the documents, a principle reduction is speculation. Frequently, the borrower does not read and does not understand.
The typical situation would be that the new terms do not include a principle reduction. Usually some amount of principle is set to an interest rate of zero and a payment rate of zero, but is still due, hopefully to be collected in the future after values rise again.
The lender will now collect a substantial payment instead of zero. The gutted mark-to-market rules allow the lender to avoid writing down the asset value and capital value.
Participant[quote=sdrealtor]Here’s a new story from the field about a shadow inventory house. I have never heard one like this but when I hear one I gotta beleive there are others. It’s a true story and some posters will write it off as a realtor fabrication but its not. I do not have the exact details but what i have is close enough. I was floored and still am. I was actually out partying last nite with a regular Pigg poster who can cooberate it.
I bumped into an old client who tried but failed to sell his house a couple years ago because he couldnt get what he wanted/needed. He had an extended period of unemployment and refi’d into a neg am Option ARM just under 600K about a year before he tried to sell. He neg am’d up to around 700K and it recast. He couldnt afford the payments so he stopped paying. He approached the bank for a loan mod and went back and forth for about a year. He owed almost 700K plus another $50K in missed payments. He was willing and ready to walk if the bank foreclosed. Out of nowhere he got contacted by the bank with an offer. New loan for about $490K and a sub 5% 30 yr fixed rate. Thats a principle reduction of about $200K plus forgiving a years worth of interest payments.
Oops there goes another shadow inventory house, oops there goes another…….[/quote]
Ask him to let you read the loan documents.
Until you read the documents, a principle reduction is speculation. Frequently, the borrower does not read and does not understand.
The typical situation would be that the new terms do not include a principle reduction. Usually some amount of principle is set to an interest rate of zero and a payment rate of zero, but is still due, hopefully to be collected in the future after values rise again.
The lender will now collect a substantial payment instead of zero. The gutted mark-to-market rules allow the lender to avoid writing down the asset value and capital value.
Participant[quote=sdrealtor]Here’s a new story from the field about a shadow inventory house. I have never heard one like this but when I hear one I gotta beleive there are others. It’s a true story and some posters will write it off as a realtor fabrication but its not. I do not have the exact details but what i have is close enough. I was floored and still am. I was actually out partying last nite with a regular Pigg poster who can cooberate it.
I bumped into an old client who tried but failed to sell his house a couple years ago because he couldnt get what he wanted/needed. He had an extended period of unemployment and refi’d into a neg am Option ARM just under 600K about a year before he tried to sell. He neg am’d up to around 700K and it recast. He couldnt afford the payments so he stopped paying. He approached the bank for a loan mod and went back and forth for about a year. He owed almost 700K plus another $50K in missed payments. He was willing and ready to walk if the bank foreclosed. Out of nowhere he got contacted by the bank with an offer. New loan for about $490K and a sub 5% 30 yr fixed rate. Thats a principle reduction of about $200K plus forgiving a years worth of interest payments.
Oops there goes another shadow inventory house, oops there goes another…….[/quote]
Ask him to let you read the loan documents.
Until you read the documents, a principle reduction is speculation. Frequently, the borrower does not read and does not understand.
The typical situation would be that the new terms do not include a principle reduction. Usually some amount of principle is set to an interest rate of zero and a payment rate of zero, but is still due, hopefully to be collected in the future after values rise again.
The lender will now collect a substantial payment instead of zero. The gutted mark-to-market rules allow the lender to avoid writing down the asset value and capital value.
Participant[quote=sdrealtor]Here’s a new story from the field about a shadow inventory house. I have never heard one like this but when I hear one I gotta beleive there are others. It’s a true story and some posters will write it off as a realtor fabrication but its not. I do not have the exact details but what i have is close enough. I was floored and still am. I was actually out partying last nite with a regular Pigg poster who can cooberate it.
I bumped into an old client who tried but failed to sell his house a couple years ago because he couldnt get what he wanted/needed. He had an extended period of unemployment and refi’d into a neg am Option ARM just under 600K about a year before he tried to sell. He neg am’d up to around 700K and it recast. He couldnt afford the payments so he stopped paying. He approached the bank for a loan mod and went back and forth for about a year. He owed almost 700K plus another $50K in missed payments. He was willing and ready to walk if the bank foreclosed. Out of nowhere he got contacted by the bank with an offer. New loan for about $490K and a sub 5% 30 yr fixed rate. Thats a principle reduction of about $200K plus forgiving a years worth of interest payments.
Oops there goes another shadow inventory house, oops there goes another…….[/quote]
Ask him to let you read the loan documents.
Until you read the documents, a principle reduction is speculation. Frequently, the borrower does not read and does not understand.
The typical situation would be that the new terms do not include a principle reduction. Usually some amount of principle is set to an interest rate of zero and a payment rate of zero, but is still due, hopefully to be collected in the future after values rise again.
The lender will now collect a substantial payment instead of zero. The gutted mark-to-market rules allow the lender to avoid writing down the asset value and capital value.
Participant[quote=sdrealtor]Here’s a new story from the field about a shadow inventory house. I have never heard one like this but when I hear one I gotta beleive there are others. It’s a true story and some posters will write it off as a realtor fabrication but its not. I do not have the exact details but what i have is close enough. I was floored and still am. I was actually out partying last nite with a regular Pigg poster who can cooberate it.
I bumped into an old client who tried but failed to sell his house a couple years ago because he couldnt get what he wanted/needed. He had an extended period of unemployment and refi’d into a neg am Option ARM just under 600K about a year before he tried to sell. He neg am’d up to around 700K and it recast. He couldnt afford the payments so he stopped paying. He approached the bank for a loan mod and went back and forth for about a year. He owed almost 700K plus another $50K in missed payments. He was willing and ready to walk if the bank foreclosed. Out of nowhere he got contacted by the bank with an offer. New loan for about $490K and a sub 5% 30 yr fixed rate. Thats a principle reduction of about $200K plus forgiving a years worth of interest payments.
Oops there goes another shadow inventory house, oops there goes another…….[/quote]
Ask him to let you read the loan documents.
Until you read the documents, a principle reduction is speculation. Frequently, the borrower does not read and does not understand.
The typical situation would be that the new terms do not include a principle reduction. Usually some amount of principle is set to an interest rate of zero and a payment rate of zero, but is still due, hopefully to be collected in the future after values rise again.
The lender will now collect a substantial payment instead of zero. The gutted mark-to-market rules allow the lender to avoid writing down the asset value and capital value.
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