patrick.net

I thought with secured loans, the security for the loan ensured that you could not 'rob' the bank even if you defaulted. So the existence of the property made it such that they could always take it back if you breached the contract. This way they always win. I would have thought it was up to the bank to decide how much was a fair risk since they had agreed to take it back. I don't know when they started gambling, but somewhere in there they started taking on some pretty high risk ventures.

I won't even lie and say I understand how Equity loans make sense. If I was a bank I wouldn't be giving them out so I won't speak to those.

If someone stopped paying on a car (for whatever reason) and it was repossessed... would we say they had robbed the dealership if the price of that car happened to be lower by this time than when they purchased it? It's the dealership that gets to sell the car all over again not the guy who lost it, and they get to keep any money he had paid so far. As long as I can make sure I'm selling good cars, I'd take the spot of the car dealer in this deal! :)

Is California State University tuition still $85 a semester for all the hours one wants?

jnsaisquoi says

.....

Hyperbole aside, I think it's fair to say that at least during the two year period around the peak of the housing bubble, no intelligent person who did their homework would have bought without accepting that their house was likely to fall in value by a significant amount. If (for instance) they did do their homework but did not care, or paid all cash, then I wouldn't call them a moron. In fact, there's some modesty in taking a hit like that on the cheek.

I'm talking about the people who were irresponsible or blindly stupid about the biggest purchase in their life. People who thought they were going to see 20% yearly gains on their house's value. Folks who thought that renting wasn't a viable option due to their self-perceived social stratosphere or belief in realtor propaganda. Those people who are now demanding principal reductions and walking away in the absence of freebies to compensate for negative equity, those are the stupid fucks. If amongst them there are intelligent people, then their decision-making abilities are defined by their lack of diligence when making the biggest purchase in their life. The increase in prices is in no way comparable to any point in history, even California in the 1970's (which, even then, there was not a lot of data to make an informed opinion on the market).

Gold is very likely to be in a significant bubble right now. But if the inflation theorists are proven correct about the USD, then the gold purchasers will not be burned. That and they're not going to be underwater on their gold purchases, stuck with a 30 year mortgage on a piece of depreciating metal. Gold is transferable and in demand all over the world. Houses are stationary and a townhouse in Raleigh, NC has a value determined by the demographics and supply/demand within Raleigh. So the comparison in terms of risk/reward and fundamentals isn't apt.

I completely agree about college tuition costs. They're absurd, and in many cases, not worth it for an individual. Part of what is feeding that is the same as the housing bubble: easy credit. It doesn't take much these for a 17 year old to get a six-figure loan to pursue a worthless degree when they should be learning a valuable trade skill.

the same people who bought at the peak now walking away at the bottom. These people are not financially sophisticated. Book smarts doesn't equal street smarts and most people are too busy at their 9-5 to become smart about finance they just needed a place to live.

I wouldn't say they're dumb, it's just that real estate is complicated business and the industry advisors who are supposed to be helping you mostly can't be trusted.

Schizlor says

People who cannot do mathematics past the 6th grade level, or understand one word of the disclosures being sent to them, do not have any business buying a home any more than I have any business climbing into the cockpit of a Boeing 757 and “giving it a go” without any knowledge of what I’m getting into.

I have learned from other posters on this forum that if somebody gave you the keys to the 757, it's not your fault if you try to fly it. Nothing is anybody's fault, ever, which is why they are all victims.

klarek says

Schizlor says

People who cannot do mathematics past the 6th grade level, or understand one word of the disclosures being sent to them, do not have any business buying a home any more than I have any business climbing into the cockpit of a Boeing 757 and “giving it a go” without any knowledge of what I’m getting into.

I have learned from other posters on this forum that if somebody gave you the keys to the 757, it’s not your fault if you try to fly it. Nothing is anybody’s fault, ever, which is why they are all victims.

It's kind of like blaming a drug dealer for your addiction to cocaine, because he dastardly offered you, "just a taste" and you decided to take it without thinking of the consequences first.

This is a plague on this country. Parents tell their children not to hang around certain "bad" kids because of the poor influence they have on the child...instead of doing what they did back in our grandparent's generation...which was smack them upside the head for being a naive, foolish idiot for listening to their jackass friends in the first place. The minute our society changed from, "take some goddamned responsibility for yourself", to, "Let's get to the REAL root of your poor decision making....the outside influence of "bad" people who "made" you do what you did", the country begain it's slow, inexorable, winding procession down the wall of the toilet bowl.

This is what happens in recourse states such as Texas, Florida, Georgia, Illinois and others:

http://finance.yahoo.com/loans/article/113605/house-gone-debt-lives-on-wsj?mod=loans-home

quote: "Some close observers of the housing scene are convinced this is just the beginning of a surge in deficiency judgments."

California recently passed SB458, which prevents deficiency judgments on junior liens in a short sale.

Whether it's retroactive or not remains to be seen.

My short sale was in '08. If I'm sued, SB458 will be one of my defenses. If I lose, my only true recourse is Chapter 13 BK. I will fight the whole way.

It's a numbers game. If they think they can get more from me in a Chapter 13... enough to offset the court costs and risk of losing, then I suppose they'll go for it.

It remains to be seen.

I think a case can be made that buying into the bubble was a rational choice and not necessarily stupid. Investing in real estate in many areas allows one to privitize the gain and socialize the loss (such as several banks have done). This is unlike any other investment that I know of. I happen to think gold is in a bubble but of course I don't know for sure; If I had a fool proof way to make a highly leveraged investment in gold which would allow me to keep any future gains but walk away from any future losses I would seriously consider doing it.

I don't think it's moral for people to have speculated on a highly leveraged RE investment during the bubble knowing that if the investment continued to rise they would keep the profits but if the investment fell they would walk away relatively unscathed, but I think a case can be made that it was rational. BTW, I did not buy in the bubble and am a long term RE investor, not a speculator.

@fatguy

Interesting this SB458 -- so this law is actually retroactive. I think lenders of a second mortgage will hesitate more in allowing short sales, since their interest may be wiped out. Any other comments on this?

Banks may be more hesitant to start new litigation based on SB 458, but I'm sure they're just as interested as to whether it's retroactive or not. The only way to test that is in court, unless the legislature amends it one way or the other.

StoutFiles says

A lot of people got burned on that risk and now they don't want to own up for it.

I heard,now lots of responsible people who bought after 2004 can't refinance their mortgages.

fatguy says

California recently passed SB458, which prevents deficiency judgments on junior liens in a short sale.

Whether it's retroactive or not remains to be seen.

My short sale was in '08. If I'm sued, SB458 will be one of my defenses. If I lose, my only true recourse is Chapter 13 BK. I will fight the whole way.

Why would it be retroactive? Do you see any language in the law that suggests it would be?

The practical effect of SB458 is that second mortgagees and third mortgagees will just stop agreeing to short sales unless they get what they want (more money). This is not really a good law.

fatguy, did you take a cash-out refi?

bubblesitter says

I heard,now lots of responsible people who bought after 2004 can't refinance their mortgages.

They weren't *that* responsible -- they paid bubble prices voluntarily and bid up prices with stupid loans. How many people do you know that were truly responsible who can't pay their mortgage now? I've never seen one mentioned in a media article, despite the fact that sometimes the media refers to them as "victims."