WatchI guess this really shows where the "morality" of this country is headed... Contract law apparently has very little meaning today....
......"Nearly one-third of people surveyed by San Diego-based ID Analytics said homeowners should be able to strategically default on their mortgages without any consequences."
......"What jumped out is how many Americans feel it is acceptable for homeowners to walk away from a mortgage and go into foreclosure,” said John Zogby, senior analyst with JZ Analytics. “If Americans carry on with that mindset, it will continue to cause problems as the economy undergoes a slow recovery."
http://www.housingwire.com/content/one-third-people-say-strategically-defaulting-acceptable
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JohnLaw says
I agree with most of what you say, with a couple of exceptions. First, private hedge funds want to be in the next bubble, which is why they don't want to be on the Dodd Frank systemic risk list. Hedge funds tied to the shadow banking system made a fortune. Second, the US government, and Tim Geithner, to be specific, was a Fed mole. He had been NY Fed president, the most powerful Fed, at the start of the bogus AAA housing bubble that exploded in mid 2003.
But now, the banksters got what they wanted from Obama and now are funding Romney to get Dodd Frank and Volcker overturned.
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033 says
But Barney tried to fix the mess by Dodd Frank, and the banks hate him for it. Trust me, they float stories saying it is a weak bill, but secretly want it repealed.
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Call it Crazy says
It isn't a question of having it both ways. The easy money was offered in a scam to drive up the prices of the houses. The banks made fees, got rid of the crap loans, and then the investors saw it was a scam, took away their money, and the homes crashed. It was a banker scam from start to finish.
Bankers found it so easy to get rid of toxic loans that they didn't need their underwriters to underwrite. And that was their job, to make sure people didn't get too much house.
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Strategic default is a business decision, as is squatter's rent.
Someone pays 0 percent down on an 80/20 that was worth 700K in '06 and is worth $400K now.
For every year they don't pay and don't get a trustee's deed, they bank $30K to $50K in rent. It's going on five years or more for some. Then there's the $5K in move-out at FC.
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Entitlemented says
That is incorrect. 76 percent of the subprime toxics and all the prime toxics were underwritten by the private label MBS. Look at this chart as proof:
http://www.businessinsider.com/you-can-hate-fed-behavior-without-being-a-libertarian-wacko-2011-7
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bgamall4,
What you say is true. But what are we going to do about it now?
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We're up to a THIRD? It's a start.
We should aim for at least 60%, that'll put the fear of God back into banksters.
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033 says
1. Don't vote Republican, ever.
2. Live multigenerationally
3. Don't borrow
4. Boycott mortgages
5. Save money
Look, there isn't much we can do other than the above, because there is a boatload of money offshore that is waiting to buy up all the real estate. Do not think that because there is cash demand that there is real demand so that you can sell quickly if you flip.
The cash buyers are a giant wrecking ball to the American dream which will have to manifest itself in savings.
This is not personal or professional financial advice I am giving. I am giving you what my heart thinks will work in a survival mode.
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BGamal, you could rent. But rent now costs more. That's an incentive to absentee landlord cash buyers who are clambering over themselves like cockroaches to get to an REO that makes it to market.
Most properties aren't making it to REO of late, quietly hoping that they'll get 2HP'd and not getting that there won't be a principal reduction, or quietly deferring the NOTS. Or both.
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bgamall4 says
At what point did your typical buyer stupidly accept that prices DOUBLE in a very few short years. But that was the mentality of people.. cant get enough of RE regardless of the mortgages. Its now wonder many talk about a recovery in prices .. recover to what!
No its not a $200K home.. its a $1M home.. because because because!
Oh how we soon forget!
http://www.nytimes.com/1997/04/27/realestate/live-work-law-for-artists-roils-san-franciscans.html
A report released this month by the National Association of Home Builders put San Francisco's median residential price for 1996 at $285,000. With prices beginning at $175,000 to $200,000, lofts are the cheapest nonsubsidized units on the market, according to David Becker, a broker with Ritchie Commercial Real Estate. They are, nonetheless, still too expensive for the artists for whom they were intended, Ms. Hestor said
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TWong,
Put yourself in 2005. You have 2-3 children. Your kids want to run around, and they ain't making more land in California, right?
Every other ad that's not for Viagra is offering 80/20 "no money down" loans to anyone who called the 866-number. We'll even give you "options" on what to pay? See how cheap and easy?
What could go wrong?
The buyers didn't see it coming. They should have. And they would have if they were 20 percent invested, and if they'd had an am table.
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tatupu70 says
You need to go back to Finance 101 class!
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033 says
033 says
033 says
OH yes! we certainly all heard this before.. including "prices in CA never go down" yet many didnt recall this all happened before.. consumer speculation disconnected from Incomes and Inflation.
But if you were atune to events during 1985 to 1995 you certainly saw prices did go up and correct down.. including LA by 40%... somewhere many forgot that.
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Robert Shiller - On Home Prices Always Going Up
People are insane.. regardless of mortgages!
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Thomas,
I was paying attention during this time period and made my life decisions accordingly.
But others did not. To a certain extent, you can blame them. They shouldn't have bought a house they couldn't afford, but they had to put down less than first and last in some cases, their "experts" (equivalent to "doctors" in their minds) told them all was A-OK,.
They didn't even know what they were doing was wrong.
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033 says
God knows, i tried explaining to some about all this for a very very long time.. but it had little impact.
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Because prices always go up.
Because you can always refinance.
Because Washington Mutual will always be there to help.
If people knew what they had to pay, some may not have signed the papers.
Others would have, realizing the possibility of $150K in free rent for a price of a 3 year derog, after which they could pursue a 3.2 percent FHA loan.
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thomaswong.1986 says
I can't believe you are actually a controller. Your finance knowledge is severely lacking. Are you under the impression that depositors take a loss when the bank loses money?? Depositors are not owners. They are not entitled to a portion of the banks profits nor are they responsible for any of the banks losses.
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Call it Crazy says
History says differently. You might as well be condemning divorce as blasphemy.
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Squatting in East CoCo says
But no one forced them to pay the price they did. If they felt that the asking price was too much, they should have continued to rent unitl the time to buy was right for their circumstances/fundamentals.
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bgamall4 says
Yes, but if people would not agree to buy at higher asking prices, the whole thing would have stopped in their tracks. Unfortunately, and we all know this, 2 categories fucked things up for everyone else - those who bought they home for investment as evidenced by no ammortization or negative ammortization loans and those who were willing to buy at any price so that they could feel as successful americans. Did any of these people truly repent for what they did?
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dublin hillz says
True. No one forced them to pay the price they did.
The bank made bad investments in some peoples ability to pay.
At least the banks get to keep the house and offer it to someone else who can, or will, pay.
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Call it Crazy says
A million in debt is the new middle class!
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bgamall4 says
Right... the buyer has no responsibility to figure out if they can afford the payment, yea right..... just a banker scam....
Average buyer making $5K a month gross, takes on a $3k/month mortgage payment, has two car loans and two kids, but doesn't know how to use a calculator or balance his check book..
But he says "it's OK honey, the mortgage loan broker said we can afford the payment"......
Gee, what could go wrong with that assumption????
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tatupu70 says
The shareholders do not fund banking activity, the depositors do that.
Basic definition.. http://en.wikipedia.org/wiki/Bank
A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers that have capital deficits to customers with capital surpluses.
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bgamall4 says
You are falling into the red/blue paradigm. They are both the same. They play the good cop/bad cop game with the public but both of them support the status quo. The majority of Americans who don't vote have already figured this one out.
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dublin hillz says
As the realtors kept saying.. we have higher multiple offers and final offer must be on the desk by next Tuesday (2 days from now).. sounds familiar?
And off course add in the media with its own hype...
We are no where near reforming the process of selling/buying property in the US.
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thomaswong.1986 says
The capital of a bank has 3 tiers. Depositors (about 60%), bondholders (about 30%) and shareholder equity (about 10%). In a normal bank liquidation management is fired, stockholders take the first losses, bondholders the second and depositors are fully guaranteed by the government. This is what should have happened in 2007-2008. Instead, Hank Paulson and the FED decided to recapitalize shareholder equity (at the expense of taxpayers) and save bondholders from taking losses (at the expense of taxpayers). This in and of itself was the biggest boon to the so-called 1%ers ever! Had the normal liquidation process been taken, there would have been a major and immediate shift that resolved some of the income inequality in the USA.
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thomaswong.1986 says
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JohnLaw says
Nope... secured creditors get first dips on assets. shareholders are dead last.
and NO a company that has millions on deposit in its bank to pay its employees and vendors ARE NOT covered by FDIC. Only idividuals up to $250K are covered.
So what happens to the Fortune 500 company with Billions/Trillions in actual cash or smaller firms ?
That is why we had a so called Bail Out... Else No Payroll would be funded or vendors would get paid.
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JohnLaw says
You really mean everyone ~ the whole 100%
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thomaswong.1986 says
I think you may have mis-interpreted what I was saying (I just listed them in reverse). Depositors get first dibs then secured creditors then non-secured creditors then shareholders.
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thomaswong.1986 says
Yes, they do. That has nothing to do with the point at hand. When a bank loses money, it does NOT come out of depositors. It comes from the equity. Either stockholders or private owners.
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dublin hillz says
Why should anyone repent. They are paying the penalty that has been assigned to someone who defaults. They lose the asset, any capital that they have invested in it, and their credit is trashed for some number of years.
It's a business decision. Do business owners repent when they close a plant becaue it's not longer competitive? Does Donald Trump repent when he files for bankruptcy for the 3rd time?
Why do people keep assigning some morality argument? It's a purely financial decision.
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tatupu70 says
and who after that makes the depositors whole ?
and no dont say FDIC (which is funded by banks) since it wouldnt cover anyone individual acct holders above the limits... like a small to large corporation...
why else did the stock market crash ?
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thomaswong.1986 says
After equity comes the bondholders. Secured then unsecured. A bank would have to lose about 40% of its capital (including bondholders) before depositors would be impacted. That is highly unlikely. The FDIC should have stepped in and held insolvent banks in receivership. Actually that is exactly what Sheila Bair was trying to do when the traitor Hank Paulson and criminal banksters Ben Bernanke and Timothy Geithner ganged up on her and decided to use their positions of power to serve their mafia overloads, many of whom should have been prosecuted for fraud.
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JohnLaw says
You still havent answered what happens to say large deposits from Microsoft to Boeing and many other firms who have billions in banks checking accounts. Are they insured ?
How about Apple.. Checking balance of $ 5-10B alone to pay employees and vendors ?
http://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation
A March 2008 memorandum to the FDIC board of directors shows a 2007 year-end Deposit Insurance Fund balance of about $52.4 billion, which represented a reserve ratio of 1.22% of its exposure to insured deposits, totaling about $4.29 trillion. The 2008 year-end insured deposits were projected to reach about $4.42 trillion with the reserve growing to $55.2 billion, a ratio of 1.25%. As of June 2008, the DIF had a balance of $45.2 billion. However, 9 months later, in March, 2009, the DIF fell to $13 billion. That was the lowest total since September, 1993 and represented a reserve ratio of 0.27% of its exposure to insured deposits totaling about $4.83 trillion.
In the second quarter of 2009, the FDIC imposed an emergency fee aimed at raising $5.6 billion to replenish the DIF. However, Saxo Bank Research reported that, after Aug 7, further bank failures had reduced the DIF balance to $648.1 million.
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tatupu70 says
While this penalty would be just and appropriate to someone who put down 20%, I don't think that is nearly enough for those who went in with 0%-3.5% with negative ammortization or interest only loans. These people truly fucked things up for everyone else and for the social consequences of their decisions something else must be done. Such as maybe a 30 year ban on applying for a home loan.
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dublin hillz says
Nobody forced the bank to lend them money. Like I said to Thomas-if I offered you $1MM and said that loan would be backed by a paper clip, are you wrong for taking the loan? Or am I wrong for offering it?
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thomaswong.1986 says
Back to your original quote Thomas. Neglecting the obvious mathematical error, the $35 balance will come from stock and bond holders. That amount of loss would not affect depositors.