Irvine Housing Blog

Yeah, I think much of the “shadow inventory”, however you define the term, is simply paperwork sitting on a huge pile on some guy’s desk that the poor guy hasn’t gotten to yet.

Yes, I did mention the either/or nature of the decision for lenders. I was forced to take out some tangential information. For instance, when I first wrote the post, I had a detailed explanation of what happens during the three weeks between Notice of Default and Trustee Sale, but the post was long enough, and the three-week estimate is close enough so I removed it. The attorney’s post I link to goes into more detail about the legal aspects including the “one action” rule.

Watch the opening scene of “Capitalism : A Love Story”

A sheriff from the county is called to the home with a locksmith, and the home-debtors are typically given a couple of hours to get out.  I’ve seen this happen several times.  It’s sad.  Most of the time when the sheriff arrives, the home has already been abandon.

Also, the home-debtors are generally offered money from the lender, via a realtor, to leave the undamaged home voluntarily by a certain date.

the new owner at the trustee’s sale would have to go through an eviction process.

Hey Yummy,

Since you seem to know everything regarding real estate law…why don’t you take the time and effort to educate us.  And I’m not talking about your one sentence…“Simple, blah, blah.”

Everything few months we get people like you who come out the woodwork and criticize everything and everyone here.

An astute teacher such as yourself should also know about the extension through 2012 of debt forgiveness relief laws.

Speaking of which, when does the special law that forgives taxes on forgiven housing debt expire?

Oh yes, 2012.
http://www.irs.gov/individuals/article/0,,id=179414,00.html

The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
 
If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.

You are wrong.  Insolvency may lead to reassessment of tax liability due to forgiven debt, but is not a given, and must be declared by the IRS after investigation.  HELOC funds may be excluded from cap gains tax, as other borrowed funds may also, but only under certain circumstances, usually if they were used to improve the property, but HELOC funds are not exempt for cap gains tax by the nature of their being HELOC funds.  That is just plain stupid.  IR was not complete, but he was way more accurate than you.

From the link above~

By Jim Kuhnhenn, Associated Press Writer , On Thursday January 21, 2010, 11:42 am

WASHINGTON (AP)—President Barack Obama is calling for tougher regulations on banks that would limit the size and complexity of large financial institutions.

The proposal would limit banks’ ability to engage in high-risk trades. Restrictions would be placed on proprietary trading by commercial banks to separate those institutions from investment banks.

Obama said Thursday that without these regulations, the financial system will continue to operate under the same rules that led to its near collapse.

The announcement comes as Obama renews his calls for financial regulatory reform, which is being negotiated on Capitol Hill.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

Ric Edelman is pretty well known and i read some of his books.

however, i just read his article you referred to and feel skeptical.

first, i think this article was written before the housing crash in which most of his assumptions are house price will go up forever (just like most everyone else thought during the bubble years)

second, this is the question for IR and anyone:

Assuming you have no other better investment (like right now) to invest the cash, should you pay cash for the house (of course, assuming you have the cash).

maybe i’m missing something in my logic, but i just don’t see any benefit of spending $1 to get 30 cents back on tax (assuming 30% tax bracket).  that 70 cents still come out of your pocket???

appreciate anyone’s thought!

There are many correct things in that article, but they need to be viewed in context not as absolutes.

He’s making and not stating some underlying assumptions:
1) Inflation will be high, possibly even higher than your mortgage interest rate.
2) Investments will return a higher rate than you’d pay out in interest.

On the 15 versus 30 year mortgages. The problem with a 15 year mortgage only comes about if the 15 year payment is one that’s onerous.

Prepaying a mortgage is exactly like investing in something with a rate of return equal to the interest rate. Except for the liquidity problem he rightly points out. But that’s all really about diversification. Don’t put all of your money into your house. Don’t pay extra into your house if you can’t actually afford to while having more money left over for investing.  An emergency fund is more important than prepaying your mortgage.

But really it all comes down to inflation expectations. That $98/month wouldn’t go far in groceries these days so avoiding it during retirement doesn’t do you that much good. Far better to have investments that stand a chance of keeping up with inflation. Since it’s nearly impossible to predict the next 30 years of inflation, you need to hedge your bets in both ways. Pay down your mortgage and invest elsewhere.

There is way too much to this question to answer in a few paragraphs.

But, financial advisors do not make money by making money for their clients.  They make money by selling their services and bringing assets under their commissioned direction.  Read “Confessions of a Wall Street Insider.”

More simply the question being asked is whether to use leverage when buying a home?

Leverage is useful on an appreciating asset.  Leverage will kill you on a depreciating asset.  Can you think of any recent examples?

“Isn’t it funny when you walk into a investment firm, and you see all of the financial advisors watching CNBC — that gives me the same feeling of confidence I would have if I walked into the Mayo-clinic or Sloan Kettering and all the medical were watching General Hospital…”

-Senior portfolio manager, UBS

I think some of it is knowing yourself and your family.  If you are the type to spend all the excess income - then you may be better paying off the house, because otherwise you (or your spouse) is going to blow away the moola anyhow.  Then if there is a truly rainy day and nothing saved (and by truly, I don’t mean car died want to buy a new car, I mean huge medical problem/unemployment), the savings in the house can get extracted (ex sell it).

But if you are disciplined about savings, the answer may be yes or may be now, depending on economy, inflation, taxes etc etc.

Thank you John, cara, awgee and Anonymous for your answers. Seems there is no rule-of-thumb to go about this and a mixed approach seems to make sense. Probably the current investment environment may have to do with the big down payments we are seeing in Irvine. But I wonder if this is short-sighted if those people are putting most of their savings down. It appears having the liquidity could offer them a better flexibility to make up for any loss even if their house depreciates in value in the long run. So, does Eric’s recommendation still make sense even if the house depreciates in value ? Of course this is assuming that the alternate investment performs well in the long run, which could be likely given the flexibility to adapt the portfolio. Just speculating from common sense that is devoid of any training in finance…

People want to be homeowners so that they can have a reason to go to Home Depot. If you rent it would be crazy of you to paint your rental at your own expense, but if you own you can justify being at Home Depot on the weekends. I guess you need new Hobbies after you have been married a number of year and that is where being a homeowner and Home Depot fill the void

Wake up!!!

Regular “financial adviser” is nothing else but simply another name for low life salesperson, who sells financial products. Even kids know that.

Real financial advicer must be paid directly by client and never by somebody else. Good one is not much cheaper than good attorney.