[XBoxBoy]

Seems we get a thread on this every couple of weeks or so. It would be interesting to go back and see who’s predictions were right, and who’s were way off.

I don’t think anyone knows enough to make a very solid prediction about this, and I certainly wouldn’t trust the consensus view you hear on MSM, but I’ll venture out on a couple of points:

1) The fed will not raise rates before the end of the year. More than likely, Bernanke will be out of a job before the fed raises rates.

2) Realization that the economy is not recovering will occur this fall, and that will slow any inflation expectations. (And thus help to keep rates lower)

3) If China, India or any of the other countries that hold so many dollars are shown to be seriously dropping dollars, all bets are off, and long term interest rates go through the roof.

[XBoxBoy]

Seems we get a thread on this every couple of weeks or so. It would be interesting to go back and see who’s predictions were right, and who’s were way off.

I don’t think anyone knows enough to make a very solid prediction about this, and I certainly wouldn’t trust the consensus view you hear on MSM, but I’ll venture out on a couple of points:

1) The fed will not raise rates before the end of the year. More than likely, Bernanke will be out of a job before the fed raises rates.

2) Realization that the economy is not recovering will occur this fall, and that will slow any inflation expectations. (And thus help to keep rates lower)

3) If China, India or any of the other countries that hold so many dollars are shown to be seriously dropping dollars, all bets are off, and long term interest rates go through the roof.

[XBoxBoy]

Seems we get a thread on this every couple of weeks or so. It would be interesting to go back and see who’s predictions were right, and who’s were way off.

I don’t think anyone knows enough to make a very solid prediction about this, and I certainly wouldn’t trust the consensus view you hear on MSM, but I’ll venture out on a couple of points:

1) The fed will not raise rates before the end of the year. More than likely, Bernanke will be out of a job before the fed raises rates.

2) Realization that the economy is not recovering will occur this fall, and that will slow any inflation expectations. (And thus help to keep rates lower)

3) If China, India or any of the other countries that hold so many dollars are shown to be seriously dropping dollars, all bets are off, and long term interest rates go through the roof.

[XBoxBoy]

[quote=ucodegen]XboxBoy,
You missed one of the choices of the bank in dealing with the delinquent home ‘owner’.. the forth is to take the property in foreclosure and then lease/rent it back to the previous ‘owner’ they foreclosed on. [/quote]

Hey, I have no problem with that if the bank wants to do that. But isn’t that still a foreclosure? (Which would be number one of the three options) What the bank wants to do with the place after they foreclose is up to them.

I do see two problems with this though.
1) Banks are not equipped nor do they want to become property managers.
2) Most people aren’t going to want to rent the house they were just foreclosed on for various psychological reasons.

I would think that most people who make it to foreclosure auction just want forget the whole mess. Okay, some want to stay rent free until they get evicted or get cash for keys, but I doubt many will want to pay rent to stay in a place that daily reminds them of their failed financial endeavour. Just my guess though.

XBoxBoy

[XBoxBoy]

[quote=ucodegen]XboxBoy,
You missed one of the choices of the bank in dealing with the delinquent home ‘owner’.. the forth is to take the property in foreclosure and then lease/rent it back to the previous ‘owner’ they foreclosed on. [/quote]

Hey, I have no problem with that if the bank wants to do that. But isn’t that still a foreclosure? (Which would be number one of the three options) What the bank wants to do with the place after they foreclose is up to them.

I do see two problems with this though.
1) Banks are not equipped nor do they want to become property managers.
2) Most people aren’t going to want to rent the house they were just foreclosed on for various psychological reasons.

I would think that most people who make it to foreclosure auction just want forget the whole mess. Okay, some want to stay rent free until they get evicted or get cash for keys, but I doubt many will want to pay rent to stay in a place that daily reminds them of their failed financial endeavour. Just my guess though.

XBoxBoy

[XBoxBoy]

[quote=ucodegen]XboxBoy,
You missed one of the choices of the bank in dealing with the delinquent home ‘owner’.. the forth is to take the property in foreclosure and then lease/rent it back to the previous ‘owner’ they foreclosed on. [/quote]

Hey, I have no problem with that if the bank wants to do that. But isn’t that still a foreclosure? (Which would be number one of the three options) What the bank wants to do with the place after they foreclose is up to them.

I do see two problems with this though.
1) Banks are not equipped nor do they want to become property managers.
2) Most people aren’t going to want to rent the house they were just foreclosed on for various psychological reasons.

I would think that most people who make it to foreclosure auction just want forget the whole mess. Okay, some want to stay rent free until they get evicted or get cash for keys, but I doubt many will want to pay rent to stay in a place that daily reminds them of their failed financial endeavour. Just my guess though.

XBoxBoy

[XBoxBoy]

[quote=ucodegen]XboxBoy,
You missed one of the choices of the bank in dealing with the delinquent home ‘owner’.. the forth is to take the property in foreclosure and then lease/rent it back to the previous ‘owner’ they foreclosed on. [/quote]

Hey, I have no problem with that if the bank wants to do that. But isn’t that still a foreclosure? (Which would be number one of the three options) What the bank wants to do with the place after they foreclose is up to them.

I do see two problems with this though.
1) Banks are not equipped nor do they want to become property managers.
2) Most people aren’t going to want to rent the house they were just foreclosed on for various psychological reasons.

I would think that most people who make it to foreclosure auction just want forget the whole mess. Okay, some want to stay rent free until they get evicted or get cash for keys, but I doubt many will want to pay rent to stay in a place that daily reminds them of their failed financial endeavour. Just my guess though.

XBoxBoy

[XBoxBoy]

[quote=ucodegen]XboxBoy,
You missed one of the choices of the bank in dealing with the delinquent home ‘owner’.. the forth is to take the property in foreclosure and then lease/rent it back to the previous ‘owner’ they foreclosed on. [/quote]

Hey, I have no problem with that if the bank wants to do that. But isn’t that still a foreclosure? (Which would be number one of the three options) What the bank wants to do with the place after they foreclose is up to them.

I do see two problems with this though.
1) Banks are not equipped nor do they want to become property managers.
2) Most people aren’t going to want to rent the house they were just foreclosed on for various psychological reasons.

I would think that most people who make it to foreclosure auction just want forget the whole mess. Okay, some want to stay rent free until they get evicted or get cash for keys, but I doubt many will want to pay rent to stay in a place that daily reminds them of their failed financial endeavour. Just my guess though.

XBoxBoy

[XBoxBoy]

PadreBrian,

If you take these comments at face value, then you’re probably right, they will help support the dollar. However, given how much talk has happened lately regarding dropping the dollar as a reserve currency you have to wonder how reliable these comments are.

In general I think that China, India, Russia, Brazil, and the other developing countries would like to see an orderly move away from the dollar as the reserve currency. But it’s doubtful that such a move could be orderly. So, that leaves us with either, dollar remains the reserve currency, or a sudden move that either causes a crisis, or is caused by a crisis.

I’ve got no real insight into which path this will take. But I suspect that whatever is going to happen, will happen regardless of the speeches given by various officials, either Chinese or US.

XBoxBoy

[XBoxBoy]

PadreBrian,

If you take these comments at face value, then you’re probably right, they will help support the dollar. However, given how much talk has happened lately regarding dropping the dollar as a reserve currency you have to wonder how reliable these comments are.

In general I think that China, India, Russia, Brazil, and the other developing countries would like to see an orderly move away from the dollar as the reserve currency. But it’s doubtful that such a move could be orderly. So, that leaves us with either, dollar remains the reserve currency, or a sudden move that either causes a crisis, or is caused by a crisis.

I’ve got no real insight into which path this will take. But I suspect that whatever is going to happen, will happen regardless of the speeches given by various officials, either Chinese or US.

XBoxBoy

[XBoxBoy]

PadreBrian,

If you take these comments at face value, then you’re probably right, they will help support the dollar. However, given how much talk has happened lately regarding dropping the dollar as a reserve currency you have to wonder how reliable these comments are.

In general I think that China, India, Russia, Brazil, and the other developing countries would like to see an orderly move away from the dollar as the reserve currency. But it’s doubtful that such a move could be orderly. So, that leaves us with either, dollar remains the reserve currency, or a sudden move that either causes a crisis, or is caused by a crisis.

I’ve got no real insight into which path this will take. But I suspect that whatever is going to happen, will happen regardless of the speeches given by various officials, either Chinese or US.

XBoxBoy

[XBoxBoy]

PadreBrian,

If you take these comments at face value, then you’re probably right, they will help support the dollar. However, given how much talk has happened lately regarding dropping the dollar as a reserve currency you have to wonder how reliable these comments are.

In general I think that China, India, Russia, Brazil, and the other developing countries would like to see an orderly move away from the dollar as the reserve currency. But it’s doubtful that such a move could be orderly. So, that leaves us with either, dollar remains the reserve currency, or a sudden move that either causes a crisis, or is caused by a crisis.

I’ve got no real insight into which path this will take. But I suspect that whatever is going to happen, will happen regardless of the speeches given by various officials, either Chinese or US.

XBoxBoy

[XBoxBoy]

PadreBrian,

If you take these comments at face value, then you’re probably right, they will help support the dollar. However, given how much talk has happened lately regarding dropping the dollar as a reserve currency you have to wonder how reliable these comments are.

In general I think that China, India, Russia, Brazil, and the other developing countries would like to see an orderly move away from the dollar as the reserve currency. But it’s doubtful that such a move could be orderly. So, that leaves us with either, dollar remains the reserve currency, or a sudden move that either causes a crisis, or is caused by a crisis.

I’ve got no real insight into which path this will take. But I suspect that whatever is going to happen, will happen regardless of the speeches given by various officials, either Chinese or US.

XBoxBoy

[XBoxBoy]

[quote=equalizer]However flawed the part ownership, it is better than outright principal reduction. [/quote]

While I’m not exactly sure of the details of Taleb’s plan I think it’s straightforward principal reduction in exchange for a part ownership that has little if any value and potentially lots of administrative headaches. If that’s better than outright principal reduction it is only a very small amount better.

[quote=equalizer] Do you have any better ideas short of foreclosure? [/quote]

Back up a second. The problem is that the banks hold loans that due to falling prices are no longer sufficiently collateralized. If the borrower continues to pay the mortgage, the bank does not have a problem. However, if the borrower stops paying the mortgage, the bank has three choices:

1) Take their losses either with a foreclosure or short sale.

2) Outright principal reduction. This is a particularly bad option because doing this for one person only encourages others to go into default hoping to get their principal reduced.

3) Try some scheme that kicks the payments down the road, hoping that some time in the future somehow the borrower coughs up more money. My perspective is that virtually all the schemes put forward, including this one from Mr. Taleb, are nothing more than a fancy cover for this option. They are not a fix, just a postponement of the problem.

Notice that before I listed the bank’s options, I made clear that if the borrower continued to make payments there was no problem. So, if the bank was thinking things through they would realize that a very high priority is to make sure that people keep paying in full at the agreed upon terms. Option 2 and 3 undermine that. (As we’ve discussed in a number of threads here on piggington)

So, regardless of the area I think it’s pretty clear foreclosure and/or short sales are the best answer.

In regards to your comments about areas where the economy is collapsing. (Modesto, Bakersfield, Detroit) In these areas, it’s the broad economic issues that need to be addressed first before housing can be addressed. (ie, what are people in these areas going to produce/sell that will generate the cash coming into the community so that it can grow) Since these issues are not being addressed seriously, I doubt that any kicking the problem down the road will work, only postpone the problem.

XBoxBoy

[XBoxBoy]

[quote=equalizer]However flawed the part ownership, it is better than outright principal reduction. [/quote]

While I’m not exactly sure of the details of Taleb’s plan I think it’s straightforward principal reduction in exchange for a part ownership that has little if any value and potentially lots of administrative headaches. If that’s better than outright principal reduction it is only a very small amount better.

[quote=equalizer] Do you have any better ideas short of foreclosure? [/quote]

Back up a second. The problem is that the banks hold loans that due to falling prices are no longer sufficiently collateralized. If the borrower continues to pay the mortgage, the bank does not have a problem. However, if the borrower stops paying the mortgage, the bank has three choices:

1) Take their losses either with a foreclosure or short sale.

2) Outright principal reduction. This is a particularly bad option because doing this for one person only encourages others to go into default hoping to get their principal reduced.

3) Try some scheme that kicks the payments down the road, hoping that some time in the future somehow the borrower coughs up more money. My perspective is that virtually all the schemes put forward, including this one from Mr. Taleb, are nothing more than a fancy cover for this option. They are not a fix, just a postponement of the problem.

Notice that before I listed the bank’s options, I made clear that if the borrower continued to make payments there was no problem. So, if the bank was thinking things through they would realize that a very high priority is to make sure that people keep paying in full at the agreed upon terms. Option 2 and 3 undermine that. (As we’ve discussed in a number of threads here on piggington)

So, regardless of the area I think it’s pretty clear foreclosure and/or short sales are the best answer.

In regards to your comments about areas where the economy is collapsing. (Modesto, Bakersfield, Detroit) In these areas, it’s the broad economic issues that need to be addressed first before housing can be addressed. (ie, what are people in these areas going to produce/sell that will generate the cash coming into the community so that it can grow) Since these issues are not being addressed seriously, I doubt that any kicking the problem down the road will work, only postpone the problem.

XBoxBoy

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