Fibonacci

Last time I checked the headlines, we don't have a 'rich folk crisis' or a 'corporation default crisis'.

So you're implying that rich people only get rich by being greedy, lying, cheating bastards? While us little people are virtuous and righteous? There are good and bad apples in every tax bracket buddy.

Fibonacci

Okay since I'm such a schmuck and you're such a genius, show us all how to do it then. You've asked people for PM's to strategically default and you've made crystal clear the benefits (to you personally). So go ahead give us your best sales pitch about how all of us on Azine should ALL RUN OUT AND DO THIS NOW and how it will be awesome for our neighborhoods, communities and the country at large.

I have a very low tolerance for bullshit, so make your pitch succinct please...

benben01

You have to watch more than FOX news and read beyond the Drudge Report

Not implying just stating the fact. If you look at MBA published stats, mortgages over $1 millions have close to a 15% default vs. the 8% default rate for conventional mortgages. Oh yeah, don't forget stupid and naive in every tax bracket too

You may not like what Bubba did but you clearly don't walk in his shoes. Bubba, morally wrong or financially savvy, made a business decision to exit a bad transaction that would have crippled him. I hope no one has to go through something like this...

Fibonacci

For the record, I haven't watched Fox News since, like 2002. And I rarely click on Drudge these days, its annoying how he takes out of context quotes and makes headlines out of them. Thanks for attempting to pidgeonhole me though.


How many of those jumbo's are simply in high cost housing areas? That doesn't necessarily mean those homeowners are necessarily all 'rich'.

Fibonacci

Bubba took out a piggyback loan, had little skin in the game, bought a home he wanted to flip, and then puked it. What he is trying to encourage is more bad behavior and will extend the housing/banking crisis and will raise the cost of credit for the rest of us who are trying to do the right thing, it will increase the tax burden on those of us trying to do the right thing, it will impair economic growth because banks are saddled with more bad loans because of people like Bubba.

Bubba picked a home he liked, had the ability pay, he didn't lose his job, he wasn't forced into bankruptcy because of medical bills. HE IS NOT A VICTIM.

benben01

You are quite welcome. Just having fun with this debate nothing more...


Case in point, Nicholas Cage... Nuff said. Yes you don't have to be all that rich to get a $1M mortgage. However, you have to make more than $250K to qualify even with the loosest standards from back in the day....

Bubba is not the problem. The problem is "US". We collectively elect these so called public servants to office and allow them to pass loose regulations to foster this housing crisis. "We" also allowed these servants to repeal Glass-Stegall and let the banks leveraged up 40 to 1. Bubba is not necessary a victim. Bubba is just smart and realized he's in a bad situation and worked his way out of it legally. Don't hate Bubba for what he did. Take precautions to protect your assets and wealth.

NSXNEXT

iTrader: (2)

What happened to honoring your obligations? Oh yeah don't worry about that, minor details... Don't hate Bubba? Why the hell not? If his strategic default ends up being the difference between me being able to refinance or not I'd be extremely pissed off.

Lucky for me I put well over 20% down and I am refinancing my mortgage Tuesday @ 3.5%. My area has seen little foreclosure activity and my assessment came back a few weeks ago and the new assessment is $3,500 less then my initial assessment. Thank god I don't live next to a Bubba.

BubbaMarkTL

HAHA, I love how you are privy to all the details of my situation. I have revealed alot about my situation and how everything unfolded but lets be clear.

I did NOT take out any "piggyback" loan or any HELOC after the purchase of the condo.

I did NOT have an ARM

I did NOT have an exotic loan (interest only, variable payment, etc)

I did NOT purchase the condo to "flip". My intention was to live there 5 years max, 3 years minimum, which based on about 8 DECADES worth of data on housing prior to 2006/2007, made this a safe proposition with no risk or indication of impending doom in the real estate market and subsequent value loss.

I had no skin in the game, thats correct, but did it ever occur to you WHY that was? How about because the property lost more than 60% of its value. I would have had to put down 75% at purchase to have ANY "skin in the game".

You are again making subjective statements. "bad behavior"? According to whom? What makes it bad? Because you dont like it? Sorry, but I don't care. Its not "bad behavior" just because YOU or anyone else says so. You really need to be more careful in seperating facts from your own opinions.

There is no "tax burden" on you as a result of what I did. There is no "tax burden" on the other residents in that building or in the City of Chicago as a result of what I did. At closing, I paid up in full all due property taxes and the new owners pick up where I left off, taking care of the future "tax burden".

I was forgiven $105,000 +/-. Who pays for that? Well thats complicated...the bank takes it as a loss, charges it off. Does that mean that they send a bill to the US government for the $105,000? No. You can play games and connect dots that may or may not even really connect to somehow make a point that the $105,000 I was forgiven ends up coming out of your pocket personally but thats a really far stretch.

And tell me, how is that any different than this administrations miserable failures of "real estate rescue" programs HAMP/HARP? The goverment pumped millions and billions into those programs and Obama himself admitted they are failures. Those programs failed me personally as I tried my best to go that route. This new program they are planning is also doomed to fail. They DO NOT address the real problem in the market. The REAL PROBLEM is the millions of folks that are in the same shoes I was. Successful, employed, good credit, middle class/upper middle class folks who are trapped in their homes, unable to refinance, unable to relocate, unable to upgrade homes. The longer that large portion of the market is stuck on the sidelines, the worse the situation gets for everyone.

The government is not going to bail those folks out in any tangible sense but they sure are quick to bail out auto manufacturers, banks, etc. I came up with my own "real estate rescue" program and it worked flawlessly. Many have done the same. Hopefully many more will do the same as well because its the only way any of this is ever going to get better. The bottom has not been reached and until that happens you are kidding yourself if you think things are getting any better. People dont have time to wait 25 years to regain equity that was lost. Life is too short. Property values on average are down 33% from peak. It will take a gain of 51% to make up that difference. The deck is most definately stacked against homeowners stuck in this cycle. a 51% gain is decades off...many many decades.

BubbaMarkTL

Key phrase here..."your area".

Congrats on being lucky enough to live in an area of the country that was not horribly effected by the crisis. Guess what, not everyone lives in your area. Youd be humming a different tune if your situation mirrored what I was facing. 64% value drop in 3 years with no end in site + rising property taxes, rising HOA costs and escalating local crime? Sure, you'd ride that one out, I beleive you. Better yet, youd dip into your savings, retirement, positive cashflow to shore up the bad investment just to attempt to bring your bottom line closer to $0 instead of -$105,000. Because THAT makes perfect financial sense. Flush money down the toilet to bring your financial position on the property back to a fictional, inflated value that is not going to be seen again in your lifetime. Makes Perfect sense right? Get real. I know you are not a foolish person. Go ahead and tell us all that you would do "the right thing" and flush 6 FIGURES down the toilet on a property like I just described.

whudini3000

iTrader: (1)

I see this no differently than a cell phone contract. Pay the cancellation fee and move on. It's apparent some view a mortgage as a business contract and others as a moral obligation. In the end, everyone will do what is best for their current situation.

NSXNEXT

iTrader: (2)

Did you seriously just compare a mortgage default to a cell phone contract?

Ken1997TL

Gotta love the moral relativism here!

Since you wish to compare cell phone contracts to mortgages, I have decided to compare your moral relativism (i.e. people will do what they feel is 'best' for themselves in their current situation) to Adolf Hitler's view on Lebensraum. Extreme? Of course. It's to make a point.

Wrong is wrong.

NSXNEXT

iTrader: (2)

Well if I had to walk away from my current mortgage I'd be out just under $200k. This includes down payment and home improvements I have done. This is why they need to make it a much harder decision for homeowners to walk away.
Minimum 20% down payment is a good start.

benben01

Don't hate Bubba.. Hate the game!

All seriousness.. If anyone of us were in Bubba's shoes, we would be doing the same thing. That's why we are Acura (going out on a limb... value conscious) owners and not some foo foo Euro-snob right? For those of us who have put a substantial down payment on our homes, that's great. We approached the situation with some conservatism and financial prudence. For better or worse, that's a decision we chose to make. For the folks in this case, Bubba included, it's was really easy to get caught up in the hype of home ownership. Is Bubba clear of all blame? No. Is he guilty of committing a crime or fraud? No. The situation is what it is. Some will fair better than others and that's life. There is not equal justice or fairness for all. We do what we have to do to protect our own interests. Blaming Bubba is nothing more than frustration at the fact that we can't get some relief of our own even though we may not need it. On a side note, we and I do mean we, have seen too many damn once in a life time events. If we can't pass this wisdom on the next generation, the finger pointing will come back at US.

LaCostaRacer

^ I don't think anyone is blaming Bubba. The problem I have with this thread is how it's trying to show that people who honor their agreements are fools and people that pass on their loss to the bank are brainiacs.

The ironic thing about this is everybody is paying for these brainiacs and their antics: shareholders in banks certainly have, prospective home buyers are (higher fees and PMI rates), and homeowners are (reduced equity or chances for refi'ing)- even renters are because rents are higher than they would normally be. Fortunately the defaulters are still a small percentage of the entire market- this would not work too well if everybody decided to default.

whudini3000

iTrader: (1)

^ Not so much. It is only foolish to put good money after bad. This is what I refuse to do. It is also foolish to fufill a contract if your being stiffed or entity who refuses to work with you during hardship. Would anyone on this board continue to pour thousands of dollars in maintenance for a leased vehicle? Would you pay the cost to break the lease or would you fufil the leasing term because breaking the lease is immoral?

#1 STUNNA

LOL Godwin's Law in full effect up in here!

https://en.wikipedia.org/wiki/Godwin's_law

LaCostaRacer

^hold on- we're talking about owning a property and not leasing a vehicle. Also- it's not like the Condo broke down physically- just in price- it was the same condo as before.

Bubba and others bought their properties because the property seemed like a good deal at the time- BEFORE IT CRATERED IN VALUE. Of coarse after it cratered and there was not a lot of 'skin' in their holdings- it was easy to stop making payments and here we are.

Some people are trading houses like I trade stocks. Almost all owners of property lost equity- I have for sure. Do you see me crying about how I should have sold my rental in 2006 to preserve my equity? No because people like me look at real estate as LONG TERM investments- you take out a 30 year loan for a reason because you intend to live or own the property for a long time and not dump it because you perceive a drop in value. If you can't play the real estate game with those rules- you shouldn't be in it and you certainly shouldn't be blaming others for your own greedy/short-sighted decision as well.

The banks are part of the blame for this problem (as well as the FED) making such ridiculous loans- but they got caught up in the game too thinking prices could never go down. I'm sure some of us will see this b/s again in 30 or 40 years, but things are going to be pretty tight loan wise in the meantime. I saw the tightness refi'ing my rental 6 months ago- harder than buying my first house in 1987 and this was a property with lots of equity too.

Ken1997TL

I'm well aware of Godwin's Law

You're talking to someone who has been 'arguing' on the internet since IRC

Fibonacci

Bubba, if you didn't have a piggyback loan or a HELOC, what's with settling two mortgages?

Enough gloating, you've made your point enough times about how you came out smelling like roses, how about the rest of us? Still waiting for your sales pitch...

https://acurazine.com/forums/showpos...6&postcount=82

whudini3000

iTrader: (1)

It doesn't matter if its a car, house, boat or a plane. The gist of this discussion is meeting a so called "moral obligation". It seems one wishes to "prioritize" his/hers "moral obligations" when it suits them. Not fulfilling the lease of a vehicle , Iphone contracts, Apt. leases, Time Warner Cable etc. is supposedly immoral based on recent post. Why? Because you didn't fulfill the full term of the contractual agreement, even if you paid the fee's associated with early termination of the agreement.... it's still "immoral" because you did not fulfill the contract in its entirety. I'm sorry, but that's garbage.

Fibonacci

Are you really as dumb as you repeatedly sound?

We don't have a national iPhone default crisis or a Time Warner Cable default crisis or an apartment rental default crisis. Enough with the lame analogies.

whudini3000

iTrader: (1)

:tonguefaw Its apparent youre an attention whore who lacks real-life social skills. Either way, I'll make room for you on my ignore list. Oh geeee, youre my first!

Fibonacci

I didn't start this thread dude! And I'm not the one crapping on the financial system and encouraging others to do so too.

whudini3000

iTrader: (1)

Fibonacci

I'm so devastated, can you tell?


You'll come back, just like NuttyPro.

benben01

I am certainly not going to encourage people to strategically default. However, a fire needs to be lit and force the banks to get off their asses and find a way to stabilize the housing market and keep people in their homes. Think outside of the box.. 4% 30yr. fixed for everyone.. Extend the terms out to 40 or 50 years if needed. If the homeowner can't afford to stay in his or her property, then by all means foreclose it. The name of the game is cash flow. Regardless of the value of the underlying property, as long there is a stream of cash coming in to service the loan, the damage is significantly reduced.

Fibonacci

So why are you here justifying Bubba's logic? So its only okay for him and Nicholas Cage, but not the rest of us?


See, this is where most people reveal their lack of understanding on how the mortgage origination and securitization market works. The evil banks don't hold a significant percentage of home loans. Please do a little homework before you spout off on a topic and learn to connect a few dots first. Here's a 'lil nugget just to get you started...


Fannie and Freddie Debt Among Government's Liabilities

http://www.minyanville.com/businessm...6980?page=full

benben01

I am not making any "moral" justifications for Bubba or Nicholas Cage. Merely stating some obvious facts which you seem to have issues with. Anyone can default whether it's strategic or otherwise. This is a good lead in to address your next statement about banks holding a small percentage of mortgages on their books.

See if we are going to debate this issues of morality, you have to at least acknowledge that we are dealing with institutions that are business oriented. That means, they can and will "walk" away at any time if a transaction does not go in their favor. That is a fact. Does it seem fair they expect you the borrower to upheld you end of deal?

Most banks don't hold a significant number of mortgages on their books. However, they can't always sell every loan they take in. Case in point, Bank of America with the acquisition of Country Wide is the largest private holder of mortgages in the country. Close to 50% of Fannie's loans come from Bank of America/Country Wide. As for Fannie and Freddie, their loan portfolio consisted for 10-15% sub prime loan which is the bulk of this crisis. The mistake they made was not having enough cash reserves and buying the very same sub prime securities they were selling to boost EPS. As for the banks, they are not disclosing their entire portfolio of bad mortgages they have. Why? If they do, they would be insolvent as mark to market will render those holding at next to nothing. It's difficult to get a market value for an asset when there is little to no market for it. So yeah, I can connect dots.

The real question is this.. If we were in Bubba's shoes, would we do the same thing and legally work our way out of a bad business deal?

LaCostaRacer

^The banks do now and did in the old days as well.

Do you really think this is all the banks fault? I'm going back to original point of this thread that evolved a strategic default by a person that actually could make his payment to the bank for an agreed upon amount.

1. The bank did not determine the high price of the Condo for the initial sales price- that was the market between buyers and sellers. If anything the banks would bring down
prices in cases when the buyer actually couldn't get financing for the loan amount.

2. The bank did not cause the change in the economy in which more manufacturing jobs are being lost and replaced with lower paying service jobs. No that is the government and some of the wacky corporate taxes and regulations. You lose jobs and you lose potential buyers of homes and bring down confidence. It's pretty hard to buy a home if you don't know if you'll have a job in 5 years or where it might be.

3. The bank did not cause the 20-50 Trillion deficit this country has that requires the FED to keep interest rates abnormally low to keep out of going into default. The U.S. is going to be the next Greece if things don't change quick. These low interest rates in turn created huge demand for real estate because it made things appear 'affordable' to people.


So many of the reasons for this discussion did not originate from the banks- they were players just like the buyers of property and have gotten burned as much as under-water home owners have in many respects.

benben01

You are so right on how this thread can spawn off so many discussions. I will say this, the banks and the whole investment community can take a big part of the blame for this problem. Case in point, why would anyone ever thought it was good idea to do NO DOC/liar loans? That's where we crossed the line from well intentioned to greed... BTW, how's the weather on the left coast? It's butt cold here in the DC area today.. 40+ mph wind with sub 30 degree temp.. Burrrrrr

Oh yeah who wants to buy a "We love Bubba!" or "Die Bubba Die!" t-shirt? I see a business opportunity here

LaCostaRacer

^ Good thoughts. It's a 'chilly' 56 at the moment- I might have to turn on the seat heaters possibly.

Yes the funny loans: liar, zero down, 5/30, piggy back, and others all helped cause this problem because people marginally able to buy a home could. Unfortunately those are some of the same people most prone to economic downturns and will crater the first.

I think I could fix this crisis pretty quickly with just one change to how Home/Property loans are done regarding PMI:

First time buyers or non-defaulters: PMI is needed for down payments < 20 %- no loans written with less than 10% downpayment period. This is kind of like things are already.

Defaulters (past or future): PMI is needed for down payments < 40%. PMI rate is higher
than normal borrowers much like car insurance works for people who have had accidients- rates go back to normal once 30% equity is met. Payment revenue after 20% equity gets split 50/50 from loan writer and Fed Government to help bring down deficit (which ballooned because of this crisis)

How does this sound for a start?

LaCostaRacer

Wow that's pretty funny comparing a property to a consumable like a cell phone that has a life of less than 5 years. Yes cell phone contracts state in them what the cancellation fee is so you the consumer can make an educated decision in this regard- of coarse you don't have any skin in that game- kind of like getting a speeding ticket in many ways.

Now bank loans don't state what the penalty for foreclosure is and that is where the problem really is- perhaps they should state a penalty. I had a proposal in the posting before this one that should 'bite'. In fact many bank loans don't even charge an 'early payment' fee so the consumer is getting all the breaks from the evil bank in many ways.

benben01

If it makes too much sense.. It will never get implemented. It's pessimistic I know..

But hopefully in time, we can get back to some degree of normalcy where the ability to make such a large purchase is not solely based on just a credit score which is very subjective and misleading. I would also like to propose a few rules of my own...

- 5% down for first time homebuyers with a max loan limit set at 2.5 times gross income. (i.e. if you are making say 50K, you can't borrow more than 125K which will yield a very manageable mortgage payment)

- Unless co-signed, first time home buyers must have a minimum of 3 years of continuous employment

- Max loan limit for conventional conforming loans set at 2.5 times of borrower(s) gross income

- 2nd homes, rentals, investment properties, etc must require a 50% down payment (it's starting to happen now.. sign of hope )

- HELCO cannot be established until at least 24 months of homeownership.

Bearcat94

Isn't it primariy up to each individual bank to establish their loan criteria? Isn't that one element essential to a 'free market'? Aren't there already regulations (or perhaps "were regulations" before this mess started) about the amount of risk a bank can carry compared to assets/reserves?

If those things are true, then we don't need 'new rules'; we need to hold accountable those that break the existing rules. So far, as far as I can tell, the only people consistently expected to be accountable are the home owners; which is fine, in many/most cases they should be accountable, but it's kind of one-sided don't you think?

Will Y.

If anything, the underwater mortgage is more like buying a car with a loan, where the loan amount is higher than the value of the car.

IDK where I would stand if I were in Bubba's shoes, but I don't look at my personal residence as an "investment"-- we bought to live here on a long-term basis because it's a decent area and good for us. We could afford the payments and the value has always been greater than the mortgage amount + down payment, but IDK if we'll get it all back when we sell.

The banks did play a part, by permitting the piggy-backs that allowed mortgages with 5% down or less, and by engaging in securitization of bundles of mortgages with unknown(for all practical purposes) risks and various derivatives thereof. Much of this can be traced to market competition, which gave me serious doubts about bailing out the industry.

Oh, and I'm amazed that many people decided to leverage themselves so much to buy. Those borrowers that lied on loans should be at least be barred civilly from taking out another mortgage without money down and documentation of income.

BubbaMarkTL

You are kidding yourself from your holier than thou pedestal. Most people do not buy with the intention of staying in any home 30 years. It just doesn't happen. What is long term to you? Life changes, families grow, jobs move, etc. Americans need the flexibly to be mobile, no one can commit to staying in one place 30 years. It sounds great for your argument but it's just not realistic at all, in the process totally invalidating your argument. I think that long term in the real world means no more than 7-10 years. The crisis we are now in proves at even at 10 years, long term was a bad bad bad investment. Sorry but your logic is being blinded by your attitude and ignorance.

BubbaMarkTL

you fail again to see reality right in front of you. Your "rules" or anything similar will never be implemented because they are all flawed and would have a catastrophic effect on the market. If your rules were implemented, you just cut out about 80% of the potential buyers on the market...what do you think that will do to society? Let's see, it would stall he economy, crush our mobility, further lower home values, and make things worse than they already are overall. Your other idea regarding how to handle defaulters is also completely shortsighted and flawed. There is no way in hell any president or government would propose a rule that would make it harder on defaulters than it already is. You forget that most defaulters actually do have hardships and lost their homes against their will. You are proposing to further crush those people!? Yeah, great idea! I'm sure any president would love to propose that! Oh, just go after strategic defaulters you say? Hmm, brilliant! Stick it to those that gamed the system right? Well good luck determining who was a strategic defaulted and who wasn't. Good luck finding a way to draw a line in the sand between genuine hardship and strategic default. It will never happen! There is no way any government or any group of bankers would ever be able to agree on all of the details that would have to be explored to conclude that mystery. And had it occurred to you the vast time, manpower and tax dollars it would take to filter through millions of defaults on a case by case basis to determine which category each defaulted falls in and ultimately what fate they face based on your proposed rule?! I'm sorry but the fact that you even suggested those rules without realizing the impossibility of them proves you really do not understand any of this.

BubbaMarkTL

Benben, your rules actually do make some logical sense but there's a problem. Home values are still to high. A 50k income is above the median for this country. In most markets, what kind of home can you get for 125-150k? Unfortunately that price bracket is mostly dumps...or tiny dumps...that's not feasible for American families at all. There was a time when home values were in line with incomes like your proposal...the glory days of the early 20th century up until about 1990. Your rules would work almost perfectly if home prices lined up with incomes like back then. So what does it all mean...well looks like logic points to values needing to fall further...or incomes rising much more rapidly...I'm fine with either one of those options but only one is likely (dare I say already) happening.

LaCostaRacer

Gee Bubba- you're back! I figured that PMI proposal would smoke you out into coming back for another round and it actually did. God knows you wouldn't want to come up with 40% down next time because that would make what you just did damn near impossible. Who in their right mind would walk from 40% down + what ever principal has been paid through a normal amortized loan?

How long were you in that Condo for? You certainly weren't in it even 10 years now were you? I do realize that many people don't live in their homes for 30 years but that's not the point here. Those that sell their homes will generally do it for a profit and not start threads like you have seeking advice or showing how you actually got away with a default and still smell like a rose.

If your life is changing that much you shouldn't be buying a property in the first place and should just RENT.