Irvine Housing Blog

You are fundamentally correct on all the points. 

I would like to re-iterate, again, that attempting to hide assets or income when filing bankruptcy often leads to a federal felony conviction.  Sure, they don’t catch everybody, but is it worth risking up to 5 years in a federal prison?

Assuming the people in the hypothetical could hide the bonus away legally

1. They can’t.  It’s called bankruptcy fraud and it’s a federal felony.  You’ll do time in a federal-pound-me-in-the-@ss prison.  It happens all the time.

it is a regular business practice to negotiate, partial pay or not pay at all debts when a business is in trouble

2. As has been mentioned elsewhere, when you owe the bank $10,000, it’s your problem; when you owe the bank $100,000,000, it’s the bank’s problem.

is it immoral, unethical or just bad form for an individual to do something that is considered “sharp business” for a corporate entity

3. It’s not, but (a) large corps don’t lie on their bankruptcy petitions, because that’s an easy way for the CEO to go to jail with no upside--unlike an individual who would directly keep any money they “hid” and risk #1, above, so it’s not really applicable in bankruptcy; and (b) for all non-bankruptcy-related situations, see #2, above.

Bah.  In 2003, in Irvine, it was often cheaper or at least equivalent to buy vs. rent if you were willing to use an adjustable rate mortgage… I got a mortgage in the summer of 2003 at under 4% for god’s sake.  30-year fixed conventionals were in the high 4% to low 5% range.  There is no way that buying could have doubled up the cost of renting at those mortgage rates.

I can tell you that most brokerage firms DO make margin loans secured only by the stock, as I work in that industry.

But firms are liquidating very quickly when calls go unmet.

They didn’t “force” us to rent, exactly, they merely drove the prices past the point anyone would or could pay without a moonshine mortgage.

The affordability gap is most obvious in the moderate-to-middle income brackets. Since 2002, a moderate-income person would pay twice as much to buy as to rent- a sure sign the property is overpriced.

Mandy is essentially correct- those of us who were unwilling to assume the risk entailed in buying an overpriced property with high-risk financing were left on the curb.

I don’t think anyone but a bankruptcy lawyer has any right to chime in here, but this is the internet! So here’s my “I’m not a bankruptcy lawyer but I play one on the internet” take:

If you choose Option A (put $ in bank, declare bankruptcy): The bankruptcy court orders your assets liquidated and/or your wages garnished to service your debt. Welcome to the next ten years of Hell.

If you choose Option B: You’re out of debt and up $10,000.

I know people who’ve gone through bankruptcy, it’s survivable but not recommended if you have another option. If you have had some disaster like a major health emergency, unemployment or divorce, my heart goes out to you. If you just got happy with the Visa card, talk to the hand.

I’m not of the mindset like some others that bankruptcy is too lenient or that people who declare bankruptcy are selfish and lazy.

I think the punishments are exactly what they should be. If we make bankruptcy more draconian, we’ll just chill the credit markets so that even the most creditworthy people will shun credit out of fear they may one day lose their jobs or other crisis. Our economy, like it or not, requires some risk-taking, and that risk is reflected in the interest rate on loans. If we insist on zero lending risk by having draconian bankruptcy penalties, no one will take the risk of borrowing. People will stop buying until they can pay cash, and our plastic-driven economy will Grind. To. A. Halt.

No more people buying new cars.

No more major appliances.

No more real estate.

No more using credit cards for everyday things like groceries.

Sorry. You don’t have to like it, but that’s the truth.

There are lots of people in Texas who hate Bush. He only won in Dallas County voting by two percent. But there are so damned many more who don’t see anything wrong with the guy…

Because we all know that corporations are the scum of the earth. Who wants to mimic them?

As a third party observer from up here in NW, I would rather buy this S%$hole in Irvine for $1.2 million than the same price house in Dallas.

There are things much important than how much you are paying for your housing.

Bush was a popular governor in Texas which propelled him to be the worst president in US history. You can’t pay me enough money to live in a state where they thing W is the greatest thing since the slice bread.

oh lord I’m so sick of this randroid nonsense.

Thanks, formerbanker.  Makes sense and very helpful.

Actually, the Los Angeles Metropolitan Area is so much larger than the Bay Area that we have much better availability of “culture”.

San Francisco is more snotty but it has nowhere the market clout of LA/OC.  So, when a touring act ( classical, redneck, punk, etc...) makes a decision where to go, LA and OC are far better choices financially. 

Also, in LA/OC an act can put together two sold out nights without the added havoc and expense of moving, so this makes our market much more desireable.

What it comes down to is that SF may have a greater “density” of “culture” but when it comes to sheer numbers it’s miniscule compared to LA/OC.

Same with Boston, really.  Boston, SF, for example, have excellent local orchestras which are well funded, but it is a smaller market that NYC and LA/OC.

And really, you can not compare LA/OC with Texas.  The premium for SoCal has always been the weather.  And, yes, we do have still a reasonably strong economy.  Just because the Mortage Industry shed jobs in Irvine and Calabasas (San Fernando Valley) it doesn’t mean that jobs in other industries went away.  Besides, not everyone who lives in Irvine works in Irvine.

Really....

I hate to say it, but I hope that they get soaked.  Both the owners and the bank.  People & banks like this have caused much of our housing situation.

tonye - I am no classical music expert but I would imagine SF and the Bay area get a much richer offering of “culture” than OC/LA. For that matter Boston when I lived there beat them both. And both areas bleed high paying jobs. The weather in Boston sucks however. No argument there. And the evening news always leads off with the Sox or Pats. Seriously. They would pre-empt a Middle East Peace announcement for an emergency update on Manny’s whereabouts.

OC is a paradise, but that is derived from one element: phenomenal beaches with nice weather and all the accoutrements. Mid-market economy otherwise with very pedestrian avg wages, and lacking a world class university. Plenty up the road in L.A., but OC is really its own market. And for non-beach people, I find that OC strangely holds no allure. Many prefer the Westlake Village area. More open space, less crime, still close to Malibu if you need the beach. I’d personally love to have my Bay area job and salary and transplant it to Irvine. That ain’t gonna happen.

When it’s all said and done, I feel TX will look bubblicious compared to OC RE values. The only thing that will rescue the OC market is a big ramp in the local economy, as such a huge percentage is in the REIC. I did read that OC is becoming known as a center of mobile application development. Building the software, biotech and biomedical industries is needed to boost local wages and thus put a floor on the crash, because as our friends in TX have noted, the premium due to it being different in OC shot up rather precipitously from 2000 - 2007.

Interesting comment over at http://lansner.freedomblogging.com/2008/01/25/tell-us-will-stimulus-save-oc-housing/

clemente Says:
January 25th, 2008 at 7:46 pm

Cross posted from Calculated Risk comments section:

For the time being, the GSEs are living by OFHEO’s rules on capital (haven’t heard that we’re throwing those out yet) and the reality is that they are having trouble just holding on to what they have on the portfolio now. Given how they account for their derivatives, it is almost certain that they will have to raise more capital after they print their Q4 numbers. Ceteris paribus this crowds something else out of the GSE portfolio or draws capital away from some other mortgage portfolio.

The GSE have dramatically scaled back the amount of IO/high LTV/Low FICO/etc higher risk loans they are doing as a result of the capital constaints (to say nothing of the way they have performed). The GSEs are not in a position to wave a magic wand and save the housing/mortgage market.

I was at a mortgage credit conference today and there was a very strong consensus that these jumbo lite loans would not be pooled with conforming loans. The best guess was that this move might cut the current jumbo/conforming spread in half.

Of course, the Paulson/Pelosi/Bonehead troika didn’t stop to think about any of this, nor did they think about how they would sieze up the jumbo market while this plan works its way through Congress. When the market got wind of this, prices on jumbos hit the floor because no one wants to hold them knowing that jumbo holders will have a much stronger propensity to refi when this gets put into place. So if you want to know why jumbo rates jumped 50 BP yesterday, you can think our august leadership in Washington.

Brian | 01.25.08 - 9:34 pm

Jumbo Loan Limit Increase and other ways to revive the patient.
http://thegreatloanblog.blgospot.com

they do, it’s called a ‘just war’

Skek,

A depositor’s deposit accounts (CD, money market, checking account) are insured up to $100,000 per institution.  There are combination rules for different account types that can raise that limit higher.  For example, if you have a joint account with a spouse, you are each insured $100,000 so the account would be insured up to $200,000 if neither one of you had other accounts at that bank.  Or, a husband and wife could have a deposit account in trust for their three children, and you’d actually have $600,000 of deposit insurance.  You can calculate insurance coverage using the FDIC’s online Electronic Deposit Insurance Estimator at: www2.fdic.gov/edie

If you buy securities through the brokerage services offered by your bank, you are correct - they are not FDIC insured (i.e. your principal is always at risk to the market forces) but they are separate and apart from deposit liabilities.  Typically, if you buy investments through a ‘bank’, you are dealing with a bank affiliate company, and not the insured deposit institution bank subsidiary.  Say you buy $1,000 of company ABC through the affiliate’s brokerage service.  The affiliate acts as a fiduciary for the account (buys the security on your behalf, puts in in ‘safekeeping’ electronically, maintains investment account records, etc.) The cash you paid for the security went to the seller of that security.  That security doesn’t show as an asset on the bank’s balance sheet (banks do have investments/securities on their balance sheet, but those are securities that the bank buys for its own behalf to earn interest income, not securities it is holding in fiduciary capacity for its customers).  Hope that makes sense…

You can ride horses in SoCal. 
You can see Opera in SoCal. 
Mr. Joe Ely and the ilk travel to the Crazy Horse in Irvine ( they’re moving ).  In fact there’s a lot of music diversity and lotsa redneck music here too.
You can watch a real college football team play.  USC.  Some years too if UCLA is up to it.
If you must go NFL, you can drive to SD.  It’s not far from Irvine.
And I’ve owned my house for 21 years.

So there.

Of course, it did rain today. 

And to be perfectly clear, I’m not arguing for what I am going to put forth below, only putting into it the conversation for the sake of discussion.

Assuming the people in the hypothetical could hide the bonus away legally and issues of perceived morality aside, why should they pay back the debt?

I’ll say it again, it is a regular business practice to negotiate, partial pay or not pay at all debts when a business is in trouble.  To take a step further, we have energy companies that sell to each other, one shows a loss the other rakes windfall profits.  It’s not illegal per se, so why not?

My point comes down to this, why is it immoral, unethical or just bad form for an individual to do something that is considered “sharp business” for a corporate entity?

I believe the tax forgiveness is only on cost basis of home purchase, not MEW.  Also CA is not in the forgiveness mode.  I hope these folks have to write checks the rest of their lives to the gov.

I should clarify.  Mtges are secured loans.  So you might be able to get rid of or minimize credit card debt and other non-secured debt, and still keep your house. . .but you have to make your payments.  If you never fell behind and just have credit card debt, this is possible, practically.  If you’re also trying to catch up, you have to pay your old payment, a catch-up payment and a hefty trustee’s fee.  In practice this is a snare and a delusion.  People who can’t keep their loan current, can’t keep it current with all those add-ons.

The free pass doesn’t go up to infinity any more in Florida for homestead.  There are all these extremely complicated rules about timing and prices, that frankly, I don’t understand. 

In Texas, it used to be that you couldn’t get a home equity loan, could just get a 2nd mtg for home improvements, but this info is 20 years old, so I don’t know if it’s still true.  At that time, if you lied and it was just to take out money, you could avoid being foreclosed on, but go to jail for lying.  I was told that this happened to some pro football player. 

Anyway, if this law is still on the books in Tx, it probably saved a bunch of Texan tushies.  And made a lot of lenders reluctant to make 2nds.

Wow, the spread on 30-year fixed loan program between conventional and jumbo at the lender I watch is 1.375%.  Yikes… That is the worst I have seen it.

Err… we’re on a joking trip.

An Acura or Honda with spinners turns my stomach.

Actually, spinners in general turn my stomach, around, and around, and around, and around....

As a professional driver, I HATE spinners.
One of the clues you use when driving defensively is-"Is that vehicle stopped moving? And if it’s moving, how fast and is it speeding up or slowing down?”
One of your best clues at slow speeds, especially when you yourself are moving at traffic speeds and your angles are changing constantly, is watching the wheels of cars that may enter your path. Spinners completely screw this up. I think they are as bad as “obs view” or tinted windows and should be ILLEGAL.
Posers.

I agree - this is one ugly house.  I can’t believe they’ll ever sell it.

Did a class paper on Henry George a few years ago… definitely something to it.  The lady with the 17k house didn’t contribute anything to make the land under the house worth more - it became more valuable because of improvement of neighboring properties - if all the properties in the neighborhood were neglected to the same degree it would be blighted. it’s sponging off your neighbors’ investment.

I kind of like it when you can ride horses, see an opera, dance/drink to Joe Ely and catch a Horns game in the same weekend. More specifically - when you can afford to.

Hmmm… what a dropping Full Market Value means now is that the IRS could come back and haunt the homeowners.

I can see where homeowners will want to ask the County to lower their assessed values to drop their RE taxes.  However, they will have to be careful that the IRS doesn’t come back and starts auditing their tax returns.

Oh boy.  The joys of those 100%LTV HELOCs.

Yeah.  I was thinking about those.  But cost a bundle.

I’d have to sell my house and get a 110LTV on a McMansion in TRidge.  Hopefully next year I’ll double my money and I can get some 22 Pimp Stars in my Benz AMG G-Wagon.

I can imagine how IR would roll with the SUV and the PimpStars:

Most spinners are simply wheel covers that go over existing wheels.  They probably wouldn’t clip to your alloy wheels.

Real spinners, i.e. custom rims with the portion that spins are essentially defined by rim manufacturer Dub.  The smallest size you’ll find Dub Spins in is probably 18”.

If you really want to snaz up your Civic Hybrid, forget Spinners.  They are so 2005… You need some Pimp Stars instead.  Set of 22’s will set you back $12K.

http://customwheel.com/custom_wheels/product_info.php/products_id/1687

I wonder how my Acura TL and Honda Odyssey would look like with spinners.  Surely it would drive nuts the control freaks across the street.

Are spinners heavy?  Would they be heavier than the lightweight alloy wheels in my cars?

Would I have to to 22” wheels and rubber protectors?

I think I need to apply for a HELOC to buy us a couple of sets.. heck make that three sets and we’ll have the only Civic Hybrid with spinners.

Here you go.  Houston

http://www.houstonsymphony.org/ticket/production.aspx?id=1394&src=t

However, if you think that you can compare a regional symphony orchestra with the LA, NYC, LSO, BSO, VSO, et. al… (even Cleveland and Chicago are good) you are simply confused.

It’s not the same. 

Even in a high end stereo ( I got one ) you do not capture the experience and the dynamics and power of a top notch orchestra ( you will capture their expression though).

Van Cliburn… I got his recordings.  But none with a Texan Orchestra.  This is with Chicago

http://www.cduniverse.com/search/xx/music/pid/1131754/a/rachmaninoff+concerto+no+2;+beethoven+/+van+cliburn.htm

At some point, the Chicago and Cleveland were really fantastic too.  And Minnesota is rather good today.

Come on Kate - you know all we do is ride our horses and go huntin for fun! 

These are recourse loans, and the lender could go after any assets from the seller in the event of a short sale or foreclosure. However, you can’t get blood from a turnip.

It is refreshing to read stories about people who saw this foolishness for what it was when everyone around them failed to do so. You will be rewarded for your patience.

Not quite true tonye.  There is not a restriction on the interest deduction per se, there is a restriction on what you can characterize as home equity debt which in turn limits the interest available to be taken as a deduction. 

For most people in CA, who didn’t buy over the last couple of years, they may have up to $100K in home equity debt and fully deduct the interest paid on that debt.  It matters not what they did with the money… Pay off credit cards, buy a car, take some vacations.  IRS does not care.

There is a home equity debt limitation related to FMV of the home and the acquisition debt.  Many recent buyers, who may have an original acquisiton mortgage which could be equal to or even below the FMV of their home, would likely not be able to deduct interest on HELOCs or 2nd mortgages per IRS rules.

See the following if interested:

http://www.irs.gov/pub/irs-pdf/p936.pdf

um… the major cities in tx (and everywhere else) all have at least one major symphony/orch/opera/ dance co - yes we have high culture out here and lots of oil money to throw at it (especially now). Van Cliburn is from here, e.g. But what I think I have come to appreciate more about the place is the high level of amateur achievement/involvement - people play music, not just go to concerts.  I noticed this about the midwest too - lots of general musical skill.

I’m not passing any kind of judgement, and not trying to be a troll - I’m trying to figure out what the precipitating factors are here.  TX has a huge history of booms and busts, I’m just trying to figure out who not so much this time.  I seriously doubt it’s some bit of legislation - under this gov we’re working with W’s B-team - they make Brownie look sharp.

And if you’ll notice, I didn’t say anything about relative prices, just relative appreciation.

And I think the Frisco house is a tacky McMansion - but probably no tackier than McMansions anywhere else.

Gee Laura, you sure are sanctimonious.  What did these people do?  They put their house up for sale.  Big friggen deal!

This isn’t a short sale, this isn’t a REO.  So what if they spent the equity in their house.  Who cares?

You want to put them in a Virtual Debtors Prison for 15 years and have them live in rathole when, at least at this point, there isn’t any evidence that they aren’t paying their bills.  Jeesh!

California makes more cheese than Wisconsin.

Besides, California has happy cows.

Oh, I can not overemphasize the importance and beauty of Beethoven Violin Concerto.

Not a fiddle, and Karajan with the 7th was unstoppable.  A true panzer.  But jesus man.... Karajan and the Berlin knew how to scale Beethoven.

Oh.. did I tell you that we once saw the Berlin Philharmonic do Beethoven on back to back nights… and four months later it was the Vienna do the same back to back trick with Mozart, Beethoven, et. al.....

Courtesy of the ORANGE COUNTY Philharmonic Society.

What do you get in Dallas?  Joey “Happy” Benson III and his bunch of gypsy fiddles?

My mortgage is worth because I can experience things near my house that will cost you a far trip.  I see top notch global orchestras ten times a year -more sometimes.  If you wanted to experience that you would have to pay for ten trips to OC or NYC -or worse yet, Europe.  That would run you a lot more than my mortgage.

When we all die, I can say that I have seen and heard some astonishing artists play some of the most sublime music ever written.  And experienced the sun setting over the ocean many times.

You keep Texas.  Obviously your values are different.  But don’t go passing judgment.  Passing judgment is something that many people outside of California like to do.

That’s karma they’ll have to sweat out.

mortgage brokers are licensed/regulated… houses are not as protected in bankruptcy as people think.  In the major MSAs median incomes are about half irvines, but that doesn’t mean anything for appreciation, expecially with the freaky mortgages.  Although with the foreclosures, that may indicate some degree of freakishness - I’m just wondering why it didn’t translate into (much of) a bubble.  there were bubbles in a lot of places other than CA-FL-NV (Minneapolis, e.g.).  And why are prices in Seattle still like CA in 2006?

Um, they were in Lawrence, KS, last week.  And Ames, IA, right after that.

Texas and Florida have unlimited homestead exemptions.  But that doesn’t affect mortgages, as liens pass through bankruptcy.  The dodge is to run up huge, unsecured debts and use that money (and whatever other money you have) to purchase as big a house as you can in TX or FL.  For a not-quite-on-point example, see OJ.

umm… every city in tx has at least one major symphony orch - we have high culture here as well… http://www.cliburn.org/index.php?page=cliburn_concerts ...and also the artistic community is very participatory - it’s for people who play music, not just go to concerts… http://www.festivalhill.org/index.php?&MMN_position=1:1 I

And this is for tomorrow night.

Ten minutes from my house.  Our usual mid orchestra seats.

http://www.philharmonicsociety.org/presentations.aspx?i=232

Weber: Overture to Oberon
Beethoven: Symphony No. 7 in A Major, Op. 92
Beethoven: Violin Concerto in D Major, Op. 61

Royal Phiharmonic
Pinchas Zukerman, conductor and violin

DUDE..... I’m in HEAVEN.  This is THE VIOLIN concerto for all time.  And this is the second time in 20 years that we’ve had top notch talent do it.

Then the 7th.  Holy Shit Batman.  .. Time to take Smetana off the iPod and navigate towards the 7th.. aargh...I only von Karajan’s version of that one, his third round .

Webber, well that’s often paired with Beethoven anyhow.

Good luck getting that type of talent anywhere in the US but NY, SoCal (LA, Costa Mesa) and perhaps, perhaps Chicago.  We’re talking REAL talent here.

hmmm

Try this for size

http://www.philharmonicsociety.org/concerts.aspx?i=Masterworks-GOLD-Series

I love LA… err.. OC. 

You stay in Texas, you hear?  We have enough people here.

As a refinance, this is a recourse loan, right? So aren’t they on the hook?

If the lender won’t go after them for the balance, maybe there should be a secondary market for deficiency judgements (if there isn’t already). Anyway, an idea for all of you enterprising folks out there.

Forgiveness does not mean you get a free ride.

The restriction is on the interest deduction only.  If you borrow the money on your house and then spend it on a car you can not deduct that interest.

You can spend the money off your HELOC anyway you wish.

However, if you had spent your own money earlier on the house ( say doing 20K of work, which is not that hard to do ) then you could borrow the money to cover what you had paid and then go buy the car.

In essence the interest on the amount you borrow to cover your home maintenances and upgrades ( cost basis ) is deductible.

I believe there is also a 1MIL limit on the total loan amounts.

Alan

It isn’t true that you were supposed to only use HELOC money on improvements! In fact, the loan sales sharks made a big deal about how you could spend it on a car, as did all their ads on TV. Take a vacation, buy diamonds, etc etc was their hue and cry. Apparently lots of folks took them up on it.

Yes, cash out refinances are restricted, I’m not sure in what ways but I know most lenders will not do cash out in TX.

Last I heard,in 2001, Texas, and Florida as well, had the most liberal, corrupt bankruptcy laws in the country. You don’t want to buy bundles of debt from these 2 states.

In the 30s Dustbowl era, foreclosed Oklahoma homesteaders would carve “GTT”, or Gone To Texas, on the doorsill as they departed, for Texas has always had a Homestead law that protects your residence from creditors in the event of your insolvency. I forget exacty what the value is capped at.

tx property taxes are high and the overall system pretty regressive - but we hardly have a monopoly on that (prop 13).
I have been wondering why tx didn’t seen the big run-up in prices like other parts of the country. There were a few gentrifying neighborhoods, and some condo mania, but overall, not so bad. The cultrual pathologies described by IR are at least as bad here. My thoughts so far:

1) the third coast is not as appealing as the east or west ones
2) there is a lot of room to build new stuff, and weak regulation to contain it
3) economies stung badly by the tech bubble and Enron
4) still smarting from the S&L meltdown

I’m not kidding about the last one - it was even worse than in CA - banks in Houston asked people to stay in their foreclosed houses just so they wouldn’t deteriorate.

of course, the lack of a run-up doesn’t mean it can’t deteriorate - that will depend on foreclosures. equity lending was only legalized less than a decade ago, so may not have become so common (that and the lack of runup makes it harder to use), but there are already zip codes with nationally high foreclosure rates.

when I go home to visit my folks in CA I sometimes see ads from houston companies for investment in “underpriced” tx real estate… but really - not so much. Rents in houston are apparently going down, and not from people buying up.

These people should have to dwell in a Virtual Debtors Prison for at least 15 years.

By that, I mean that they should get no credit for at least that long, and should have to be on the hook for a considerable portion of this debt.

If they make, say, $100K a year, they should be given a living allowance of about $2800 a month of their income at the most. They will just have to find something out there that rents for $700 or $800 a month and if that meens Chula Vista or Santa Ana, well, TOUGH. Same goes for cars..somebody will have to take the bus, maybe.

They should have enough personal luxury items left over from their spending spree, like snazzy electronics and expensive clothes and jewelry, to solace them while they live in a 700 sq ft rathole and drive around in a 15-year-old rustbucket.

There is fraud in probably 95% of all reduced doc loans, and in most cases the borrower knew about it or initiated it. On the final loan todays borrowers took out, I’ll bet they went stated or no doc knowing that they could not reasonably qualify for the loan. Your idea is rational but not realistic because it would be way to hard to prove who is the victim and who is the criminal. Of course the borrowers would say that they never made the income that was on the application if they could be forgiven.

If th owner had sold the house outright rather than a piece at a time, there wouldn’t even be anything to talk about.  There would be an unremarkable story about someone who bought property at the top of an inflationary spiral and lost a lot of money.  Moral outrage at them because the most insistent and convenient potential buyers for their properties were lenders strikes me as a bit ridiculous.  They were just playing by the rules.  Next you’ll be saying that people shouldn’t be able to spend money from the sale of appreciated stock.

If anyone is to blame, it’s the geniuses who dreamed up the SIVs, tranches, etc. that masked the risk and funneled billions of dollars of “safe” investment capital into the loans that inflated this bubble, and the genius analysts who evaluated the results and called them investment grade, and the genius actuaries and accountants who insured them, even though the companies doing the insuring didn’t have the capital to actually--you know--insure (that would have been expensive, after all).

I’m not claiming the housing market has been sane, but I don’t see why this property owner is more culpable than someone who sold near the top of the market, pocketed a large gain, and moved into a rental to ride out the fall.

We bought the exact same little island-thingy for $89 at Ikea a year ago.  It sure looks nice in that kitchen that costs more than our house.

Cool.  That’s what $1.2M ought to look like.
Is there some law in Texas that restricts the crazy lending in some way?  I seem to recall there was some lending laws passed after the last oil boom/real estate crash that prevented bubbles or something (bigger % down?  no HELOC?) but I forget what it was.

I’m kinda fuzzy on the recourse/nonrecourse thing, but—this being a refi—can’t the lender go after the couple’s other assets, such a boats and such?

Prop taxes are kind of high - I pay about $2.10 per $1k but we do have reassessment every year so it is based on “market value”.  However, no income tax so that helps.

I love California but there is no way I could move back after experiencing the cost of living here.  I’ll just keep visiting for a couple of weeks a year.

Perhaps the person in question should show some class and pay his debts, since he has the money to do so.  Why is this even a question?  It is disappointing that the American Dream seems to increasingly revolve around gaming the system and leaving others to pay your debts.

“Keep living in your little fantasy world paying outrageous taxes”

The property taxes in Texas are MURDER. Nothing against TX, I like the place esp Austin and the lakes leading into it.

The profits are privatized (tax sheltered), and the losses are socialized (picked up by you and me).

“If the borrower never intended to pay the money back, you might have an argument, but he probably did, when the house’s value rose some more.”

Have you heard the saying “The road to hell is paved with good intentions?”

Do you think their intention to repay extends beyond the ability of their house to make the payment for them?

Yeah, it really sucks here.  It may be a WTF price but I’d sure as hell rather live in the Dallas house than the Irvine POS. 

I still talk to some old friends who are still in Cali and here that same crap all the time… “man, it must suck to live in Texas” type stuff.  Trust me, things aren’t so bad here.  Keep living in your little fantasy world paying outrageous taxes, having criminals let out of prison because your state gov can’t manage within the limits of reality and enjoy the nice weather and traffic.  I’ll continue to come out and visit every summer and live in this hell we call Texas.

I don’t know - call me crazy, but if I had to pick moving to the Dallas House or today’s Irvine House; I’d become a Cowboys fan real quick.

SHHH!!

Don’t alarm the masses!

Gonna ruin the cheese party!

Good point.  I wonder if someone from the industry could explain the limits of FDIC insurance ($100k cash per institution, I believe).  My specific question is whether securities are safe when a bank goes under.  I know they are not FDIC insured, but my understanding is that the financial institution holds stocks, bonds, treasuries, mutual funds in trust for their customers and as such, those assets are beyond the reach of the bank’s creditors.  My understanding is that this isn’t true of a money market.  True?  False?  Any input is appreciated.

Actually, that is the funny thing about banks, they created the money out of thin air.

http://video.google.com/videoplay?docid=-9050474362583451279

Someone had to buy all that debt - it’s possible you have already bailed them out, you just haven’t had to mark to market your 401K, pension, taxes already collected & now invested, etc. yet.

(1) But you have to live in Dallas.
(2) For all we know, that’s a WTF price too.

Bottom line?  Post like that are trolls.

I bet not.

When you spend THOUSANDS of dollars a year on yourself.  $600 is nuffin.

GIMME MORE!!!!!!!!

How in the world would allowing people to NOT pay back their debts “benefit the country as a whole”?

What concerns me is Uncle Sam asking me to pay THEIR debts while they continue to live in a house that should be MINE!

Down with Dodd!!!

Wow!  I can’t believe that is all you get for $1.2M in Irvine.  Here in the Dallas burbs this is what you would get:

http://www.realtor.com/realestate/frisco-tx-75034-1093276234/

We left California back in the late 80’s and I’ve been watching the real estate market wondering when it would fall.  Looks like it’s finally happening…

Mandy - by your own admission you are not a victim - “forced us to rent because we didn’t want to play their game”.  You have freewill, made the choice not to buy, etc. etc.  The free money train was making lots of stops in OC and you didn’t want to get on it.  How can you be a victim if you made the choice not to ride?

Seven years ago I bought for $300K or so and we made very low six figures then.  Prices were already climbing, but mortgages were very affordable…

Here’s the problem--if the bonus is earned but not paid, it’s likely to end up in the BK estate anyway, i.e., it will be used to pay off the debt. 

Also, given the level of CC debt and the implied income, it would be difficult, under the new-ish law, to file 7 instead of 13.  If filing 13, it wouldn’t matter when the bonus was earned, if it’s paid in the next 3-5 years (depneding on the plan), it would go to pay down the debt. 

Bad, bad idea.  This is one more reason that any mortgage “bailout” sucks--if you didn’t have the opportunity to roll your excessive CC debt into home equity, you’re out of luck.

Oof, BK’s are bad.  If I was in that situation, I might try to move my $50K from card to card going for 0% interest deals every 6-12 months, and bank the $60K in hopes of having enough to throw a down payment on a place at market bottom or when interest rates got so crazy low it made good sense to buy.  Can’t buy squat for $300K though so I might only do this if I thought I could save up another $20K or to add to the $60K.  If that’s wasn’t possible, pay down the debt.

And for sure, if I had $50K in cc debt, I sure as hell wouldn’t be paying the premium to rent in Woodbury!