You have a genuine scoop with that list, CR ! So I've found out where the honest schmucks who don't renege on their debts live - Anchorage is a little cold but Tuscaloosa, AL and Richmond VA? And Pueblo, CO ? PUEBLO ? man that's a industrial pit of a place. Who knew ? I might join them one of these days.
For Countrywide Purchase Loans:
Soft Market Category 4-5 loans: Maximum financing will be reduced by 5%
Soft Market Category 1-3 loans: Maximum financing will be reduced by 5% if the appraisal or appraisal review indicates any of the following: Declining Market, Oversupply, Marketing time over 6 months.
For Countrywide Home Equity Loans:
Soft Market Category 5 loans: Maximum financing will be reduced by 10%
Soft Market Category 4 loans: Maximum financing will be reduced by 5%
Soft Market Category 1-3 loans: Maximum financing will be reduced by 5% if the appraisal or appraisal review indicates any of the following: Declining Market, Oversupply, Marketing time over 6 months.
Any idea what the new max LTV levels are for categories 4 and 5?
Between stated income limits, lack of 2nd liens, high jumbo rates and falling LTV ceilings, California is not a great place to apply for a re-fi right now.
I wonder if the Fed takes that into account in figuring the monetary policy multiplier? Or do they just run their models on the last five years of data?
As I see it, the biggest impediment to widespread jinglemail is not some sort of moral argument (since polling indicates that a lot of people do not have issues with it), but the fact that most people don't have an accurate gauge that their house is way underwater.
If the government wants to prevent the next major level of catastrophe (widespread jinglemail), perhaps they should secretly buy Zillow and 'adjust' the zestimate formula upward across the board.
Neil, if I read the letter correctly, Countrywide is suggesting that the risk assessment is based on policies implemented by the GSEs and private mortgage insurance companies. If so, these county risk levels are industry wide.
The list is interesting. But I was also interested in the wording of the letter - especially the concern about borrower's "economic interest to repay".
As home prices move into a protracted period of decline, consumers will finally recognise the perils of bubble-distorted saving strategies. Financially battered households will respond by rebuilding income-based saving balances. That means the consumption share of gross domestic product will fall and the US economy will most likely tumble into recession.
CR,
This basically puts the homebuilders into a death spiral financing situation for house prices.
Now, the big question is how the mainstream media is going to play this.
I think it basically will allow BAC to walk away from CFC- after all why do they need a front office to generate more business- if they are cutting loan limits right and left, investor loans will be the hardest to get in a situation that require more investor financing.
CR,I also thought that phrase was telling.The speculators will of course be looking at the bottom line,and walking away when their loss is clear...but a lot of the honorable people will stick it out to the last,they keep their deals.gah,adverse selection.I am listening to SOTUA in the background,I had best turn it off before I lose my temper and fill the TV wit
This is the obvious moral hazard of relaxing lending standards. For 0% down, non-recourse loans the only real collateral the bank holds is the borrower's credit history. If the bank gives everyone a loan, regardless of credit history, then credit history loses it's value as collateral. Countrywide easy-accepted themselves right into this. The only way out is to tighten lending standards (which of course will reduce the size of the lending market, increase foreclosures, etc.)
just re: non-recourse 100% mortgages...if someone just mailed the keys back to the bank, is that it? do they have any tax liability on the loss the bank takes when it sells the property?
As I see it, the biggest impediment to widespread jinglemail is not some sort of moral argument (since polling indicates that a lot of people do not have issues with it), but the fact that most people don't have an accurate gauge that their house is way underwater.
That's why there's usually a "foreclosure sale across the street" associated with these walk-away stories.
When somebody actually sees another house in their neighborhood selling for 30% less than they paid it's a little hard to stay in denial.
Sounds like the borrowers have told them, "If I have to choose between your interests and mine, and the choice is make or break, I'll have to choose mine."
What were the previous limits? i.e. pursuant to tbizzle's post, if maximum financing is reduced 5% in a specified category, is it known if that means it went from 100% to 95%, 95% to 90%, 90% to 85%, etc?
This scary, the map from 60 minutes tells it all. The 30/60/90 baskets that will turn into REOs... wow. The homebuilders should really sell off land ASAP if I were them I'd do that.
I hear you had a good offer down on Third Avenue
You tell me that was the reason
For whatcha' put me through, Yeah
And now you come collapsin' back
I feel the heat of your attack
Want me to take you back
I'm givin' you the sack
So don't waste your time
Chorus:
It's a Little Too Little
It's a Little Too Late
I'm a Little Too Hurt
And there's nothin' left that I've gotta say
You can cry to me baby
But there's only so much I can take
Ah, it's a Little Too Little
It's a Little Too Late
You say you had a good time
But did ya' think it was for free - yeah
And how much did it get ya', all their flattery
And now you come back, runnin' for protection
You've been bitten by love and stung by rejection
You can't connect
What did you expect?
I'm still gettin' over you
You'd think that living in a zip code entirely contained within a category 4 risk county would exempt me from Countrywide Junk Mail offering to refinance my 15-year fixed mortgage into a brand new 40-year mortgage. You'd be wrong.
If I hear the word "challenge" to mean failure, bankruptcy, or incipient business collapse, I shall scream.
I really liked the point about the people who are not "into" houses and mtges the way we are, not mailing in the keys, solely because they do not realize how underwater they are. And then finally realizing it when houses are foreclosed all around. It was something I had not thought of.
I am walking. my current "servicer" bought my mort. betting on my credit history, and no doubt had at least an inkling of what was bound to happen. now i have a $2400 monthly and a 30% loss so far. theres some rationalization going on, sure- but thats mostly to keep wifey from losing her mind. For me it comes down to this: I can afford to make the payment, so my decision is based solely on falling value; I made a bet, same as the bank, and lost. If the bank was losing money like this on me, there is no doubt they would drop me just as quickly. I do not exist to pay a mortgage and the moment it is not in my "economic interest" ill stop.
"economic interest to repay".
is spot on. we know its a waste, its just some haven't acknowledged it yet.
In fact, the NAIC is currently working with Berkshire Hathaway Assurance Corporation to submit an Expansion Application using the NAIC's Uniform Certificate of Authority Application (UCAA). The UCAA provides a streamlined, uniform application process for insurers seeking to do business in multiple states.
And Cape Coral/Ft Meyers is not a 4, but a 6 if there was such a thing.
Gosh, my own Brevard County, is neither a 5 nor a 4.
Before you walk, why don't you give the mtg co the opportunity to reduce your principal balance by 30%. They'll say no, but you can tell yourself that at least you tried.
Man - you know you're a nobody from nowhere when your county doesn't even make that list. I searched up and down & dryfly's county not there... some near me are on the list (one of the nearby Twin Cities counties ranks a Cat 2... all the rest are measly Cat 1's).
I remember when I used to work.
I remember when I used to create things.
Now I spend my time fending of predators because of that incredible magic of "the free market", where anything goes, including screwing home buyers with outrageous prices and half-assed subprime loans that reset to outrageous levels in 2 or 3 years.
It's actually not the free market, it's quite the opposite.
It all stems from a government mandated banking monopoly(Fed Res), price fixing interest rates(Fed Res Discount window, open market operations, mandrake mech.), and legalized fraud(fractional reserve banking).
If we had free market we would have banks that exist to safely store money(real money, as in store of value and medium of exchange), use as a clearing mechanism, etc.
The near-constant inflation of the last 70+, combined with the bailouts of banking institutions, led to the extreme desire for yield as opposed to savings, which in turn led lending by numbers instead of trust.
Can we put to rest all the libertarian nonsense of the last 20 years? Greenspan was a devotee of Ayn Rand.
Nonsense. Show me a successful libertarian society.
Give me a decent society, with freedom of press and freedom of religion. In other words, let's dump the Republican party which promises libertarianism, while delivering government bailouts and invasive snooping by the government...
It's pointless man. If the gov' were writing the loans, these people would still blame the "Free Market" as long as one semi autonomous (non-gov't owned company) played any peripheral role in the transaction. You know the pen makers and printer makers.
Show many any society that maintains success(however you define it) in the long term. Doesn't mean we should abandon the ideals that gave the people of this country the liberty they once had.
suggests that in cat 4 and 5 areas, the loan to value ratio needs to be increased to qualify for the same loan product. So instead of getting a loan for 95% of the value of the property, you can only get one for 90% of the value. I wonder if it applies to the old 20% down payment rule, making it 25%. That would hurt around here.
Hopefully Tanta can explain this a bit better if she gets the chance.
"Can we put to rest all the libertarian nonsense of the last 20 years? Greenspan was a devotee of Ayn Rand.
Nonsense. Show me a successful libertarian society.
Give me a decent society, with freedom of press and freedom of religion. In other words, let's dump the Republican party which promises libertarianism, while delivering government bailouts and invasive snooping by the government.."
See what I mean. They think the rebooblikuds are libertarian. Not even the slightest understanding exists with these folks. Just dumborat party pablum.
The fact that the west in this country during the 1900's was fairly libertarian...weak to non existent gov't never penetrates the brain.
I had just noticed that. It's also all of NOVA and all of Suburban MD (Baltimore and some related counties are level 3). It's strange, the DC entry seems to include quite a bit of territory.
I think if people weren't so afraid of the government, the laywers, etc. That there would be much less large scale fraudulent institutions, because there would be more lynchings and tar and featherings.
I'm actually quite serious about this. We can sit on a blog and complain all day long, but as long as it's "their"(the gov) job to regulate, the general society will be victims.
Doesn't mean we should abandon the ideals that gave the people of this country the liberty they once had.
They never had 'Liberty'... wtf. White men with a lot of property had something close to 'Liberty'... the rest were 18th century equivalents of wage slaves or REAL slaves.
We had gov't interference then - we got it now - get over it & find a work around.
Read some history - then wax poetic about the good old days. Sheesh.
Nothing much changes - earth goes round and round while circling the sun and people wake up every morning and say 'but today its different'. Ya right.
Government, banks and the news media never shared the critical information with citizens that banks no longer held risk for the loans they made. That makes those groups culpable. People are too busy to ferret out such information. A few years back I told a PHD engineer that I thought the house he was buying was way overpriced. This otherwise very smart man informed me that the bank would not give him the loan if the home was overpriced. He trusted his country and its institutions. His agent told me comps had become meaningless. Should my friend focus on his work during the day, and then come home and read thousands of pages of government legislation each night to see if he can find any changes in law that might effect him in big ways, or should he have been able to trust his government and news agencies to inform him of material changes like allowing banks to separate risk from reward? This man was smart and had he known, he would have understood how such a change would drive up prices (especially if it is unannounced). For that reason I do not fault anyone for anything they do to unload a home bought over the last few years.
How do we adapt to globalization? The Chinese are killing us, not to mention the Japanese and other mercantile regimes in Asia. Their governments are heavily involved in their competitive advantage.
Sure it would be great if the world economy would just run itself without government intervention, but where is the evidence that this is realistic?
Government is necessary, because nature abhors a vacuum. Rules are necessary, and that doesn't just mean that we need the police to prevent breakins and holdups. We need economic rules. If the government doesn't set and enforce rules, who does?
What surprises me is how long the list is for the 1's and 2's. I expected worse in many places. Agree that the DC metro area looks disconcerting. Where can we find a description of what goes into the scoring?
you realize that ill be getting credit card offers in the mail as soon as i change addresses, right? banks put a lot less value on your credit rating than you might think.
its not all bad. ill be renting a friends house, who would be thinking jinglemail otherwise. the payment is the same, only ill live in a much nicer house. thats the meaning of "economic interest". If i am going choose between a human whose name i know, and a bank, ill choose the human every time.
I have already noticed some pretty odd changes in Zillow -- changes in their graphs etc., that make me think they may have different ownership. They seem to have smoothed up and out, their graphs on home prices.
I remember reading in "The Builders" by Martin Mayer that during more autocratic periods homes asking prices are much higher than actual market sales prices.
How would I interpret this list vis-a-vis counties that appear on and ones that do not ?
The county that I live in is flagged as Cat-3. The two adjacent counties (2-miles and 5-miles away) do not appear at all. Are the non-represented counties de-facto Cat-0 (i.e. risk not worth worrying about) ?
zillow has been scatterbrained lately. last month it placed my house at 270k or so, and falling. this month its 325k, and the 30 day shows a drop of 32k- WTF i say. after the earlier comment about a government takeover of zillow i wonder....
rich, i am trying to gauge your tone there...not as sharp as i used to be on these here internets.
jeez detroit dan, it sounds like your measure of any society's success is their economic output.
The USA has turned into a steaming pile of shit, and from what I have read so has much of europe. I'm not talking about GDP, or innovation, or any other generic measurement. I'm talking about the people. I have no one to look up to, because nearly everyone will drop their proclaimed ideals for the smallest promise of comfort or "success".
dryfly, I agree that many more people had absolutely NO liberty in the past, and their were massive injustices everywhere you look. That is part of human nature. If we just ignore what is happening and abandon the ideals soon nobody will have any liberty, and it really appears as though that is where our society is headed.
Anyway, you can't tell me that white men killing off the natives is any worse that the massive depleted uranium poisening of the middle east, or the genocide happening to the palestinians. That is happening NOW with YOUR tax dollars(assuming you are from US).
What amuses me is that amid all the bullhorning about how the Manattan mkt is different, move along, nothing to see, and lo, there is NY county (along with other NYC boros) on the category 3 list.
What, the boro of rich supergeniuses has the same risk level as its workingclass neighbors? Whodathunk!
Very optimistic list, I think. Must be based on where prices are already falling. I have family that own property in Alabama counties marked "category 1" and those markets are VERY bubblicious.
No country is perfect, and never has been. I'm trying to see which governing philosophies have worked better than others. Isn't that how evolution works?
I'm off to bed. Hope to discuss more some other time...
I am with Dryfly in a lot of way, most of the MSA around here is a Cat 1 but I cringe when reading posts such as Dyanamite Jacket's. Scary stuff.
Try talking someone out of buying when they think it is the right thing to do. Try talking someone out of that wonderful exotic mortgage product they heard of where they only have to pay 1%-they don't get (or they refuse to understand) that it is negative am.
After 20+ years in this industry I am still - yea, you know it- shocked by what it has become. Give me the old days of lending-you know, where we still looked at a credit report and calculated NET income instead of gross.
The mortgage industry has become a farce of what is used to be and now we are paying the price. We downsized out most of the people that actually knew how to calculate DTI, LTV and knew what a chain of title was, not to mention they knew how to prepare Assignments-HOLY CRAP, you mean that was real document?
We are left with clerks and frankly, if you are depending on a clerk to help you with your renegotiation, God have mercy on your soul.
Wasn't there a report a few months back at how some companies were dropping clients who were not profitable. I think it was some phone company and some retailers also. Well anyhow, now people are dropping the banks.
If the roles were reversed and the banks were losing money by continuing to hold your savings (as an example), you bet they would give you back your money and say "sorry, asta la vista", can't do business anymore. So what is wrong with people just making a business decision just like companies do? Moral Hazard? Are you kidding? What would the banks do if the roles were reversed. Give back the house and cut their loses.
dryfly, I agree that many more people had absolutely NO liberty in the past, and their were massive injustices everywhere you look. That is part of human nature. If we just ignore what is happening and abandon the ideals soon nobody will have any liberty, and it really appears as though that is where our society is headed.
I hear ya - I just get real tired of the things were good way back when we were FREE and it sucks now. Just wasn't so.
You can make the case that it should be different or better going forward but not the case that we were somehow 'better' in the past. We weren't.
Looks like housing in a number of the communities are caught between a rock and a hard place. High purchase prices in areas with few rental options.
Anyone else notice it?
Well, there are some Spanish land grants that are title sources. And I bet there are at least a few square feet of reservation that never were part of the white mans land.
And while I totally agree about past injustice and killing of the natives here, I must point out that the vastest number of deaths have to do with Western diseases which the Indians weren't immune to. Even if Columbus, the conquitadores, and Indian fighters had the souls of mother Teresa, the Buddha, Gandi, Socrates and Christ, the death outcome would have been essentially the same.
The Mexican Indians really weren't so inferior in warpower than the Conquistadores, but all they had to do was breathe the air of a white person, and they were toast. So if you're going to blame somebody, blame god who invented those diseases, or a misfortune of evolution.
Sorry, it's off track, but the great Tanta said it was ok, late at nite, which it is.
The one point I'd argue that's different is the whole "nanny society" thing we've developed since the New Deal. Outside of the cavalry or the local doctor that made house calls, people didn't expect help from anyone but themselves and their neighbors.
I expect that a majority of your neighbors still think that way, as mine did back in rural Colorado. However, the cities are another matter entirely.
The Mexican Indians really weren't so inferior in warpower than the Conquistadores, but all they had to do was breathe the air of a white person, and they were toast. So if you're going to blame somebody, blame god who invented those diseases, or a misfortune of evolution.
What is going on with Zillow? After reading a few posts, I decided to log on. I looked up my property, my best friend's, my brother's and my Dad's and ALL of them were UP HUGE!!!! That is nuts!! I,m talking 50K to 80K from about 2 months ago when I last looked them up.
All of us are scattered thru-out North Jersey and prices are definately NOT going up. We don't have a crash scenerio but no way any increase in values.
Does anyone know what is truly going on? Are they trying to help the markets by convincing would be buyers that the property is a steal?
We're all city dwellers now. 3% of Americans live on, or have access to a farm (no proof, read it somewhere, and it sounds plausible). I might someday see the Cavalry coming down I-95, but I doubt they'll be coming to anyone's rescue.
The one point I'd argue that's different is the whole "nanny society" thing we've developed since the New Deal. Outside of the cavalry or the local doctor that made house calls, people didn't expect help from anyone but themselves and their neighbors.
Quit blaming the New Deal - no one makes you use any of those services. And while you pay for them you will pay for a lot of things you might not like - get over it. Life is too short, its only money.
We have 300 million people HERE in the US now. We have 6 plus billion on the planet. That is the ONE thing that has changed - with density expect more rules.
I have a friend who lives up on the Canadian border - very rural. He grew up in a suburb and said he always wanted a place where he could walk out on to his deck naked in the morning and piss off into his back yard - just to do it. I laughed and said he could do that back in suburban Minneapolis too - except they'd cuff him for exposure if any of the neighbors there saw it.
Laws & gov't are like Frost's poem "The Mending Wall"... When everyone is jammed in tight, good fences make good neighbors even if we secretly wish the wall was down. Gov't is the mother of all fence menders for good and bad alike.
dynamitejacke, your the Platonic Form of whats rotten with this culture, an american deadbeat. Able to rationalize anything...were you at woodstock? I'll bet you'd dump your wife and kids if they became an economic or emotional liability...as in "we grew apart". If it feels good do it. Don't try this in asia.
Not against walls, per se. I am against cradle-to-grave coddling. Like they say, if you subsidize something you get more of it. We've subsidized dependence.
Marcus,
Ugh. Thanks for reminding me. I think I'll go clean my guns.
Yes. Makes me wonder. Been looking at farms (mostly in Canada - prices for farmland are much more reasonable, Property taxes are reasonable, infrastructure is good, and they've got water). Couldn't hurt to own a small farm outright.
dynamitejacket -
when you bet and lose and don't pay, you would expect to feel some pain. I hope you get what is coming to you if you walk.
You are also screwing your neighbors, in addition to whoever has to take care of your house.
You know it's theft if someone refi'd, took the cash and then walked - how are you any different?
dio. i hear your argument, now here are some details:
i am almost thirty. i make around 60k a year in orange county. wife is home with 2 kiddies. i work a 40+ hour week and take night classes at the CC to keep up my "marketability" I bought the 900 sq ft. dump of a house 4 years ago, with a no-nonsense loan. i have since dumped 40k of MY OWN money into renovations, in hopes of selling in 5 years to buy a place big enough for 2.5 kids and a dog.
my 40k, and then some have evaporated due to the scandalous speculation and hype, and subsequent crash of the market in my area. i couldnt give this house away, and i am not going to force my kids to live here for ten years in hopes of recovery.
are you sure deadbeat is the term you want to use here? nice use of Platonic though
Countrywide Financial Corp's decision to sell itself to Bank of America Corp was driven in part by fear of potential crackdowns by regulators, the Wall Street Journal reported on its Web site on Monday.
Not against walls, per se. I am against cradle-to-grave coddling.
Then don't be coddled. But also quit worrying about others being coddled.
One of the weird things I got from reading 'Atlas Shrugged' AFTER I had already been working for myself was the sudden realization that almost ALL my hardcore Libertarian friends either worked for gov't or large corporations. I was their token 'socialist friend' and yet the only one self-employed.
BTW - I'm not a socialist either (I got friends who really are an know the difference) but I quickly learned if you're not a Libertarian then one drop of pro-gov't policy makes you a socialist.
Its really pretty funny. I enjoy the company of both camps as long as they don't meet. If they did, it would be matter anti-matter.
I was going to defend the woodstock generation but I realized that's the generation I watched on TV, as a kid, not participated in. But the anti-apartheid demos, the anti-Vietnam war demos, the student "strikes" ( doesn't that sound quaint ) against hmm Eyesenck, the Catholic civil rights protests in Northern Ireland, the earlier "Ban the Bomb" and anti-capital punishment movements, quite apart from the efforts towards gender equality and the nascent "one world thinking" - cf The Nigerian Civil War and the famine in Biafra and who can forget the campaigns against homelessness(SHELTER).
And that's just the UK I'm talking about.
That's a pretty impressive list of the contributions of the Woodstock generation - by my reckoning anyway.
ill be keeping the lights on, and paying the water bill. even hired a gardener. im not giving the lender the whole middle finger- im just accepting that its not beneficial to my family to throw money away-
All of this talk of jingle mail and walking away, and the moral/ethical ramifications of doing so, is pointless. By hook or crook, people will be losing their homes. Bankruptcies will follow. You can't walk away from debt unless you file bankruptcy. If you think your defaulted mortgage-holder won't come after your present and future income and assets, you're kidding yourself. I think the banks are going to get right pushy about collecting as much as they can.
You know it's theft if someone refi'd, took the cash and then walked - how are you any different?
jp,
What a coward and hypocrit you are, jp. You don't know anything about dynamite or his financial situation or his values. And you wouldn't have the guts to say this kind of thing to his face in person.
Stop buttin' into other people's business. Stick to your own. Make sure your house is clean before you call others dirty.
Lots of blame to go around, lots of fingers to be pointed and targets to point too. Lots of stories on all sides. Full of rationalizations, reasons -- real and imagined, and pain and suffering.
Oh well... It was all just a fantasy, a grand illusion. None of it was real, right? So, no use getting all worked up about nothing.
I don't fault dynanitejacke or any of the other jingle-mailers for what they do. They are simply making an economic decision that is in their best interest. There was a reason that 20% down payment was required in the past. And will soon be required again.
I think the list is based on counties in Metropolitan Statistical Areas (i.e. urban areas). If you want the breakdown for MSAs, it's here: U.S. Census Bureau: Page not found metrodef.html
ST - there are a number of counties on that list NOT in MSA's. I can't speak for all omissions but know there are at least a few near me to void that explanation (see Wabasha county Minnesota then google map it - ain't no MSA but is on the list).
curious what being in Cat 1 really means in that list. Some of the homes around here do seem to be sitting for a long time. And the prices shot up in the last few years, there were stories in the paper about how people who work here can't afford to live nearby. The boomers are buying up all the rural areas too. Commuting for an hour including driving over a mountain is not what central Pennsylvanians are used to. Turns out the places those lower income people are living in are now in cat2. The price of gas combined with long commutes has to be taking a toll.
anonymous: smart money has covered their shorts, and have left with the cash. There may be opportunities, but this was fairly obvious to some smart people a while back. I realized there were going to be problems a couple of years ago, but I'm not smart enough to have done anything about it.
I live in the city, albeit in the hills, so I gotta worry about those around me. If LA ever gets the big one, we're buggin' out fast.
That I agree with 100% - do what you have to do, control your destiny the best you can (or was it Seinfeld & 'master of your own domain' - love it). But I'd quit wasting a second thinking about others being 'coddled' - that's their issue. That was my point.
BTW my neighbors are probably crazier than yours - the craziest crazies seem to all live in the bush - they are spread out so you don't see'em like in a city street corner.
``The Fed is going to have to keep slashing rates, probably below inflation,'' said Robert Shiller, the Yale University economist who co-founded an index of house prices.
So-called negative real interest rates represent an emergency strategy by Chairman Ben S. Bernanke and are fraught with risks. The central bank would be skewing incentives toward spending, away from saving, typically leading to asset booms and busts that have to be dealt with later.
Like I said, Rogue Trader story will keep getting more tangled and it will become a PR nightmare for SocGen. Their credibility will soon be shot.
There will probably be dozens of people implicated in the scheme and Rogue Trader may be the most junior and naive of them all. He may even turn out to be a pawn.
``The Fed is going to have to keep slashing rates, probably below inflation,'' said Robert Shiller, the Yale University economist who co-founded an index of house prices.
Fed funds is 3.5%. CPI for 2007 was 4.1% Aren't we there already?
Just to keep it all balanced, here is a view opposite to Robert Shiller's:
The Federal Open Markets Committee may want further rate cuts but inflation fears limit their options, writes David Litterick
....
Barclays Capital believes the current make-up of the FOMC is more likely to place inflation concerns above the threat to growth. "Overall, the 2008 voters are more hawkish than the 2007 voters," the bank said.
This realisation, and the knowledge that at least part of last week's sell-off was down to the rogue trader at Société Générale, has slightly pared expectations for a 50 basis point reduction at this week's meeting to follow last week's emergency 75 basis point cut.
....
Recently he[Bernanke] spelled out the dilemma. "It is not the responsibility of the Federal Reserve to protect lenders and investors from the consequences of their decisions. But developments in financial markets can have broad economic effects felt by many outside the market and the Federal Reserve must take them into account."
...
As for this week's likely move, according to Howard Wheeldon of BCG Partners: "It's a hard one to call.
...
"A half-point cut would take the US benchmark Fed funds rate down to 3pc. However, combined with last week's large cut, the $150bn Bush fiscal plan and continued central bank liquidity support, the opposing theory would be to suggest that as the Fed may have no consensus for another cut it will prefer to wait."
...
"The Fed really doesn't want to bail out investors," said James Hamilton, professor of economics at the University of California. "There will be lots more blood on the floor before this is done."
It's an old saying that a fish rots from the head down. Well, to those of you that think bailing on an underwater mortgage is dishonorable or theft I say so what. Surely you've seen stories about CEOs who run a company into oblivion and still walk away with millions. Do you really think no one else has noticed? After all, what they do is just business.The free market yada yada yada. Why should any lowly American peasant behave any differently than those at the top? In other words, the rot has started to spread.
I think dynomite is Alright and wish more of us had his resolve...the neighborhood would not have collapsed...the values attached to these houses would have been in line with the wages behind them...the transaction would have been more personal and less "disintermediated".
I am amazed at the interest shown in these rankings...don't try that on me you subprimers.
Just so happens I have several Russian co-workers, and they've hit me with lots of jewels like that one. Great people with great stories, and even better jokes!
The free market yada yada yada. Why should any lowly American peasant behave any differently than those at the top?
Besides Americans have been doing this FOREVER... Abandoned squalid farms in Europe & came to New England... Left New England to go to the Midwest... Left Midwest to go to California... Left rural areas to go to cities, left cities to go to suburbs, left suburbs to go exurban.
Sometimes they 'sold'... sometimes they just 'left'.
Nothing much changes in human history. Guys like dynamite aren't villains or heros... just folks clawing their way through life. I wish him the best of luck with his next adventure.
Zillow is largely a joke. Please don't rely on it.
You can do your own quickie appraisal with Redfin.com, if they cover your area. Use the search parameters to show sales in the last 3 months...that will give you a good indication of the truth.
There's no moral imperative to keep paying to a faceless corporation that would screw you the minute it made the a penny legally.
Kind of depends on whether you entered the agreement with the implied thought of a moral quid pro quo. I think most of the people who believe that there is a moral line that is crossed do believe that it doesn't matter whether you make a bargain with a person, company, or yourself: a bargain is a bargain, and a contract is a contract. They are rightfully shocked to find out not everyone believes this.
Not to be facetious; if you look at the civil contract known as marriage, and it's history in the Judeo-Christian literature, you'll find that the Old Testament god relented and allowed divorce, recognizing we're not going to stick by a particularly bad bargain.
If I were in a situation where I was pouring money into a money pit, I'd ask myself at what point does it still make sense? For different people, it'll be answered differently. I'd be more swayed by the money, but I do believe in Karma.
There's a reason canada farmland is cheaper..the yields are much lower. Ex Wheat yield of 30bu per acre vs 75bu ac in Eastern WA. The income from 75bu is much more than the implied 2.5X of 30bu. Farming is not economically feasible in the saskatchewan without mass govt subsidy..the numbers just don't work at 30 bushel yields.
Countrywide has finally discovered that the American borrower who 'owns' a home has decided to outsource/offshore their mortgage debt to the lender. Or to downsize/rightsize their mortgage debt, as the case may be be.
What a surprise - if offshoring/outsourcing/downsizing/rightsizing was good for corporate America, which for decades considered a contract to be worth what it costs in legal fees to break (or lobbying fees to buy laws changing it), why should the America 'homeowner' be any different? After all, it may take a while, but even the most dim witted consumer could figure out what such American luminaries as Milken ('the biggest player in the insider trading scandals of 1980s') or Lay (1990s) discovered - as long as the money is free, gorge on it, and worry about the lawyer fees later.
Oh wait, now we will hear about how such practices threaten the moral center of America? Or the financial center of the debt society - the one that was supposed to work by those handing out the credit at interest rates generally ranging from inflated to usurious living large. See Wall Street's bonus pool last year - where do you think those 'profits' came from? If people walk away from their mortgage debt, tens of billions of those bonus dollars will walk with them, which would be a catastrophe. Much like the plundering of pension funds was for Wall Street not so long ago - not because the people supposed to receive their pensions (ExxonMobil and its 4 billion dollar pension shortfall in a period of 10 billion dollar quarterly profits or 400 million dollar CEO retirement compensation comes to mind as a non-Wall Street example of how corporate America values its commitments) didn't get them, but because the well ran dry. It is the eternal challenge of being a locust, I guess.
America's seemingly plain moral decline has any number of causes, but generally, rot starts at the top, and slowly spreads to the roots.
It is only when the top discovers that the roots are dying that the problem becomes grave enough to address.
"There is no fraud, sir. There is no fraud. The word fraud was used by Bouton numerous times," said Kerviel's lawyer, Christian Charriere-Bournazel.
"Mr Bouton held this unfortunate man up for public vilification, threw him to the dogs ... and there was no substance to it," he told reporters late on Monday.
I did say that the charge of "fraud" in the first SocGen press release and in other public statements was a bad legal lapse. Now, Rogue Trader will sue SocGen for slander, further tarnish their image, and receive a very lucrative settlement from them.
There is irony here. In connection with monoline discussions, several people have speculated what would happen if equities could be insured like bonds are.
The guarantee of equity returns is a huge global biz and SocGen is a leader. Tens of billions of structured investment funds have been created backed by SocGen's guarantee to pay X% of principal. Investors in these funds have redemption rights. If a confidence crisis develops at SocGen, a lot of this money could unwind.
In turn, the unwinding of SocGen structured guaranteed products could put pressure on the underlying funds (mostly hedge funds) to sell in a falling market, which could trigger liabilities under SocGen's guarantees.
The next wave down for housing is coming. Remember all the housing bulls who said back in 2006 that housing could never fall without rising unemployment? Well, they are about to get what they wished for.
All the major builders are in the early stages of massive layoffs. Not just contractors, but engineers, architects, surveyors. As these folks lose their jobs the economy will suffer another hit.
I have analyzed the balance sheets of most major builders and the only way they can possibly survive is to raise cash and layoff most of the staff. It's survival mode now, hunker down.
"Jan. 29 (Bloomberg) -- Tousa Inc., the Florida homebuilder that lost 98 percent of its market value in the past year, sought bankruptcy protection from creditors after missing three interest payments this month.
About that list. Countrywide doesn't have any Indiana counties in the lower three rankings, but Indiana is among the top ten states for foreclosure rates, according to RealtyTrac. I understand that there is some room for slippage, but that seems a lot of slippage. What gives?
I know that I am coming to the conversation a little late (OK, very late), but I am not sure many of these "jingle mailers" have thought of the tax consequences of the lender writing off the debt and the ensuing tax bill they will be getting. What are we going to do as a country when all of these middle class folks cannot pay their tax bill, either? Under the new bankruptcy law, I'm pretty sure that one of the changes was that they could never discharge this particular tax obligation.
So, is this another shoe that will drop with all of these folks that are buying houses "across the street?"
We have one hell of a mess on our hands that I suspect will come next year. Where is the money going to come from to pay the upcoming tax debt? The public policy implications of middle class folks who will regress into the lower classes is shuddering.
Xennady writes:
It's an old saying that a fish rots from the head down...
Xennady | 01.29.08 - 12:53 am | #
Yes, Prince of Citi can walk away with millions in his pocket, but we can't have the little guys walk away from their upside down mortgages; that would be immoral, if not outright illegal. The system that condones and even encourages the former does certainly frown upon the latter. We can't have the masses "misbehave." That right is reserved for the ruling class only.
Interesting confluence of different subjects. Zillow home price estimates are all over the place as they attempt to automate appraisals which are inherently subjective. Last month they changed their proprietary model and some prices saw wild swings. Mine went from -$211,000 over 30 days to -$9,500 due to the very most recent changes. Unfortunately these changes are not documented and there is no way to examine the alogrithm . Now we have Countrywide attempting to automate risk assessment with what appears to be MSA price trends from OFHEO as applied to entire counties. As others have noted this is very poor practice. What I don't hear is any concern for correlation to ethnic demography. It won't be long before CFC is forced to abandon (at least publicaly) this over accusations of discriminatory lending. SocGen trader thinks he's got a model that makes money by correctly assessing risk; costs SG $8bn. The Homebuilders learned from their past errors and were fully prepared for this downturn. Their models told them so. The default rates for NODs going to NOTS are many times larger than the banks expected according to their models. Stop me when you sense a pattern.
Interesting that CFCs home area is Cat 4. Interesting that they apparently once included a moral imperative to repay into their default models. Too bad the lessons come too late.
Not at all. I'm a guy who bought with fixed rate loans in Nov 2005. I had heard the market was cooling, but did not understand what I do now, and that the market would drop like this. Nonetheless, I plan to ride it out.
I hope the people around me have more morals than dynamitejacket. He says he'll keep the lights on and the lawn mowed, but how long until he decides that it is "no longer in his interest" to do so? It's not like he has ethics or anything. His neighbors at best will have an REO sale to bring down their comps; at worse it will becomes an eyesore and/or squatters palace, drughouse or vandalized ruin.
When he starts renting from his friend, I hopes he's got a crackhouse on one side and a meth lab on the other.
What seems lost in this conversation is that physical community requires at least some level of interdependence. There is a lot of talk about what individuals should do in their own best interest, but there is no talk about pulling together as communities to solve our problems. I live in a state without property tax protections, so when my neighborhood saw huge price increases, my retired neighbors could not afford to stay. Yes, they made some money, but they also left the churches, neighbors and friends that they had lived with for decades. They lost community. Ten years ago, I lived in a community of people who helped each other and made decisions not only in their own best interests, but in the interests of their neighbors, schools, communities. We volunteered to improve the communal environment and built strong relationships. I sympathize with people who feel financially distressed, but there is another side of the coin. People who participated in bidding up the price of homes to unrealistic levels, and who took out mortgages that they could not afford, displaced many people and decimated communities. More than 60% of my old neighbors are gone. The new neighbors are mostly two income, and do not have the time or the apparent interest to invest in our community. Yes, business leaders have behaved without any regard for community. If we all choose to follow their example, then what will our neighborhoods look like?
now i have a $2400 monthly....i make around 60k a year in orange county. wife is home with 2 kiddies. i work a 40+ hour week and take night classes at the CC to keep up my "marketability" I bought the 900 sq ft. dump of a house 4 years ago, with a no-nonsense loan.
OK, so let's look at this numerically. If you're PITI is $2400/mo with no-nonsense loan, then my guess is that you bought something on the order of $300,000 - which would be 5 times your income . Your DTI is at almost 50% assuming no other debt at all.
Just exactly how the f*** was this supposed to work?
I bought at under 3x income and my DTI is in the low 30s - maybe that's why I can stand it.
Don't complain about speculators, dude - you are/were one.
--
bZb: " We can't have the masses "misbehave." That right is reserved for the ruling class only."
What part of "System of the Crooks, by the Crooks, and for the Crooks" don't you understand? I think that you probably do, but most here don't.
Americans are bred to be dopes not to question the sanctity of the system itself even when it has manifestly been taken over by the NYC Banking and Finance Cabal. Let us see who they own, in order, Hillary, McCain, Guiliani, Romney, Obama. You get the picture. Poor Ron Paul and his supporters.
There's an old anecdote that the whole debate above calls to mind - can't remember the protagonist, but it sounds like something Churchill would have said, so I'll go with that.
Churchill meets a woman at a fancy dress ball and, after some hours of philosophical discussion, poses a pointed question to her: "Would you sleep with me if I offered you a million dollars?"
The woman thinks about it and finally says, "Well, yes ... for a million dollars, I suppose I would."
Churchill says, "In that case, how about $10?"
The woman recoils in shock and horror. "Ten dollars? What kind of woman do you think I am?"
To which he replies, "We've already determined that. Now we're just haggling over the price."
Moral of the story: When it comes down to it, nearly everybody has their price.
For some Americans, their 'price' may well be lower than what they would stand to lose by being trapped in a three-decade-long contract to pay back an enormous sum of money backed by nothing but a rapidly depreciating asset. And anybody who is shocked, shocked! at this news is either foolish, naive, or quite possibly both.
OT-Durable goods up 5.2 %, MMM good numbers, LLY super numbers.
I thought I would just mention this since everyone here is bound and determined to ignore any good news. And yes there is plenty of bad news too, and no, I am not ignoring it.
I have been thinking of dynamite's actions in the light of what I know of history, and what someone else posted somewhere, everythings got so long it's hard to say where.
Anyway, a peasant's revolt, which this is sorta becoming, is, basically, a WAR, people die in wars. Nearly always, the peasants lose. Usually, the artistocracy gets stronger afterwards, sometimes temporarily. Therefore, as a proxy for war, merely mailing in some keys is actually very civilized. And tho foreclosures certainly mess up a neighborhood, it certainly beats the effects of burning down a village.
Aristocracies and monarchies nearly always are cruel and heavy handed, and leach off the peasants, while telling the peasants that we are all in our correct spot, because god put us there. Peasants put up with it, until things start getting a little better, and then they start asking questions and want things to be a lot better. Obviously, we are in a different situation, but not so different.
And yes 1491 is a wonderful book, should have cited it.
Jas,
I have tried to address the "fundamental question" which you ask. Americans are indoctrinated with the concept of independence almost from birth. American mothers place their babies in a crib, often in another room and 'ferberize' them, which is they allow them to cry themselves out. The Japanese, in contrast, sleep with their children for at least the first year of life and often long afterwards and focus on developing interdependence.
This difference in values produces measurable neurological differences. I have long believed that Americans would walk from their mortgages in large numbers based in part on this thinking.
I think that I was very lucky to have been able to spend a great deal of time in Chinese and Japanese households as a child, and I value both independence and interdependence.
Based on your comments in the past, I think that you can clearly see the damage caused by the American inability to find the middle way; however, I think that you fail to understand the value of the maverick and do not realize the degree to which Americans have the ability to live according to their own ideas and values.
Guys like dynamite aren't villains or heros... just folks clawing their way through life.
thanks. that is how i feel about it-
Lawyerliz-
history shows a recurring theme: Those with money become increasingly adept at extracting wealth from lower classes. eventually the lower classes realize the game, or run out of wealth to extract, and the game resets. Sometimes the peasants get a little back, often they do not.
Actually, at DTI of 50%, with 2 kids, you really can't afford that payment. For the kids sake, you should walk, but it only makes sense if the monthly pmt is lower. Going to a nicer place for the same money is not going to solve anything.
The million-dollar tale is usually attributed to Samuel Clemens/Mark Twain. At this late date, we're unsure if he was repeating a good yarn or was spinning one himself.
Most of the oft-quoted Winston C. exchanges (some quite possibly true) were between himself and Lady Astor. All rather cruel, some excessively funny.
i will be paying the equivalent of the mortgage on my friends place. for the sake of simplicity, i said "the same" but really my rent will be 2k per mo flat, and ill be taking care of some maintenance. so it is quite a bit more affordable. But then i am also banking on my friend's faith in a rebound, and he doesnt mind waiting ten or more years for it. i could not do the same.
my apologies for any confusion caused in the name of simplicity, bob
They classified Jefferson County, Idaho as a 1. The Idaho Business Review did a story about a 20 year supply of homes over $500,000 there, building in Jefferson County were anticipating the Californians to buy them. Looks like they are going to have to wait a long time.
Also, the settlement of the West was accompanied by a great deal of legal maneuvering and outright chicanery. There was a reason that 19th century towns were always vying to be the county seat--living in the county seat made the legal machinations so much easier! (You thought you had title to that ranch? Well ) Also check out any history of the mining strikes--the folks who ended up with the productive mines were those with the best lawyers. (And 19th century mining scams make contemporary versions look downright tame.)
"Anyway, a peasant's revolt, what this is sorta becoming, is, basically, a WAR, people die in wars."
Lawyerliz-
Excellent point which the common man generally cannot comprehend. If the Fed let's this get out of control, this subtle ensuing form of revolt could quickly escalate into civil unrest. And there are far more Americans with guns now than any other time in history.
A dangerously large portion of our population will not be waiting for a handout, it will be all about takeout.
my apologies for any confusion caused in the name of simplicity, bobn
dynamitejacket
Sorry I took off so hard, too. (It's just the visions of vast swaths of walked-away-from ruins that gets to me.) If you maintain the current house, that shows some real ethics. You might try to arrange a short-sale, though I don't know the details of that, but the bill that takes the tax sting out of that did get passed and signed.
And there are far more Americans with guns now than any other time in history.
A dangerously large portion of our population will not be waiting for a handout, it will be all about takeout.
Quincy k
I can't speak for illegal gun-owners, but the legal ones I know are, near as I can tell, all or nearly all upright folks who believe in the right to keep and bear arms for purposes of defense.
I am now one of them, an action I took as a result of reading here and other places of what could be coming.
Not that I could predict anybodies actions if their kids were starving, of course.
Here's another variation on the theme. Retiring boomer with good credit and enough cash to buy house outright. Takes a high LTV mortgage instead, so that if values fall too much, he has the option to use his cash to buy a second house at a post-crash deflated price, followed by walking from the mortgage on the first.
No fraud here at execution of the contingency, as there is no second loan app involved with the cash sale. Essentially, the mortgage/banking industry provides a hedge against a large decline caused by...the counterparty in the mirror, the mortgage/banking industry.
Could it be that the brilliant writers of no-recourse statutes had "housing always goes up" on the brain while they were writing?
The sanctimoniousness around is incredible. Do you people NOT understand the basic transaction here?
Let's back up a bit and talk about the past. In the past, someone wanted to buy a house, they put up 20%. They had skin in the game, and they would suffer greatly if they "walked away". Also, if the bank thought the buyer was a credit risk, they would price that in via increased interest rates. And they would verify the income to make sure they were going to get paid back.
The penalty for walking away was the loss of a significant chunk of money (even more if the house had appreciated). But the buyer ALWAYS had the option of walking away, but the banks had priced in that risk and made money accordingly.
These were the rules back in the day, and they worked great.
Fast forward to recently. No more down payment. Credit was proffered based on a credit score. The penalty that a buyer suffers for walking away was no longer a significant chunk of money - it was the "penalty" of a reduced credit score. Not really as much of a "penalty" is it? Especially considering that the buyer was likely to get mortgage and credit card offers at his/her new rental next week.
dynamitejacket didn't make the rules, he's just playing by them. I don't see how anyone can get MAD at him.
Do I think he's greedy? Yeah, he made a bet that he could "afford" the deal he made (which he should have never been able to do) but that's his call and he'll pay whatever "penalty" the rules stipulate.
Geez, this pretty much puts the struggling homebuilders in problem areas underwater.
Redlining by county!
Call the Fed!
Phoenix is pretty much dead now.
Someday this war's gonna end...
Question:
What is the implication of other lenders not redlining counties that Countrywide has redlined?
When risk premiums come back, they come back harshly. Since neighborhoods cannot be redlined, banks will have to redline counties.
Got popcorn?
Neil
You have a genuine scoop with that list, CR ! So I've found out where the honest schmucks who don't renege on their debts live - Anchorage is a little cold but Tuscaloosa, AL and Richmond VA? And Pueblo, CO ? PUEBLO ? man that's a industrial pit of a place. Who knew ? I might join them one of these days.
-K
BofA has this discounted I am sure.
from socketsite- here are the changes
For Countrywide Purchase Loans:
Soft Market Category 4-5 loans: Maximum financing will be reduced by 5%
Soft Market Category 1-3 loans: Maximum financing will be reduced by 5% if the appraisal or appraisal review indicates any of the following: Declining Market, Oversupply, Marketing time over 6 months.
For Countrywide Home Equity Loans:
Soft Market Category 5 loans: Maximum financing will be reduced by 10%
Soft Market Category 4 loans: Maximum financing will be reduced by 5%
Soft Market Category 1-3 loans: Maximum financing will be reduced by 5% if the appraisal or appraisal review indicates any of the following: Declining Market, Oversupply, Marketing time over 6 months.
Any idea what the new max LTV levels are for categories 4 and 5?
Between stated income limits, lack of 2nd liens, high jumbo rates and falling LTV ceilings, California is not a great place to apply for a re-fi right now.
I wonder if the Fed takes that into account in figuring the monetary policy multiplier? Or do they just run their models on the last five years of data?
Thanks tbizzle.
As I see it, the biggest impediment to widespread jinglemail is not some sort of moral argument (since polling indicates that a lot of people do not have issues with it), but the fact that most people don't have an accurate gauge that their house is way underwater.
If the government wants to prevent the next major level of catastrophe (widespread jinglemail), perhaps they should secretly buy Zillow and 'adjust' the zestimate formula upward across the board.
Neil, if I read the letter correctly, Countrywide is suggesting that the risk assessment is based on policies implemented by the GSEs and private mortgage insurance companies. If so, these county risk levels are industry wide.
The list is interesting. But I was also interested in the wording of the letter - especially the concern about borrower's "economic interest to repay".
Best to all.
As home prices move into a protracted period of decline, consumers will finally recognise the perils of bubble-distorted saving strategies. Financially battered households will respond by rebuilding income-based saving balances. That means the consumption share of gross domestic product will fall and the US economy will most likely tumble into recession.
it's all quite simple really...no equity, no incentive.
OT:
haloscan is a mess with this printing the commenter's name at the top AND bottom of a post. can we revert back to normal?
CR,
This basically puts the homebuilders into a death spiral financing situation for house prices.
Now, the big question is how the mainstream media is going to play this.
I think it basically will allow BAC to walk away from CFC- after all why do they need a front office to generate more business- if they are cutting loan limits right and left, investor loans will be the hardest to get in a situation that require more investor financing.
What a disaster!!!
Someday this war's gonna end...
Shorter Countrywide letter: "You can only f--- 'em so many times..."
CR,I also thought that phrase was telling.The speculators will of course be looking at the bottom line,and walking away when their loss is clear...but a lot of the honorable people will stick it out to the last,they keep their deals.gah,adverse selection.I am listening to SOTUA in the background,I had best turn it off before I lose my temper and fill the TV wit
This is the obvious moral hazard of relaxing lending standards. For 0% down, non-recourse loans the only real collateral the bank holds is the borrower's credit history. If the bank gives everyone a loan, regardless of credit history, then credit history loses it's value as collateral. Countrywide easy-accepted themselves right into this. The only way out is to tighten lending standards (which of course will reduce the size of the lending market, increase foreclosures, etc.)
h silver bullets.
yeah! I'm living in the loca uno! Time for some cerveza.
just re: non-recourse 100% mortgages...if someone just mailed the keys back to the bank, is that it? do they have any tax liability on the loss the bank takes when it sells the property?
As I see it, the biggest impediment to widespread jinglemail is not some sort of moral argument (since polling indicates that a lot of people do not have issues with it), but the fact that most people don't have an accurate gauge that their house is way underwater.
That's why there's usually a "foreclosure sale across the street" associated with these walk-away stories.
When somebody actually sees another house in their neighborhood selling for 30% less than they paid it's a little hard to stay in denial.
"economic interest to pay"
Sounds like the borrowers have told them, "If I have to choose between your interests and mine, and the choice is make or break, I'll have to choose mine."
mortgage professionals must strive to ensure that borrowers do not take on loans that they do not have the ability or economic interest to repay.
Horse. Barn Door.
Silly PR from a company about to go down for the 3rd time.
anonymous writes:
Shorter Countrywide letter: "You can only f--- 'em so many times..."
And this sums up the pending rationalization by many mortgage holders: I'm a victim, it's the lenders fault, I'm outta here.
What were the previous limits? i.e. pursuant to tbizzle's post, if maximum financing is reduced 5% in a specified category, is it known if that means it went from 100% to 95%, 95% to 90%, 90% to 85%, etc?
haloscan is a mess with this printing the commenter's name at the top AND bottom of a post.
I disagree. I LIKE the new style. This lets me avoid slogging through the posts of certain folks who have become quite tedious of late.
This scary, the map from 60 minutes tells it all. The 30/60/90 baskets that will turn into REOs... wow. The homebuilders should really sell off land ASAP if I were them I'd do that.
So, Countrywide is getting religion.
I'm pretty much ashamed that I even thought of this.
YouTube - Pat Benatar - A Little Too Late
I hear you had a good offer down on Third Avenue
You tell me that was the reason
For whatcha' put me through, Yeah
And now you come collapsin' back
I feel the heat of your attack
Want me to take you back
I'm givin' you the sack
So don't waste your time
Chorus:
It's a Little Too Little
It's a Little Too Late
I'm a Little Too Hurt
And there's nothin' left that I've gotta say
You can cry to me baby
But there's only so much I can take
Ah, it's a Little Too Little
It's a Little Too Late
You say you had a good time
But did ya' think it was for free - yeah
And how much did it get ya', all their flattery
And now you come back, runnin' for protection
You've been bitten by love and stung by rejection
You can't connect
What did you expect?
I'm still gettin' over you
You'd think that living in a zip code entirely contained within a category 4 risk county would exempt me from Countrywide Junk Mail offering to refinance my 15-year fixed mortgage into a brand new 40-year mortgage. You'd be wrong.
Well, for once living in an area referred to as number 2 isn't all that bad!
I love the new comment style with the posters name in bold. Scrolling past trools is now a breeze.
Bush didn't talk too much about the economy did he?
Wow Cat5 and Cat4 areas pretty much describe where KFC's portfolio is concentrated. Must be one of them coincidence thingy's
Cheers,
If I hear the word "challenge" to mean failure, bankruptcy, or incipient business collapse, I shall scream.
I really liked the point about the people who are not "into" houses and mtges the way we are, not mailing in the keys, solely because they do not realize how underwater they are. And then finally realizing it when houses are foreclosed all around. It was something I had not thought of.
idoc,
Shrubboy doesn't KNOW much about the economy. Not that I'd watch an episode of the State of the Empire Show...Just sayin'
Cheers,
Jingle mail is hitting epidemic levels. Was that in the SOTU?
I am walking. my current "servicer" bought my mort. betting on my credit history, and no doubt had at least an inkling of what was bound to happen. now i have a $2400 monthly and a 30% loss so far. theres some rationalization going on, sure- but thats mostly to keep wifey from losing her mind. For me it comes down to this: I can afford to make the payment, so my decision is based solely on falling value; I made a bet, same as the bank, and lost. If the bank was losing money like this on me, there is no doubt they would drop me just as quickly. I do not exist to pay a mortgage and the moment it is not in my "economic interest" ill stop.
"economic interest to repay".
is spot on. we know its a waste, its just some haven't acknowledged it yet.
Good move, dynamitejacket.
The financial system is broken. This will probably not be discussed on TV following SOTU...
OT....
In fact, the NAIC is currently working with Berkshire Hathaway Assurance Corporation to submit an Expansion Application using the NAIC's Uniform Certificate of Authority Application (UCAA). The UCAA provides a streamlined, uniform application process for insurers seeking to do business in multiple states.
NAIC News Release
Miami just got hit by another Cat 5 storm!!
And Cape Coral/Ft Meyers is not a 4, but a 6 if there was such a thing.
Gosh, my own Brevard County, is neither a 5 nor a 4.
Before you walk, why don't you give the mtg co the opportunity to reduce your principal balance by 30%. They'll say no, but you can tell yourself that at least you tried.
Mississippi's looking pretty good according to the
list.
Man - you know you're a nobody from nowhere when your county doesn't even make that list. I searched up and down & dryfly's county not there... some near me are on the list (one of the nearby Twin Cities counties ranks a Cat 2... all the rest are measly Cat 1's).
I am so ashamed.
Having moved twice in less than 5 years I can definitively state that it will take more than a few dollars a month to get me to do it again.
Glad to know my area is only DEFCON 4 (or 2 using CFC's rating system).
The financial system is broken, and we can blame a lack of regulation and government oversight. It turns out that free markets aren't worth shit...
I remember when I used to work.
I remember when I used to create things.
Now I spend my time fending of predators because of that incredible magic of "the free market", where anything goes, including screwing home buyers with outrageous prices and half-assed subprime loans that reset to outrageous levels in 2 or 3 years.
Is there a way to find out what each of those categories actually means?
Pretty much the entire DC Metro area is Cat 4.
Detroit Dan-
It's actually not the free market, it's quite the opposite.
It all stems from a government mandated banking monopoly(Fed Res), price fixing interest rates(Fed Res Discount window, open market operations, mandrake mech.), and legalized fraud(fractional reserve banking).
If we had free market we would have banks that exist to safely store money(real money, as in store of value and medium of exchange), use as a clearing mechanism, etc.
The near-constant inflation of the last 70+, combined with the bailouts of banking institutions, led to the extreme desire for yield as opposed to savings, which in turn led lending by numbers instead of trust.
Can we put to rest all the libertarian nonsense of the last 20 years? Greenspan was a devotee of Ayn Rand.
Nonsense. Show me a successful libertarian society.
Give me a decent society, with freedom of press and freedom of religion. In other words, let's dump the Republican party which promises libertarianism, while delivering government bailouts and invasive snooping by the government...
dynamitejacket,
Please post your real name so I can be sure not to do business with you, ever.
Hope your credit is wrecked for years, schmuck. Employers and rental agents look at that, you know.
SweetHomeKilla,
I realize that the libertarians mean well, but the speculators and profiteers need to be restrained, don't you think?
SweetHomeKilla,
It's pointless man. If the gov' were writing the loans, these people would still blame the "Free Market" as long as one semi autonomous (non-gov't owned company) played any peripheral role in the transaction. You know the pen makers and printer makers.
Cheers,
detroit dan-
Show many any society that maintains success(however you define it) in the long term. Doesn't mean we should abandon the ideals that gave the people of this country the liberty they once had.
bobn,
You seem upset. But shouldn't people do what is best for them economically? Let's be realistic!
WDCRob -
This link:
Real Estate Blog - Countrywide New "Soft Market" Policy Changes
suggests that in cat 4 and 5 areas, the loan to value ratio needs to be increased to qualify for the same loan product. So instead of getting a loan for 95% of the value of the property, you can only get one for 90% of the value. I wonder if it applies to the old 20% down payment rule, making it 25%. That would hurt around here.
Hopefully Tanta can explain this a bit better if she gets the chance.
Oops, I was wrong, Brevard, Fl is a 4 didn't scroll down far enough.
Sweethhomekilla,
"Can we put to rest all the libertarian nonsense of the last 20 years? Greenspan was a devotee of Ayn Rand.
Nonsense. Show me a successful libertarian society.
Give me a decent society, with freedom of press and freedom of religion. In other words, let's dump the Republican party which promises libertarianism, while delivering government bailouts and invasive snooping by the government.."
See what I mean. They think the rebooblikuds are libertarian. Not even the slightest understanding exists with these folks. Just dumborat party pablum.
The fact that the west in this country during the 1900's was fairly libertarian...weak to non existent gov't never penetrates the brain.
Cheers,
WDCRob | 01.28.08 - 10:47 pm
I had just noticed that. It's also all of NOVA and all of Suburban MD (Baltimore and some related counties are level 3). It's strange, the DC entry seems to include quite a bit of territory.
We're immune.
that is the way it should be because too many poeple are par of he recession problem subprime lending crisis is how we got into ruin
Lively Money: 2008 is claimed to be the year of a Recession!
SweetHomeKilla, Misean,
From my perspective, Europe has passed us. They are better off than we are. Their economies are more competitive, and they have a better safety net.
I wouldn't have said this 7 years ago, but it seems to me that the "ownership economy" has gone too far.
Respectfully,
Detroit Da
here is some mortgage broker chit chat .... anyone ever heard of amtrust?
I think if people weren't so afraid of the government, the laywers, etc. That there would be much less large scale fraudulent institutions, because there would be more lynchings and tar and featherings.
I'm actually quite serious about this. We can sit on a blog and complain all day long, but as long as it's "their"(the gov) job to regulate, the general society will be victims.
Doesn't mean we should abandon the ideals that gave the people of this country the liberty they once had.
They never had 'Liberty'... wtf. White men with a lot of property had something close to 'Liberty'... the rest were 18th century equivalents of wage slaves or REAL slaves.
We had gov't interference then - we got it now - get over it & find a work around.
Read some history - then wax poetic about the good old days. Sheesh.
Nothing much changes - earth goes round and round while circling the sun and people wake up every morning and say 'but today its different'. Ya right.
Government, banks and the news media never shared the critical information with citizens that banks no longer held risk for the loans they made. That makes those groups culpable. People are too busy to ferret out such information. A few years back I told a PHD engineer that I thought the house he was buying was way overpriced. This otherwise very smart man informed me that the bank would not give him the loan if the home was overpriced. He trusted his country and its institutions. His agent told me comps had become meaningless. Should my friend focus on his work during the day, and then come home and read thousands of pages of government legislation each night to see if he can find any changes in law that might effect him in big ways, or should he have been able to trust his government and news agencies to inform him of material changes like allowing banks to separate risk from reward? This man was smart and had he known, he would have understood how such a change would drive up prices (especially if it is unannounced). For that reason I do not fault anyone for anything they do to unload a home bought over the last few years.
Thanks Dryfly,a little reality is welcome.
DD,
Europe ain't trying to carry the largest military force on the face of the planet. An empire with bases in more than 170 countries.
As to a better safety net, how's about this:
Don't treat the old and unhealthy, say doctors - Telegraph
Cheers,
The fact that the west in this country during the 1900's was fairly libertarian...weak to non existent gov't never penetrates the brain.
That freedom worked real well too... unless you were Lakota or Northern Cheyenne. Or held deed to property from Spanish Mission times...
Might still made right... even without Washington overseeing it all.
The human condition just doesn't change.
OK, the comments have officially jumped the shark. My time is too valuable.
SweetHomeKilla, Misean,
How do we adapt to globalization? The Chinese are killing us, not to mention the Japanese and other mercantile regimes in Asia. Their governments are heavily involved in their competitive advantage.
Sure it would be great if the world economy would just run itself without government intervention, but where is the evidence that this is realistic?
Government is necessary, because nature abhors a vacuum. Rules are necessary, and that doesn't just mean that we need the police to prevent breakins and holdups. We need economic rules. If the government doesn't set and enforce rules, who does?
Is there a map of all those counties?
Is this basically all the populated areas of the US?
There are, ummm 68 counties in Florida. How many are NOT in the danger zone?
What surprises me is how long the list is for the 1's and 2's. I expected worse in many places. Agree that the DC metro area looks disconcerting. Where can we find a description of what goes into the scoring?
Is there a map of all those counties?
My county is not on the list - most around me are but mine is a no show (but it is very rural).
Zigurrat - what about Amtrust?
Liv - thanks for the reference. I'm hoping "not" on the 25% thing. Hoping to do 15-20% down a year from now!
Markel, It's late night -- time for some respectful political discussion. See you during business hours.
Misean, Thanks for the reference. You make some good points. See you next time...
bobn
you realize that ill be getting credit card offers in the mail as soon as i change addresses, right? banks put a lot less value on your credit rating than you might think.
its not all bad. ill be renting a friends house, who would be thinking jinglemail otherwise. the payment is the same, only ill live in a much nicer house. thats the meaning of "economic interest". If i am going choose between a human whose name i know, and a bank, ill choose the human every time.
I have already noticed some pretty odd changes in Zillow -- changes in their graphs etc., that make me think they may have different ownership. They seem to have smoothed up and out, their graphs on home prices.
I remember reading in "The Builders" by Martin Mayer that during more autocratic periods homes asking prices are much higher than actual market sales prices.
dynamitejacket,
You da new Rambo!
Better quality of life, too. Most of Europe will bounce back from recession faster and stronger than U.S.
Mortgage Grapevine: Fannie Mae says property is in a "soft market"
woops....i forgot to post the link....just some mortgage broker chit chat.
amtrust is mentioned towards the bottom re a 100% loan in san diego.
CR,
How would I interpret this list vis-a-vis counties that appear on and ones that do not ?
The county that I live in is flagged as Cat-3. The two adjacent counties (2-miles and 5-miles away) do not appear at all. Are the non-represented counties de-facto Cat-0 (i.e. risk not worth worrying about) ?
Ray
zillow has been scatterbrained lately. last month it placed my house at 270k or so, and falling. this month its 325k, and the 30 day shows a drop of 32k- WTF i say. after the earlier comment about a government takeover of zillow i wonder....
rich, i am trying to gauge your tone there...not as sharp as i used to be on these here internets.
jeez detroit dan, it sounds like your measure of any society's success is their economic output.
The USA has turned into a steaming pile of shit, and from what I have read so has much of europe. I'm not talking about GDP, or innovation, or any other generic measurement. I'm talking about the people. I have no one to look up to, because nearly everyone will drop their proclaimed ideals for the smallest promise of comfort or "success".
dryfly, I agree that many more people had absolutely NO liberty in the past, and their were massive injustices everywhere you look. That is part of human nature. If we just ignore what is happening and abandon the ideals soon nobody will have any liberty, and it really appears as though that is where our society is headed.
Anyway, you can't tell me that white men killing off the natives is any worse that the massive depleted uranium poisening of the middle east, or the genocide happening to the palestinians. That is happening NOW with YOUR tax dollars(assuming you are from US).
Are the non-represented counties de-facto Cat-0 (i.e. risk not worth worrying about)?
LOL. That would be my neighborhood.
What amuses me is that amid all the bullhorning about how the Manattan mkt is different, move along, nothing to see, and lo, there is NY county (along with other NYC boros) on the category 3 list.
What, the boro of rich supergeniuses has the same risk level as its workingclass neighbors? Whodathunk!
Very optimistic list, I think. Must be based on where prices are already falling. I have family that own property in Alabama counties marked "category 1" and those markets are VERY bubblicious.
SweetHome,
No country is perfect, and never has been. I'm trying to see which governing philosophies have worked better than others. Isn't that how evolution works?
I'm off to bed. Hope to discuss more some other time...
I am with Dryfly in a lot of way, most of the MSA around here is a Cat 1 but I cringe when reading posts such as Dyanamite Jacket's. Scary stuff.
Try talking someone out of buying when they think it is the right thing to do. Try talking someone out of that wonderful exotic mortgage product they heard of where they only have to pay 1%-they don't get (or they refuse to understand) that it is negative am.
After 20+ years in this industry I am still - yea, you know it- shocked by what it has become. Give me the old days of lending-you know, where we still looked at a credit report and calculated NET income instead of gross.
The mortgage industry has become a farce of what is used to be and now we are paying the price. We downsized out most of the people that actually knew how to calculate DTI, LTV and knew what a chain of title was, not to mention they knew how to prepare Assignments-HOLY CRAP, you mean that was real document?
We are left with clerks and frankly, if you are depending on a clerk to help you with your renegotiation, God have mercy on your soul.
I'm not sure what's new about this other then the CW's details. The general announcement was made by fnm in December.
https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2007/0722.pdf
I suppose the 'so what' about this is the comment in the letter regarding willingness to pay and the exact list of counties.
Wasn't there a report a few months back at how some companies were dropping clients who were not profitable. I think it was some phone company and some retailers also. Well anyhow, now people are dropping the banks.
If the roles were reversed and the banks were losing money by continuing to hold your savings (as an example), you bet they would give you back your money and say "sorry, asta la vista", can't do business anymore. So what is wrong with people just making a business decision just like companies do? Moral Hazard? Are you kidding? What would the banks do if the roles were reversed. Give back the house and cut their loses.
The fact that the west in this country during the 1900's was fairly libertarian...weak to non existent gov't never penetrates the brain.
Huh? Who gave the settlers their land?
The government is behind every title.
dryfly, I agree that many more people had absolutely NO liberty in the past, and their were massive injustices everywhere you look. That is part of human nature. If we just ignore what is happening and abandon the ideals soon nobody will have any liberty, and it really appears as though that is where our society is headed.
I hear ya - I just get real tired of the things were good way back when we were FREE and it sucks now. Just wasn't so.
You can make the case that it should be different or better going forward but not the case that we were somehow 'better' in the past. We weren't.
Looks like housing in a number of the communities are caught between a rock and a hard place. High purchase prices in areas with few rental options.
Anyone else notice it?
The people in the distant American past all got free ponies.
Well, there are some Spanish land grants that are title sources. And I bet there are at least a few square feet of reservation that never were part of the white mans land.
And while I totally agree about past injustice and killing of the natives here, I must point out that the vastest number of deaths have to do with Western diseases which the Indians weren't immune to. Even if Columbus, the conquitadores, and Indian fighters had the souls of mother Teresa, the Buddha, Gandi, Socrates and Christ, the death outcome would have been essentially the same.
The Mexican Indians really weren't so inferior in warpower than the Conquistadores, but all they had to do was breathe the air of a white person, and they were toast. So if you're going to blame somebody, blame god who invented those diseases, or a misfortune of evolution.
Sorry, it's off track, but the great Tanta said it was ok, late at nite, which it is.
Early natives apparently ate all the ponies, and didn't have them again until the Spaniards showed up with'em.
What a revelation...Folks sacrificing a high FICO score for $100K+...If you're surprised, you may very well own MBS.
dryfly,
The one point I'd argue that's different is the whole "nanny society" thing we've developed since the New Deal. Outside of the cavalry or the local doctor that made house calls, people didn't expect help from anyone but themselves and their neighbors.
I expect that a majority of your neighbors still think that way, as mine did back in rural Colorado. However, the cities are another matter entirely.
The Mexican Indians really weren't so inferior in warpower than the Conquistadores, but all they had to do was breathe the air of a white person, and they were toast. So if you're going to blame somebody, blame god who invented those diseases, or a misfortune of evolution.
What is going on with Zillow? After reading a few posts, I decided to log on. I looked up my property, my best friend's, my brother's and my Dad's and ALL of them were UP HUGE!!!! That is nuts!! I,m talking 50K to 80K from about 2 months ago when I last looked them up.
All of us are scattered thru-out North Jersey and prices are definately NOT going up. We don't have a crash scenerio but no way any increase in values.
Does anyone know what is truly going on? Are they trying to help the markets by convincing would be buyers that the property is a steal?
ex-owner,
just looked at zillow and I agree. We've been trying to sell our house for nearly a year and have cut the price twice. Now zillow has it up by 100k!
they got algorithm problems or somethin.
I suspect that Zillow has mathematical models that are not equipped to deal with the turbulence and discontinuity in the valuation of properties.
Time will work it out, if you can wait.
this is a bit old, but maybe related?
Significant Problems with Hawaii Valuations - Zillow Real Estate Advice
tj & the bear | 01.28.08 - 11:42 pm |
We're all city dwellers now. 3% of Americans live on, or have access to a farm (no proof, read it somewhere, and it sounds plausible). I might someday see the Cavalry coming down I-95, but I doubt they'll be coming to anyone's rescue.
OK, Thanks everyone.
I'll look it up again in a month. But if it's not fixed, I'll work on some conspiracy theory.
MA
does it scare you that if the trucks stopped showing up at stater brothers you would starve? scares the shit out of me.
The basic issue is lack of trust, both economically & politically. Everything can be fixed in one word TRANSPERANCY.
The one point I'd argue that's different is the whole "nanny society" thing we've developed since the New Deal. Outside of the cavalry or the local doctor that made house calls, people didn't expect help from anyone but themselves and their neighbors.
Quit blaming the New Deal - no one makes you use any of those services. And while you pay for them you will pay for a lot of things you might not like - get over it. Life is too short, its only money.
We have 300 million people HERE in the US now. We have 6 plus billion on the planet. That is the ONE thing that has changed - with density expect more rules.
I have a friend who lives up on the Canadian border - very rural. He grew up in a suburb and said he always wanted a place where he could walk out on to his deck naked in the morning and piss off into his back yard - just to do it. I laughed and said he could do that back in suburban Minneapolis too - except they'd cuff him for exposure if any of the neighbors there saw it.
Laws & gov't are like Frost's poem "The Mending Wall"... When everyone is jammed in tight, good fences make good neighbors even if we secretly wish the wall was down. Gov't is the mother of all fence menders for good and bad alike.
dynamitejacke, your the Platonic Form of whats rotten with this culture, an american deadbeat. Able to rationalize anything...were you at woodstock? I'll bet you'd dump your wife and kids if they became an economic or emotional liability...as in "we grew apart". If it feels good do it. Don't try this in asia.
dryfly,
Not against walls, per se. I am against cradle-to-grave coddling. Like they say, if you subsidize something you get more of it. We've subsidized dependence.
Marcus,
Ugh. Thanks for reminding me. I think I'll go clean my guns.
dynamitejacket
Yes. Makes me wonder. Been looking at farms (mostly in Canada - prices for farmland are much more reasonable, Property taxes are reasonable, infrastructure is good, and they've got water). Couldn't hurt to own a small farm outright.
"Rogue Trader" turns out to be scapegoat for SocGen
From the Telegraph: http://tinyurl.com/2ubme4
Choice bits:
Looks like SocGen doesn't get to play the victim...
dynamitejacket -
when you bet and lose and don't pay, you would expect to feel some pain. I hope you get what is coming to you if you walk.
You are also screwing your neighbors, in addition to whoever has to take care of your house.
You know it's theft if someone refi'd, took the cash and then walked - how are you any different?
Pawn the silverware - we'll say the help stole it and collect the insurance.
dio. i hear your argument, now here are some details:
i am almost thirty. i make around 60k a year in orange county. wife is home with 2 kiddies. i work a 40+ hour week and take night classes at the CC to keep up my "marketability" I bought the 900 sq ft. dump of a house 4 years ago, with a no-nonsense loan. i have since dumped 40k of MY OWN money into renovations, in hopes of selling in 5 years to buy a place big enough for 2.5 kids and a dog.
my 40k, and then some have evaporated due to the scandalous speculation and hype, and subsequent crash of the market in my area. i couldnt give this house away, and i am not going to force my kids to live here for ten years in hopes of recovery.
are you sure deadbeat is the term you want to use here? nice use of Platonic though
Countrywide deal spurred by crackdown worries: report
Countrywide deal spurred by crackdown worries: report
| Reuters
Countrywide Financial Corp's decision to sell itself to Bank of America Corp was driven in part by fear of potential crackdowns by regulators, the Wall Street Journal reported on its Web site on Monday.
Lawyerliz, Dryfly
I think the list is based on counties in Metropolitan Statistical Areas (i.e. urban areas). If you want the breakdown for MSAs, it's here:
Current Lists of Metropolitan and Micropolitan Statistical Areas and Definitions
Not against walls, per se. I am against cradle-to-grave coddling.
Then don't be coddled. But also quit worrying about others being coddled.
One of the weird things I got from reading 'Atlas Shrugged' AFTER I had already been working for myself was the sudden realization that almost ALL my hardcore Libertarian friends either worked for gov't or large corporations. I was their token 'socialist friend' and yet the only one self-employed.
BTW - I'm not a socialist either (I got friends who really are an know the difference) but I quickly learned if you're not a Libertarian then one drop of pro-gov't policy makes you a socialist.
Its really pretty funny. I enjoy the company of both camps as long as they don't meet. If they did, it would be matter anti-matter.
...were you at woodstock? I'll bet
I was going to defend the woodstock generation but I realized that's the generation I watched on TV, as a kid, not participated in. But the anti-apartheid demos, the anti-Vietnam war demos, the student "strikes" ( doesn't that sound quaint ) against hmm Eyesenck, the Catholic civil rights protests in Northern Ireland, the earlier "Ban the Bomb" and anti-capital punishment movements, quite apart from the efforts towards gender equality and the nascent "one world thinking" - cf The Nigerian Civil War and the famine in Biafra and who can forget the campaigns against homelessness(SHELTER).
And that's just the UK I'm talking about.
That's a pretty impressive list of the contributions of the Woodstock generation - by my reckoning anyway.
-K
jp-
ill be keeping the lights on, and paying the water bill. even hired a gardener. im not giving the lender the whole middle finger- im just accepting that its not beneficial to my family to throw money away-
All of this talk of jingle mail and walking away, and the moral/ethical ramifications of doing so, is pointless. By hook or crook, people will be losing their homes. Bankruptcies will follow. You can't walk away from debt unless you file bankruptcy. If you think your defaulted mortgage-holder won't come after your present and future income and assets, you're kidding yourself. I think the banks are going to get right pushy about collecting as much as they can.
Bankruptcies will surge in the coming decade.
There is enough in the world for everyone's need, but not enough for banker's greed.
You know it's theft if someone refi'd, took the cash and then walked - how are you any different?
jp,
What a coward and hypocrit you are, jp. You don't know anything about dynamite or his financial situation or his values. And you wouldn't have the guts to say this kind of thing to his face in person.
Stop buttin' into other people's business. Stick to your own. Make sure your house is clean before you call others dirty.
Lots of blame to go around, lots of fingers to be pointed and targets to point too. Lots of stories on all sides. Full of rationalizations, reasons -- real and imagined, and pain and suffering.
Oh well... It was all just a fantasy, a grand illusion. None of it was real, right? So, no use getting all worked up about nothing.
I don't fault dynanitejacke or any of the other jingle-mailers for what they do. They are simply making an economic decision that is in their best interest. There was a reason that 20% down payment was required in the past. And will soon be required again.
I think the list is based on counties in Metropolitan Statistical Areas (i.e. urban areas). If you want the breakdown for MSAs, it's here:
U.S. Census Bureau: Page not found metrodef.html
ST - there are a number of counties on that list NOT in MSA's. I can't speak for all omissions but know there are at least a few near me to void that explanation (see Wabasha county Minnesota then google map it - ain't no MSA but is on the list).
is there ETF that short commerial real estates? thanks.
Everything in the LA area is Cat 4, and I don't think the locals even have that much of a clue yet.
curious what being in Cat 1 really means in that list. Some of the homes around here do seem to be sitting for a long time. And the prices shot up in the last few years, there were stories in the paper about how people who work here can't afford to live nearby. The boomers are buying up all the rural areas too. Commuting for an hour including driving over a mountain is not what central Pennsylvanians are used to. Turns out the places those lower income people are living in are now in cat2. The price of gas combined with long commutes has to be taking a toll.
dryfly,
I live in the city, albeit in the hills, so I gotta worry about those around me. If LA ever gets the big one, we're buggin' out fast.
Dryfly,
If you look at the updated list, Wabasha County is in the Rochester MSA (line 1418 of the Census Bureau Excel file).
anonymous: smart money has covered their shorts, and have left with the cash. There may be opportunities, but this was fairly obvious to some smart people a while back. I realized there were going to be problems a couple of years ago, but I'm not smart enough to have done anything about it.
As the profits are shrinking, most companies will try to cut down the payroll by more outsourcing (expense) and its alreay gearing up.
I live in the city, albeit in the hills, so I gotta worry about those around me. If LA ever gets the big one, we're buggin' out fast.
That I agree with 100% - do what you have to do, control your destiny the best you can (or was it Seinfeld & 'master of your own domain' - love it). But I'd quit wasting a second thinking about others being 'coddled' - that's their issue. That was my point.
BTW my neighbors are probably crazier than yours - the craziest crazies seem to all live in the bush - they are spread out so you don't see'em like in a city street corner.
``The Fed is going to have to keep slashing rates, probably below inflation,'' said Robert Shiller, the Yale University economist who co-founded an index of house prices.
So-called negative real interest rates represent an emergency strategy by Chairman Ben S. Bernanke and are fraught with risks. The central bank would be skewing incentives toward spending, away from saving, typically leading to asset booms and busts that have to be dealt with later.
Fed May Cut Rate Below Inflation, Risking Bubbles (Update3) - Bloomberg.com
Like I said, Rogue Trader story will keep getting more tangled and it will become a PR nightmare for SocGen. Their credibility will soon be shot.
There will probably be dozens of people implicated in the scheme and Rogue Trader may be the most junior and naive of them all. He may even turn out to be a pawn.
Thread music: Tammy Wynette - Til I Can Make It On My Own
YouTube
- Broadcast Yourself.
Fed funds is 3.5%. CPI for 2007 was 4.1% Aren't we there already?
If you look at the updated list, Wabasha County is in the Rochester MSA (line 1418 of the Census Bureau Excel file).
ST | 01.29.08 - 12:33 am | #
Thanks ST - my bad.
Those folks need to visit Wabasha county. We are talking VERY rural.
dryfly,
I also worry about Uncle Sam going deeper into my pocket to pay for coddling others, too.
Just to keep it all balanced, here is a view opposite to Robert Shiller's:
The Federal Open Markets Committee may want further rate cuts but inflation fears limit their options, writes David Litterick
....
Barclays Capital believes the current make-up of the FOMC is more likely to place inflation concerns above the threat to growth. "Overall, the 2008 voters are more hawkish than the 2007 voters," the bank said.
This realisation, and the knowledge that at least part of last week's sell-off was down to the rogue trader at Société Générale, has slightly pared expectations for a 50 basis point reduction at this week's meeting to follow last week's emergency 75 basis point cut.
....
Recently he[Bernanke] spelled out the dilemma. "It is not the responsibility of the Federal Reserve to protect lenders and investors from the consequences of their decisions. But developments in financial markets can have broad economic effects felt by many outside the market and the Federal Reserve must take them into account."
...
As for this week's likely move, according to Howard Wheeldon of BCG Partners: "It's a hard one to call.
...
"A half-point cut would take the US benchmark Fed funds rate down to 3pc. However, combined with last week's large cut, the $150bn Bush fiscal plan and continued central bank liquidity support, the opposing theory would be to suggest that as the Fed may have no consensus for another cut it will prefer to wait."
...
"The Fed really doesn't want to bail out investors," said James Hamilton, professor of economics at the University of California. "There will be lots more blood on the floor before this is done."
Fed risks 'blood on the floor' on rate cuts - Telegraph
-K
I also worry about Uncle Sam going deeper into my pocket to pay for coddling others, too.
Solution there is to maybe not make any money. The old Soviet joke... They pretend to pay us. We pretend to work.
My guess is that will be the next 'jingle mail' if this thing doesn't turn around.
dynamite -
you sound like an okay guy in a tough place now that you've posted details.
I responded to the tone in your original post.
however, rich,
my house is clean, I don't have debt.
I own everything outright.
It's an old saying that a fish rots from the head down. Well, to those of you that think bailing on an underwater mortgage is dishonorable or theft I say so what. Surely you've seen stories about CEOs who run a company into oblivion and still walk away with millions. Do you really think no one else has noticed? After all, what they do is just business.The free market yada yada yada. Why should any lowly American peasant behave any differently than those at the top? In other words, the rot has started to spread.
I think dynomite is Alright and wish more of us had his resolve...the neighborhood would not have collapsed...the values attached to these houses would have been in line with the wages behind them...the transaction would have been more personal and less "disintermediated".
I am amazed at the interest shown in these rankings...don't try that on me you subprimers.
dryfly,
Just so happens I have several Russian co-workers, and they've hit me with lots of jewels like that one. Great people with great stories, and even better jokes!
The free market yada yada yada. Why should any lowly American peasant behave any differently than those at the top?
Besides Americans have been doing this FOREVER... Abandoned squalid farms in Europe & came to New England... Left New England to go to the Midwest... Left Midwest to go to California... Left rural areas to go to cities, left cities to go to suburbs, left suburbs to go exurban.
Sometimes they 'sold'... sometimes they just 'left'.
Nothing much changes in human history. Guys like dynamite aren't villains or heros... just folks clawing their way through life. I wish him the best of luck with his next adventure.
dryfly- Me too.
Asian Stocks Gain on U.S. Interest Rate Speculation. We got more followers now.
Asian stocks rebounded on speculation the Federal Reserve will cut U.S. interest rates to bolster growth and after brokerages raised their ratings on Toyota Motor Corp. and Isuzu Motors Ltd
Asian Stocks Drop; Hyundai Heavy, Kyushu Electric Lead Decline - Bloomberg.com
"The Fed really doesn't want to bail out investors," said James Hamilton
This guy need to hear Poole's "fed put" speech.
Calculated Risk: Fed's Poole: Market Bailouts and the "Fed Put"
US recession will dwarf dotcom crash
US recession will dwarf dotcom crash - Telegraph
bobn, are you part of the reic?
I like dynamitejacket.
Like Anthony Hopkins character said in Legends of the Fall, "F#%$ 'em!"
RE: Zillow
Zillow is largely a joke. Please don't rely on it.
You can do your own quickie appraisal with Redfin.com, if they cover your area. Use the search parameters to show sales in the last 3 months...that will give you a good indication of the truth.
Geez, if Santa Clara county is low risk, I'm afraid for the rest of the country!
I'm with dyanmite. If everyone did this, we'd have affordable housing again within a year or two.
There's no moral imperative to keep paying to a faceless corporation that would screw you the minute it made the a penny legally.
That people think that there is baffles me.
There's no moral imperative to keep paying to a faceless corporation that would screw you the minute it made the a penny legally.
Kind of depends on whether you entered the agreement with the implied thought of a moral quid pro quo. I think most of the people who believe that there is a moral line that is crossed do believe that it doesn't matter whether you make a bargain with a person, company, or yourself: a bargain is a bargain, and a contract is a contract. They are rightfully shocked to find out not everyone believes this.
Not to be facetious; if you look at the civil contract known as marriage, and it's history in the Judeo-Christian literature, you'll find that the Old Testament god relented and allowed divorce, recognizing we're not going to stick by a particularly bad bargain.
If I were in a situation where I was pouring money into a money pit, I'd ask myself at what point does it still make sense? For different people, it'll be answered differently. I'd be more swayed by the money, but I do believe in Karma.
Marcus re:canadian farms
There's a reason canada farmland is cheaper..the yields are much lower. Ex Wheat yield of 30bu per acre vs 75bu ac in Eastern WA. The income from 75bu is much more than the implied 2.5X of 30bu. Farming is not economically feasible in the saskatchewan without mass govt subsidy..the numbers just don't work at 30 bushel yields.
Thanks, dynamite, for that story.
Countrywide has finally discovered that the American borrower who 'owns' a home has decided to outsource/offshore their mortgage debt to the lender. Or to downsize/rightsize their mortgage debt, as the case may be be.
What a surprise - if offshoring/outsourcing/downsizing/rightsizing was good for corporate America, which for decades considered a contract to be worth what it costs in legal fees to break (or lobbying fees to buy laws changing it), why should the America 'homeowner' be any different? After all, it may take a while, but even the most dim witted consumer could figure out what such American luminaries as Milken ('the biggest player in the insider trading scandals of 1980s') or Lay (1990s) discovered - as long as the money is free, gorge on it, and worry about the lawyer fees later.
Oh wait, now we will hear about how such practices threaten the moral center of America? Or the financial center of the debt society - the one that was supposed to work by those handing out the credit at interest rates generally ranging from inflated to usurious living large. See Wall Street's bonus pool last year - where do you think those 'profits' came from? If people walk away from their mortgage debt, tens of billions of those bonus dollars will walk with them, which would be a catastrophe. Much like the plundering of pension funds was for Wall Street not so long ago - not because the people supposed to receive their pensions (ExxonMobil and its 4 billion dollar pension shortfall in a period of 10 billion dollar quarterly profits or 400 million dollar CEO retirement compensation comes to mind as a non-Wall Street example of how corporate America values its commitments) didn't get them, but because the well ran dry. It is the eternal challenge of being a locust, I guess.
America's seemingly plain moral decline has any number of causes, but generally, rot starts at the top, and slowly spreads to the roots.
It is only when the top discovers that the roots are dying that the problem becomes grave enough to address.
mortgage professionals must strive to ensure that borrowers do not take on loans that they do not have the ability or economic interest to repay.
You have an "economic interest to repay" when ownership costs are no more than renting, or there is a substantial down payment.
So how much of the US do you redline under that criterion? Pretty much the whole country, wouldn't you say?
The mortgage industry had might as well take a vacation until prices return to 2001 levels.
however, rich,
my house is clean, I don't have debt.
I own everything outright.
jp,
from now on, hold your nasty fire against others on this board until you know more facts.
"Mr Bouton held this unfortunate man up for public vilification, threw him to the dogs ... and there was no substance to it," he told reporters late on Monday.
I did say that the charge of "fraud" in the first SocGen press release and in other public statements was a bad legal lapse. Now, Rogue Trader will sue SocGen for slander, further tarnish their image, and receive a very lucrative settlement from them.
There is irony here. In connection with monoline discussions, several people have speculated what would happen if equities could be insured like bonds are.
The guarantee of equity returns is a huge global biz and SocGen is a leader. Tens of billions of structured investment funds have been created backed by SocGen's guarantee to pay X% of principal. Investors in these funds have redemption rights. If a confidence crisis develops at SocGen, a lot of this money could unwind.
In turn, the unwinding of SocGen structured guaranteed products could put pressure on the underlying funds (mostly hedge funds) to sell in a falling market, which could trigger liabilities under SocGen's guarantees.
The next wave down for housing is coming. Remember all the housing bulls who said back in 2006 that housing could never fall without rising unemployment? Well, they are about to get what they wished for.
All the major builders are in the early stages of massive layoffs. Not just contractors, but engineers, architects, surveyors. As these folks lose their jobs the economy will suffer another hit.
I have analyzed the balance sheets of most major builders and the only way they can possibly survive is to raise cash and layoff most of the staff. It's survival mode now, hunker down.
"Jan. 29 (Bloomberg) -- Tousa Inc., the Florida homebuilder that lost 98 percent of its market value in the past year, sought bankruptcy protection from creditors after missing three interest payments this month.
The company, based in Hollywood, Florida, listed assets of $2.3 billion and debt of $1.8 billion in a Chapter 11 petition filed today in U.S. Bankruptcy Court in Fort Lauderdale, Florida. "
Tousa, Florida Homebuilder, Files for Bankruptcy (Update7) - Bloomberg.com
About that list. Countrywide doesn't have any Indiana counties in the lower three rankings, but Indiana is among the top ten states for foreclosure rates, according to RealtyTrac. I understand that there is some room for slippage, but that seems a lot of slippage. What gives?
I know that I am coming to the conversation a little late (OK, very late), but I am not sure many of these "jingle mailers" have thought of the tax consequences of the lender writing off the debt and the ensuing tax bill they will be getting. What are we going to do as a country when all of these middle class folks cannot pay their tax bill, either? Under the new bankruptcy law, I'm pretty sure that one of the changes was that they could never discharge this particular tax obligation.
So, is this another shoe that will drop with all of these folks that are buying houses "across the street?"
We have one hell of a mess on our hands that I suspect will come next year. Where is the money going to come from to pay the upcoming tax debt? The public policy implications of middle class folks who will regress into the lower classes is shuddering.
Xennady writes:
It's an old saying that a fish rots from the head down...
Xennady | 01.29.08 - 12:53 am | #
Yes, Prince of Citi can walk away with millions in his pocket, but we can't have the little guys walk away from their upside down mortgages; that would be immoral, if not outright illegal. The system that condones and even encourages the former does certainly frown upon the latter. We can't have the masses "misbehave." That right is reserved for the ruling class only.
Interesting confluence of different subjects. Zillow home price estimates are all over the place as they attempt to automate appraisals which are inherently subjective. Last month they changed their proprietary model and some prices saw wild swings. Mine went from -$211,000 over 30 days to -$9,500 due to the very most recent changes. Unfortunately these changes are not documented and there is no way to examine the alogrithm . Now we have Countrywide attempting to automate risk assessment with what appears to be MSA price trends from OFHEO as applied to entire counties. As others have noted this is very poor practice. What I don't hear is any concern for correlation to ethnic demography. It won't be long before CFC is forced to abandon (at least publicaly) this over accusations of discriminatory lending. SocGen trader thinks he's got a model that makes money by correctly assessing risk; costs SG $8bn. The Homebuilders learned from their past errors and were fully prepared for this downturn. Their models told them so. The default rates for NODs going to NOTS are many times larger than the banks expected according to their models. Stop me when you sense a pattern.
Interesting that CFCs home area is Cat 4. Interesting that they apparently once included a moral imperative to repay into their default models. Too bad the lessons come too late.
Someone asks: bobn, are you part of the reic?
Not at all. I'm a guy who bought with fixed rate loans in Nov 2005. I had heard the market was cooling, but did not understand what I do now, and that the market would drop like this. Nonetheless, I plan to ride it out.
I hope the people around me have more morals than dynamitejacket. He says he'll keep the lights on and the lawn mowed, but how long until he decides that it is "no longer in his interest" to do so? It's not like he has ethics or anything. His neighbors at best will have an REO sale to bring down their comps; at worse it will becomes an eyesore and/or squatters palace, drughouse or vandalized ruin.
When he starts renting from his friend, I hopes he's got a crackhouse on one side and a meth lab on the other.
--
CFC reporting much bigger loss than "expected." Wall Street Crooks continue to be behind the curve.
Jas
What seems lost in this conversation is that physical community requires at least some level of interdependence. There is a lot of talk about what individuals should do in their own best interest, but there is no talk about pulling together as communities to solve our problems. I live in a state without property tax protections, so when my neighborhood saw huge price increases, my retired neighbors could not afford to stay. Yes, they made some money, but they also left the churches, neighbors and friends that they had lived with for decades. They lost community. Ten years ago, I lived in a community of people who helped each other and made decisions not only in their own best interests, but in the interests of their neighbors, schools, communities. We volunteered to improve the communal environment and built strong relationships. I sympathize with people who feel financially distressed, but there is another side of the coin. People who participated in bidding up the price of homes to unrealistic levels, and who took out mortgages that they could not afford, displaced many people and decimated communities. More than 60% of my old neighbors are gone. The new neighbors are mostly two income, and do not have the time or the apparent interest to invest in our community. Yes, business leaders have behaved without any regard for community. If we all choose to follow their example, then what will our neighborhoods look like?
dynamitejacket said:
now i have a $2400 monthly....i make around 60k a year in orange county. wife is home with 2 kiddies. i work a 40+ hour week and take night classes at the CC to keep up my "marketability" I bought the 900 sq ft. dump of a house 4 years ago, with a no-nonsense loan.
OK, so let's look at this numerically. If you're PITI is $2400/mo with no-nonsense loan, then my guess is that you bought something on the order of $300,000 - which would be 5 times your income . Your DTI is at almost 50% assuming no other debt at all.
Just exactly how the f*** was this supposed to work?
I bought at under 3x income and my DTI is in the low 30s - maybe that's why I can stand it.
Don't complain about speculators, dude - you are/were one.
Is anyone aware of projected writeoffs by banks and investors assuming various percentage levels of jingle-mailing?
Just curious...
--
bZb: " We can't have the masses "misbehave." That right is reserved for the ruling class only."
What part of "System of the Crooks, by the Crooks, and for the Crooks" don't you understand? I think that you probably do, but most here don't.
Americans are bred to be dopes not to question the sanctity of the system itself even when it has manifestly been taken over by the NYC Banking and Finance Cabal. Let us see who they own, in order, Hillary, McCain, Guiliani, Romney, Obama. You get the picture. Poor Ron Paul and his supporters.
Jas
--
No one here has bothered to ask the most fundamental question:
What kind of system allows, even encourages, the behavior of the lenders and borrowers?
Jas
Haha. Look who's getting their face ripped off now!
There's an old anecdote that the whole debate above calls to mind - can't remember the protagonist, but it sounds like something Churchill would have said, so I'll go with that.
Churchill meets a woman at a fancy dress ball and, after some hours of philosophical discussion, poses a pointed question to her: "Would you sleep with me if I offered you a million dollars?"
The woman thinks about it and finally says, "Well, yes ... for a million dollars, I suppose I would."
Churchill says, "In that case, how about $10?"
The woman recoils in shock and horror. "Ten dollars? What kind of woman do you think I am?"
To which he replies, "We've already determined that. Now we're just haggling over the price."
Moral of the story: When it comes down to it, nearly everybody has their price.
For some Americans, their 'price' may well be lower than what they would stand to lose by being trapped in a three-decade-long contract to pay back an enormous sum of money backed by nothing but a rapidly depreciating asset. And anybody who is shocked, shocked! at this news is either foolish, naive, or quite possibly both.
OT-Durable goods up 5.2 %, MMM good numbers, LLY super numbers.
I thought I would just mention this since everyone here is bound and determined to ignore any good news. And yes there is plenty of bad news too, and no, I am not ignoring it.
OT (to the effects of debt on parts of society)...
NYT: A History Buff Uncovers Thefts of American History Treasures
His thefts intensified last year, he wrote, because my daughter, Maria, unexpectedly ran up a $10,000 credit card bill.
Ugh.
What idiot would give their kid a credit card? My daughter at college has a debit card. If she wants credit, she can get a job...
I have been thinking of dynamite's actions in the light of what I know of history, and what someone else posted somewhere, everythings got so long it's hard to say where.
Anyway, a peasant's revolt, which this is sorta becoming, is, basically, a WAR, people die in wars. Nearly always, the peasants lose. Usually, the artistocracy gets stronger afterwards, sometimes temporarily. Therefore, as a proxy for war, merely mailing in some keys is actually very civilized. And tho foreclosures certainly mess up a neighborhood, it certainly beats the effects of burning down a village.
Aristocracies and monarchies nearly always are cruel and heavy handed, and leach off the peasants, while telling the peasants that we are all in our correct spot, because god put us there. Peasants put up with it, until things start getting a little better, and then they start asking questions and want things to be a lot better. Obviously, we are in a different situation, but not so different.
And yes 1491 is a wonderful book, should have cited it.
Jas,
I have tried to address the "fundamental question" which you ask. Americans are indoctrinated with the concept of independence almost from birth. American mothers place their babies in a crib, often in another room and 'ferberize' them, which is they allow them to cry themselves out. The Japanese, in contrast, sleep with their children for at least the first year of life and often long afterwards and focus on developing interdependence.
This difference in values produces measurable neurological differences. I have long believed that Americans would walk from their mortgages in large numbers based in part on this thinking.
I think that I was very lucky to have been able to spend a great deal of time in Chinese and Japanese households as a child, and I value both independence and interdependence.
Based on your comments in the past, I think that you can clearly see the damage caused by the American inability to find the middle way; however, I think that you fail to understand the value of the maverick and do not realize the degree to which Americans have the ability to live according to their own ideas and values.
Guys like dynamite aren't villains or heros... just folks clawing their way through life.
thanks. that is how i feel about it-
Lawyerliz-
history shows a recurring theme: Those with money become increasingly adept at extracting wealth from lower classes. eventually the lower classes realize the game, or run out of wealth to extract, and the game resets. Sometimes the peasants get a little back, often they do not.
Zinn's People's History- another good one.
--
Been thinking more about dynamitejacket.
Actually, at DTI of 50%, with 2 kids, you really can't afford that payment. For the kids sake, you should walk, but it only makes sense if the monthly pmt is lower. Going to a nicer place for the same money is not going to solve anything.
Mook,
The million-dollar tale is usually attributed to Samuel Clemens/Mark Twain. At this late date, we're unsure if he was repeating a good yarn or was spinning one himself.
Most of the oft-quoted Winston C. exchanges (some quite possibly true) were between himself and Lady Astor. All rather cruel, some excessively funny.
/trivia
i will be paying the equivalent of the mortgage on my friends place. for the sake of simplicity, i said "the same" but really my rent will be 2k per mo flat, and ill be taking care of some maintenance. so it is quite a bit more affordable. But then i am also banking on my friend's faith in a rebound, and he doesnt mind waiting ten or more years for it. i could not do the same.
my apologies for any confusion caused in the name of simplicity, bob
They classified Jefferson County, Idaho as a 1. The Idaho Business Review did a story about a 20 year supply of homes over $500,000 there, building in Jefferson County were anticipating the Californians to buy them. Looks like they are going to have to wait a long time.
I heartily endorse the recommendations of "1491."
Also, the settlement of the West was accompanied by a great deal of legal maneuvering and outright chicanery. There was a reason that 19th century towns were always vying to be the county seat--living in the county seat made the legal machinations so much easier! (You thought you had title to that ranch? Well ) Also check out any history of the mining strikes--the folks who ended up with the productive mines were those with the best lawyers. (And 19th century mining scams make contemporary versions look downright tame.)
And since it's evidently joke time, another one of Soviet vintage:
"Under capitalism man exploits man. Under socialism the reverse is true."
bobn-
Dynamitejacket is going to do what he's gotta do. Although I don't condone his actions, for those that have a problem with it...tough sh_t.
Dynamitejacket's behavior is the end result of an abused fiat fractional reserve system previously controlled by a grossly negligent Fed chairman.
Greenspan should be imprisoned. If this were to have occured in an earlier period, he probably would be hanged or shot.
"Anyway, a peasant's revolt, what this is sorta becoming, is, basically, a WAR, people die in wars."
Lawyerliz-
Excellent point which the common man generally cannot comprehend. If the Fed let's this get out of control, this subtle ensuing form of revolt could quickly escalate into civil unrest. And there are far more Americans with guns now than any other time in history.
A dangerously large portion of our population will not be waiting for a handout, it will be all about takeout.
my apologies for any confusion caused in the name of simplicity, bobn
dynamitejacket
Sorry I took off so hard, too. (It's just the visions of vast swaths of walked-away-from ruins that gets to me.) If you maintain the current house, that shows some real ethics. You might try to arrange a short-sale, though I don't know the details of that, but the bill that takes the tax sting out of that did get passed and signed.
Good luck.
And there are far more Americans with guns now than any other time in history.
A dangerously large portion of our population will not be waiting for a handout, it will be all about takeout.
Quincy k
I can't speak for illegal gun-owners, but the legal ones I know are, near as I can tell, all or nearly all upright folks who believe in the right to keep and bear arms for purposes of defense.
I am now one of them, an action I took as a result of reading here and other places of what could be coming.
Not that I could predict anybodies actions if their kids were starving, of course.
Here's another variation on the theme. Retiring boomer with good credit and enough cash to buy house outright. Takes a high LTV mortgage instead, so that if values fall too much, he has the option to use his cash to buy a second house at a post-crash deflated price, followed by walking from the mortgage on the first.
No fraud here at execution of the contingency, as there is no second loan app involved with the cash sale. Essentially, the mortgage/banking industry provides a hedge against a large decline caused by...the counterparty in the mirror, the mortgage/banking industry.
Could it be that the brilliant writers of no-recourse statutes had "housing always goes up" on the brain while they were writing?
cd
The sanctimoniousness around is incredible. Do you people NOT understand the basic transaction here?
Let's back up a bit and talk about the past. In the past, someone wanted to buy a house, they put up 20%. They had skin in the game, and they would suffer greatly if they "walked away". Also, if the bank thought the buyer was a credit risk, they would price that in via increased interest rates. And they would verify the income to make sure they were going to get paid back.
The penalty for walking away was the loss of a significant chunk of money (even more if the house had appreciated). But the buyer ALWAYS had the option of walking away, but the banks had priced in that risk and made money accordingly.
These were the rules back in the day, and they worked great.
Fast forward to recently. No more down payment. Credit was proffered based on a credit score. The penalty that a buyer suffers for walking away was no longer a significant chunk of money - it was the "penalty" of a reduced credit score. Not really as much of a "penalty" is it? Especially considering that the buyer was likely to get mortgage and credit card offers at his/her new rental next week.
dynamitejacket didn't make the rules, he's just playing by them. I don't see how anyone can get MAD at him.
Do I think he's greedy? Yeah, he made a bet that he could "afford" the deal he made (which he should have never been able to do) but that's his call and he'll pay whatever "penalty" the rules stipulate.
Don't hate the player, hate the game.