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ucodegen
ParticipantInstead, Countywide et al, made a bunch of bad loans to people who couldn’t afford them causing them to foreclose. Now Countrywide et al is dumping these units back on the market at reduced prices because they have to get rid of them.
No, they are dumping them on the market at those prices because that is what they are worth now. The value is what it will sell for currently.
Units in concrete buildings are now trading near replacement costs.
Another definition of what an item is worth.. its replacement cost.It is not as if I am getting a free ride. My $100,000+ downpayment is already gone. Also, the bank will be getting $50,000+ in upgrades (lighting, built in cabinets, flooring, etc.)
Neither is the bank.. because they loaned you more money to buy the place than they will get back on foreclosure. They also did not get to live in the place in the meantime.
At this point, I would be glad to sign a Deed in Lieu of Foreclosure if they wanted to save the time and money of an actual forclosure. I don’t know the advantages/disadvantes of doing this.
If you don’t have a second or HELOC, this could be done. It does have the ability to get you out from under quickly. I think the bank will want to offer you ‘generous’ terms on a refi, or second which would end up being recourse. If the only money is a purchase money loan, then don’t do any refi or HELOCs. Keep it non-recourse. It gives you a bargaining chip.Very simple math. I may decide that it is not worth losing $6,000 a month (Mortgage, Taxes, HOA) for the next 7 years ($504,000 total) while not gaining any equity (and probably losing more).
One question to ask here.. is the loan amortizing or I/O? What is the equivalent rent for same type of location or for place that you could live in?I am not going to continue to fund a bad investment indefinitely especially whin I know that the peak of bad loans won’t happen until March 2008.
There are going to be two peaks… one in 2008.. a pause of about 1.5 years and then the Option ARMS start to hit.@sd gal
If you borrowed 100% financing with 500k. You walk away from 500k mortgage, then lender sell the property for 350k. The loss of 150k will be considered as income for the year’s tax return for you. You will be responsible for income tax of 150k which will be around 40-50k?
Not if it is original purchase money loan (1st mortgage on purchase). These are non-recourse in California.What about 2nd mortgage? Can I walk away from it too? Or they would come after my other asset?
2nds are recourse in California. They can come after you. If they feel they can’t get anything from you, they can 1099 you for loan loss forgiveness which gets taxed at income rates for the equivalent $$.ParticipantInstead, Countywide et al, made a bunch of bad loans to people who couldn’t afford them causing them to foreclose. Now Countrywide et al is dumping these units back on the market at reduced prices because they have to get rid of them.
No, they are dumping them on the market at those prices because that is what they are worth now. The value is what it will sell for currently.
Units in concrete buildings are now trading near replacement costs.
Another definition of what an item is worth.. its replacement cost.It is not as if I am getting a free ride. My $100,000+ downpayment is already gone. Also, the bank will be getting $50,000+ in upgrades (lighting, built in cabinets, flooring, etc.)
Neither is the bank.. because they loaned you more money to buy the place than they will get back on foreclosure. They also did not get to live in the place in the meantime.
At this point, I would be glad to sign a Deed in Lieu of Foreclosure if they wanted to save the time and money of an actual forclosure. I don’t know the advantages/disadvantes of doing this.
If you don’t have a second or HELOC, this could be done. It does have the ability to get you out from under quickly. I think the bank will want to offer you ‘generous’ terms on a refi, or second which would end up being recourse. If the only money is a purchase money loan, then don’t do any refi or HELOCs. Keep it non-recourse. It gives you a bargaining chip.Very simple math. I may decide that it is not worth losing $6,000 a month (Mortgage, Taxes, HOA) for the next 7 years ($504,000 total) while not gaining any equity (and probably losing more).
One question to ask here.. is the loan amortizing or I/O? What is the equivalent rent for same type of location or for place that you could live in?I am not going to continue to fund a bad investment indefinitely especially whin I know that the peak of bad loans won’t happen until March 2008.
There are going to be two peaks… one in 2008.. a pause of about 1.5 years and then the Option ARMS start to hit.@sd gal
If you borrowed 100% financing with 500k. You walk away from 500k mortgage, then lender sell the property for 350k. The loss of 150k will be considered as income for the year’s tax return for you. You will be responsible for income tax of 150k which will be around 40-50k?
Not if it is original purchase money loan (1st mortgage on purchase). These are non-recourse in California.What about 2nd mortgage? Can I walk away from it too? Or they would come after my other asset?
2nds are recourse in California. They can come after you. If they feel they can’t get anything from you, they can 1099 you for loan loss forgiveness which gets taxed at income rates for the equivalent $$.ParticipantMost apartment complexes do not allow you to work on your car on the property… even if it is done in the garage. Some of them try rotating garage inspections to enforce.
ParticipantMost apartment complexes do not allow you to work on your car on the property… even if it is done in the garage. Some of them try rotating garage inspections to enforce.
ParticipantMost apartment complexes do not allow you to work on your car on the property… even if it is done in the garage. Some of them try rotating garage inspections to enforce.
ParticipantMost apartment complexes do not allow you to work on your car on the property… even if it is done in the garage. Some of them try rotating garage inspections to enforce.
ParticipantMost apartment complexes do not allow you to work on your car on the property… even if it is done in the garage. Some of them try rotating garage inspections to enforce.
ParticipantActually, my statement with respect to is fairly accurate, though quite un-PC. It can be seen in the behavior of Goldman Sachs stating that there will be no problem when they were in the midst of the CDOs/MBSs.. once they got clear of the toxic waste, they come out with a statement (reference on piggington) that a drop of 40% is likely in the works.
In fact one would argue the exact opposite, that in fact they DID know that the cycle would turn and they were either negligient or assumed some sort of bailout or delay would save them. Or that they didn’t give a hoot because the loan would be sold to another party.
Seriously though, to argue that they felt unabated appreciation would continue is something that I feel you do not really believe.
Actually I think it is a mixture (Some thought it would continue unabated, others didn’t. My personal opinion was that it wouldn’t because I have seen it before). There are some lending institutions whose management thought that this was a new paradigm (remember the tech bubble?). In fact, I think some even came out and said it. On the other hand, there were others that were very conservative during this period. The underlying problem is related the underlying reason why many mutual funds underperform the indexes. They are paid for short term, not long term performance. There may be some aspect of self delusion on the part of the lending institution participants here too.. They were all marking to model, not to market (Don’t have time to Warren Buffet quote on this.. but he did state that they should mark to market not model on these instruments).
The other regulatory measures you spoke of could not hurt either. Altough again, if you are going to allow someone to walk away from a loan, then why not let them walk away from a security or stock bought on margin?
This is one I had a bit of a fight with myself on. My purest belief is that they shouldn’t. But there are secondary issues. Effectively, if I form a corporation that is an investment vehicle, I can walk away from margin losses (corp declares bankruptcy, I’m clear). In addition, some stocks have 0 intrinsic value, or can go to it. Land always has some intrinsic value. If the LTV was the same as margin rates, I would have no problem with purchase loans being recourse.. but who can put down 50% right now (stock margin req is 50%)? I know I can, but who else? If it goes to all recourse, I think it will need to be done in steps.uco this last rant is not aimed at you but at the topic overall… why are any piggs waiting to purchase then?
Because the effect on your credit of a foreclosure makes it hard to get financing when it might be a good time to buy (lenders will only loan to you at a high interest premium). Besides, you will be paying higher than rental rates all the way down too.. so might as well rent until the cost to buy becomes closer to the cost to rent.ParticipantActually, my statement with respect to is fairly accurate, though quite un-PC. It can be seen in the behavior of Goldman Sachs stating that there will be no problem when they were in the midst of the CDOs/MBSs.. once they got clear of the toxic waste, they come out with a statement (reference on piggington) that a drop of 40% is likely in the works.
In fact one would argue the exact opposite, that in fact they DID know that the cycle would turn and they were either negligient or assumed some sort of bailout or delay would save them. Or that they didn’t give a hoot because the loan would be sold to another party.
Seriously though, to argue that they felt unabated appreciation would continue is something that I feel you do not really believe.
Actually I think it is a mixture (Some thought it would continue unabated, others didn’t. My personal opinion was that it wouldn’t because I have seen it before). There are some lending institutions whose management thought that this was a new paradigm (remember the tech bubble?). In fact, I think some even came out and said it. On the other hand, there were others that were very conservative during this period. The underlying problem is related the underlying reason why many mutual funds underperform the indexes. They are paid for short term, not long term performance. There may be some aspect of self delusion on the part of the lending institution participants here too.. They were all marking to model, not to market (Don’t have time to Warren Buffet quote on this.. but he did state that they should mark to market not model on these instruments).
The other regulatory measures you spoke of could not hurt either. Altough again, if you are going to allow someone to walk away from a loan, then why not let them walk away from a security or stock bought on margin?
This is one I had a bit of a fight with myself on. My purest belief is that they shouldn’t. But there are secondary issues. Effectively, if I form a corporation that is an investment vehicle, I can walk away from margin losses (corp declares bankruptcy, I’m clear). In addition, some stocks have 0 intrinsic value, or can go to it. Land always has some intrinsic value. If the LTV was the same as margin rates, I would have no problem with purchase loans being recourse.. but who can put down 50% right now (stock margin req is 50%)? I know I can, but who else? If it goes to all recourse, I think it will need to be done in steps.uco this last rant is not aimed at you but at the topic overall… why are any piggs waiting to purchase then?
Because the effect on your credit of a foreclosure makes it hard to get financing when it might be a good time to buy (lenders will only loan to you at a high interest premium). Besides, you will be paying higher than rental rates all the way down too.. so might as well rent until the cost to buy becomes closer to the cost to rent.ParticipantActually, my statement with respect to is fairly accurate, though quite un-PC. It can be seen in the behavior of Goldman Sachs stating that there will be no problem when they were in the midst of the CDOs/MBSs.. once they got clear of the toxic waste, they come out with a statement (reference on piggington) that a drop of 40% is likely in the works.
In fact one would argue the exact opposite, that in fact they DID know that the cycle would turn and they were either negligient or assumed some sort of bailout or delay would save them. Or that they didn’t give a hoot because the loan would be sold to another party.
Seriously though, to argue that they felt unabated appreciation would continue is something that I feel you do not really believe.
Actually I think it is a mixture (Some thought it would continue unabated, others didn’t. My personal opinion was that it wouldn’t because I have seen it before). There are some lending institutions whose management thought that this was a new paradigm (remember the tech bubble?). In fact, I think some even came out and said it. On the other hand, there were others that were very conservative during this period. The underlying problem is related the underlying reason why many mutual funds underperform the indexes. They are paid for short term, not long term performance. There may be some aspect of self delusion on the part of the lending institution participants here too.. They were all marking to model, not to market (Don’t have time to Warren Buffet quote on this.. but he did state that they should mark to market not model on these instruments).
The other regulatory measures you spoke of could not hurt either. Altough again, if you are going to allow someone to walk away from a loan, then why not let them walk away from a security or stock bought on margin?
This is one I had a bit of a fight with myself on. My purest belief is that they shouldn’t. But there are secondary issues. Effectively, if I form a corporation that is an investment vehicle, I can walk away from margin losses (corp declares bankruptcy, I’m clear). In addition, some stocks have 0 intrinsic value, or can go to it. Land always has some intrinsic value. If the LTV was the same as margin rates, I would have no problem with purchase loans being recourse.. but who can put down 50% right now (stock margin req is 50%)? I know I can, but who else? If it goes to all recourse, I think it will need to be done in steps.uco this last rant is not aimed at you but at the topic overall… why are any piggs waiting to purchase then?
Because the effect on your credit of a foreclosure makes it hard to get financing when it might be a good time to buy (lenders will only loan to you at a high interest premium). Besides, you will be paying higher than rental rates all the way down too.. so might as well rent until the cost to buy becomes closer to the cost to rent.ParticipantActually, my statement with respect to is fairly accurate, though quite un-PC. It can be seen in the behavior of Goldman Sachs stating that there will be no problem when they were in the midst of the CDOs/MBSs.. once they got clear of the toxic waste, they come out with a statement (reference on piggington) that a drop of 40% is likely in the works.
In fact one would argue the exact opposite, that in fact they DID know that the cycle would turn and they were either negligient or assumed some sort of bailout or delay would save them. Or that they didn’t give a hoot because the loan would be sold to another party.
Seriously though, to argue that they felt unabated appreciation would continue is something that I feel you do not really believe.
Actually I think it is a mixture (Some thought it would continue unabated, others didn’t. My personal opinion was that it wouldn’t because I have seen it before). There are some lending institutions whose management thought that this was a new paradigm (remember the tech bubble?). In fact, I think some even came out and said it. On the other hand, there were others that were very conservative during this period. The underlying problem is related the underlying reason why many mutual funds underperform the indexes. They are paid for short term, not long term performance. There may be some aspect of self delusion on the part of the lending institution participants here too.. They were all marking to model, not to market (Don’t have time to Warren Buffet quote on this.. but he did state that they should mark to market not model on these instruments).
The other regulatory measures you spoke of could not hurt either. Altough again, if you are going to allow someone to walk away from a loan, then why not let them walk away from a security or stock bought on margin?
This is one I had a bit of a fight with myself on. My purest belief is that they shouldn’t. But there are secondary issues. Effectively, if I form a corporation that is an investment vehicle, I can walk away from margin losses (corp declares bankruptcy, I’m clear). In addition, some stocks have 0 intrinsic value, or can go to it. Land always has some intrinsic value. If the LTV was the same as margin rates, I would have no problem with purchase loans being recourse.. but who can put down 50% right now (stock margin req is 50%)? I know I can, but who else? If it goes to all recourse, I think it will need to be done in steps.uco this last rant is not aimed at you but at the topic overall… why are any piggs waiting to purchase then?
Because the effect on your credit of a foreclosure makes it hard to get financing when it might be a good time to buy (lenders will only loan to you at a high interest premium). Besides, you will be paying higher than rental rates all the way down too.. so might as well rent until the cost to buy becomes closer to the cost to rent.ParticipantActually, my statement with respect to is fairly accurate, though quite un-PC. It can be seen in the behavior of Goldman Sachs stating that there will be no problem when they were in the midst of the CDOs/MBSs.. once they got clear of the toxic waste, they come out with a statement (reference on piggington) that a drop of 40% is likely in the works.
In fact one would argue the exact opposite, that in fact they DID know that the cycle would turn and they were either negligient or assumed some sort of bailout or delay would save them. Or that they didn’t give a hoot because the loan would be sold to another party.
Seriously though, to argue that they felt unabated appreciation would continue is something that I feel you do not really believe.
Actually I think it is a mixture (Some thought it would continue unabated, others didn’t. My personal opinion was that it wouldn’t because I have seen it before). There are some lending institutions whose management thought that this was a new paradigm (remember the tech bubble?). In fact, I think some even came out and said it. On the other hand, there were others that were very conservative during this period. The underlying problem is related the underlying reason why many mutual funds underperform the indexes. They are paid for short term, not long term performance. There may be some aspect of self delusion on the part of the lending institution participants here too.. They were all marking to model, not to market (Don’t have time to Warren Buffet quote on this.. but he did state that they should mark to market not model on these instruments).
The other regulatory measures you spoke of could not hurt either. Altough again, if you are going to allow someone to walk away from a loan, then why not let them walk away from a security or stock bought on margin?
This is one I had a bit of a fight with myself on. My purest belief is that they shouldn’t. But there are secondary issues. Effectively, if I form a corporation that is an investment vehicle, I can walk away from margin losses (corp declares bankruptcy, I’m clear). In addition, some stocks have 0 intrinsic value, or can go to it. Land always has some intrinsic value. If the LTV was the same as margin rates, I would have no problem with purchase loans being recourse.. but who can put down 50% right now (stock margin req is 50%)? I know I can, but who else? If it goes to all recourse, I think it will need to be done in steps.uco this last rant is not aimed at you but at the topic overall… why are any piggs waiting to purchase then?
Because the effect on your credit of a foreclosure makes it hard to get financing when it might be a good time to buy (lenders will only loan to you at a high interest premium). Besides, you will be paying higher than rental rates all the way down too.. so might as well rent until the cost to buy becomes closer to the cost to rent.ParticipantLA_R – I don’t think that freezing the interest rate or in some other way modifying an existing purchase money loan would automatically change the characterization of the loan from non-recourse to recourse.
The ones I have seen are really a no-cost refi, not a change in loan terms. It is put forth (advertised) as a loan modification, but paperwork looks like a no-cost refi… some even advise that you take a little money out (cash out) for emergency cushion. This cash out also allows them to charge an extra 0.25% to 0.5% on the rate. Admittedly, I have not seen all the ‘mods’ being done..Certainly anyone who agrees to a modification would want to pay close attention to any mod agreement they may be required to sign to determine if there is any language regarding recourse.
As always Caveat Emptor..ParticipantLA_R – I don’t think that freezing the interest rate or in some other way modifying an existing purchase money loan would automatically change the characterization of the loan from non-recourse to recourse.
The ones I have seen are really a no-cost refi, not a change in loan terms. It is put forth (advertised) as a loan modification, but paperwork looks like a no-cost refi… some even advise that you take a little money out (cash out) for emergency cushion. This cash out also allows them to charge an extra 0.25% to 0.5% on the rate. Admittedly, I have not seen all the ‘mods’ being done..Certainly anyone who agrees to a modification would want to pay close attention to any mod agreement they may be required to sign to determine if there is any language regarding recourse.
As always Caveat Emptor.. -
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