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bubba99
ParticipantYour question involves a couple of twists and turns.
The first part is the purchase was done with “80/20 from Wells Fargo with both loans starting as HELOC’s”. Both were purchase money and in California are non-recourse if never expanded by adding charges to the LOC or refinanced.
The 80% may be (probably is still) non recourse and is not taxable. The foreclosure is the remedy. In California, a company cannot take two bites of the apple. If they foreclose on a loan, that is their only remedy. Some people might say that because the first was a HELOC, it is always recourse, but that is not the case in California. There is no debt forgiveness on the first, because it is a contractual/legal remedy, not loan forgiveness.
The second (20%) because it was refinanced is no longer purchase money loan and is recourse. The collections part is because the bank can come after you for all or part of the second. Any part of the second they “forgive” is taxable as “loan forgiveness”.
The real question you should be asking is “What will I do if Wells Fargo goes all the way after the total second mortgage?” There your options are pay it, negotiate it, or file for bankruptcy. The tax on debt forgiveness is only an issue if Wells is in a good mood.
ParticipantYour question involves a couple of twists and turns.
The first part is the purchase was done with “80/20 from Wells Fargo with both loans starting as HELOC’s”. Both were purchase money and in California are non-recourse if never expanded by adding charges to the LOC or refinanced.
The 80% may be (probably is still) non recourse and is not taxable. The foreclosure is the remedy. In California, a company cannot take two bites of the apple. If they foreclose on a loan, that is their only remedy. Some people might say that because the first was a HELOC, it is always recourse, but that is not the case in California. There is no debt forgiveness on the first, because it is a contractual/legal remedy, not loan forgiveness.
The second (20%) because it was refinanced is no longer purchase money loan and is recourse. The collections part is because the bank can come after you for all or part of the second. Any part of the second they “forgive” is taxable as “loan forgiveness”.
The real question you should be asking is “What will I do if Wells Fargo goes all the way after the total second mortgage?” There your options are pay it, negotiate it, or file for bankruptcy. The tax on debt forgiveness is only an issue if Wells is in a good mood.
ParticipantSo, given that the holder of an MBS will or can be compelled to take less than the contract rate, the MBS must be discounted for the lower return. The holder then still suffers a “big” loss. If the spread is even 4% for 5 years, the loss is at least 20% of the MBS – much more when the additional risk of future discounts, FAS157 kicks in, and the new S+P ratings are applied. Maybe as high as 50% discount over contract. Does the MBS insurer eat the loss, or CITI who gave buyback guarantees or . . . ?
And does the re-valuation of the CDOs and CMOs kick another round of dominos when “offsheet” liabilities like buyback guarantees are finally triggered.
The owner of the MBS still has a 50% hit. The homeowner is still paying for an overpriced asset, and nothing has been solved. Moreover, who is going to buy MBS or CDOs in the future. The financial market is still screwed, and we haves solved nothing. The MBS holder is actually better off taking the asset (house), and holding it at close to par for as long as possible.
ParticipantSo, given that the holder of an MBS will or can be compelled to take less than the contract rate, the MBS must be discounted for the lower return. The holder then still suffers a “big” loss. If the spread is even 4% for 5 years, the loss is at least 20% of the MBS – much more when the additional risk of future discounts, FAS157 kicks in, and the new S+P ratings are applied. Maybe as high as 50% discount over contract. Does the MBS insurer eat the loss, or CITI who gave buyback guarantees or . . . ?
And does the re-valuation of the CDOs and CMOs kick another round of dominos when “offsheet” liabilities like buyback guarantees are finally triggered.
The owner of the MBS still has a 50% hit. The homeowner is still paying for an overpriced asset, and nothing has been solved. Moreover, who is going to buy MBS or CDOs in the future. The financial market is still screwed, and we haves solved nothing. The MBS holder is actually better off taking the asset (house), and holding it at close to par for as long as possible.
ParticipantSo, given that the holder of an MBS will or can be compelled to take less than the contract rate, the MBS must be discounted for the lower return. The holder then still suffers a “big” loss. If the spread is even 4% for 5 years, the loss is at least 20% of the MBS – much more when the additional risk of future discounts, FAS157 kicks in, and the new S+P ratings are applied. Maybe as high as 50% discount over contract. Does the MBS insurer eat the loss, or CITI who gave buyback guarantees or . . . ?
And does the re-valuation of the CDOs and CMOs kick another round of dominos when “offsheet” liabilities like buyback guarantees are finally triggered.
The owner of the MBS still has a 50% hit. The homeowner is still paying for an overpriced asset, and nothing has been solved. Moreover, who is going to buy MBS or CDOs in the future. The financial market is still screwed, and we haves solved nothing. The MBS holder is actually better off taking the asset (house), and holding it at close to par for as long as possible.
ParticipantSo, given that the holder of an MBS will or can be compelled to take less than the contract rate, the MBS must be discounted for the lower return. The holder then still suffers a “big” loss. If the spread is even 4% for 5 years, the loss is at least 20% of the MBS – much more when the additional risk of future discounts, FAS157 kicks in, and the new S+P ratings are applied. Maybe as high as 50% discount over contract. Does the MBS insurer eat the loss, or CITI who gave buyback guarantees or . . . ?
And does the re-valuation of the CDOs and CMOs kick another round of dominos when “offsheet” liabilities like buyback guarantees are finally triggered.
The owner of the MBS still has a 50% hit. The homeowner is still paying for an overpriced asset, and nothing has been solved. Moreover, who is going to buy MBS or CDOs in the future. The financial market is still screwed, and we haves solved nothing. The MBS holder is actually better off taking the asset (house), and holding it at close to par for as long as possible.
ParticipantSo, given that the holder of an MBS will or can be compelled to take less than the contract rate, the MBS must be discounted for the lower return. The holder then still suffers a “big” loss. If the spread is even 4% for 5 years, the loss is at least 20% of the MBS – much more when the additional risk of future discounts, FAS157 kicks in, and the new S+P ratings are applied. Maybe as high as 50% discount over contract. Does the MBS insurer eat the loss, or CITI who gave buyback guarantees or . . . ?
And does the re-valuation of the CDOs and CMOs kick another round of dominos when “offsheet” liabilities like buyback guarantees are finally triggered.
The owner of the MBS still has a 50% hit. The homeowner is still paying for an overpriced asset, and nothing has been solved. Moreover, who is going to buy MBS or CDOs in the future. The financial market is still screwed, and we haves solved nothing. The MBS holder is actually better off taking the asset (house), and holding it at close to par for as long as possible.
ParticipantJust wanted to be clear that the “government” is not bailing out anyone. The poor savers here and abroad, who have been funding this at 2%-5% annual interest rates have been funding the bubble, and will fund the bail out.
The loss of 5% or 6% because of inflation vs. the FED’s artifically low interest rate has paved the way for the bubble, and looks to be the FED’s solution to the problem.
IF the yield curve gets inverted again, and mortgage rates go to 2 or 3%, problem solved – and paid for by the “moral” savers who fund the mess with negative real rates of inflation.
It must be hubris that allows someone to speak of a borrower being immoral while walking away from a bank that has been robbing its depositors for years.
ParticipantJust wanted to be clear that the “government” is not bailing out anyone. The poor savers here and abroad, who have been funding this at 2%-5% annual interest rates have been funding the bubble, and will fund the bail out.
The loss of 5% or 6% because of inflation vs. the FED’s artifically low interest rate has paved the way for the bubble, and looks to be the FED’s solution to the problem.
IF the yield curve gets inverted again, and mortgage rates go to 2 or 3%, problem solved – and paid for by the “moral” savers who fund the mess with negative real rates of inflation.
It must be hubris that allows someone to speak of a borrower being immoral while walking away from a bank that has been robbing its depositors for years.
ParticipantJust wanted to be clear that the “government” is not bailing out anyone. The poor savers here and abroad, who have been funding this at 2%-5% annual interest rates have been funding the bubble, and will fund the bail out.
The loss of 5% or 6% because of inflation vs. the FED’s artifically low interest rate has paved the way for the bubble, and looks to be the FED’s solution to the problem.
IF the yield curve gets inverted again, and mortgage rates go to 2 or 3%, problem solved – and paid for by the “moral” savers who fund the mess with negative real rates of inflation.
It must be hubris that allows someone to speak of a borrower being immoral while walking away from a bank that has been robbing its depositors for years.
ParticipantJust wanted to be clear that the “government” is not bailing out anyone. The poor savers here and abroad, who have been funding this at 2%-5% annual interest rates have been funding the bubble, and will fund the bail out.
The loss of 5% or 6% because of inflation vs. the FED’s artifically low interest rate has paved the way for the bubble, and looks to be the FED’s solution to the problem.
IF the yield curve gets inverted again, and mortgage rates go to 2 or 3%, problem solved – and paid for by the “moral” savers who fund the mess with negative real rates of inflation.
It must be hubris that allows someone to speak of a borrower being immoral while walking away from a bank that has been robbing its depositors for years.
ParticipantJust wanted to be clear that the “government” is not bailing out anyone. The poor savers here and abroad, who have been funding this at 2%-5% annual interest rates have been funding the bubble, and will fund the bail out.
The loss of 5% or 6% because of inflation vs. the FED’s artifically low interest rate has paved the way for the bubble, and looks to be the FED’s solution to the problem.
IF the yield curve gets inverted again, and mortgage rates go to 2 or 3%, problem solved – and paid for by the “moral” savers who fund the mess with negative real rates of inflation.
It must be hubris that allows someone to speak of a borrower being immoral while walking away from a bank that has been robbing its depositors for years.
ParticipantI looked at EverBank’s website, and they advertise that they charge up to 1% above the days currency trading rate to convert US$ to euros or pounds, etc.
What was your experience in terms of actual “premium” on days exchange rate?
A % on top, and a % when you sell, wipes out a lot of capital
ParticipantI looked at EverBank’s website, and they advertise that they charge up to 1% above the days currency trading rate to convert US$ to euros or pounds, etc.
What was your experience in terms of actual “premium” on days exchange rate?
A % on top, and a % when you sell, wipes out a lot of capital
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