[DaCounselor]

“Banks would essentially be forced to write down every loan made between 2000 and now for it to be fair, and that still doesn’t address the fact that I knew I couldn’t afford a house, so I didn’t buy. What compensation should I get to make it fair? Should I get $100,000 check from the government?”
______________________________

I certainly don’t have the numbers at my fingertips but my best guess is that nowhere near every loan made since 2000 is upside down in relation to the home value. Not even close. So there’s that.

As for what is fair for you, trust me that is the furthest thing from anyone’s mind but your own. Addressing what is fair for you is not going to solve the problem. If you feel like it is unfair that other people are going to get bailed out and you are going to get a big fat 0 my advice is to get used to it because life is just not fair.

What we have here is a truly global economic crisis that has been triggered by defaulting loans. There is plenty of blame to go around but make no mistake, if the powers that be do not address the coming wave of future defaults then things are get to get much much worse. I continue to maintain the mindset that the best solution is to stop the defaults to the greatest extent possible via mods. What’s “fair” to everyone is really out the window at this point.

[DaCounselor]

“Banks would essentially be forced to write down every loan made between 2000 and now for it to be fair, and that still doesn’t address the fact that I knew I couldn’t afford a house, so I didn’t buy. What compensation should I get to make it fair? Should I get $100,000 check from the government?”
______________________________

I certainly don’t have the numbers at my fingertips but my best guess is that nowhere near every loan made since 2000 is upside down in relation to the home value. Not even close. So there’s that.

As for what is fair for you, trust me that is the furthest thing from anyone’s mind but your own. Addressing what is fair for you is not going to solve the problem. If you feel like it is unfair that other people are going to get bailed out and you are going to get a big fat 0 my advice is to get used to it because life is just not fair.

What we have here is a truly global economic crisis that has been triggered by defaulting loans. There is plenty of blame to go around but make no mistake, if the powers that be do not address the coming wave of future defaults then things are get to get much much worse. I continue to maintain the mindset that the best solution is to stop the defaults to the greatest extent possible via mods. What’s “fair” to everyone is really out the window at this point.

[DaCounselor]

“Banks would essentially be forced to write down every loan made between 2000 and now for it to be fair, and that still doesn’t address the fact that I knew I couldn’t afford a house, so I didn’t buy. What compensation should I get to make it fair? Should I get $100,000 check from the government?”
______________________________

I certainly don’t have the numbers at my fingertips but my best guess is that nowhere near every loan made since 2000 is upside down in relation to the home value. Not even close. So there’s that.

As for what is fair for you, trust me that is the furthest thing from anyone’s mind but your own. Addressing what is fair for you is not going to solve the problem. If you feel like it is unfair that other people are going to get bailed out and you are going to get a big fat 0 my advice is to get used to it because life is just not fair.

What we have here is a truly global economic crisis that has been triggered by defaulting loans. There is plenty of blame to go around but make no mistake, if the powers that be do not address the coming wave of future defaults then things are get to get much much worse. I continue to maintain the mindset that the best solution is to stop the defaults to the greatest extent possible via mods. What’s “fair” to everyone is really out the window at this point.

[DaCounselor]

“Banks would essentially be forced to write down every loan made between 2000 and now for it to be fair, and that still doesn’t address the fact that I knew I couldn’t afford a house, so I didn’t buy. What compensation should I get to make it fair? Should I get $100,000 check from the government?”
______________________________

I certainly don’t have the numbers at my fingertips but my best guess is that nowhere near every loan made since 2000 is upside down in relation to the home value. Not even close. So there’s that.

As for what is fair for you, trust me that is the furthest thing from anyone’s mind but your own. Addressing what is fair for you is not going to solve the problem. If you feel like it is unfair that other people are going to get bailed out and you are going to get a big fat 0 my advice is to get used to it because life is just not fair.

What we have here is a truly global economic crisis that has been triggered by defaulting loans. There is plenty of blame to go around but make no mistake, if the powers that be do not address the coming wave of future defaults then things are get to get much much worse. I continue to maintain the mindset that the best solution is to stop the defaults to the greatest extent possible via mods. What’s “fair” to everyone is really out the window at this point.

[DaCounselor]

I think the only way to stop the walk-aways is to modify the loans into very good fixed rates and write down the principal balances. I understand the moral hazard argument but at this point in time my response is “so what?” Even if a homeowner has the ability to pay the existing mortgage, it’s going to come down to WILL he pay, not CAN he pay. If he ruthlessly defaults, the end result is the same. Who cares at this point?

I cannot imagine that it will be more cost-effective to go through the foreclosure process just to end up selling the house as a discounted REO for the same price that you could have written down the balance to and kept the homeowner in the home. It’s a bad business decision to forego the mod. I understand the complications due to the securitization of these loans, but the govt’s purchase of this paper may resolve the issues. They do give a nod to this in Sections 109 & 110 of the new bill. We’ll see I guess.

[DaCounselor]

I think the only way to stop the walk-aways is to modify the loans into very good fixed rates and write down the principal balances. I understand the moral hazard argument but at this point in time my response is “so what?” Even if a homeowner has the ability to pay the existing mortgage, it’s going to come down to WILL he pay, not CAN he pay. If he ruthlessly defaults, the end result is the same. Who cares at this point?

I cannot imagine that it will be more cost-effective to go through the foreclosure process just to end up selling the house as a discounted REO for the same price that you could have written down the balance to and kept the homeowner in the home. It’s a bad business decision to forego the mod. I understand the complications due to the securitization of these loans, but the govt’s purchase of this paper may resolve the issues. They do give a nod to this in Sections 109 & 110 of the new bill. We’ll see I guess.

[DaCounselor]

I think the only way to stop the walk-aways is to modify the loans into very good fixed rates and write down the principal balances. I understand the moral hazard argument but at this point in time my response is “so what?” Even if a homeowner has the ability to pay the existing mortgage, it’s going to come down to WILL he pay, not CAN he pay. If he ruthlessly defaults, the end result is the same. Who cares at this point?

I cannot imagine that it will be more cost-effective to go through the foreclosure process just to end up selling the house as a discounted REO for the same price that you could have written down the balance to and kept the homeowner in the home. It’s a bad business decision to forego the mod. I understand the complications due to the securitization of these loans, but the govt’s purchase of this paper may resolve the issues. They do give a nod to this in Sections 109 & 110 of the new bill. We’ll see I guess.

[DaCounselor]

I think the only way to stop the walk-aways is to modify the loans into very good fixed rates and write down the principal balances. I understand the moral hazard argument but at this point in time my response is “so what?” Even if a homeowner has the ability to pay the existing mortgage, it’s going to come down to WILL he pay, not CAN he pay. If he ruthlessly defaults, the end result is the same. Who cares at this point?

I cannot imagine that it will be more cost-effective to go through the foreclosure process just to end up selling the house as a discounted REO for the same price that you could have written down the balance to and kept the homeowner in the home. It’s a bad business decision to forego the mod. I understand the complications due to the securitization of these loans, but the govt’s purchase of this paper may resolve the issues. They do give a nod to this in Sections 109 & 110 of the new bill. We’ll see I guess.

[DaCounselor]

I think the only way to stop the walk-aways is to modify the loans into very good fixed rates and write down the principal balances. I understand the moral hazard argument but at this point in time my response is “so what?” Even if a homeowner has the ability to pay the existing mortgage, it’s going to come down to WILL he pay, not CAN he pay. If he ruthlessly defaults, the end result is the same. Who cares at this point?

I cannot imagine that it will be more cost-effective to go through the foreclosure process just to end up selling the house as a discounted REO for the same price that you could have written down the balance to and kept the homeowner in the home. It’s a bad business decision to forego the mod. I understand the complications due to the securitization of these loans, but the govt’s purchase of this paper may resolve the issues. They do give a nod to this in Sections 109 & 110 of the new bill. We’ll see I guess.

[DaCounselor]

Regarding a few of the previous posts regarding the so-called TARP not being relevant to borrowers (only REO’s are going to be bought, etc.), I have yet to see any fund criteria that suggests that a foreclosure is a pre-requisite for a fund purchase or that junk MBS will not be purchased (where if so, the fund becomes the owner and then it’s a new ball game regarding leeway for servicer mods that may not comply with the existing p&s agreements – but where the fund may waive p&s restrictions and in fact may direct mods)

[DaCounselor]

Regarding a few of the previous posts regarding the so-called TARP not being relevant to borrowers (only REO’s are going to be bought, etc.), I have yet to see any fund criteria that suggests that a foreclosure is a pre-requisite for a fund purchase or that junk MBS will not be purchased (where if so, the fund becomes the owner and then it’s a new ball game regarding leeway for servicer mods that may not comply with the existing p&s agreements – but where the fund may waive p&s restrictions and in fact may direct mods)

[DaCounselor]

Regarding a few of the previous posts regarding the so-called TARP not being relevant to borrowers (only REO’s are going to be bought, etc.), I have yet to see any fund criteria that suggests that a foreclosure is a pre-requisite for a fund purchase or that junk MBS will not be purchased (where if so, the fund becomes the owner and then it’s a new ball game regarding leeway for servicer mods that may not comply with the existing p&s agreements – but where the fund may waive p&s restrictions and in fact may direct mods)

[DaCounselor]

Regarding a few of the previous posts regarding the so-called TARP not being relevant to borrowers (only REO’s are going to be bought, etc.), I have yet to see any fund criteria that suggests that a foreclosure is a pre-requisite for a fund purchase or that junk MBS will not be purchased (where if so, the fund becomes the owner and then it’s a new ball game regarding leeway for servicer mods that may not comply with the existing p&s agreements – but where the fund may waive p&s restrictions and in fact may direct mods)

[DaCounselor]

Regarding a few of the previous posts regarding the so-called TARP not being relevant to borrowers (only REO’s are going to be bought, etc.), I have yet to see any fund criteria that suggests that a foreclosure is a pre-requisite for a fund purchase or that junk MBS will not be purchased (where if so, the fund becomes the owner and then it’s a new ball game regarding leeway for servicer mods that may not comply with the existing p&s agreements – but where the fund may waive p&s restrictions and in fact may direct mods)

[DaCounselor]

I think we are all very interested in seeing the criteria set by the soon-to-be-created govt. fund with respect to not only what they will purchase but also how they will manage it and ultimately dispose of it. I anticipate that the starting criteria on all fronts will change as the buying/managing/disposing process moves along. I don’t know what parameters they will begin with but they very well may end up with a sweeping and immediate mark-to-market action.

We are looking at a huge number of potential defaults in the pipeline. To the extent that the govt. fund is going to purchase souring mortgages in vast quantities, I can envision an immediate principal writedown to something actually below market value, with repayment terms modified into a very attractive 30 yr fixed rate. If the current owner (who is in default) can make the new payment, they keep the home. Essentially, I think we could very well see a situation where the govt. fund writes down principal/interest rate regardless of ability to pay more.

Of course this creates a moral hazard and will lead to more ruthless defaults from those with ability but I think the govt. has already served notice that it is willing to pick its poison. Is the overall economic impact worse if they allow ruthless defaults to run their course in the private sector or is it worse if they just buy the loans and write down the balances regardless of ability? That is the question. I certainly think it’s a possibility that they will determine that the former is the case and therefore they will go the purchase/write down route and keep those people in the home.

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