Alas, poor Tanta, I knew her well.

These are not the droids you're looking for.

Seriously though,

Companies screw people regularly with the "fine print." Now, the little people finally have a chance to screw the companies with the "fine print".

So why is that wrong?

Tanta, switch to decaf if you are gonna keep reading Poor Gretchen. We want you around for a long time Uberposting™.

Since this seems to be a thread about metaissues rather than the specifics of Ms. Palmer, I offer the following:

The problem is people are connected to houses they cannot afford to hold. Nothing except separating the wrong people from the wrong houses can possibly address this fundamental mismatch. Anything that attempts to delay or divert that process can only do greater harm for a great time. People and businesses fail all the time. Centuries of experience tells us the correct action is to run off the assets and move on. Where some economist or politician or whatever got the idea that we could move on without running off the assets is the mystery here. TANSTAAFL.

Tanta --

I'm not sure I'd call this "rough justice."

Out of curiosity, what sort of outcome here would you describe as "just"?

The woman now owes more than she did when all this started.

Except now she never has to make a single payment on that debt. If she can merely afford taxes and maintenance, she can happily live there for the rest of her life.

If not, FDICMac gets the property. Which is all they will ever get, anyway, with a reverse mortgage... So the nominal value of the debt is not really an issue here; the "rest of her story" would be identical whether it is $70,000 or $700,000.

Or do I misunderstand what "reverse mortgage" means?

When the classmates.com ad at the top of the page expands to block your view of the first post, just hit refresh to make it go away.

Hope this helps.

Mission Accomplished!!!

We have always been at war with Eastasia.

that's the worst ellipses i've ever seen.

Oh the solar ellipse isn't until Aug 1st

OT but does the infamous housing bill allocate extra money to the FHA to do its new duties? I bet not.

I'm also sure it doesn't allocate any money to first and 2nd lien holders to pay for the additional underwriters necessary to figure out who should and shouldn't get a deal.

So I think hardly anybody will actually get this deal, a la Hope Now, which should be called Hopeless Now.

Why should anybody in Dade or Broward County, or the inner circle of doom Ft. Meyes/Cape Coral, which are probably still declining go for this? So the bank gets a 10% haircut? So what, if values go down by 20% or more and everybody knows this. And I do think people are getting a few clues, finally.

And finally, despite all the discussion, it's not clear to me that
you have to be behind on your payments to qualify for this.

And I think the lady kinda came out even. She won if the property really did appreciate, and has kept the appreciation.

How will putting a stop to foreclosures change the end game? Seems to me that it will only prolong the inevitable, draw out the damage, and makes things worse in the end. But the logic seems to be that foreclosures are BAD and stopping anything bad is GOOD, so all of this is GOOD.

There's an ellipse on Aug. 1?
Cool!
That's our 15th anniv, aniiv, uh, 15th time we celebrate getting married. And all goes dark for a few minutes. How fitting.

Thanks bacon, I didn't know that

OT: Another story of why you should check to make sure you are under the FDIC limits. This time a small business owner who did not keep track of their accounts.

404 Not Found

Maybe that's all she wants, Tanta, to live there and die there.

And money or something the rest of us here would regard as sensible has nothing to do with it. It's just emotion.

Ok, so you just have to prove that you can't keep making the payments, even if you are making them now. How can you prove that? Any crystal ball sellers on eBay?

Actually, I do have a client that this might help. He put 30% down and is still underwater, in a very nice house in Miami-Dade. He's about 10% underwater. So he waits to have it go another 10 underwater and then re-fis? He's not in foreclosure yet. Think I'll advise him to hang on just enough to not be foreclosed, which he can do. And he can probably show he can't continue to make the payments, as his business of refurbishing 50s cars is in the crapper.

Oh, and can you do this more than once? Could he get the cramdown, and then sell, split a little money and then do it again with a new residence, if it's within the proper time frame?

Her heirs don't own that house.

Reverse mtges are not a bad idea for
old people who are living on just over $600s a month, and not being given one cent each month for help by the said heirs for extra help. Had a old guy in my office consulting about this just last week. His kids don't like it. Tough.

MiTurn.

Actually, I don't think the banks will be worse enough off to make a difference. Those 2nds were always an illusion, and always gonna be wiped out.

I don't think they are even gonna be wiped out any faster than otherwise.

Because this is a NOTHINGBURGER.

OT - What does it mean when the largest newspaper in one of the world's most important RE markets halts publication of its RE section?

From LA Times:

"In case you missed the announcement today in Real Estate, because of reductions in staff and space, the Sunday Real Estate section has printed its final edition."

Portentious, or no?

For thems what ain't got all the way through law school, or Tanta school...

wiki/Reverse_mortgage

A reverse mortgage (known as lifetime mortgage in the United Kingdom) is a loan available to seniors (62 and older in the United States), and is used to release the home equity in the property as one lump sum or multiple payments. The homeowner's obligation to repay the loan is deferred until the owner dies, the home is sold, or the owner leaves (e.g., into aged care). A reverse mortgage is analogous to an annuity where the principal and interest are paid with homeowner's equity.

In a conventional mortgage the homeowner makes a monthly amortized payment to the lender; after each payment the equity increases within his or her property, and typically after the end of the term (e.g., 30 years) the mortgage has been paid in full and the property is released from the lender. In a reverse mortgage, the home owner makes no payments and all interest is added to the lien on the property. If the owner receives monthly payments, or a bulk payment of the available equity percentage for their age, then the debt on the property increases each month.

If a property has increased in value after a reverse mortgage is taken out, it is possible to acquire a second (or third) reverse mortgage over the increased equity in the home. But in certain countries (including the United States), a reverse mortgage must be the first and only mortgage on the property.

(But I did know what tendentiousness means.)

Feckless Ness writes: "Portentious, or no?"

Plummeting circulation and decreased ad revenue made for cuts everywhere. The LA Times even cut the web team despite a 50% increase y-o-y.

From now on the Real Estate news will be limited to taking up what a great deal property near the LA Time building are and oh BTW those buildings are also for sale.

"You ask, what is our aim? I can answer with one word: Victory - victory at all costs, victory in spite of all terror, victory however long and hard the road may be; for without victory there is no survival."
Winston Churchill to the House of Commons on May 13, 1940 in his first address as the newly appointed Prime Minister of England

OT, but still pertinent. Is this the US writ large? I found this in a Market Watch comment.

http://www.sandiego.gov/cityattorney/reports/pdf/ibaanalysis.pdf

Why yes, MiTurn it is.

I would guess the persons who put this in play were persons who were in a conflict of interest situation since they were going to retire soon and would thus benefit.

So why not cut the bennies down to something reasonable? Yeah, they will scream, but then so will all the other people whose services are cut.

Misean writes:
Rob Dawg,
Damn you're right. I got some scotch though.

I only settled for Gin & Tonic because someone ahead of me bought all the gunpowder and then barricaded himself in the whiskey aisle. Last I saw of the bartering a Slim Jim bought you a swallow.

Nothing in there about the interest rate on the IndyMac/FDIC reverse mortgage; is 7% a reasonable guess? So the interest will accrue, for the moment, at $5,600/year and compound as time goes on. Not a bad investment if the Zillow estimate is at all close.

Also, I've heard that reverse mortgage fees were high, but $12.4k on an $80k loan is outta sight!

MiTurn -

Most public employees in California are part of CalPERS, second only to SSA in size. Contributions are split between employer and employee and are based on the retirement formula adopted by that employer (available on CalPERS website). In good years, CalPERS is superfunded by its own ROI and the employer's share is zero. Some employers pay the employee's share as well.

What has gotten local governments in trouble is adopting the highest benefit plans - 3@50 for public safety and 3@60 for non-safety employees. That's 3% of highest salary times years worked, retiring at age 50 or 60. Many cops retire with 90% of their highest salary and then get a non-PERS job elsewhere.

Local governments compete for each other's employees, so there's a domino effect - as soon as one employer adopts a better formula, everybody wants it. It takes a VERY strong local government to stand up to the cops' and firefighters' unions; most aren't that strong.

The problem is the impact on CalPERS' portfolio as the market declines. The contributions required of local governments will skyrocket. And once any kind of wage or benefit increase is given to public employees, it's VERY difficult to get it back. What might seem obvious to the average citizen (roll back wages/benefits) is almost impossible.

To add insult to injury, local governments rely heavily on sales tax, property tax, and other revenues that are going to be hit hard. There is a lag because current operations are based on past revenues, but there's a world of hurt on the way.

Can't imagine what Florida's facing - they already had huge cuts in local government due to a property tax abatement law.

Feckless Ness writes: "To add insult to injury, local governments rely heavily on sales tax, property tax, and other revenues that are going to be hit hard. There is a lag because current operations are based on past revenues, but there's a world of hurt on the way."

Thanks for the summary Feckless. This tells me that this scheme can't go on indefinitely. It's going to have to find equilibrium, if you know what I mean. Ouch!

Anonymous Bosch, Tanta did an UberNerd on reverse mortgages a while ago:

Having read that for the first time, I now know more than I ever wanted to about reverse mortgages (IOW, good job Tanta !).

There is one thing I don't see talked about in there: are reverse mortgages securitized ?

I have this strange lingering thought, in the back of my mind, concerning reverse mortgages that were written during the recent 'bubble' years, at property values that may no longer exist. What happens to the people on the lending end, when the models don't accurately predict the decline in home prices ?

MiTurn writes:
OT, but still pertinent. Is this the US writ large? I found this in a Market Watch comment.

City of San Diego Official Website cityatto...ibaanalysis.pdf

Thanks for posting this. This is not the U.S. writ large. San Diego might be in a class by itself for potential pension time bombs. (Actually, San Diego and NJ.) But it's pretty interesting.

Based on the file you posted, SD has a funded ratio of just 53%. That is, the plan's market value is just 53% of the present value of its future liabilities. That's red zone territory for a DB plan.

But the only reason it isn't worse is the strong performance on plan investments over the past two years. By backing out cashflows, I calculated that SD's DB plan achieved returns of 23% from 2005-06 and 19% from 06-07. It probably means they were heavily invested in stocks and hedge funds, although I probably should check.

If they can't keep up that kind of return (and it's doubtful this year), they will be in deeper trouble. I don't understand who in their right mind would loan money to SD (I mean, unless it's MBIA-insured).

What happens to the people on the lending end, when the models don't accurately predict the decline in home prices ?

What happens to the people on the lending end when the homeowner lives in the home another 20 years, the neighborhood gradually declines and the home slowly rots away?

Do the math.

This is not the U.S. writ large. San Diego might be in a class by itself for potential pension time bombs. (Actually, San Diego and NJ.)

Beg to differ, rich. Already a big issue for State of CA, City of Vallejo, Orange County, City of Long Beach, and many others. And that was during the good ROI years.

rich, here's your answer:

If the sales proceeds are insufficient to pay the amount owed, HUD will pay the lender the amount of the shortfall. The Federal Housing Administration, which is part of HUD, collects an insurance premium from all borrowers to provide this coverage.

1929 ….….. 1979 …….. 2009 ?

From page 15 in "Harvest of Rage" (Dyer,1997):
" The rate of inflation [in the 70's] was running
several percent above interest rates, so banks
and government lenders, such as the Farm Home
Administration (FmHA), were encouraging
farmers to borrow as much money as possible
to buy farmland.
… the price of farmland skyrocketed as farmers
tried to outbid each other … . Lenders would
actually call farmers and ask them if they could
take more money. … Many lenders at the time
were getting paid bonuses based on how much
money they could loan. "

" But that all changed in 1979. Fed Chairman
Volcker decided that inflation was out of control.
… raising interest rates to unheard-of heights.
… [farm]values collapsed at the same time the
interest rates on the farmer's loans climbed out
of sight.
The men and women who had listened
to the experts, and had done exactly
as they were told, lost everything. "
_

"without destroying much of that industry in its current form."

OMG! I just figured it out.
If I have a mortgage with Indymac and Sheila Blair is not going to proceed with any foreclosures ... can anybody tell me why I should continue to make my mortgage payments?

So, does a county never initiate foreclosure proceedings for nonpayment of property taxes?

I know what happens in Florida, but not the other 49 states. Here, the county sells a "tax certificate" at auction. The auction is based on "who will bid the lowest interest rate" (with bidding beginning at 18%). The amount paid by the low-bidder is the property taxes owed, plus some type of administrative fee.

The certificate holder either gets the amount paid plus interest (assuming the property owner finally shows up at the tax office with cash), or they get to run the property thru a tax auction (if the certificate has not been redeemed after 3 years have passed).

IIRC, there is a minimum interest amount, even if the property owner shows up the day after the action to pay the taxes.

The county is more interested in getting cash to continue operating (via the certificate auction) than they are in chasing down the owner. The certificate is, in effect, a lien.

Autre Canadien,

I hope you're enjoying the show.

My understanding is that the $25 billion is mostly unrelated to the 400,000 foreclosures. The 400,000 foreclosures were nearly all on non-conforming mortgages so F&F would not buy them except for their ownportfolios.

The F&F Rescue bill was hastily added to the foreclosure relief bill. The $25 billion estimate was made by the Congressional Budget Office, by assuming that there was 50% chance that the F&F rescue would have zero cost. CBO assumed a 5% probability of a $100 billion cost, which was assigned a $5 billion estimated cost. I believe CBO assumed a 20% probability to the $50 billion loss scenario, resulting in $10 billion in estimated cost. The sum of the weighted cost estimates for these scenarios was was $25 billion.

"what happens with the stock market on monday"

Why, it's gonna soar! What, you expect it to act rationally?

Oh, Edd, this money is nowhere where it could be recovered. A lot of it went for trips and cruises. A lot of it went to overimprove homes (which will be largely destroyed if left vacant.) I don't think much was spent on drugs and gambling. Some was spent on medical care; some was spent on college tuition.

But I think most was spent on things like very expensive handbags.

Oh, forgot, a lot was used as downpayments on other houses. Quite a lot. I know somebody who used the money to have that stomach stapling operation that his insurance co wouldn't pay for. Actually it probably saved his life; he's lost 170 pounds, is no longer diabetic, and lord knows how many clothes sizes. He's still paying his bills, tho no longer a re/mtg broker (honest).

But what, at the end of the day, do we disagree on here?

Certainly not the facts: your analysis of what actually occurred in terms of the financial outcome is indisputable. Nor would I argue with your characterization of how GM has misrepresented this outcome. What you resist coming to terms with is that this is a manifestation of a deliberate editorial policy at the Times (and increasingly in the MSM in general). Bread and circuses, no; propaganda, yes. The Times is casting the principal actors in a morality tale that we're all familiar with: Mamie Ruth is Little Nell, and Bank of New York is Snidely Whiplash. We all know how this has to end -- and why. Because villains must be punished, and so they are:

To try to protect its borrowers, Georgia just instituted a law requiring that lenders moving to foreclose on a borrower must file proof in county records that they own the underlying property before the home goes to foreclosure sale. “We believe that many of these companies can’t find the assignments,” said William J. Brennan Jr., director of the Home Defense Program of the Atlanta Legal Aid Society. “If they can never prove ownership, then they can never foreclose.”

Just one of many obstacles for lenders being constructed at the state and local level as legislators pick up on the message that the media drums are sending. This is not the first time the Times has led a public policy crusade, and it certainly won't be the last. While no one knows what the end result will turn out to be, it is, in my humble opinion, unlikely to be any worse than what we have today.

Vlad K. writes:
Why should our children work, or even stay in this country, just to pay taxes so inner city blacks get free houses and sit on their fat arse all day?

Door's that way, Vlad, don't let it hit you on the ass on the way out.

We keep brutalizing capitalism and democracy
(in a "nation of faith").
And Paulism is organized stupidity.

Maybe the Empire would take us back,
though a few heads might roll.
_

My 73-year old co-worker is grumbling that his 5-year APR is about to reset and he's looking for a 30-year fixed. Since this particular dude plays tennis daily, he just might make it to 103.
Although my coworker is otherwise unlike Mamie financially, they both bought houses (well, he refinanced) after retirement age. Question for you baners out there: why does it makes sense for a lender to loan money to someone who has a high likelihood of dying before the loan is paid off?

Tanta writes:
I thought you needed equity to get a reverse?

You do.

Her home was valued at $78,000 in 2002.

Per Zillow, it's now $136,000.

So, to the extent you could call this homeowner a winner, it was home value appreciation which enabled the reverse mortgage workout. Home value appreciation is an opportunity many people entering foreclosure today will be unable to tap; quite the opposite. Moreover Mamie does lose because the equity that emerged has been appropriated by BONY and IndyMac/FDIC. Imagine how much better off Mamie might have been had that home equity been hers.
Will Mamie keep up payments on taxes, insurance and maintenance in the future?

The settlement also (...) called for the installation of central air-conditioning in Ms. Palmer’s home.

Sounds like Ms. Palmer got a nice RENTAL contract for the house (I wouldn't dare to call it HER house).