Irvine Housing Blog

Thanks, I will use that article next week.

Yes, I just read that piece and was hoping it would make the rounds today.  I give the guy credit for coming clean on his egregious mistakes, and his empathy for people who made similar ones.  But I can’t figure out why anyone would ever trust their money to his care again after reading this, nor would I buy a book by him.

As for the crap settlement discussed in this blog posting, I have a suggestion for how to distribute the money.  Let every qualified loan owner submit a bid.  How much do I need in relief to keep my house?  Why do I deserve x amount in principal reduction?  What would I do with the extra money?

Submit the bids to the banks and to an impartial panel of experts, say one assembled by the folks at Propublica.  I don’t really want the government involved because what is being granted here is government/legal absolution, so they are not at all impartial.  Plus, the government and the banks have, collectively, been botching the housing “rescue” for at least three years now.  My dog could do a better job.

At the end of the day, we’d shine a spotlight on the real plight of millions, (maybe) force the banks to give relief to the most worthy, and demonstrate how utterly inadequate these attempts are once and for all.

End extend and pretend.  It’s the only way out.

While this story is much better than most other human interest foreclosure stories, it’s still missing too much info.  In order to provide a complete picture, we need to know his financials when he bought the house, when he HELOC’d the house, and when he sold it short.  How else do I know if he bought a house he couldn’t afford?  It’s a safe assumption, but why not provide the entire story?

e.g. He bought a $575K house.  If his household had no other debt and their income was ~$200K, then that’s not unreasonable.  If their income was less than $100K and they had a lot of other debt, then it was doomed from the start.

Also, I don’t like financial planners who took a few courses and passed an easy CFP test being able to advise people about finances.  Does he have a college degree in anything, much less a degree in business, economics, finance, etc.? 

It’s a lot like allowing High School grads with similar credentials providing financial advice on everyone’s most expensive purchase - their house.  It is unconscionable.

One more point.  I want people like him to explain their end-game.  What was the plan?  You bought a house you couldn’t afford, but you expected its value to increase substantially.  So what then?

e.g. You finance $575K on a < $100K income. It’s worth $1M in five years and you take your $400K equity and you buy a $2M house financing $1.6M.  Great!  You’re in a huge house in a great neighborhood and you feel rich, plus you have $400K in equity! 

But how do you plan to service that debt?  There is no end-game unless your income grows alongside the home’s value enabling you to finance the next big house.  Or is the plan to move to a low-cost area and take all of your cash with you?

I just don’t get the thought process back then and I want someone to explain theirs to me,

This guy’s article does a good job of summing up the crazy mentality of the credit bubble. My wife and I encountered the same thing in la. Endless communities of people paying insane house prices and then renovating them and filling them with expensive stuff. On top of that they all drove luxury cars, ate out all the time, took expensive vacations, sent their kids to rivate schools and were constantly buying new toys. Our initial reaction was that everyone must make way more money than us. It took us over a year to realize that we actually made way more income than they did! We just didn’t like debt. How so many people decided massive never-ending debt is ok is to me the biggest mystery of the bubble. It’s herd mentality taken to the extreme.

As for the weak settlement, I just hope it gets banks back on the foreclosure train.