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Latest Comments56 Comments
Loan Delinquency Data Suggest We're Nowhere Near a Great Depression II
Today it was announced that we have been in a rescession since Dec. 07...
More focus on softening the landing is necessary... telling us that a depression is not hear just does not mean much.
How to Solve the Excess Supply in Housing
Well, the risks of investment are clear. However, homeowners should never consider buying their home an investment. (I have never agreed with the real estate industry that promoted such trash). Being a homeonwer is providing for a basic human need... shelter. A human need that we will have until death.
So, while no question investors will be hurt by promoting homeownership in the short run, in the long run they will do fine as they will be able to sell their investment at a profit when the market stabilizes and property values increase. But as a matter of public policy, investments are risky and homeownership is stabilizing. It makes no sense to make investments risk less and homeownership more risky.
Prosecutors Going after Fraudulent Mortgage Borrowers
It Might Be Impossible to Stop the Decline of Housing Prices
First, the government should create a new lending entity guaranteed by the full faith and credit of the U.S. Gov. that makes loans to BUYERS (not refinances) with rates in line with such a guarantee (5% approx). Only those loans could be purchased from financial institutions. They should make the criteria looser than current standards. This would ease up the ability for credit and since they would be treasury grade, the U.S. Gov. would not have too much difficulty selling the securities for them.
Create a tax credit for homebuyers the purchase in the next two years.
Change the bankruptcy laws to allow cram downs (modifications) on existing loans.
This would shift the losses right back to the banks and investors which would slow down foreclosures dramatically, allow homeowners to stay in their homes and lower payments that equivelent to rent considering the tax incentives. This slow down of foreclosures coupled with a new source of money for purchases would impact the supply side of the equation by reducing inventory.
Unfortunately, our representatives (a joke) are more influenced by the banking and securities lobby then they are doing what is best for our economy and its citizens. As long as they are talking bailouts, that means the average citizen needs to get its wallet out.
The Right Way to Encourage Home Ownership
Proposed Homeowner Bailout Plans are Loaded With Problems
The Obama approach is alive and well in California which has temporarily slowed foreclosures while lenders must comply with new notice requirements and delays... but we will see soon the flood of foreclosures.
Truth is, lenders are not really working out loans with consumers. They are churning out paper and making a lot of noise but consumers are being misled, loan mods and short sales are more focused on helping the lenders and not helping the consumer. Note: Persons who refi'ed and are in trouble really need to have their loan documents evaluated for TILA violations as they may be able to rescind as the best remedy.
With all that being said, a method of implementing a solution to stop housing prices from falling is quite simple:
1. Government provide financing to a new entity whose only purpose is to make new loans for the purchase of homes and NOT purchase any old loans or allow refis with the money. This would create plenty of money for sales. I would even ease up on criteria and try to make it inexpensive.
2. Tax credit for anyone who buys in the next 18 months.
3. Allow bankruptcy judges to cramdown on principal residences. If lenders know that a judge can, they will have more motivation to work out loans with consumers.
4. A moratorium on credit reporting of derogatory credit reporting, except in cases of fraud, to bring consumers who lost homes back into the market to stimulate sales. Let them buy the type of house they paid 400k for now at 200k like the rest.
All of this will lead to hitting a bottom in real estate and start the slow recovery process. As for the old loans, well, all made a bad investment, its the American way to take your losses as well as profits. That should be left alone.
More Clues Housing Bottom May Be Near in Sacramento
Where were all those real estate agents in California who were supposed to acting in a fiduciary compacity and advise and protect their clients? Well, many of those consumers are going to be litigating with many of them.
I guess everyone forgot that California put a slow down in foreclosures legislatively. The tidal wave of foreclosures and inventory should begin around the first of the year. I expect that come this winter the last thing you will be talking about is a bottom.
Its about to get way more uglier than we have seen!
Common Sense: My Solution to the Mortgage Crisis
It’s tragic to see all these very smart people up in Washington panicking. You can see the lobbyist activity at work by their “selling” of the President and legislature that the solution is for the taxpayers to pay for the bad deeds of the lending and securities firms. There is another choice. If the folks back in Washington were to be focused on the taxpayers, the solution gets easy, here is a simple 4 step plan:
1. Create a new agency to purchase NEW loans made with very solid lending criteria with the 700 billion. This would make plenty of money available in the economy to lend as it would only be used for NEW lending on purchases.
a. This would stimulate new purchases and there would be plenty of money to lend.
b. This new agency would be backed by the full faith and credit of the government thereby having lower risk which should keep rates low on this product.
2. Provide a home purchase tax credit for the next two years that is equal to $10,000.00 per year for the next 3 years for a total of $30,000.00.
a. This will also stimulate new purchases.
3. Since the loans provided to consumers were so toxic (Washington’s words), provide a moratorium on all mortgage credit reporting for loans made during the period of January 2005 to December 31, 2008 (the dates and loan time frames could be tweaked).
a. This would dramatically improve credit scores of those that have been victimized by this crisis and allow them to re-enter the market to purchase.
b. This is an important point, if they are truly seen as victims, help them, if they are not victims, don’t do it. Depending on who you talk to, this point is not clear. Personally, I see them as victims and they should be treated as such. Of course there are exceptions.
4. Modify the bankruptcy code for a new type of bankruptcy filing to allow cram downs on principal residence loans to the present market value of the property and at fixed rates of interest in line with the market. An alternative to bankruptcy is to just create a new Federal statute that allows a person to petition any court for that relief, not just bankruptcy court.
a. In effect, this is the type of loan modification programs lenders should be giving but refuse.
b. It would not impact any other debt, just modify the mortgage, call it a Chapter 8 or something similar. Do not allow it to have such a bad stigma.
c. This would bring lenders to the table on loan modification and cut foreclosures dramatically almost immediately.
You will notice, this plan is focused on the curing the problem. The problem is basic, supply and demand. We have way too much supply and no demand. The above focuses on the demand by the following:
• Addresses the liquidity crisis by making loans available for purchases.
• Addresses the supply side of the problem as it will stimulate sales thereby forcing a bottom to housing prices. Realistically, prices will most likely stay flat for a while and they should. Supply side is impacted by:
o New money for sales.
o Tax incentives to buy.
o Brings buyers who traditionally have bought and a high percentage will return to buy (they are renters now, the folks who lost their homes).
• Solution is citizen (taxpayer) focused.
• The 700 billion is a profit driven investment, not a bailout.
• The changes to the bankruptcy code would also impact the supply side as it would give more homeowners the ability to modify and stay in their homes instead of being foreclosed on.
What it will not do:
• It will not bail out the financial institutions and Wall Street for their bad loans they made.
• It will not throw good money after bad. Those that invested in these bad products will have to take their losses as with any investment.
As you can see, looking at the problem in a different way will cost the tax payers much less and focus on the “cure” for the problem.
Mortgage Delinquencies Continue to Climb, Watch Out for Other Loans
I worked in a major bank who provided those and have a law degree and MBA. I was brought a TIL to examine when I was first hired on an Option ARM that was the payment was to be fixed for a 5 year term but the TIL showed the payment changing at 33 months. It took me about 4 hours and excel spreadsheets to figure out that the loan was resetting at 110% due to the high margin. No one, not even funders or the Account Execs were able to figure that out. It was such a major revelation, I put on an emergency training "clarification&qu... for all staff that handled those products, funders, account execs, loan officers, etc. (it took a couple of weeks) to explain what was going on. Reaction? I did not know that was one... other was... gee, if I tell my customers the truth, they would never take this loan.
I will never accept that consumers, of average education, can ever understand the complexities of an option arms just by reading the documents... it took some doing on my part.
More 'Workouts', But Will They Stem Foreclosure Tide? [Housing Tracker]
First, the lender is not interested in helping the consumer really but interested in securing financial information and craft the workout that extracts the most amount of cash from the consumer that minimizes their currently way under water loan they have. It makes more sense for them to lower the interest rate on their 300k loan on a property that is worth 200k and turn that 100k loss into a performing asset which is not a loss.
Second, if they discover the consumer did not tell the truth at application, even though they do a loan mod, they are required by law to report the consumer with a SAR (suspicious activity report) which could trigger criminal charges down the road for the consumer.
Finally, it fails to address the legal remedies, even solves them in some cases, that the consumer could take against the lender. Lien stripping of jr. loans, rescission issues, unfair business practices, etc.
In effect, while the media and government has been pushing this, going for help to the person who contributed to your woes is like asking for help from the guy that robbed you.
Home Prices Have Stopped Falling: The Statistics Are Skewed
Second Mortgages: Why Absolve Consumers for Stupidity?
Capacity is the ability to pay back the loan. Collateral is equity. Credit is the credit standing of the person borrowing.
But do not lose sight on which ones are most important... Capacity and Collateral.
You are clearly seeing today that many consumers lack the capacity and collateral to support the loan. You may make the "personal assessment" of personal responsibilty but this is business and the risk of capacity and collateral was always a known risk by the lender. They are impacted today by their risk, not deadbeat consumers. Clearly, if consumers had the collateral and capacity, this would not be an issue which is why it is always a risk for lender!
If I was a consumer in this situation, my first responsiblity would be to provide for my family.
As a consumer, I would do whatever is lawful and best for me. Here in the 9th Circuit, consumers can strip seconds lawfully in a bankruptcy. It is time for consumers to look at all options and take those that are lawful. On the flip side, lenders should do the same. This is business, not personal responsiblity.
Time To Cover Those Housing Shorts
Economic Report Summary: Housing Market Getting Worse, Not Better
Finally, the credit crunch is alive and well and resetting option arms are just now getting full steam ahead. If you think things were bad before, they are about to get a whole lot worse. Lets mark this date and reflect on it again in February. Absent the Federal government declaring a state of national emergency in the economy and suspending all foreclosures, litigation and bankrupcy laws, it will get very ugly!
Why Big Mortgage Losses Are Here To Stay
Best recourse is to review the original loan transaction for some sort of defect (about 40% of loans have serious ones) and then tie the lender up into litigation until they offer some real relief... i.e. walk away cleanly without credit dings and pay their legal fees and some moving costs. It makes no sense to stay in a home that the loan is 400k and the value is 200k. It makes even less sense to get the lender to write down the balance from 400k to 300k or 200k and then have the value fall to 150k.
The better deal again is to buy at the 150k with those FHA programs that are out there with little down and when the market turns around years down the road and the value goes to 200k, you made 50k instead of being under water.