Baked in right?

Care to see a CA example of why?

Check this one out :

663 OAKLAND Ave, Oakland, CA 94611 | MLS# 40416728

Sold for $1.185 mil in Oct 2006. Now, $600k bank owned.

TStone, where are ya?

Mr. Tan Man
Make me a loan
The craziest loan the world's ever known...

BofA puts 7-day hold on California IOUs

So what happens to all those folks who literally struggle paycheck to paycheck and now the paycheck is going to be effectively 7 days late? Will this apply to unemployment check issued as IOUs?

What's the second deriviative of the increasing loss estimates?

Another sad story. This one sadder than most because the foreclosee
put a lot down.

Only 20k underwater. Some hope here. I don't like it when they have hope,
'cause I can't cleanly just say walk away. \

Was a rental and honestly described as same. Renter is paying rent reasonably
timely and has lived there many years--before my lady bought. If the bank
can be talked into reducing the interest rate to 3%, they can make the payments.

Won't quite cash flow, but almost.

This lady even paid extra on the mtg, but then their business went downhill,
and they couldn't any more. The business? Making custom furniture. Still have
some 'cause they deal with rich people.

"S&P noted a surge in the inventory of bank-owned properties."

They're not the only ones. Haven't I been saying this for a few weeks?

And it is not just Alt A and Subprime that are going to be affected.

I posted this over the weekend; Whitney Tilson had some great comments in a recent Forbes article. Anyone who thinks they can accurately predict how mortgages are going to perform are fooling themselves, but of course that doesn't stop all the credit analysts in banks running their flawed LP model from putting in their rosy HP scenarios and justifying a mark of 95 cents on the dollar.

Tilson Talks Mortgage Default - Forbes.com

"And the third key variable is what are people who are underwater do? Twenty-five percent minimum of all the mortgages in the country are underwater. And so the question is: Some of those people are underwater and can't make the payments, but what about all the people who are underwater and who can make the payments but [who] might be economically rational to walk away and hand the keys to the bank? Because why should I keep paying the bank a $400,000 mortgage on a home that's only worth $250,000?

Now that's a key variable, because historically people don't like to lose their homes, they don't like to have their credit rating ruined. But historically no one has ever been $150,000 underwater with a mortgage. It's never happened before. And now you have millions of people who are deep underwater. So how those people behave in terms of walking away from loans that they can make the monthly payments on but it's economically rational for them to walk is going to be a very important variable and one I can't really predict. "

"BofA puts 7-day hold on California IOUs"

BofA does this as a matter of course on business accounts - sometimes a longer period.

They are among the slimiest of all banks, and going for #1.

now the paycheck is going to be effectively 7 days late?

Excellent!

Now BofA & others can charge late fees, too, and really rack up the profits!

Posted this last night:
BofA just "doubled" their margin on a credit card for my bud from 3.25% to 6.74%.
Burn, you SOB's.
Oh, and my bud as good credit; never late.

WestSac_Grrl, it is even worse because they made such a big deal of reassuring everyone that "the big banks" had agreed to honor the IOUs, in effect temporarily bailing out Cali by issuing actual cash for the darn things. Now BofA drops the bomb, "Oh, yeah, that's not real money, so it is subject to our 7-day hold policy ..."

Makes it look like BofA doesn't really want to hold these things after all, eh? But I have a hunch that this is not going to be popular with the boys in charge ... someone with a big desk and an Elliptical Office might just be about to step on BofA real hard. They're still TARPed, ain't they?
Or maybe a big line of people standing outside a local branch waving their useless IOUs for the cameras will do the trick.
"I'll take Pitchforks and Torches for $100, Alex!"

Poor Moz:
http://img200.imageshack.us/img200/3070/moz.jpg

LL,

I have been underwater on RRE before and understand you buy what you can afford and wait it out. The responsible thing to do.

BOA just wants better terms from the Fed government to be the conduit for the Cali bail-out. It'll get worked out.

And so I told her. It's my job to advise her what is best financially. But she could
be responsible and lose everything. There are more properties involved. She can't
keep them all and if she tries, she will lose everything, which is not good for
her or the banks involved.

I have been underwater on RRE before and understand you buy what you can afford and wait it out. The responsible thing to do.

Responsible in what sense of the word? Who do you owe responsibility to? Your family? The crooks holding paper over your head?

I thought so.

This idea of being "responsible" to society at large is an anachronism carried from a time when most of society played by the rules and didn't make their living by exploiting saps still playing by the rules. The old set of rules.

New age. Steal from the government, or steal from your family, as they said in Russia.

Think of it this way. The bankers will always get paid. Someone will be making those payments. You have a choice in this new economy, just about the only one afforded to you in this whole lousy operation: Who will be the ones making the payments? Your family or your government? Who benefits from making the payments and saving the banks, from maintaining the status-wage-slave-quo, your family, or your government?

Frankly, it's immoral to pay your debts in this environment. Keep that in mind, soldier.

"BofA just "doubled" their margin on a credit card for my bud from 3.25% to 6.74%.
Burn, you SOB's.
Oh, and my bud as good credit; never late"

Your bud is simply ani-amerikan - the interest would be lowered if he/she was chronically late....the objective is to rack interest not serve the customer...ggeezz!

Responsible in what sense of the word? Who do you owe responsibility to? Your family or the crooks holding paper over your head?

I really hope no "crooks" ever bother giving you a mortgage or a credit card.

That would be Cali non-persons Liz. We are treated like dirt, and thus, dirt we shall become.

But historically no one has ever been $150,000 underwater with a mortgage. It's never happened before.

Well not exactly. Plenty of folks in the oil producing states were underwater to the tune of $150k in real terms during the 80's and early 90s. It took my brother over 15 years to see the nominal value of his condo rise to his mid 80s purchase price. Then there was the Florida land rush of the 1920s. RE booms and busts are not new, just take on different flavors.

This is bigger and more widespread than those earlier booms and busts.

It is different here, there and everywhere.

I really hope no "crooks" ever bother giving you a mortgage or a credit card.

They don't need to anymore, they've found a more profitable venture: Scaring my tax dollars out of the government.

Essential for the economy, don't you know.

Would your opinion of me change if you knew that these banks were intentionally seeking out people like me, who wouldn't or couldn't pay, so they could write me a loan? No? And you're paying for their losses? No still?

Aren't you the "I know why unemployment is so high - you people are all just stupid and lazy, pull up your bootstraps" regean knob slobber from yesterday?

It's never happened before.

Not on a national scale.

This is bigger and more widespread than those earlier booms and busts.

Agree 100%. But jingle mail is not new. There was plenty of it here in Texas, Oklahoma, and Lousianna during the 80s and early 90s.

Aren't you the "I know why unemployment is so high - you people are all just stupid and lazy, pull up your bootstraps" regean knob slobber from yesterday?

No actually I'm the guy who thinks unemployment is so high because people took on too much debt and aren't willing to take responsibility for their actions.

p.s. I really love that you think I'm a Reaganite, that is funny on a lot of levels.

But hey, keep taking on credit and not paying your bills. Let me know how that works out for you as a life plan.

"But jingle mail is not new. "

No, but the media effect is new.

I haven't heard this at all, do you have anymore info or source? Last I heard of BofA they reduced the amount they would take on a second before agreeing to a short sale.

I have voluntarily left a high paying job in the corporate securities sector out of moral outrage, and I'm voluntarily unemployed.

Again, let me know how that works out for you as a life plan.

Inflation by its very definition is theft.

And yet the Fed's ideal inflation rate is 2% a year.

@Hoopajoops LTD

Good for you; I voluntarily quit my high-paying california job a few weeks ago as well, and converted most of my savings out of dollar (have been for a while). Gonna travel in Asia for a year soon (studying Japanese in Tokyo for 6 months)

ghostfaceinvestah (profile) wrote on Mon, 7/6/2009 - 5:06 p

Now that's a key variable, because historically people don't like to lose their homes, they don't like to have their credit rating ruined. But historically no one has ever been $150,000 underwater with a mortgage. It's never happened before. And now you have millions of people who are deep underwater. So how those people behave in terms of walking away from loans that they can make the monthly payments on but it's economically rational for them to walk is going to be a very important variable and one I can't really predict. "

I think you are exactly right- which is why all the "scenarios" regarding price declines are irrelevant. If people can not refinance and they are having their credit card lines cut for those cards that are not already maxed out- what exactly is the value of a good credit rating. Makes much more sense to stop paying and wait for the bank to come after you and in the meanwhile live rent free for a while. You can also stop making tax payments since the tax lien will come out of the banks hide. Good thing the banks raised some capital - it will make the hit tax payers are going to take smaller. I think we are close to the tipping point- when they start the "ruthless defaults" are going to make peoples heads spin.

Given this kind of back drop it is amazing that anybody is making non conforming loans. I guess getting hit by a 2 X4 is not enough to knock sense into lenders.

Again, let me know how that works out for you as a life plan.

Well, typically it results in a culture of fraud and deceit and financial collapse so how's THAT working for you?

Off to play pool.

hopps

how about helping people? seems like a nice metric.

oh and helping people who actually need the help.

the Fed helping GS bankers via AIG backdoor conduits does not count.

Wall St is gearing up to trade this ??? I Mean, WTF is that? Like we need to try to fix the state's problems by giving a slice to wall street? Someone please wake me up from this long national nightmare.

Wow - just wow. You couldn't write fiction weirder than this.

SNL writers are any of you paying attention???

Playing with crooks is irresponsible to yourself and your family. Sadly many folks just are screw ups and need some one to blame. If you don't understand what you are doing, don't do it. Your definition of responsible is sure different then mine.

We agree on one thing, Effective, B of A offered to bring my guy current if he paid 25 cents on the
dollar. He refused. but whoooo knows?

AAA rated securities losing > than 50%! Money market funds brought to the breach of default. The largest financial companies become wildly insolvent.

Do we get Pecora hearings? Nope. Do we get prosecutions? Nope. Do we get clawbacks? Nope. Do we get meaningful financial reform? Nope. Instead, we get accounting shenanigans and the banker bonus protection plan commonly known as TARP.

The biggest swindle in history.

Thanks for your reply, Hoopa.

I think the United States of America is the world's 'bad bank'.
Sink the USD as world reserve currency by shuffling off pieces of "AAA" MBS suicide bombers and replace with Yuan.
of course, I could be wong; but Hu's your daddy.

The opposite of a "tighter".

What do you alien suburbanite corporate slave motherfuckers value these days?

Effective Demand
Integrity.

Well show some more integrity and pay the banks for my neighbor's failed mortgage equity line of credit, you superlative-driven slave. To do otherwise would lack integrity.

No, but the media effect is new.

The media is irrelevant. The relatively new mechanism of destruction is the shadow banking system peddling derivatives tied to mortgages and bonds. This script has already been written and whatever media coverage it garners now will have no affect on the magnitude of damage.

That's quite loathsome hoops. I mean I knew stuff like that went on, but I really
didn't think about it.

The Senate blocked a bid to permit the U.S. comptroller general, who heads the investigative arm of Congress known as the Government Accountability Office, to audit the Federal Reserve system and issue a report.

Senate turns aside new attempt to scrutinize Fed
| Reuters

Well show some more integrity and pay the banks for my neighbor's failed mortgage equity line of credit, you superlative-driven slave. To do otherwise would lack integrity.

I can only control my actions. I take responsibility for them. I pay my debts (If I had any, I don't, but when I did, I did).

If people want to go "well everyone else is doing it, I might as well do it too".. It doesn't change my actions at all.. Because after all I can only control my actions and have to live with myself.

You want to advocate taking on debts and not paying them, go ahead (kind of funny coming from someone expressing moral outrage). It just doesn't seem like it has much personal integrity to it. But maybe that is your thing.

If people would just take care of their own shit before worrying about others shit the world would be in a much better place. People want to worry about blaming others as a pretext of ignoring their own problems.

Regarding Cali IOU's. The state is paying salaries, pensions, etc. in cash not warrants.

Effective Demand,

Stop ascribing moral value to your business decisions. The banks taking advantage of you and your family sure aren't. The minute you stop making "business sense," they'll drop you, regardless of any moral calculus. I see you pay on time... well... since we made some loans to some losers, we'll be raising your interest rate by three or four percent... you should be mad at those deadbeats, you see, they're responsible for your payments being so high... If you'll excuse me, I'm in the middle of a line of coke...

Hoop - arguing 'life measures' with a guy whose handle is 'Effective Demand' is probably a good way to not meet your own personal 'life measures'. Just sayin'...

BTW - you said you were gonna pursue 'applied sciences'... why not do UC Davis Brew School? Hell I'd do that myself...

The entire "credit score" meme is bullsh%t. Oooooh, people don't want to ruin their credit scores. What a crock. People will see throught that sham soon enough. If you live within your means and save diligently, a credit score is all but meaningless.

I have no idea what my credit score is, and I'm better off that way. I'm certain of it.

A couple years of working hard, living frugally and saving like crazy is all people need to ignore credit scores for the rest of their lives.

The neighbor had no respect for himself or his family for living on the financial edge. He did not act responsibly and wasted and simple solid life style for him and his family. Maybe next he can clean the porta poty.

I would absolutely do that, if I had any taste for beer or wine. It would be one of my first choices, actually. Fermentation is good for more than just wine and beer -- it's one of the first bioreactors human beings ever built. From those humble beginnings to the next century, when we'll be using a vat to grow everything from antibiotic, unspoilable cheese to brand new teeth. I drink no alcohol, otherwise I'd be all over it. I'm good personal friends with the director of one of those programs, won't say which.

Yeah on thinking about ED (which stands for something else too, no?) is a troll.

I will not put him on ignore, 'cause I read everybody, and he's not as nutz as some,
but basically, trollish.

"The media is irrelevant. "

I don't think you understand the term "media effect" when it comes to mortgage performance. What it refers to is the tendency of people to seek "social proof" through the media, i.e., if people hear about others walking away from their mortgage, or defaulting and living in their house rent-free for years, they will tend to do the same.

That is a big difference in this downturn. Some of you may not feel it is "moral" or whatever to stop paying your debts when you have the means to pay them, but believe me, I see it every day, more and more people are just stopping payment.

IMHO the govt is making matters worse with the bailouts, as people are taking their cue from the government that contracts and laws in this country can be repudiated on a whim.

"The relatively new mechanism of destruction is the shadow banking system peddling derivatives tied to mortgages and bonds. This script has already been written and whatever media coverage it garners now will have no affect on the magnitude of damage."

you lost me there.

I feel sorry for the chef and gardeners.

So why is my SRS in the crapper?

You are aware that credit scores are used in hiring decisions and setting insurance premiums, aren't you?

I know the deal. It's a racket and all rackets end.

I maintain that credit scores are useless and will become even more useless. Especially after the world realizes they were poor predictors of mortgage defaults.

In the future, who will they lend to - a saver with 20% down, or someone with no collateral and a good credit score?

The credit score meme was a sham to push debt. The jig is up.

Effective Demand is just towing the govt's line. If people made a rational decision on defaulting on their mortgage, the financial system would be insolvent in an instant. It doesn't take much running of the numbers to see this.

Look at the BHO housing plan. Wasn't one of the cornerstones going to be bankruptcy cramdowns? But that never made it out of the Senate.

Instead, all you have are interest rate buydowns. Big deal. The govt needs people to pay on underwater mortgages to keep it all together.

GDD,I was out and about.The interior is a lot nicer than I remember from the late 1970's.I knew one of the students who rented the place back then and I went to a couple of parties there,one was memorable.That is a busy and noisy street,and I seem to recall that the "c" and 11 bus lines use oakland ave.You can easily walk to shopping,theaters,parks and restaurants but there has historically been a surprisingly high incidence of street crime along that stretch of oakland ave.

Well, isn't that just peachy, Gnome.

"You are aware that credit scores are used in hiring decisions and setting insurance premiums, aren't you?"

Under the Fair Credit Reporting Act you are not required to consent to a credit check as a term of employment.

I just find it interesting that Hoop advocates not paying debts (top post) but then turns around and is mad at those who don't (mad at his neighbor for doing exactly what he suggests in his first post).

Very good article. Unfortunately the mortgage losses will continue to pile up for some time.

So how is one supposed to make money in such an unpredictable stock market?

In my opinion, it is all a matter of market timing. It does not matter if it is gold, oil, or Microsoft, if you have access to good market timing signals, they will help you get in and out at a profit.

No guarantees in this business, but if they are right most of the time, you can still make $s.

There are may web sites providing them out there (search Google). Just find one that works and use it! Check out Invetrics - Financial insights and stock market timing signals for the active investor  as an example.

Its Dow Jones timing signals are up 49% as of 7/5/09 while the Dow is up just 25% off its March lows.

Following a market timing system works!

"Under the Fair Credit Reporting Act you are not required to consent to a credit check as a term of employment. "

And then you get denied the job for any variety of reasons. All the company needs to do is a credit during the interview process and your denial can result in any of the other 20 interviewees being the best fit for the company.

i wish that there could be a place where people in cali could talk to others who are going through "strategic foreclsure" to kinda know what is happening to others....any suggestions?

Ghost,
That may be true, but unfortunately you failed your drug test.
Sorry.
and no you may not see the results or get a second test.
NEXT!

Dry,
I've used Northern Brewer before.
Quick friendly service.
Keep it clean and your first brew should go great!

Scrooge,
Agreed.
FED, Treasury and FedGov. against the rest of us.
That's why I paid off all my debts in 2001.
Didn't see it?
They knew this sucker was going down even then.

Nice to see a positive suggestion for a change. The threads the other evening were so negative and devoid of hope it was depressing.

I thought the guy roasting corn in the parking lot should get some credit for making the best of things too.

Liz - I don't understand why your client doesn't wait this out. 20k on a 200k property is only 10% underwater. If they can manage the payments, the market will return. If not through demand, through cheaper dollars that will inflate the price of the property down the line.

"Like I said, If everybody concentrated on their own issues first and once they solved those then moved on to the others.. the world would be a better place."

Said one dutiful boilerroom coal shoveler in the titanic to the other, "Hey, I work pretty hard... but where's this ship going?"

"Concentrate on your own issue first, coalman."

CRE: Half Off Sale in San Francisco and More

Why do most states allow non recourse ? Every debt should have recourse IMO. They made stupid rules and the stupid banks played along. The mortgagee is just playing by the same stupid rules if he walks.

Morality doesn't come into play based on the moral compass of our gov't. these days. Chivalry is dead.

Frequently Asked Questions about Registered Warrants (IOUs)

1. Who will continue to receive regular, or “normal,” pay warrants?
   The State Constitution mandates that education and debt service have priority status, and the Controller will work to ensure there are sufficient funds to continue to make those payments with regular warrants. The State Constitution, federal law and court order also require that State payroll, CalPERS, CalSTRS, In-Home Supportive Services and Medi-Cal providers continue to be paid with regular warrants.
2. Who will receive registered warrants [IOU's]?
   The State in July will issue registered warrants, or IOUs, for all other payments, including those to private businesses, local governments, taxpayers receiving income tax refunds and owners of unclaimed property.

I agree with you Outsider.

Hoop was mad at me yesterday because deigned to say that people getting more unemployment for sending out resumes won't help solve the crisis and instead we should encourage them after a year of unemployment to try to attain more or different skills. I don't believe that is lacking compassion, I don't see paying people to send out resume after resume as helping resolve the crisis. I say we pay them to do something else, go to school, relocate if they can find a job in another area. Anything but send out another resume.

Today I deigned to suggest that people should seriously consider any debt they take on before they take it on and do so very sparingly. And if they do take it on strive to pay it back. We wouldn't be in a credit bubble if that happened. Banks AND people lost the value of additional debt, it is a two way street.

Tuition assistance (as in, pretty much free) for those in fields that no longer exist, to redirect them into careers that actually hold promise - that's an idea.

HomeGnome...BoA probably set up XYZ Corp to buy back exec cars and airplanes, now to be repurchased and financed by yours truly!

Outsider - i would agree w/ you. However, when none of the goodwill is reciprocated I think most finally give up and say why not

Your speculation on the pricing of seconds...

I've heard of banks taking a certain % to settle debt (both seconds and CC, as seen in the NYT article). I have also heard after 90 days backs have to charge off such debt. And since as I understand it banks just sell recourse debt to debt collectors for pennies on whats owed... I just thought my statement was a logical extension of the banks maximizing their returns based of the facts as I know them.

I agree to some degree with both Hoops and ED. They seem to be arguing the same thing from opposing vantage points and that doesn't work.

Hoops might be a little shrill, but I'm sure he's more circumspect than his board persona. And ED, nobody can argue with your moral viewpoint, but that isn't always the question.

It's like a child who touches a hot stove and gets burned. It seems ED would rather make sure that the child knows full well that he/she should never do that again before applying the salve, whereas Hoops is arguing that the burn already happened so the lecture is useless. What do we do about it now that the damage is done? I can see both sides.

ED - Sounds like maybe a difference in basic assumptions about people.

These are shorthand thoughts posted here. I wouldn't worry about what anyone else says about your posts because if you sat down face to face and really discussed it, you might find there's more agreement than disagreement. Internet communications tend to be a little weird.

ED - I don't think that's what Hoops is saying, and I concur with Outsider's comment. You two probably agree more than disagree but message boards don't allow for body language.

Anyone who applies moral imperatives to their decision of whether to pay off Bank of America is still a sucker, though.

Outsider is actually a she. And a former social work major. So we're all friends now? Good. You'll get my bill.

After further checking, apparently the short sales are being limited to severe hardship cases specifically income reduction due to job loss et al, divorce and death in family. The same limitations apply to loan modifications but these seem to be treated more liberally. If one stops making payments there is a presumption of hardship and the lender starts to talk to you about your "hardship." From what I can see in this market, Las Vegas, fewer than one in ten short sales meets the hardship test but more than half of potential loan modifications meet that criteria. It could be that the people in the two categories are that different. I think it's all about cash flow to the banks. If you stop making payments and they can modify you back into giving them cash they're happy, but if they don't allow a short sale, where their loss is now and substantial the banks give the borrower the hard choice- keep servicing an impossible debt or go to the trustee's sale. Admittedly the loss on the trustees sale is greater by about $50k than the short sale but its delayed typically six months and the game is won by the banks if a majority of would be short sellers can be forced back into making their payments.