Extracted from Paulson’s address:

“Subtracting the speculators and those who took on more than they could handle leaves us with our target population of subprime borrowers for whom we are seeking a solution – those who want to keep their homes, have the financial wherewithal, but are facing challenges making their monthly payments.”

This approach sounds reasonable, what are the chances they could actually implement it though?

I got in a friendly argument with a realtor who was showing me houses for lease. I asked him what would happen to the price of houses if rates went over 8%. His response? “The government won’t let that happen.”

For now, he is right. It’s looking more like a Japanese style recession where government meddling stretches out the whole mess over years and years.

Experts agree that falling home values are not the root of the problem.

OH but they are the root of the problem.

This is a pathetic attempt to maintain inflated house prices.  They think if they can keep the foreclosures off the market then prices will stabilize.  All it’s going to do is make sellers lower their prices at a slower rate.

I remember when Paulson made that statement. It showed how little he understands the housing bubble, particularly here in California.

The supposition he is making is that the number of speculators is very small, and the population of ordinary homeowners who could be saved is very large. The reality is exactly reversed. There is a real difficulty in separating the wheat from the chaff. Who is a speculator? and who is not?

IMO, today’s featured property owner was a speculator. I imagine it is his opinion that he is an ordinary homeowner who deserves a break.

Here in California, ordinary homeowners behaved like speculators. They bought houses for appreciation without regard to whether or not they could afford it. What criteria could the government come up with that would separate these two groups? I don’t believe it can be done.

We all need to calm down and remember that houses will appreciate 10 to 15% a year (forever) and everything will get back to normal. Can’t we all just get along?

Yup.  Perhaps 0% interest rates are right around the corner.

Seriously, how can they call these ppl “experts.” Isn’t the highest correlation with default, negative equity? Yea, falling home values has nothing to do with negative equity… f’n unbelievable.

When I started to read this blog entry I thought that it was april 1. This must be a joke…....if you want to really screw up our banks, don’t make borrowers accountable.

It is a joke, but I threw in some real comments Paulson made to underscore the absurdity of it all.

The second picture is a combo shot.  You can see the garage door on the right hand side and the greenbelt in the background.

You know, the “greenbelt” that is otherwise known as the 405.

Paulson understands the the problem very well. He’s lying.

Me too!

I’ve never posted before, but been reading daily for a long time. 

IrvineRenter: you’re not capturing to total loss here with Option Arm loans.  Presumably the borrower took an option arm to get the artificially low “minimum” (negatively amortizing) payment, in which case he added to his loan balance every month because he didn’t even cover the actual interest due.  Therefore, with the size of his loan, the balance is now probably well over 600k.

By the way… NOTHING I’ve seen offered by ANY lender or gov’t entity addresses fixing option arm loans. There is currently no help for them, and it’s impossible to make them more “affordable” to those homeowners in trouble.

Paulson is no idiot, he’s a liar. He’s no genius either but so many look to him as one of the ‘Masters-of-the-Universe’.

When is someone in the press going to call him on some of the absurdity he spews?

I’m calling for a New Revolution.

Indeed.  They will say whatever needs to be said in order to keep those payments coming in from their debt-slaving minions.

Must make banker happy. 

Must keep payment coming.

Must keep slave working.

Yes… The “experts”

You! You have done fairly well for yourself chasing bubbles and ripping off shareholders, come join our panel of experts.

When the property preservation crew hired by the banks come around to do the re-key, trashout, yardwork, etc. they are required to provide before and after photos. Most of the mls pics I see for REO properties are from the cleanup crew, not the sales agent. In most cases, the realtard is too lazy to visit or walk the property personally. They just get the crappy preservation pics from lender and toss them up on mls and pray for a sale with little or no effort on their part.

I came to the conclusion that refinancing should be allowed.  However, you shouldn’t be able to deduct the interest in any additional principal on your taxes.  HELOC interest should not be deductible at all, unless it is really for home improvement.  In that case, it’s a construction loan which turns into a part of a larger mortgage.  Of course, the bank will need actual receipts, verify that construction is taking place, just like if a home was being built from scratch.

Some refis are responsible.  When interest rates drop and someone wants to go to a lower rate loan with the same principal, I’m all for it.  If the effects of cashing out some value and lower fixed interest rates net out to the same payment, I am not so supportive, but not heavily opposed.

For cashout refis that raise payments and principal, I think the tax code should not enable this behavior.  Bank regulation might also be able to reduce the offering of such loans.

Affordability is the problem.  If virtually all homeowners could afford their current houses and loans, prices dropping would mean renters moving to ownership, and people buying second homes.

That situation probably wounldn’t last long.  Either new homes would be built or prices would go up.

The highest correlation of homes which go into default making it to actual foreclosure and REO is negative equity.

The most likely causes of having a default are: unemployment, divorce, death, loan payments resetting, and (in recent years) fraud.  A large downpayment doesn’t insulate you from default if you have no other savings and become unemployed.  However, in most real estate markets a 20% downpayment would have given you a good chance of selling a house you could no longer make payments on.  In the current environment, that is not the case.

Is that a chastened Hank Paulson on the cover of your book?  If not, maybe AZ Dave can make us one?  Whose face should we put on the left side of the cover?

Paulson is a liar, they are all liars.  The Sh**t will hit the fan when Bush is no longer president, they are going to let all this fall onto Obama, everyone wanted change, well we are going to get it soon, lets just hope that our currency will not dissapear or be worthless, like it was in Germany before the war, history is repeating itself, read up on it.  The gilded age of the roaring 2000’s is over.

Not only should interest paid toward the HELOC not be tax deductable, all the Proposition 13 benefits should be suspended as well. Property tax should increase the moment any equity is extracted (via HELOC or a cash-out refi); equity extractions reaffirm a home’s current value, and if owners want to touch that money they should be liable for the tax bill on the current value of their home as determined by the outstanding debt.

Falling home values are NOT the root of the problem; THEY’RE THE SOLUTION!

I wish Suzanne wasn’t a faceless voice on the telephone. She would be perfect.

lol

How about “All your negative equity are belong to us” as the caption?

I’m a big Prop 13 supporter, but I like this idea.

Isn’t it insulting to hear politicians talking about falling home prices being a problem? These are the same people who said rising home prices were a problem because average people couldn’t afford homes.

Now home prices are becoming more affordable by the day, and this is our main “problem”?

IR, congrats on having a post included in Michael Lewis’ new book “Panic.”

FWIW, this is from the Wikipedia on the subprime mortgage crisis

Speculation

Speculation in residential real estate has been a contributing factor. During 2006, 22% of homes purchased (1.65 million units) were for investment purposes, with an additional 14% (1.07 million units) purchased as vacation homes. During 2005, these figures were 28% and 12%, respectively. In other words, a record level of nearly 40% of homes purchases were not intended as primary residences. David Lereah, NAR’s chief economist at the time, stated that the 2006 decline in investment buying was expected: “Speculators left the market in 2006, which caused investment sales to fall much faster than the primary market.”[49]

Falling home prices are only a problem when their business partners are losing money.

Yes, or

“Don’t worry - your down payment is safe with us”

How about:

“These are not the Mortgage Rates your looking for..”

Dejnov

The second picture is a nice view of the sound wall on the 405, right?  I’ve only seen it from the other side…

Hank sez….“The American people are kind and generous. They certainly won’t mind helping out their fellow citizens with tax dollars as necessary.“

WTF ?!  Uh, yeah…I MIND !

LOL…staying with the star wars theme (though this was Princess’ Leia’s line)  “This is some rescue. When you came in here, didn’t you have a plan for getting out?”

LoL.  Good one.

How can you be against helping your fellow banker-I-mean-neighbor? 

Have you no decency?!

I think I turning Japanese!

Yes he’s just counting the days until he can dump the whole mess into Geithner’s lap and get the heck out of there.

#  1% teaser rate for $528,000.
# On 4/26/2007 he opened a HELOC for $24,847.

So this person was paying $5,280 in interest, zero principal, and $4500 in tax, plus $1200/yr HOA.

[B]That adds up to less than $1000/month.[/B]  Of course, the subsequent HELOC covered that payment for two years, then they stop paying.

Free rent!

And yet they still blame it on the subprime buyer—-the immigrant—the ignorant person—

those who stole from all of us is just about everyone involved and yet we all will pay for this huge fraud.

The best part they still feel these homes are worth their value—LOL—-

my taxes will only go up and up—-

Last week while being shown another overpriced house the realtor actually concluded his canned, predictable, cliche’d speach by saying ” house prices double every 7 years”
After I picked myself up from the floor I could not get outta there fast enough. Can someone in this industry please tell me when these people will get the memo. Or do they just think any potential buyer is a total moron!!

Politicians must identify “problems” so they can justify their existence and gain power by pledging to solve those “problems”.

This is the first post that has made me angry in awhile.  WTF?!

Paulson: The American people are kind and generous. They certainly won’t mind helping out their fellow citizens with tax dollars as necessary.

Why would I want to pay more taxes to bail out liars, thieves, and morons who got themselves into mortgages they could not afford????? Why???

Ok, help is on the way

This would essentially add 1-1.5% annual interest to equity extraction in CA.  It wouldn’t kill off the process, but it would reduce it.

Prop 13 is hard to change, but I like the general direction of your suggestion. 

There might be a way to do something similar in the income tax code.  Alternatively, there could be a cashout refi tax.  Or, you might be able to exclude heloc and cashout refi interest from the mortgage interest deduction.

“These are the same people who said rising home prices were a problem because average people couldn’t afford homes.”

I don’t recall too many politicians raising a stink about high home prices. Everyone just played along and enjoyed the ride.  How do you like being ridden?

Me, not much.

Unemployment and under-employment are the problem, not falling home values.  If Americans had more confidence in their jobs, they would be more willing to take out mortgages, spend money frivolously, and become consumers again.  Falling home values are a symptom of the underlying problem of unemployment.  Gee, all this outsourcing has a cost doesn’t it?  Suddenly Americas can’t afford to buy the widgets that these companies have outsourced in order to improve their bottom line and not pay Americans.  They’re too stupid to see that it’s all a circle.

Realtards are too dumb to “get the memo.”  They’re salespeople who have abundant self-confidence but not much else going for them.

She isn’t.  I believe at the end of the commercial they show her business card w/mug shot.

http://www.irvinehousingblog.com/images/uploads/dec2008early/bubble paulson.jpg

Maybe we should send another memo—“House prices are cut in half every 7 years!”

The purpose of Prop 13 has never been to avoid making the tax man guess at property value.  It’s to force the state to discriminate against new homeowners in favor of existing homeowners (who are typically older and wealthier).

I like the idea, but I’m in favor of anything that chips away at the ridiculousness of Prop 13.

When home prices are at reasonable levels within 2-4 years, any you buy, you’ll become a big Prop 13 supporter. It doesn’t unfairly discriminate against anyone. It protects every homebuyer by capping the amount of tax they’ll be forced to pay, regardless of ridiculous bubbles that appear every decade or so.

AMEN!!

We are finally seeing rollbacks to rent parity, at least on lower-end properties. Higher-priced properties have to follow, especially since developers saturated the upper-middle and upper bracket markets with stuff that sits unsold.

Foreclosures on luxury properties here in Chicago are rampant.

Rollbacks to affordability will help bring back moderate income buyers, and will make housing more affordable for everyone in every price bracket.

Hopefully, this debacle will put an end to the idea that housing inflation constitutes a solid basis on which to found the economy, so we can return to those activities that always were the true founts of wealth and that made United States the most powerful economy in the world: manufacturing and commercial.

No population ever benefited from overpriced housing relative to rents and incomes, and no economy was ever successfully based on asset inflation, monetary manipulation, and the accumulation of debt.

There is no discrimination.  It protects homeowners from being taxed out of their homes.  Think of the fixed income folks that could have been forced out.  Your statement “typically older and wealthier” is not true.  Many people that stay in their homes for long periods of time can’t afford to move.  Locking in the taxes allow someone to make an informed decision on whether they can afford the house in the long-term.  That is only fair when you would have to pay thousands in real estate fees to get out of an ballooning tax situation.

Wow, that really explains a lot!  Thank you for that factoid.

Something seems to be screwed up with the stylesheet(s) on the site.  This article shows up as dark orange text on a dark blue background.  This occurs on both Firefox and Safari on Mac OS.  Looks okay in IE on Windows.

Also, IR, “moratorium” is misspelled in the article title.

I take it back—the page is messed up on IE too, just in a less severe way.

7 months

Wonderful chop.

“This is not the return to sanity you were looking for.”

You mean with “smug” shot.

Here comes Santa Claus,
Here comes Santa Claus,
Right down Bailout Lane;
Fannie Mae & Freddy Mac
A-pullin’ on the reins;
Gummint Gravy pouring in,
All is Happy and Bright;
Dream of condos to flip flip flip
‘Cause Santa Claus Comes Tonight!

Don’t you wish you were a Mooch instead of a Sucker?

Have to start with the younger crowd who is being taught by their parents that the way to grow rich is to buy real-estate and chase bubbles.

No, the REAL way to get rich is to SUE!
For Everything They’ve Got!