[ucodegen]

[quote sdrealtor]
I disagree that the 1st statement is not accurate. The bank is not recognizing a loss and it is not taking a loss. Are they making as much money as they hoped when the loan documents were first signed? Absolutely not!

Please show me where the bank is taking a loss.
[/quote]
Quite easily done. Remember that what the bank is lending out, is not their money. They have borrowed money to loan out to others. The banks have to pay interest on those notes. These notes are also ‘long term’ commitments, whose rates were set when the mortgage was first made. If it is costing the bank 3% on the money they borrowed to make the loan, and they are lending it out at 2% for the ‘new mortgage’.. they are taking a 1% loss per year on the mortgage.

This also does not factor in risk of never getting all of the principal back, the risk of the banks borrowing costs going up while still supporting the 2% mortgage.

[quote sdrealtor]
If I had a contract to earne $1M this year but got injured and only made $500K would you say I lost $500K?
[/quote]
If the contract was underwritten by borrowed money costing you $750K/year.. you would lose money.
If inflation ate away more than 0% of the value of the money per year.. you would lose money.

[ucodegen]

[quote sdrealtor]
I disagree that the 1st statement is not accurate. The bank is not recognizing a loss and it is not taking a loss. Are they making as much money as they hoped when the loan documents were first signed? Absolutely not!

Please show me where the bank is taking a loss.
[/quote]
Quite easily done. Remember that what the bank is lending out, is not their money. They have borrowed money to loan out to others. The banks have to pay interest on those notes. These notes are also ‘long term’ commitments, whose rates were set when the mortgage was first made. If it is costing the bank 3% on the money they borrowed to make the loan, and they are lending it out at 2% for the ‘new mortgage’.. they are taking a 1% loss per year on the mortgage.

This also does not factor in risk of never getting all of the principal back, the risk of the banks borrowing costs going up while still supporting the 2% mortgage.

[quote sdrealtor]
If I had a contract to earne $1M this year but got injured and only made $500K would you say I lost $500K?
[/quote]
If the contract was underwritten by borrowed money costing you $750K/year.. you would lose money.
If inflation ate away more than 0% of the value of the money per year.. you would lose money.

[ucodegen]

[quote sdrealtor]
I disagree that the 1st statement is not accurate. The bank is not recognizing a loss and it is not taking a loss. Are they making as much money as they hoped when the loan documents were first signed? Absolutely not!

Please show me where the bank is taking a loss.
[/quote]
Quite easily done. Remember that what the bank is lending out, is not their money. They have borrowed money to loan out to others. The banks have to pay interest on those notes. These notes are also ‘long term’ commitments, whose rates were set when the mortgage was first made. If it is costing the bank 3% on the money they borrowed to make the loan, and they are lending it out at 2% for the ‘new mortgage’.. they are taking a 1% loss per year on the mortgage.

This also does not factor in risk of never getting all of the principal back, the risk of the banks borrowing costs going up while still supporting the 2% mortgage.

[quote sdrealtor]
If I had a contract to earne $1M this year but got injured and only made $500K would you say I lost $500K?
[/quote]
If the contract was underwritten by borrowed money costing you $750K/year.. you would lose money.
If inflation ate away more than 0% of the value of the money per year.. you would lose money.

[ucodegen]

[quote sdrealtor]
The bank is avoiding a loss and his interest rate is being subsidized but no where near $200K. Part of the process he went through involves the bank making a NPV calculation. If it was better to liquidate they would have done that but the asset is more valuable to them and hence tax payers by keeping this one on the books.
[/quote]
The first statement is not accurate. The loss would be nowhere near $200K on a property that has a current value of $400K. The bank is taking a partial loss in the loan negotiation. The second two sentences are much more accurate of what is really going on. The only problem is that the fed is tampering in these steps with the blind intent of ‘we got to keep those people in those houses’. To do this, the fed is putting their finger on the scale when the bank is weighing whether there is a better outcome on liquidation or renegotiation of the loan. The cost of this is carried by the taxpayers and is being done quite opaquely – contrary to the ‘promise’ of the current administration.

Unfortunately, one aspect of the costs of supporting current house prices is being ignored by the fed. If the price of housing is kept at the current high percentage of available income, less discretionary income is available for other things. ie. to support other businesses other than banks, retirement, health care. It also causes a higher barrier to entry for new homeowners.

Using a metaphore: Congress has forgotten one thing. You can’t increase the size of one piece of the pie without reducing the size of other pieces unless you work on increasing the total size of the pie..

[ucodegen]

[quote sdrealtor]
The bank is avoiding a loss and his interest rate is being subsidized but no where near $200K. Part of the process he went through involves the bank making a NPV calculation. If it was better to liquidate they would have done that but the asset is more valuable to them and hence tax payers by keeping this one on the books.
[/quote]
The first statement is not accurate. The loss would be nowhere near $200K on a property that has a current value of $400K. The bank is taking a partial loss in the loan negotiation. The second two sentences are much more accurate of what is really going on. The only problem is that the fed is tampering in these steps with the blind intent of ‘we got to keep those people in those houses’. To do this, the fed is putting their finger on the scale when the bank is weighing whether there is a better outcome on liquidation or renegotiation of the loan. The cost of this is carried by the taxpayers and is being done quite opaquely – contrary to the ‘promise’ of the current administration.

Unfortunately, one aspect of the costs of supporting current house prices is being ignored by the fed. If the price of housing is kept at the current high percentage of available income, less discretionary income is available for other things. ie. to support other businesses other than banks, retirement, health care. It also causes a higher barrier to entry for new homeowners.

Using a metaphore: Congress has forgotten one thing. You can’t increase the size of one piece of the pie without reducing the size of other pieces unless you work on increasing the total size of the pie..

[ucodegen]

[quote sdrealtor]
The bank is avoiding a loss and his interest rate is being subsidized but no where near $200K. Part of the process he went through involves the bank making a NPV calculation. If it was better to liquidate they would have done that but the asset is more valuable to them and hence tax payers by keeping this one on the books.
[/quote]
The first statement is not accurate. The loss would be nowhere near $200K on a property that has a current value of $400K. The bank is taking a partial loss in the loan negotiation. The second two sentences are much more accurate of what is really going on. The only problem is that the fed is tampering in these steps with the blind intent of ‘we got to keep those people in those houses’. To do this, the fed is putting their finger on the scale when the bank is weighing whether there is a better outcome on liquidation or renegotiation of the loan. The cost of this is carried by the taxpayers and is being done quite opaquely – contrary to the ‘promise’ of the current administration.

Unfortunately, one aspect of the costs of supporting current house prices is being ignored by the fed. If the price of housing is kept at the current high percentage of available income, less discretionary income is available for other things. ie. to support other businesses other than banks, retirement, health care. It also causes a higher barrier to entry for new homeowners.

Using a metaphore: Congress has forgotten one thing. You can’t increase the size of one piece of the pie without reducing the size of other pieces unless you work on increasing the total size of the pie..

[ucodegen]

[quote sdrealtor]
The bank is avoiding a loss and his interest rate is being subsidized but no where near $200K. Part of the process he went through involves the bank making a NPV calculation. If it was better to liquidate they would have done that but the asset is more valuable to them and hence tax payers by keeping this one on the books.
[/quote]
The first statement is not accurate. The loss would be nowhere near $200K on a property that has a current value of $400K. The bank is taking a partial loss in the loan negotiation. The second two sentences are much more accurate of what is really going on. The only problem is that the fed is tampering in these steps with the blind intent of ‘we got to keep those people in those houses’. To do this, the fed is putting their finger on the scale when the bank is weighing whether there is a better outcome on liquidation or renegotiation of the loan. The cost of this is carried by the taxpayers and is being done quite opaquely – contrary to the ‘promise’ of the current administration.

Unfortunately, one aspect of the costs of supporting current house prices is being ignored by the fed. If the price of housing is kept at the current high percentage of available income, less discretionary income is available for other things. ie. to support other businesses other than banks, retirement, health care. It also causes a higher barrier to entry for new homeowners.

Using a metaphore: Congress has forgotten one thing. You can’t increase the size of one piece of the pie without reducing the size of other pieces unless you work on increasing the total size of the pie..

[ucodegen]

[quote sdrealtor]
The bank is avoiding a loss and his interest rate is being subsidized but no where near $200K. Part of the process he went through involves the bank making a NPV calculation. If it was better to liquidate they would have done that but the asset is more valuable to them and hence tax payers by keeping this one on the books.
[/quote]
The first statement is not accurate. The loss would be nowhere near $200K on a property that has a current value of $400K. The bank is taking a partial loss in the loan negotiation. The second two sentences are much more accurate of what is really going on. The only problem is that the fed is tampering in these steps with the blind intent of ‘we got to keep those people in those houses’. To do this, the fed is putting their finger on the scale when the bank is weighing whether there is a better outcome on liquidation or renegotiation of the loan. The cost of this is carried by the taxpayers and is being done quite opaquely – contrary to the ‘promise’ of the current administration.

Unfortunately, one aspect of the costs of supporting current house prices is being ignored by the fed. If the price of housing is kept at the current high percentage of available income, less discretionary income is available for other things. ie. to support other businesses other than banks, retirement, health care. It also causes a higher barrier to entry for new homeowners.

Using a metaphore: Congress has forgotten one thing. You can’t increase the size of one piece of the pie without reducing the size of other pieces unless you work on increasing the total size of the pie..

[ucodegen]

Thought this article about math illiteracy and the chance of foreclosure was interesting. Wonder if Piggys have higher math illiteracy than the average person.

Perhaps you meant “Wonder if Piggys have higher math literacy than the average person” ?

from article:
The other alternative, he said, would be working to help borrowers improve their financial literacy before they took out the loan.

<soapbox>
One thing I have always felt was important, was better financial education within our school system along with the basics and less emphasis on the ‘feel-good’ types of studies.
<soapbox>

[ucodegen]

Thought this article about math illiteracy and the chance of foreclosure was interesting. Wonder if Piggys have higher math illiteracy than the average person.

Perhaps you meant “Wonder if Piggys have higher math literacy than the average person” ?

from article:
The other alternative, he said, would be working to help borrowers improve their financial literacy before they took out the loan.

<soapbox>
One thing I have always felt was important, was better financial education within our school system along with the basics and less emphasis on the ‘feel-good’ types of studies.
<soapbox>

[ucodegen]

Thought this article about math illiteracy and the chance of foreclosure was interesting. Wonder if Piggys have higher math illiteracy than the average person.

Perhaps you meant “Wonder if Piggys have higher math literacy than the average person” ?

from article:
The other alternative, he said, would be working to help borrowers improve their financial literacy before they took out the loan.

<soapbox>
One thing I have always felt was important, was better financial education within our school system along with the basics and less emphasis on the ‘feel-good’ types of studies.
<soapbox>

[ucodegen]

Thought this article about math illiteracy and the chance of foreclosure was interesting. Wonder if Piggys have higher math illiteracy than the average person.

Perhaps you meant “Wonder if Piggys have higher math literacy than the average person” ?

from article:
The other alternative, he said, would be working to help borrowers improve their financial literacy before they took out the loan.

<soapbox>
One thing I have always felt was important, was better financial education within our school system along with the basics and less emphasis on the ‘feel-good’ types of studies.
<soapbox>

[ucodegen]

Thought this article about math illiteracy and the chance of foreclosure was interesting. Wonder if Piggys have higher math illiteracy than the average person.

Perhaps you meant “Wonder if Piggys have higher math literacy than the average person” ?

from article:
The other alternative, he said, would be working to help borrowers improve their financial literacy before they took out the loan.

<soapbox>
One thing I have always felt was important, was better financial education within our school system along with the basics and less emphasis on the ‘feel-good’ types of studies.
<soapbox>

[ucodegen]

[quote afx114]
Problem is, our current economy is an energy welfare queen.
[/quote]

Actually that is not accurate. The best measure is energy consumed per GDP of production, or Energy intensity of the economy:
http://en.wikipedia.org/wiki/Energy_intensity
http://earthtrends.wri.org/text/energy-resources/variable-668.html
http://seekingalpha.com/article/82481-energy-use-per-gdp-unit-by-country

Considering that BP doesn’t seem that concerned about capping the run-away oil well and that they are talking about burning off 600,000 gallons of crude a day.. I think the true price of fossil fuels is actually considerably less than market price.
http://www.breakdownofamerica.com/2010/06/09/bp-to-burn-oil-it-collects-from-gulf-spill-as-containment-dome-runs-out-of-space
http://news.gather.com/viewArticle.action?articleId=281474978292099

Otherwise BP would try to capture every last drop of the crude…

[ucodegen]

[quote afx114]
Problem is, our current economy is an energy welfare queen.
[/quote]

Actually that is not accurate. The best measure is energy consumed per GDP of production, or Energy intensity of the economy:
http://en.wikipedia.org/wiki/Energy_intensity
http://earthtrends.wri.org/text/energy-resources/variable-668.html
http://seekingalpha.com/article/82481-energy-use-per-gdp-unit-by-country

Considering that BP doesn’t seem that concerned about capping the run-away oil well and that they are talking about burning off 600,000 gallons of crude a day.. I think the true price of fossil fuels is actually considerably less than market price.
http://www.breakdownofamerica.com/2010/06/09/bp-to-burn-oil-it-collects-from-gulf-spill-as-containment-dome-runs-out-of-space
http://news.gather.com/viewArticle.action?articleId=281474978292099

Otherwise BP would try to capture every last drop of the crude…

[Author]

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