Fairness in Lending
[Guest post by DRJ]
Mortgage lenders and bank executives told Congress today it wouldn’t be fair to let some homeowners avoid paying part of their mortgages:
“The executives told lawmakers on Tuesday they are reducing the amount that troubled borrowers owe on their home loans only in limited cases. That’s because consumers who are paying their mortgages on time are likely to see such reductions as unfair, the executives said.
Such programs “could raise issues of fairness,” agreed Sanjiv Das, Citigroup’s top mortgage executive, who appeared in front of the House Financial Services committee with top executives from Bank of America, Wells Fargo & Co. and JPMorgan Chase.
David Lowman, chief executive of Chase’s mortgage business, told lawmakers that large-scale mortgage principal reduction “could be harmful to consumers, investors and future mortgage market conditions.”
Chase estimates that reducing home loan balances so that no homeowners would owe more than the value of their homes would cost up to $900 billion, with $150 billion of that borne by the government.”
The article doesn’t address how members of Congress responded but some homeowner activists were not impressed:
“After the hearing was over, dozens of activists from the Boston-based Neighborhood Assistance Corp. of America chased Lowman through the marble-floored hallways of the Rayburn House Office Building, pressing him to do more to help troubled homeowners.
He did not respond to their requests for a meeting and eventually left the building with the assistance of police.
Homeowners complained that the bank has been difficult to deal with. Charandra Smith of Prince George’s County, Md., said in an interview that her home she bought in 2007 is now worth about $300,000 — a decline of $170,000 from her purchase price. Chase, she said, has been unwilling to help.
“I’m not asking (Lowman) to do anything extraordinary. I want my home, I intend to stay in my home, but make it reasonable,” she said. “If I sell my home, I lose everything.”
A Chase spokesman declined to comment on the activist group.”
Bruce Marks, the chief executive of Neighborhood Assistance of America, is a self-described “bank terrorist“:
“We wear that as a badge of honor. Bank terrorism is a nonviolent way we personalize the consequences of CEOs’ actions. When someone loses their home, they lose their neighbors, they lose their community, and their kids lose their friends and their schools. It’s personal. Lives have been devastated. We go to the CEOs’ homes, usually on Sunday morning, which is family time, in their gated communities. We are relentless and we go after them everywhere they go.”
They call themselves bank terrorists and we’re supposed to believe Tea Party folks are dangerous?
— DRJ
The age of zero personal responsibilty…
gazzer (87d7c3) — 4/13/2010 @ 4:26 pmThat’s also why I’m no fan of ACORN’s, in my area ACORN was giving out “advice” to homeowners about ways to attempt to defraud their mortgage companies. I ended up cleaning up some of their messes in some bankruptcy cases.
SPQR (26be8b) — 4/13/2010 @ 4:41 pmAs a current customer who has the misfortune of having a home mortgage that has transitioned to Chase Bank after their acquisition of WaMu, I am fairly skeptical of Chase’s motivation.
To put it in today’s vernacular, Chase Bank sucks.
GeneralMalaise (a1a83b) — 4/13/2010 @ 4:41 pmYou bought the house, the bank didn’t pick it for you. I’m sorry YOUR investment has turned bad. Why should the bank and taxpayers eat your loss? When housing values go back up can they raise the mortgage again? I think not. My house has lost value as well and I lost value on my stock should I be bailed out? No! Suck it up and pay your own bills, I’ll pay mine.
Bart998 (b89b89) — 4/13/2010 @ 5:58 pmPrivate Foreclosure Reduction Plan Trumps Government Plan
Three Policy Changes; that is all it will take to decrease unemployment and foreclosures.
#! Create a mortgage that fits the current economic conditions. I am proposing: A mortgage with a starting interest rate of 3% and go up 1/4% a year for seven years and cap out at 5%. The borrower must qualify at the 5% interest rate. This mortgage would be available to any homeowner that could qualify, even those people that their mortgage is underwater. (Currently banks offer the 5/1 Adjustable Rate Mortgage, which earns about the same amount of interest in the first 5yrs. The new mortgage is not indexed. Therefore people will refinance their homes.)
#2. Mortgages that are underwater would have their unpaid balance reduced by an amount equal to 30% of their monthly payment amount each month for up to 10 yrs or until the mortgage equals the then current possible sale price of the home, which ever is less. Second lien holders would be able to participate in this mortgage reduction plan. Their interest rate and terms would be the same as the first lien holder. A modification agreement would be used to modify the terms of the mortgage.
#3. Enact the Zero Inflation Taxation Policy. This policy decreases the chance of another bubble/bust economic cycle and stabilizes interest rates.
These polices http://www.economysflaw.wordpress.com/ will not cost the taxpayers a dime.
Leonard C. Tekaat is a retired economic analyst, economic scholar, businessman, financier, investor and author. He has over forty years experience in the financial world. He is Chairman of the Committee for Economic Reform and a Better Economic Future. He is a Tea Party member.
Review of policies by Economics Professor Mark Evans CSUB
From: “Economics Professor Mark Evans CSUB” To: “Leonard Tekaat” Hi, Leonard. I agree that current policies haven’t been very effective thus far in addressing the foreclosure mess and that the macro economy remains vulnerable to a two-dipper because of it. I think we probably need something along the lines you suggest that cuts both interest rates and the principle upon which the monthly payments are based. Several months ago, I found a couple of columns online, by Alan Blinder, (Home Owner Loan Corp.) which described the highly successful program that was implemented during the depression due to upside-down mortgages and defaults. The agency that was created to run this program ran a profit and was “put to rest” sometime in the 1950’s when the last of the contracts expired. I’m not sure without looking at it more closely, but I think your suggestion may work in a similar fashion. We also need some regulatory changes to reduce the risk of bubbles and we needed the stimulus package, as imperfect as it was. Professor Mark Evans.
The Private Fix is the correct way to solve the foreclosure crisis because it does not award the reckless jerks or flipping investors. It will increase economic activity and the disposable income of a large number of people, which will reduce unemployment.
The responsible homebuyer or homeowner did not create the foreclosure crisis, economic crisis, or the unemployment crisis. The taxpayers should not have their taxes increased to bail out the economy or to pay for a huge federal deficit. It was the Capitalistic entity (Banks and Federal Reserve) and the government, taxation and housing policies that caused the housing bubble and the Great Recession of 2008.
How will this mortgage help the economy? The banks and the homeowner will both benefit. The homeowner’s monthly interest payment will be lower for eights years. If the homeowner refinances a 6% loan their interest will decrease by 50% from say $1500.00 to $750.00, the first year and slowly increase the other seven years.
It is going to take time to heal our economy but this private economic recovery plan will help the housing market recover faster and make the financial service sector stronger.
The banks will benefit because the new mortgage cost them less than the amount to foreclose or short sale the house. They are currently losing hundreds of millions of dollars due to foreclosures, short sales, and lost of interest and principal payments.
The economy will improve because more people’s disposable income will be increased, than with the government’s economic recovery plan. This will increase aggregate demand, increasing economic activity thereby reducing unemployment and foreclosures, shortening the Great Recession of 2008.
For more detailed Info. Go to http://www.economysflaw.wordpress.com/
Copy right by Leonard C. Tekaat 3-28-2010
All Rights Reserved
Comments
Posted by catpaw on Mar 27, 2010 at 08:18 AM
These polices will not cost the taxpayers a dime.
But how much would it cost the banks? Banks are not about to set a dangerous precedent of social conscience or giving a rat’s tail about rectifying the duplicity that sucked home buyers into this mess or in any way show a sense of responsibility for the economic downturn they helped create.
Banks are in the business of making money. And they don’t care where it comes from or how they get it.
Report Violation
Posted by happyashell on Mar 27, 2010 at 10:12 PM
To catpaw, Banks want to make money that is correct. They also don’t want to lose money if they can prevent it. If a person bought a 2000 sq ft. house in 2007, for $400,000.00, it might sell now for around $200,000.00. If the borrower decided they didn’t want to pay for the house. The bank’s, if the buyer had put down 10%($20,000.00), unpaid balance on the mortgage is $380,000.00. The bank or the investor, who invested in the mortgage, would loose $180,000.00 on the mortgage, $10,000.00 on foreclosure and selling cost. They would loose the unpaid interest for all the months the borrower had not paid the mortgage and the time it sat empty waiting for it to be sold. Say a year at 5% is $10,000.00. This all adds up to $200,000.00. If the house is damaged while its empty or it needed repairs when it was foreclosed on, it might sell for a lot less than $200,000.00. So the loss could be more.
If the bank or investor did sell the house, they would earn 5% interest on the $200,000.00 or a smaller amount. At that selling price, the interest earned for 30yrs can be over $100,000.00 less than if they allowed the borrower stay in the home, if they were not a credit risk. This is why I think it best to qualify the borrower at the 5% interest rate.
If they offer the owner, the terms of my mortgage they would lose about $35,000.00 in interest in the eight years until the interest rate reaches 5%. and 30% of the principle amount, or about $7300.00 a year until the home went up in price and it met the mortgage as it was being discounted down. If the home does not go up in ten years the maximum amount that would be discounted is $73,000.00 plus the interest of $35,000.00 for a total of $108,000.00. They will make some of the lose back because they will be receiving interest on the larger unpaid balance for 22 yrs which will be a higher unpaid balance than if they foreclosed or short sold the home today. Also more than likely the home will go up in price before the ten years is up and everyone will be smiling again.
Report Violation
Leonard C. Tekaat (e1e2a3) — 4/13/2010 @ 6:04 pmDon’t forget, a lot of these folks were using their homes as an ATM. Constantly refinancing and taking out the “equity” for fripperies. As a Realtor myself, I also see the damage many of these people inflict on the properties as they flee. It is criminal, yet they are almost never charged. Smashed sinks, toilets and tubs. concrete poured down sewer lines and waste lines. It goes on and on. I often say that if they worked as hard at their jobs as they did on the vandalism of the home, they may have been able to keep both.
gazzer (87d7c3) — 4/13/2010 @ 6:32 pmThe Obama Administration and the media like to talk about how greedy bankers are but these borrowers are the greedy ones. If their homes were currently worth more than the loans, none of them would share their profits with the mortgage companies — proving that their idea of fairness is a one-way street.
DRJ (daa62a) — 4/13/2010 @ 6:36 pm“Why should the bank and taxpayers eat your loss?”
Because they (and your neighbors) may eat less of a loss if they cut you slack on your principal instead of foreclosing and then selling the house for the new, lower value.
imdw (b75942) — 4/13/2010 @ 7:08 pmWe pay our mortgage, and we’re also in the comfortable position of owning a home worth more than when we bought it.
That said, supposedly the entire system was going to crash because of defaulting mortgages, so billions of dollars went into “bailing out” banks and other financial institutions. If the losses by the banks, etc., were being defrayed by taxpayer money, then the banks should be in a positionh to write off some of their losses and renegotiate terms to allow people to stay in their homes- at least the most responsible people. If this is not the case, where did the money go and what did it accomplish?
I believe in #5 is a discussion in more detail about something I’ve thought of and mentioned before, the bank would probably take less of a loss by renegotiating the mortgage rather than bearing the cost of foreclosure, the drop in value of the house, the cost of vandelism repair, etc. So the people in the house get to stay in a house and have to contribute toward what the house is worth, the bank loses less money than they would have otherwise, and the taxpayer money has helped maintain a system that is better than dumping money down a drain to balance a budget sheet. My 2 cents.
MD in Philly (3d3f72) — 4/13/2010 @ 7:16 pmHere’s another side of the Home Affordable Loan Modification Program.
http://www.cnbc.com/id/36422316
“…First he describes a case study of someone who applied for the government’s Home Affordable Modification Program.
The person had an $1,880.00 monthly mortgage payment on which they’d defaulted, but said person’s monthly bank statement showed payments to a tanning salon, nail spa, liquor stores, DirecTV bill with premium charges, and $1,700.00 in retail purchases from The Gap, Old Navy, Home Depot, Sears, etc…”
I strongly resent people who game the system in this way.
JoeH (eeb280) — 4/13/2010 @ 7:21 pmThe link for the previous comment is
Mortgage Defaults May Be Driving Consumer Spending
JoeH (eeb280) — 4/13/2010 @ 7:23 pmSee how many people like Leonard think that they have the right to abrogate mortgage holders’ contractual rights? Gee, how inconvenient that Constitution is …
SPQR (26be8b) — 4/13/2010 @ 7:28 pmMD,
I doubt it’s true that banks lose less money by renegotiating mortgages. More than half of the loan modifications on delinquent loans had already defaulted again just 9 months after the modifications. In the meantime, banks lost more money in modifying, monitoring and foreclosing on loans a second time. Or in some cases, a third or fourth time.
DRJ (daa62a) — 4/13/2010 @ 7:29 pmYep, DRJ, that’s a key fact that explains why banks are so reluctant to really modify loans. There is a tiny fraction of troubled mortgages where modification is appropriate and successful.
SPQR (26be8b) — 4/13/2010 @ 7:33 pmA-freaking-men, DRJ. A-freaking-men.
JD (18e145) — 4/13/2010 @ 7:34 pmI was referring to #7, but #14 is spot-on too.
JD (18e145) — 4/13/2010 @ 7:36 pmBrilliant! JD is congratulating himself on his own comments now.
Intelliology (00d844) — 4/13/2010 @ 7:42 pmAs opposed to overt lying? I will take a typo any day of the week.
JD (18e145) — 4/13/2010 @ 7:48 pm#4, you hit the nail squarely…Who is going to make me whole on the loss my 401k plan has sustained? Besides, most of these people are still living in their homes, and prices will likely eventually recover at least somewhat.
sam (5ef311) — 4/13/2010 @ 8:25 pm#9, bravo to you, too. There have been times over the past 30-some years that I’ve owned my house that money was tight…very tight. Many-a-month I had to choose between the electric bill and the mortgage, the credit card bill and the mortgage, the phone bill and the mortgage. In every case, the mortgage check went out, on time. You can argue/negotiate with the utilities, and sometimes the credit card guys have to wait, but I absolutely was NOT going to screw around with the house payment. Unless someone is out of work for an extended period of time, or gets seriously ill, I have very very little patience for those whining about the value of their homes relative to what they owe on it. Suck it up and pay your debts. Don’t include the rest of us in your mismanagement and poor judgement.
I think I can confidently say, as someone who has kept current on his mortgage even as the property has declined in value (though it has not gone upside-down – and the monthly payment is less than a comparable rental), that there are millions of borrowers out there in my situation, and we will be royally pissed if scammers and deadbeats are given any forgiveness that the lenders aren’t prepared to extend to us, the responsible.
AD - RtR/OS! (f3d22b) — 4/13/2010 @ 8:48 pmWell personally it seems criminal to force a rewrite on a contract that’s been signed. Seems like a serious erosion of the rule of law. But if society reaches a concensus that this is acceptable I do have a plan that would greatly benefit the nation.
Rewrite the agreements with unionized public sector workers, salary, benefits, seniority retirement both pending and active. Send those 55 year olds back to work for another 10 or 15 years. They could apply for their old jobs as openings occurred. Otherwise I hear 7-11 and Mickey D’s are hiring.
Amused Observer (7fb53d) — 4/13/2010 @ 8:49 pmAO – Some contracts are more equal than others.
JD (18e145) — 4/13/2010 @ 8:56 pm“… Send those 55 year olds back to work for another 10 or 15 years. They could apply for their old jobs as openings occurred. Otherwise I hear 7-11 and Mickey D’s are hiring.”
Are we sure that they’re not under-qualified?
AD - RtR/OS! (f3d22b) — 4/13/2010 @ 9:08 pmThese last few years have caused me to lose a lot of faith in the basic intelligence of my fellow humans. I’ve never been in the position where I could ever consider the purchase of a home but it was blatantly obvious the market was in a major bubble and it was going to be ugly when it burst. And it had to burst. The idea that my childhood home was somehow worth over $500K (a house in Thousand Oak that went for $14K in 1966) and would only go up from there was pure insanity, unless years of massive inflation had rendered the money almost worthless.
Something had to give. How could so many people think they were going to dodge the bullet?
epobirs (8226b7) — 4/13/2010 @ 10:36 pm#18 sam:
As someone who got very ill and was out of work for a couple of years and managed to maintain my mortgage without ever being late on it, I have no patience with them at all.
EW1(SG) (edc268) — 4/14/2010 @ 4:51 amAnd there is a law on the books called the equal opportunity in credit act, which says you can’t discriminate, if memory serves based on gender or marital status, when lending. i don’t believe it specifies racial discrimination. but i do remember the marital status one, because it was so mind-blowing in its idiocy. Basically if a woman is a responsible lender, the bank has to be as willing to loan to her as anyone else, even if the bank also knows she just got married to a guy who is known to blow large sums of money on coke and hookers. This is another of the many reasons why the government caused the housing bubble in the first place.
A.W. (e7d72e) — 4/14/2010 @ 6:19 amThank you DRJ and the rest of you for correcting my (mis)perceptions.
In my neck of the woods empty homes tend to not fare well over time, and with the market being what it is, I’m assuming many foreclosed homes sit empty. I was thinking that a bank holding ownership of a property that is vandelized would end up pretty much on the losing end. I thought it was conceivable that instead of the situation being a lose-lose for everybody that some of the house’s value could be recovered by the bank and the “owners” could maintain possession. (Perhaps even a third party could buy the property from the bank at a loss to the bank, but they could recover something on the property and get it off of their books. The new holder, having less to recover, could then potentially make an agreement acceptable to those living in the home that would be a win-win.) Maybe the scenario I’m thinking of is rare, and the people who obtained sub-prime mortgages were so ill-equipped to handle a mortgage there is no salvaging the arrangement.
If that is the case, I’m inclined to let those irresponsible enough to make those kind of loans go broke rather than bail them out, which then goes back to the possibility of “the system breaking down and in need of bailing out”.
I totally agree with the comments about the need to uphold contracts and people needing to be held accountable for irresponsibility and even criminal behavior. On the other hand, salvaging, by choice, what can be salvaged seems a sensible option when it can be done.
I think (from my limited perspective) the problem came when value was attributed to pieces of paper that were then bundled and sold. The attributed value was far removed from the real value, and those who originally made the poor business decisions of giving mortgages that could not be repaid would not be the ones to face the consequences. I guess one issue is where this behavior may have actually be criminal fraud, and can it be proven. But the details of all of that is far beyond me. I’m going by how it seems things should work, not how they actually do work, but I think you know that already.
MD in Philly (3d3f72) — 4/14/2010 @ 7:20 amI bought a modest home that I could afford and din’t take out a bunch of loans to fund vacations, etc. Now Obama wants to take money away from people who have been responsible and give it to those who are irresponsible. We are now the an and grasshopper fable in reverse.
Rochf (ae9c58) — 4/14/2010 @ 7:28 amNot only in reverse, Rochf, but on steroids, and punitive.
JD (b537f4) — 4/14/2010 @ 7:31 amI think a pox on both houses is more than appropriate in this instance – irresponsible homeowners who never would have been eligible for any kind of home in the first place were severely enabled by the banks pushing their interest – only/no down payment loans in front of their noses 24/7. My first condo was bought back in ’89, before 10% down payments were ever heard of. I had to have at minimum a 20% down payment, while also had to prove via documentation that I had the assets and regular income required to maintain my payments. The banks and mortgage lenders began this inexorable slide towards disaster, and the realtors and gov’t regulators were right alongside, egging them all on in the expectations of increased profits and political power.
Dmac (21311c) — 4/14/2010 @ 7:58 am#29, I think you have the order wrong. The Feds pushed and bullied banks to lower standards, and make loans with little or nothing down. The Feds promised to back these loans thru Freddie and Fannie. Banks took advantage, regulators did not look far enough forward; while Congress looked at all the new homeownership and expanded the programs.
Corwin (ea9428) — 4/14/2010 @ 8:20 amPersonal responsibility fell by the wayside as home buyers had their heads in the clouds.
Personally, I put less blame on the banks – those businesses acted within the constaints of the market, which were articially skewed by the Feds. That is not to say they are not partially responsible, they are. But the Feds are the biggest culprit, and anyone buying a home that far above their means is largely to blame as well.
For the most part, I agree, Dmac. However, the pox is not extending to both houses in how it plays out. The responsible ones are taking it on the chin.
JD (0f9c01) — 4/14/2010 @ 8:25 amBanks took advantage, regulators did not look far enough forward; while Congress looked at all the new homeownership and expanded the programs.
That’s a fair point, but regardless of whom was “pushing” whom, the excesses of people like Mozillo of Countrywide are truly excreable. He didn’t give a rat’s -ss whether his new customers could actually pay any part of their mortgages, it was all about the fees, baby. His mortgage brokers eliminated all documentation near the end, and they all knew it was going to blow up in their homeowner’s faces. Enablers enabling the enabled – quite a vicious circle.
The responsible ones are taking it on the chin.
I agree – I read somewhere that even with all of the defaults, they still only represent something like 10% off all outstanding mortgages in this country. So we’re the real suckers in this fiasco, as usual.
Dmac (21311c) — 4/14/2010 @ 8:57 amThis is not limited to simply mortgages, which are exponentially more difficult to get right now. Credit card rates for the responsible are going up. Countless other ways that people are being helped out of financial trouble at the expense of people who did not get in financial trouble.
JD (0f9c01) — 4/14/2010 @ 9:01 amThe ‘fundemental change’ in America: if you don’t spend it, we’ll take it away; if you don’t earn it, we’ll give it to you anyway; if you act irresponsibly, we’ve got you covered.
Corwin (ea9428) — 4/14/2010 @ 9:10 amIf you’re watching what’s happening in NJ with Christie facing down the public sector unions (and winning – so far), there’s still hope for the responsible among us. Even the insanely taxed voters there have finally had enough, and seem able to comprehend simple arithmetic.
Dmac (21311c) — 4/14/2010 @ 9:22 amI remember there was a time when policymakers pointed to rising homeownership as a good. Bad idea. Home ownership is not for everyone. Specially not at the cost.
[note: fished from spam filter. –Stashiu]
imdw (6ce957) — 4/14/2010 @ 9:31 amI know this is revisiting history, but maybe in retrospect there are clearer answers that you who understand these things can now share.
Was it necessary to “bail out” anybody to keep the economy from a worse meltdown that would hurt everybody?
Where did the money go, who was helped?
I agree with what’s been said, that fed officials pressured the market to take on risky obligations, those in the private sector not only took on these obligations, but then found ways to minimize their own exposure by selling derivatives to others (who may or may not have understood the risk at the foundation of the investments). And somewhere along the line people were obtaining mortgages and using artificially inflated property values to leverage credit for other things.
I am just interested in everyone paying their share of the consequences. Once the crime has happened, there often is no way to “fix it” that is “fair” to everyone. If there is unfairness to those responsible, of which I count ourselves, is it better than suffering worse unfairness if the “system collapsed” due to reasons we were not responsible for?
If it is judged that intervention was needed to minimize the damage to everyone, then the nquestion isn’t so much if something is “fair”, but whether it is “as fair as possible”, or “the least unfair as possible”.
Those politically responsible and perhaps criminally responsible should be held to account. From there everyone should take their lumps proportionately. Everybody who walked away from Fannie and Freddy and private institutions with big bucks who was complicit in the problem should be heavily fined. Enough “bail out” should be given along the way to keep things afloat. If some big bank gets a $10 billion check as a bail out, the creditors beholden to the bank, such as individual mortgage holders, should see some result from that. If 50% of their bad mortgage debt is covered by public funds, I think some of that should be credited to some of those accounts as well. In some ways I would see it as, say, $10,000 down on every involved mortgage. The one “paying” the mortgage now has $10,000 less debt, the bank has $10,000 less of a loss, and so on up through the chain. In other words, I don’t want some institutions and individuals getting “bailed out” at the expense of others.
Now, what I’m wishing for may be impossible, either in theory or practicality. The way to deal with this correctly was to never let it happen, but it did, so now what is the “least unfair” way to deal with it. Maybe it was to let banks go belly up, private speculators would buy up stuff at sheriff sales and properties would be “recycled” that way.
MD in Philly (3d3f72) — 4/14/2010 @ 9:41 amIn Cook County the preferred method is sale even a short sale (less than the debt). No bank really wants to take the house. I have seen “grace periods” of as long as seven months before foreclosure suit is filed in order not to hurt the homowners’ chances to sell or refinance.
nk (db4a41) — 4/14/2010 @ 10:06 amThanks, nk. I guess Cook County and Philadelphia are probably more alike than some real estate markets.
I’ll throw out an example if you have the time and “interest” in throwing out a guess.
Let’s say Jane and John bought a house for $250,000 at the top of the bubble. They owe $220,000 on it and Joe lost his job and they’re not making it. They put in on sale and get an offer for $190,000 which by market analysis and the realtor’s judgement is as good as they’re likley to get.
If they go ahead and sell it, being 3 months behind on the mortgage, is the bank going to be content to write off $30,000 (recognizing they already have taken in significnat interest while the principal has shrunk)?
MD in Philly (3d3f72) — 4/14/2010 @ 10:43 amMD in Philly, in that hypothetical, my experience is that most banks will approve the short sale if the bank is assured that there are no assets to make up the difference. The seller will be 1099’d for the $30K forgiveness.
SPQR (8475fc) — 4/14/2010 @ 10:59 amYes, definitely. We’re negotiating (for clients) a $650,000.00 sale on a $750,000.00 mortgage on a (in better times) $1.1 million house, with every likelihood that the bank will take the money and run.
nk (db4a41) — 4/14/2010 @ 11:00 amAll the mortgage brokers I talk to tell me that we are repeating the mistake of 1929 by tightening the money supply. That that is a formula for extending the depression and for driving people into unrecoverable poverty. Who knows?
nk (db4a41) — 4/14/2010 @ 11:07 amYou may have heard of Alexi Giannoulias, our Democratic candidate for Obama’s seat, and his bank’s troubles.
Broadway Bank specialized in 11% loans. With money it had borrowed from other banks at 9%. Which had borrowed it at 7%. From banks that were paying 5% or less to their investors.
This is the house of cards which seems to have collapsed.
nk (db4a41) — 4/14/2010 @ 11:26 amNK: I don’t follow. How is the money supply being tightened?
Is the argument that pushing for debt forgiveness de facto decreases the money supply?
aphrael (e0cdc9) — 4/14/2010 @ 11:40 amSince I have you on the phone, MD in Philly, my mother’s hospice is upset that my mother is still alive. They gave us oral morphine but we have not been giving it to her regularly because we try to get her up to walk and to sit up and eat and drink a little. So now they gave us Fentanyl patches. My mother’s only discomfort is rapid breathing. Acidosis? But the hospice bitches are laying a guilt trip on me. “Sit next to your mother and breathe as fast as she does and see how you like it.”
I have not told them yet that they do not love my mother as much as I do and she will have an eternity without suffering eventually. But I will, soon.
[note: released from moderation. –Stashiu]
nk (db4a41) — 4/14/2010 @ 11:41 amI am not trying to be snarky, nk, but does it surprise you in the least bit that a mortgage broker would feel that way?
If by tightened you mean more difficult to get, then yes, I would agree with that, and it could be argued that is not necessarily a bad thing.
JD (18e145) — 4/14/2010 @ 11:44 amI said I don’t know. Maybe in 1929 we had an enterpreneural ethos, not a consumer ethos?
nk (db4a41) — 4/14/2010 @ 11:49 amAphrael,
I meant that loans are very hard to get these days.
nk (db4a41) — 4/14/2010 @ 11:52 amThe thing that I find particularly odd is that the entire crisis seems to have been started by a collapse in the money supply caused by a panic in the financial industry and a resultant tightening of credit. The Bush administration (to its credit, I might add) responded by flooding the market with money.
What more do the mortgage brokers of your acquaintance think the government should be doing to increase the money supply?
aphrael (e0cdc9) — 4/14/2010 @ 11:52 amCan somebody explain to me why they didn’t pass the bailout through homeowners?
pitchfornksntorches (888cb1) — 4/14/2010 @ 12:55 pmIn my example $50,000.00 per homeowner would be given under the stipulation that; if used to pay down a mortgage it was tax free. If used for any other debit reduction it would have been moderately taxed. If not used as prescribed would be taxed at 100%.
The responsible borrowers would have been secured, the marginal borrowers rescued and the “Flippers” would only be able to rescue their primary dwelling.
Why didn’t we do that?
nk: fair enough that loans are hard to get these days, but it really seems to me that the government is doing everything in its power to increase the money supply.
i mean, borrowing on the order of a trillion dollars and then *spending* it ought to increase the money supply substantially.
aphrael (e0cdc9) — 4/14/2010 @ 1:26 pmThe lenders have figured out that politician will ask them to make bad loans, and then when things go south, blame the lenders for making bad loans. To hell with the shareholders!
Worked for GM, right?
People's Front of Judea (44bf37) — 4/14/2010 @ 1:44 pmMD:
I think it’s fairly common to see mortgage lenders delay foreclosure to avoid taking properties back. In rare cases, I’ve seen lenders let home mortgage payments default for over 2 years on loans where the monthly payments were $1K/month or more. At some point, however, lenders have to act.
DRJ (daa62a) — 4/14/2010 @ 1:48 pmaphrael….Read “The Forgotten Man”.
AD - RtR/OS! (4a0d27) — 4/14/2010 @ 2:22 pmwould only go up from there was pure insanity, unless years of massive inflation had rendered the money almost worthless.
That is exactly what has happened. The big jump was in the Carter years, especially 1976 to 79. I bought a house in Mission Viejo in 1972 when I moved down here. I paid $67,000. My wife and I divorced in 1978 and I begged her to keep the house or let me buy it. She wouldn’t. It is now, even after the meltdown, worth over a million dollars. Same house.
When I was a resident at LA County, I bought a small house in South Pasadena, in 1969, with some money my father left me when he died. I paid $35,000. I could put down $3500 and the seller took a second for the same amount which I paid off in a couple of years. That house I sold in 1972 for the same amount. We had been trying to sell it for $42,000 after we moved to Orange County but no dice.
About 15 years ago, it was for sale again and a friend saw it at an open house and sent me a brochure from the open house. The asking price was $595,000. The house is 1500 square feet, two story. It had three bedrooms and one bath. It is now advertised as two bath but I can’t figure out where they could put it because I wanted to add one and couldn’t find room.
I don’t know what it would sell for now but I bet it’s more than $595k.
That’s why people have been buying houses as hedges against inflation. It still works if you are careful. I bought this house for $259,000 in 1991. It is a small house but larger than the South Pas one. I now have it for sale for $630k and expect to get it. It was worth almost $900K before the collapse.
I might add that I got some comments about a surgeon buying a small house. I must not be doing well. Having given houses to two ex-wives, I had lost my interest in expensive houses so went for shelter. Ironically, right now in this area, my house, a three bedroom two bath, is selling for about the same price as a five bedroom, two story top of the line house. I have a very big lot and some other pluses but it is still interesting.
I could tell you stories about cars. I bought my first new car, a 1968 Mustang convertible for $3050. I paid $95 down and $95/ month.
That’s what inflation does and that’s why people buy houses as a hedge. The present collapse is the first real housing bubble in our history.
Mike K (2cf494) — 4/14/2010 @ 2:23 pmThe houses I’m looking at in Lake Arrowhead are mostly bank owned or short sales. Very few for sale that are not in some trouble with the mortgage.
Mike K (2cf494) — 4/14/2010 @ 2:24 pmComment by Mike K — 4/14/2010 @ 2:24 pm
Second and third houses are not priority items right now.
AD - RtR/OS! (4a0d27) — 4/14/2010 @ 2:29 pmnk-
I’m sorry you are not getting the help you need from the hospice people. The original idea of hospice was to promote and facilitate life in the face of an underlying untreatable illness. Unfortunately, over time many of the “people” (other terms are appropriate) involved in hospice care see that their job is to help people die comfortably, preferably sooner than later.
Yes, your knowledge of pathophysiology is correct. If a person is not breathing rapidly from lack of oxygen then trying to compensate from a metabolic acidosis is the reason. If her lips are pink I assume it’s acidosis, if dusky maybe inadequate oxygen. Morphine will help both. (Metabolic acidosis can be caused by renal failure, inadequate perfusion of the tissues from advanced cardiac failure, liver failure, starvation, and other things.)
It has been written up in some of the leading hospice journals that it is perfectly OK to give a person morphine to control pain (and I’ll assume theoretically respiratory distress) and at the same time give them a stimulant such as amphetamine, methylphenidate (Ritalin) or other to counteract sedation if the patient wants to be more alert to interact with others. I did a version of this once with great success and to the satisfaction of the patient, only to encounter the wrath of others (another story).
The hospice people are skilled technicians who can assist your mother and you balance her symptoms according to her wishes. To forego a higher dose of morphine for the sake of alertness, or using a stimulant in addition to the narcotic should be a decision you and your mom can make.
I don’t know if you’ve had a discussion over this with anybody other than a nurse, or with only one nurse, or what. I would feel free to request to talk with a nursing supervisor or a social worker or a physician, either from the hospice or your mother’s personal doc and make it clear that you want your mom comfortable, but prefer her to be comfortable and alert. She enjoys interacting with her family and the family enjoys interacting with her; that hospice care is not synonymous with death by terminal sedation. And you can remind them you are a lawyer and you have physician experts eager to testify if need be.
MD in Philly (3d3f72) — 4/14/2010 @ 2:43 pmThank you, MD in Philly.
nk (db4a41) — 4/14/2010 @ 2:47 pmShe is on oxygen and nebulizer so I guess it is starvation and dehydration.
nk (db4a41) — 4/14/2010 @ 2:59 pmI could tell you stories about cars. I bought my first new car, a 1968 Mustang convertible for $3050. I paid $95 down and $95/ month
My understanding is that one could buy a 240Z bare-bones for under 2,000 when they came out in 70 or 71. And my parents bought a Pinto. 🙁
Back to the main topic. In principle it seems to me that someone could make a living, either as a for-profit business or as a non-profit entity of buying properties at risk for foreclosure for a cut-rate price from the bank, then negotiate terms with the people who occupy the house that they can afford, along with some basic help in money management. etc. The bank puts closure on their liability, people have an opportunity to keep their living space if they are willing to rise to the occasion, and it’s done with little if any subsidy from the taxpayer. That’s my version of how an uncaring, let ’em go to bed hungry conservative would address the problem without (attempted and faulty) micromanagement from Washington. But as I’ve said, I have nothing of the skill set to do such a thing myself.
MD in Philly (3d3f72) — 4/14/2010 @ 3:08 pmHere on the West Coast, there was no such thing as a bare-bones 240Z, as there was a long waiting list for the cars, and due to the demand, dealers loaded them with “dealer installed options” that raised the prices considerably (to the mid 4’s); but, if you were willing to put down a heavy deposit, and wait several months, you could get one for the MSRP of $3601!
AD - RtR/OS! (4a0d27) — 4/14/2010 @ 3:41 pmhttp://www.caranddriver.com/reviews/car/00q2/datsun_240z-road_test/driving_impression_page_2
This is the house of cards which seems to have collapsed.
Don’t forget about their loans to known mobsters and the fugitives from that restaurant. But of course Alexi had nothing to do with any of those loans.
Dmac (21311c) — 4/14/2010 @ 3:54 pmSpeaking of IL corruption….
AD - RtR/OS! (4a0d27) — 4/14/2010 @ 4:02 pmWhat’s up with Patrick Fitzgerald?
You’re entirely welcome, nk. Wish I could do more.
MD in Philly (3d3f72) — 4/14/2010 @ 4:22 pmComment by AD – RtR/OS –
MD in Philly (3d3f72) — 4/14/2010 @ 4:22 pmSo I guess I can stop holding that against them. 😉 Actually, I took corners pretty fast with that rack-and-pinion (sp?) steering.
What’s up with Patrick Fitzgerald?
He’s working on the upcoming trial of Blago, and rumors are that he’s got a few more people he’s looking to indict shortly. He can do this for the next 25 years, there’s that much corruption here in the Dem Machine.
Dmac (21311c) — 4/14/2010 @ 4:56 pmAD – Rtr/OS: a full time sofware engineer and part-time law student has little time, generally speaking, for reading random books. Could you summarize its argument, for me?
And can you explain how it’s responsive to my point? (As a reminder, my point was: criticizing the government for contracting the money supply seems misguided when the government in fact seems to be doing everything it can to expand it.
aphrael (e0cdc9) — 4/15/2010 @ 12:20 pmComment by aphrael — 4/15/2010 @ 12:20 pm
How do I summarize a 468pg book?
Let’s just say that much of the “conventional wisdom” of this period is lacking. Ms.Shlaes goes into the backgrounds of most of the leading, and some not-so-leading, figures of the Coolidge, Hoover, and Roosevelt administrations, and how their actions played against the economic disruption resulting from the Crash.
One Point:
Most things that were done resulted in a “Capital Strike” that prolonged the agony. Those that had money, did not feel confident that their capital would be secure in the political environment that played out in DC, so they “sat” on it. Just as today, a lot of people are parking capital in land investments because of the uncertainties of future tax liabilities on capital-gains, dividends, and interest income.
Further work by others is leading to the conclusion that the Great Depression (a term coined in response to FDR’s depression-within-a-depression in 37-38) did not really end until late-45/early-46 when the Dem-controlled Congress actually reduced taxes to stimulate the economy, even in the face of a National Debt that exceeded 100% of GDP.
AD - RtR/OS! (7055a4) — 4/15/2010 @ 12:40 pmThe upshot was two-fold:
Economic activity was stimulated to a degree that the lower rates brought in increased revenues; and,
The GOP took over Congress in the ’46, off-year election.