Irvine Housing Blog

“US banks have an average leverage of 15:1, so a 7% loan loss will wipe out their capitalizaton.”

Source: Ray Dalio, founder of the Bridgewater Associates hedge fund and a multi-billionaire, on Charlie Rose last nite.

So you can expect DC to come up with more-and-more desperate measures to prop up banks, with raiding 401k just the opening shot.

Will government meddling into the real estate markets ever end?

Answer: probably not in our lifetimes.

Even if such a piece of foolhardy legislation were to pass, I wonder how many of those *irresponsible* loan owners would have been *responsible* enough to contribute to their 401(k) to begin with?

My hunch: not many.

This makes me laugh.  Kinda reminds me of my 341 meeting with the bankruptcy trustee and the blonde chick from the treasury department.

The T-girl told us to stop contributing to our 403b accounts so my creditors could get a piece. 

She then summarily dismissed the BK as ABUSIVE.  I lost it.  You shoulda seen me, a 40 old man downtown throwing a tantrum, cursing out my BK lawyer.  Suprised the weren’t called. Sour times.

Turns out, it was the best thing that ever happened.  Instead I opted for the IRS 1099 plan and paid them.  3k is better than 1 million any day.

No effing way I am gonna stop funding my retirement.  Financially and morally, it just doesn’t add up.

The beauty of having a BK dismissed is that all creditors must now independently prove their case if they sue.  They know you can’t pay. 

This means mortagages usually get charged off, and credit cards can be easily be defeated by making sure they have all assignments, charges, signatures, etc according to state law and UCC.

I didn’t know it at the time but the treasury broad actually did me a favor….

Well, it’s the American way to let people make the mistakes they decide to make, and even the mistakes they get conned into making. A good proportion of the rich got rich by finding ways to take people’s money with a maximum of profit. Pet rocks, anyone?

That said, I personally think one of the roles of education system and consumer protection agencies is to provide the means and resources for people to face the predators out there. The government should not be in the business of helping people to get fleeced.

This recession started a few years ago, but yesterday I received my first request from a close friend to borrow some money.  Her story is typical.  Her husband hasn’t worked in over a year.  She lost her good-paying job and now earns much less.  They filed BK and are trying to keep their house.  And she wanted to borrow $2,500 from me to help make her mortgage payments.

I tried to explain to her that her underwater house isn’t worth saving; that she cannot afford the house and needs to live rent-free for the next ~9 months and then move on.

I don’t think she heard a word I said…

I wonder what makes lenders think that this is a solution? Only 60% of Americans even have a 401K and I would be willing to wager that over 50% of those are way underfunded ( in most cases people can sock away $16,500 this year plus company matching contributions), but most people never do this because they have poor savings discipline, or because their high monthly household expenses prevent them from diverting earnings to savings.

Most people who got into 401k’s in the 1980s that are now trying to retire have found them insufficiently funded for retirement living and no freaking wonder…1987 crash, 1998-2000 dot bomb era, and then the massive financial crisis of 2009).  It’s difficult to get a leg up in a 401k over the last 20 years, but savings just a little is better than not saving at all.

When you sign a mortgage you need to prove your income and your net worth anyway to the lender.
They know what you have and will probably try to go after it if need be. 

I’m surprised banks even care to waste their PAC money. I thought the reason for all the no-doc business was because banks it was a quick buck and they just shoved those mortgages down the line and made them someone else’s problem?

The money in 401Ks isn’t just sitting on a pallet in a vault some place in Tennessee with pretty little fairies sprinkling interest dollars on top.

It’s being used by investors and as capital in other ventures - small businesses, factories, production, services, and presumably creating or preserving jobs in the global economy.

Yeah, great timing, with 9% unemployment in the US and tons of financial market uncertainty, this is just perfect. Let’s suck as much savings and capital out of the economy as freaking possible and put it all into the hands of the initial doofuses (banks). They’re not going to be happy until we’ve got “nothin’ but debt” on the books.

This is a coincidence, I just got my quarterly VIP/401K investment results..

QTD= Quarter to date CYTD = Calender Year to date.

Here’s some excerpts from my statement:

Lifepath 2020 QTD -8.1% CYTD -4.3%

S&P Stock index fund QTD -13.9% CYTD -8.7%

Company stock QTD -23.7% CYTD -15.2%

To put it in perspective, I could have paid cash for a Condo listed on MLS located in Quaill Hill with what I lost.

So what they are saying is that if I was a distressed LoanOwner, I could withdraw 50% of whatever I have left in my 401K and continue to live in the Banks’ House and work until I die.

They are also getting so desperate to plug the sinking ship that they are willing to fastrack any immigrant into the USA as long as they are willing to pay cash for a $500K Property.

http://www.latimes.com/business/la-fi-visas-home-buyers-20111021,0,6715779.story

I wonder if making it easier for people to take out their retirement money will make it easier for judges to attach it to satisfy judgments of one type or another - such as a deficiency (sp?) judgement when a lender forecloses on a house.  The lender can say, “You could have used the money to make your payments, so we can take the money to satisfy our deficiency.”

To allow a debtor to access these funds without penalty is not the same thing as to requirement to do so.  Usually I agree with IR, but I think he has gone one step too far in believeing that because he thinks that in most cases this would be foolish, this should not be allowed.  This is illiberal, since the unspoken premise is that borrowers are incapable of determining themselves what is in their interest.  In nearly all cases they are capable of doing so, and in those cases where they legally are not, the more important question might be if they were legally competent to enter the contract to begine with.  As for protecting retirement savings in bankruptcy, perhaps the law should be modified such that the petitioner can shield funds up to the median balance (or some fraction thereof) of such funds held by the population of the same age.  If the median 37 year old holds $19,000, I don’t see it has any great injustice that a 37 year old with $80,000 has to forfeit $61,000 to his/her creditors.  Whether the person was intentionally gaming the system or not really isn’t my point here - it simply makes little sense to favor post-retirement hypothetical debtors over actual ones right now.  If the median (or lowest quintile, or whatever) 37 year old is facing the future with $19K, so can you buddy.

Well all 401k contributions are made pre-tax, so theoretically if a bank wants to raid the money all at once for deficiency judgement, then wouldn’t they also be responsible to pay all of the income taxes on it, plus any penalties?  That could be significant if done in one fell swoop.

They’ll get some money, sure, but I don’t see this as an easy 1 for 1 to cover debts.

Also, the two things people often forget about saving $1.00 today in a 401K is that:

a.) what will income taxes be like in 20 years? You have to pay taxes on 401K withdrawals. Answer: Pretty damn high the way things are shaping up.

b.) What will your retirement dollars buy you in 20 years?  Answer: If you retire in the US, not very much, since the Fed’s print shops are running extra shifts.  Living in another country (with better healthcare) might be an attractive option.

Swiping retirement funds to pay for housing loans is already govt policy.  The Fed has been printing lots of money, and may print more to keep the interest rates down for mortgage holders.  This

1. devalues the dollar, which reduces value of bonds and deposits for retirees (ie. they can buy less stuff now as the price of stuff rises)
2. benefits loan owners because they can refi at lower rates.  Also helps them in the long run when houses, like all the other real goods in the economy, are worth more because there are more dollars floating around now

Timeshare mogul drinks too much of his own RE kookaid and loses his gigantic mansion under construction

http://online.wsj.com/article/SB10001424052970204346104576638981631627402.html?mod=WSJ_hp_MIDDLETopMiniLeadStory_1#articleTabs=article

Factoid: The American 401(k) program is so famous that some other countries also officially call their retirement plan “a 401k.”

I just heard that the proposed foreign cash buyer visa has some pretty awkward terms:

- US residence visa, but you can’t work
- must pay for $500,000 in real estate
- must be a US resident at least 180 days per year.

Generally Chinese want to off-shore some assets while still working full-time in China.

And other foreign cash buyers want to move here and work.

The 180 days residency can also cause tax jurisdiction issues - ie. forced to pay US income taxes.

So I don’t understand what demographic can follow those visa terms. Retirees?

Mortgage Insurer Wilts
Arizona Takes Over Struggling PMI Group; Move Hits Lenders and Investors
http://online.wsj.com/article/SB10001424052970203911804576649454068446160.html?mod=WSJ_hp_LEFTWhatsNewsCollection