Login
Subscribe
Recent Comments
- Lee Campbell on Uncovering the History of the Secret Garden
- Kelja on Uncovering the History of the Secret Garden
- Sylvia Walker on Irvine Housing by the Numbers - May 2012 Update
- Casual Observer on Irvine Housing by the Numbers - May 2012 Update
- Astute As It Comes on Open House Review: 35 Bella Rosa
- Sylvia Walker on Open House Review: 35 Bella Rosa
- Darin on Open House Review: 35 Bella Rosa
- Sylvia Walker on Investors Are Busy in Irvine's Low-End Housing Market
- Casual Observer on Investors Are Busy in Irvine's Low-End Housing Market
- irvine_home_owner on Tustin, but Irvine Schools
Recent Posts
- Uncovering the History of the Secret Garden
- Closed Sales from 5/10/2012-5/16/2012
- Open House Review: 52 Secret Garden
- Irvine Housing by the Numbers - May 2012 Update
- Paired Living with Privacy in Woodbridge
- Beige Ruth Sisters
- Closed Sales from 5/3/2012 to 5/9/2012
- Open House Review: 35 Bella Rosa
- Investors Are Busy in Irvine’s Low-End Housing Market
- Artist in Residence: Turtle Rock Glen Townhome
Categories
Archives
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- Rest of archives
Browse Homes
Irvine Homes
- Airport Area Homes
- El Camino Real Homes
- Northpark Homes
- Northwood Homes
- Oak Creek Homes
- Orangetree Homes
- Portola Springs Homes
- Quaill Hill Homes
- Rancho San Joaquin Homes
- Turtle Ridge Homes
- Turtle Rock Homes
- University Park
- University Town Center Homes
- West Irvine Homes
- Westpark Homes
- Woodbridge Homes
- Woodbury Homes
Newport Beach Homes
- Newport Coast Homes
- Crystal Cove Homes
- Corona Del Mar / Spyglass
- East Bluff / Harbor View Homes
- Lower Newport Bay / Balboa Island
- Balboa Peninsula Homes
- West Bay / Santa Ana Heights
- West Newport / Lido Homes
Other Cities
- Aliso Viejo Homes
- Anaheim Hills Homes
- Brea Homes
- Costa Mesa Homes
- Coto de Caza Homes
- Dana Point Homes
- Huntington Beach Homes
- Ladera Ranch Homes
- Laguna Beach Homes
- Laguna Hills Homes
- Laguna Niguel Homes
- Lake Forest Homes
- Mission Viejo Homes
- Orange Homes
- Rancho Santa Margarita Homes
- San Clemente Homes
- San Juan Capistrano Homes
- Santa Ana Homes
- Tustin Homes
- Villa Park Homes
- Yorba Linda Homes
Contact
.(JavaScript must be enabled to view this email address)
Foreclosures
Housing
- Talk Irvine
- IHB Forum Archive
- OC Housing News
- Coto Housing Blog
- Housing Kaboom
- Patrick.net
- Housing Chronicles
- Housing Doom
- Dr. Housing Bubble
- Manhattan Beach Confidential
- Burbed
- SoCal RE Bubble Crash
- Professor Piggington
- Real C'ville
- Westside Bubble
- Bubble Meter
- Portland Housing Blog
- Sacramento Land(ing)
- OC Register Blog
Econ/Finance/Other
- Calculated Risk
- The Big Picture
- Economist's View
- Mish's Blog
- Matrix
- Bakers' Stock
- ML-Implode
- Eschaton
- Best Mortgage Rates
- Crackerjack Finance
Latest REOs
- $199,900 :: 3125 Watermarke Pl, Irvine CA, 92612
- $349,900 :: 10 Greenleaf 16, Irvine CA, 92604
- $439,900 :: 61 Olivehurst, Irvine CA, 92602
- $889,900 :: 14 Upland, Irvine CA, 92602
- $429,900 :: 56 Great Lawn, Irvine CA, 92620
- $465,000 :: 212 Garden Gate Ln, Irvine CA, 92620
- $329,000 :: 1006 Terra Bella, Irvine CA, 92602
- $579,900 :: 8 Star Thistle, Irvine CA, 92604
- $458,500 :: 3 Ultimo Dr, Irvine CA, 92620
- $398,900 :: 191 Lockford, Irvine CA, 92602
IR, you are mistaken in your view of banks. They restructure debt all the time, which is exactly what a principal reduction would be. Does every business whine that Trump gets a principal reduction on his debt, but they don’t? Sometimes the biggest restructuring are in bankruptcy court which is what some Democrats wanted with cram-down legislation. Debt getting restructured is a more reasonable part of banking than the massive bailouts, debt guaranteeing and other government actions already taken.
You’re also somewhat wrong about California fleecing taxpayers. There was a Fox commenter who said that CA should take no more money from DC, completely ignoring that Californians send a lot of money to DC. I don’t know how much things have changed, but in 2005, CA got $0.78 back from DC for every dollar they sent in taxes.
I would agree that much of the foreclosure mitigation is really about just keeping people paying for as long as possible, when it’s in their best interest to give up, hand over the keys and become renters. We already have a program that helps people who have lost their jobs pay their mortgage/rent - it’s unemployment insurance.
Did anyone who objects to QEII ever complain about the Greenspan put? AG lowered rates at every sniff of the Dow falling. They also were quiet as investment banks cranked out trillions as they cranked up their leverage ratio (banks can create money, not just the fed).
Thanks for pointing this out.
For some reason, when the little people go through bankruptcy and have debt restructured, it’s a matter of serious concern due to moral hazard, but when Donald Trump or William Randolph Hearst does it, it’s a sensible business decision.
I understand objections to making real property subject to cramdown when the loans were written under a belief that real property is off the table in bankruptcy court, but I believe that the moral hazard happened the day these horrid loans and HELOCs were handed out.
Mass cramdowns look better than what has actually transpired. With cramdowns, there is no foot dragging by banks, debt levels are reduced immediately, and property values quickly return to a sensible multiple of incomes, allowing sensible renters to purchase using cash or small mortgages.
Oops, I forgot. I should have written sensible renting FAMILIES. See? Now they look even more deserving!
Cramdowns would also come at less cost to taxpayers.
Odious? You bet! But more sensible than what has transpired, and in line with how rich people and corporations do business - and, yes, I know this is far from a ringing moral endorsement.
Agreed 100%, but what *is* happening is that banksters will not give principal reductions because they know the government already will cover their losses.
Yes, it is not good to do principal reductions, yet when the property is foreclosed, WE pay for the losses, and the new buyer picks up the property at what the OLD owner should have been re-financed on (as long as they can meet realistic DTI ratios).
To top it all off, we have the citizens vilifying the owners (moral hazard!!! yet companies routinely walk away from investments and it’s all good). All the BS needs to stop, but it will not because we pay for it both ways. Bankster losses, and kicking out people on the streets. The house of Morgan should be proud. Anyone notice the complete takeover by east coast banks? Every corner has a Chase, every single 7-11 has a Citi-Bank.
Where do the principal reductions stop? If banks reduce to the current FMV, what happens if/when prices continue to drop? Is there a perpetual reduction system in place? Do you limit someone to only 1 reduction? Why give them 1 reduction, but not 2, or even 7 if prices continue to drop?
Why isn’t the bank/investor entitled to determine how to best mitigate its losses after a borrower has defaulted?
Had we not had massive gov’t intervention in the banking sector, gov’t would have no say is principal reductions. But we are where we are. My preferred method for the reductions is bankruptcy court, like my linked article re:Trump. If Trump (the business) gets to renegotiate his debt, what’s to stop him from doing it over and over again (bad example, because that is what he does). You can’t file for bankruptcy as rapidly as you are implying.
Reductions won’t work for everyone, but they would for some, and that has the potential to help both banks and tenants/homeowners. For those that say if this were a good idea, banks would already be doing it, consider how we got to where we’re at.
@ Honcho - I’m not sure where principal reductions stop Honcho, I have been against any principal reductions my entire life….until I witnessed the sellout of America with the bankster bailout. After that, I’m all for average, hard working americans being entitled to the SAME TREATMENT as the banksters…namely. if you are going to give the banksters our money, at least treat us the same.
Why spend all that money to evict someone, sit on the property and leave it empty and blighted, and then sell it at 50-70% of what was owed. How many thousands upon thousands of homeowners would willingly stay in their properties if DTI’s could be worked out to a reasonable amount? A huge majority would be my guess, or else they wouldn’t be in the house that long anyhow. The speculators are long gone as they understood their goal…..investment.
The whole thing sucks of crony capitalism. Boot the defaulters (who were snookered into the bubbled housing market), sit on the property to maximize losses…which in turn the taxpayers cover, and then refuse to release the property, or better yet, only release it to a few investors buying all cash. This will be at 40-50% of what was owed, allowing the INVESTOR, but not the homeowner, to reap the profits…if any.
The whole damn system makes me sick and that’s why I no longer victimize those whom are losing their house. Yes, plenty of a-holes were greedy, but there are thousands of us out here who simply got screwed by government shenanigans and a complete failure of financial regulation to protect us (Hi Christopher Cocks from Newport Beach!, you should be in prison)
Swiller writes:
> I have been against any principal reductions my entire life
“No principle reductions!” were your first words as a baby, then, I take it?
[Sorry, principle -> principal.]
Restructuring happens when you foreclose. However, when you foreclose, you get punished for not paying your mortgage. Then, somebody else, gets a chance to be responsible and get a good deal.
When you do principal reduction. The person that did not pay their mortgage, and likely was irresponsible, gets rewarded.
So, how is debt reduction better than foreclosure? It is not.
We are in desperate need of financial education in this country. “The program would provide as much as $3,000 a month for six months to cover home payments, including principal, interest, insurance and homeowner association dues.” However the maximum income is $75,000. Our leaders still don’t get it.
Are you kidding me? Considering the average American’s other debt service, particularly those that are going to need a program like this, what message does that send?
Logical and responsible fiscal policy will lead to logical and responsible behavior. Although lending restrictions are getting tighter, we still have illogical and irresponsible fiscal policy. When will we learn?
Nothing. Collectively we’ll never learn anything that is contrary to human nature.
The responsible will always pay for the irresponsible.
Greed wll always influence people.
History will always repeat itself.
I caught that too. $3k/mo @ $75k/yr income makes a DTI of 48%. Maintaining that DTI is detrimental to everyone. It would be best to transition that person as quickly as possible to a situation where their housing payments are closer to $1500/mo. My family’s housing costs are about $3600/mo…but at a DTI of ~15%. $3k/mo on housing is a luxury.
We have a good national program to do something like this - it’s unemployment insurance, and people have been able to collect for nearly 2 years. If you haven’t been able to figure out how to get your housing situation corrected after 2 years, you shouldn’t really get more options.
Exactly—-
While I had heard some of the debate, the time one can collect UE benefits may go back down to ~6 months, which is not a lot of time. The money set aside for HAMP (not a good program) could be applied to extend UE benefits (a good program), or at least taper the drop-off (go from 99 to 88 to 77 ... over a year’s time).
I am puzzled as to the consequences of the end of the 99-week unemployment payouts. It’s directly deflationary, but what will it affect first/foremost? There don’t seem to be direct near-term effects on real estate.
People on unemployment aren’t house hunting, so the direct effect on housing demand will be nil. Of the homedebtors on unemployment, more will default, but there is already so much inventory backed up, and so many delays on the part of the banks, that I don’t see a short-term effect on housing supply.
So, for the moment, this is just a downer for aggregate demand.
Longer term, however, this does not help house prices. This will add an extra boost to the housing supply in mid-2012. It’s only changing the shape of the supply flood, and not the total volume: all of these folks were headed to foreclosure, anyway.
Or is there something else here? Will delinquencies kick up enough to crush the banking cartel and break the shadow-inventory dam? Could there be a quantum bump in supply?
The program would provide as much as $3,000 a month for six months to cover home payments
Government hates renters.
That is why I would give up on the program IR mentions and improve(boost) unemployment insurance. Unemployed & a home’owner’ or renter, shouldn’t matter. But then the people with jobs, but who could never afford their payments might complain.
“First, perhaps one in a thousand pulled out equity to pay a medical debt.”
You seem to have completely missed the massive syphilis epidemic in Irvine.
Substance abuse treatment. The dealer doesn’t know from doors - a lot of HELOC money went to rebuilding the walls he crashed through - but he brings the happy juice.
“Oh yeeaaaah!”
“Hilarious” as ever, Kirk.
There’s another program available that requires a principal reduction - the FHA Short Refi. http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/10-23ml.pdf
It requires a 10% write-down by the first and allows underwater homeowners to refi at the current low rates. There are no income limitations or “hardship” requirements. The stated goal is to minimize foreclosures by making mortgage payments more affordable and to mitigate strategic default. The program runs through 2013. We’ll see how successful it is.
If this FHA loan were available with no 10% first write-down, I’d apply today. However, as currently constructed, my first would be highly unlikely to consider writing-down 10% just to get my fully-performing loan that really isn’t underwater (the 2nd is) off of their balance sheet.
How about reversing the equation, and making pain go 2 ways….
Grandfather in initial interest rate before adjustable rate hikes. Wipe out the “Due on Sale Clause” in mortgage loans if they cant qualify for new loans. Force people to move out of their expensive unaffordable homes to a pool of cheaper more affordanble “Homes of their own”.
In exchange for any writeoffs for the affordable loans, new loan agreements provide equity sharing at sale (to reimburse Uncle Sam)
People have managable mortgage payments, people resume paying their loans, Uncle Sam is an equity partner and can see a future pay back
Movers, Agents, Construction has a bonanza
Higher end homes get decimated and return to more affordable levels when the vacancy rate shoots to high levels as there is a mass move down.
We find the bottom faster
Economic crisis solved
“Force people to move out of their expensive unaffordable homes to a pool of cheaper more affordanble “Homes of their own”.”
Which arm of thugs will enact this? OCSD? FBI? CIA? Military Police? U.N. Security forces?
Maybe we can force people to live in horse stalls like we did to Japanese-Americans during WWII.
“Force people to move out of their expensive unaffordable homes to a pool of cheaper more affordanble “Homes of their own”.”
I think by this he means that if people cannot afford the fully amortized payment at the prevailing interest rate foreclose. This makes perfect sense and why we have/had the system that we had/have.
By, “to a pool of cheaper more affordable homes,” I believe, that he means rent, like thousands of responsible Americans have been doing while waiting for this disaster to be over.
Of course, if once the property is foreclosed on, the seller still refuses to leave, they can be evicted and this can be enforceable through court and then police action if necessary.
I am making some assumptions on what Tom meant, however, ultimately there is a reason the foreclosure process is in place, the fact that the banks are not following it while our tax dollars are subsidizing their poor choices and bad bets while artificially inflating the prices of the homes that many responsible American’s want to purchase and sacrificing the future of our children is not acceptable.
The argument that compares affordable rental units and draws parallels to WWII atrocities is exactly what the banks want to make people picture when they think about those living in McMansions they can’t afford getting foreclosed on and is playing a role in this debacle that is making average American’s pay for the bad bets of Wall Street elite. In reality, even if one cannot afford a $5000/month mortgage, they can still afford $2500/month rent and most likely live in a similar property and not a horse stall.
Interesting that all of a sudden we credit banks with considering moral hazard as a factor… I don’t think that ever entered their minds when they said no to the program, there’s nothing in history that indicates that was ever a factor in banks making fiscal decisions.
Cramdown seems to make sense to everyone directly affected, although at the cost of moral hazard. What will that do to housing prices though? Will it artificially prop up prices again? I don’t see how cramdown would return prices to sensible multiples, as HydroCarbon suggested…
I’m not sure if moral hazard is the correct term, however, I think that there is evidence that banks are avoiding these types of programs because they are likely to encourage more strategic default.
I was just working on a short sale transaction that had a 2nd for over $200,000 that will be completely wiped out at foreclosure, however, the credit union refused the 20k+ offered by the first. The explination the negotiator hired by the listing agent gave was essentially that the credit union was morally opposed to allowing the seller to short sale and not have the foreclosure in their record. They wanted the seller to pay via foreclosure rather than short sale.
I could speculate on the real reason. However, apparently to them it was worth 20k to not allow the short sale, however, more than that, it’s possible these banks want to send a message to strategic defaulters. Who knows what they were thinking, but this is what the negotiator said she was told.
Interesting explanation by the credit union, and maybe an earnest one considering that CUs seem to have been largely immune from the credit fallout. Having said that, I too suspect there is an underlying reason other than teaching homeowners a lesson.
What underlying reason(s)?
Go ahead. Speculate.
They could still claim the asset at $200K.
I think that’s the best bet.
The last loanowner purchased with a sub-prime lender, then refi, refi, refi, refi’d again all with companies that imploded some time ago. This property was worked harder than a $2.00 hooker during Fleet Week.
Was this loanowner taken advantage of by predatory lenders? Methinks it’s the other way around.
My .02c
Soylent Green Is People.
Was it a “COLORED” debtor?! I didn’t realize how racist these predator lenders were! Seeking out people “of color” who had medical bills! GASP!!
I report, you decide… I obviously hit a hot button…
——-Original Message——-
From:
Sent: Wednesday, November 17, 2010 10:26 AM
To: Lazo, Alejandro; Reckard, Scott
Subject: piece on principal forgivness
Sirs:
Was it possible to write a more slanted piece? Perhaps instead of criticizing lenders for not participating in principal write downs, you could have also presented the shadow side of principal write downs, namely, the moral hazard created by doing so. Foreclosure or bankruptcy provides principal write downs AND consequences for poor decision making. Principal write downs outside of foreclosure or bankruptcy encourage people to take out loans they cannot afford and allows them to feel that they can indiscriminately swipe money from tax payers (see attached cartoon). With unbalanced articles like these, is it any wonder that the LA Times and other major newspapers are seeing their circulation numbers swirl down the drain?
V/r,
Sir:
I think moral hazard is a legitimate point - if not a bit of an abstract one. I mean, like it or not, we have bailed out the banks and already allocated this money to bail out the homeowners. The story was more about how this program is struggling to get going.
But sure, we could have mentioned what, in my opinion, is a fairly obvious and abstract point: moral hazard. But there is also a lot of stuff we could have mentioned that didn’t make it into a fairly succinct newspaper article - which was actually long by today’s standards. I don’t think that made the story “slanted” in any way, I really don’t.
On a personal level, your email is thoroughly obnoxious. How about congratulating me for putting together a complex story in a readable fashion so that the public, i.e., you, can have this kind of discussion in the first place? No other media outlet is stepping up and doing stories on the program. Why not? It’s a complicated matter that requires some expertise and, absent that, a lot of hard work to get right.
Because of the Internet, stories produced by the LA Times and other major news organizations are more widely read than at any point in human history. But yes, because of the Internet, the traditional revenue model of print media is suffering and circulation is declining. Don’t confuse the two things.
Take care. And please understand when I don’t respond to anything else you may write to me.
Alex.
IR, I think you should delete this guys real name, phone number, and email.
The article writer makes a reasonable point. You can’t beat the dead horse called “moral hazard” without getting parochial. If people don’t understand the moral hazards involved after years of bailouts and proposed bailouts, maybe they have they are choosing to ignore it.
True, the moral hazard was created a long time ago.
It should be well understood by now that the responsible pay for the irresponsible.
The responsible continue to be responsible.
LOL!
“How about congratulating me for putting together a complex story in a readable fashion so that the public, i.e., you, can have this kind of discussion in the first place? ”
He thinks he has done all of us retards a big favor! Now we can figure it all out thanks to his amazing research!
“I would like one of those loans I can’t afford so the gov will pay if for me” lmao at that joke, sad part its true.
Why isn’t this program entitled “Keep the Bank’s Home”?
Thank you and Good Luck.
LOL! WTF?
Forgot to ask: what’s up with the super-goofy Photoshop effect on the kitchen picture? Does that go with the listing? Clicked over to the commercial IHB site but that picture didn’t appear.
We sold our first house and moved up in 2007. I had to pay half of the profit to my ex husband. We put 164K down on a 640k house and took a 500k loan. The house is now worth 320k.We could keep paying now but are walking so we can start over. Our house wont be out from under when we can no longer work or manage the stairs. We never refinanced ever in either house. We are victims of the massive fraud the banks perpetuated and we are walking all homeowners in California this underwater should do the same. We had perfect credit until this. We cant recover financially if we stay. We are in our early 50’s. This loss was not a normal market loss the bubble was created by these unscrupulous immoral lenders and the modifications they offer people will just prolong the pain. They should write down the loans and it would be over. I feel no shame. My only sin was wanting a bigger house for my large family (we have foster kids)Dont take a modification that keeps you enslaved forever and never allows you to get back on your feet financially. Homeowners take the pain now and start over as these morally corrupt bankers are not going to do the right thing and share the loss their fraud created with you.