Loan Modifications Succeed by Increasing Borrower Entitlements

Loan modification programs are failing because borrowers are not willing to abandon their entitlements. The government will respond by allowing people to keep their discretionary spending on consumer goods, cars, vacations, massages and the like — and taxpayers will be asked to subsidize it.

Irvine Home Address … 33 TALL HEDGE Irvine, CA 92603

Resale Home Price …… $1,299,900


Just let it die

With no goodbyes

Details don't matter

We both paid the price

Tears in my eyes

You know sometimes

It'd be like that baby

Mariah Carey — Don't Forget About Us

Lenders really need to let go. They blew it. It's over. Just let it die. Both the lender and the borrower pay a price — or at least they are supposed to. Instead, we bail them out, and we pay the price. Don't forget about us who pay for their mistakes.

Part of the price we pay is obvious in the accounting for the various bailouts, but much of the price we pay is hidden in higher home prices, greater public indebtedness, and in the subsidized entitlements of borrowers everywhere.

Government backed loan modification attempts are ill-conceived because bailouts create moral hazard. However, the bailouts and the resulting moral hazard can be disguised inside the black box of obfuscation and paperwork of the HAMP program. If the banks and bureaucrats raise the standard of entitlement allowed under the loan modification program, more people will qualify — and more people will be sustaining their indulgences on your tax dollar.

If people are not forced to cut back discretionary spending before they obtain a government bailout, taxpayers are subsidizing their discretionary spending. The standards of what constitutes discretionary spending from essential spending depends greatly on the the spender's sense of entitlement.

Personally, I really like to play golf. (I am on the course today for "business.") I don't spend the $150 per week I would like to on golf because it isn't an entitlement, and I can't afford to treat it as one. However, if I owned a house loan, and if my sense of entitlement made it right, I could consider my weekly round of golf an essential. Since this entitlement creates a hardship for me, I can petition my lender for a break on my loan payments. After all, their loan payment is discretionary spending and the US taxpayer is picking up the cost.

Do you see the problem?

Everyone draws their own conclusions about what is essential and what is discretionary. The reviewers of the HAMP programs have broad guidelines and common sense, but they will succumb to the political pressure to get results and push people through the system. The HAMP program reviewers path of least resistance is allow petitioning borrowers their indulgences when borrowers ask for loan modifications. The HAMP program reviewers will achieve great results — at great taxpayer expense.

To understand what is causing this problem, let's review the HAMP program courtesy of Calculated Risk and his contributor Shnaps:

HAMP applicants tanned and juiced

CR Note: The following is from long time reader Shnaps. Shnaps has been working in the mortgage industry in various capacities "since people were extending the antennas on their mobile phones". Shnaps currently serves in a key role related to HAMP at one of the largest non-prime mortgage servicers in the Nation.

Shnaps writes:

One aspect of the Making Home Affordable loan modification program known as ‘HAMP’ is almost always taken for granted in its wide reporting – that the borrowers in fact need ‘help’. Moreover, it is generally taken for granted that those seeking modification under HAMP simply cannot afford their monthly mortgage payment. It is assumed that they have made great sacrifices, assumed they have already cut back drastically on discretionary expenses, assumed that they have already gone over their monthly budgets with a fine-toothed comb to eliminate all but the most necessary expenditures in an effort to keep their home. So prepare to be shocked – shocked! – as I share with you that I have seen first-hand that this assumption is oftentimes greatly, seriously flawed.

Since many frugal homeowners and renters, particularly the unemployed or underemployed, have no access to entitlements loan owners take for granted as part of their privileged lives, there is an assumption that the high fliers will have their wings trimmed back to the same standard of living as the workers who are paying the bills.

Since I don't send my child to a private school, I assume that if my tax dollars are going to subsidize a loan owner's mortgage, that loan owner would need to take their child out of private school before my subsidy kicks in.

Not so.

At least, not for long. The current standard does require borrowers to demonstrate they have abandoned their entitlements, and big surprise, they are not willing to cut back! People want their loan modification in order to maintain their entitled lives.

Let me begin with a word to the wise for HAMP applicants: unless you believe Snooki is now in charge of approving HAMP applications, it might be a good idea to cut back a bit on some of the creature comforts to which you have become accustomed at least a month before submitting your HAMP modification application.

Allow me to explain. The guidelines for servicers participating in HAMP stipulate that the borrower must submit a “hardship affidavit”. This, ostensibly, is to serve as their sworn testimony that they have been driven into default due to some particular hardship they encountered, and despite making every possible sacrifice, they can no longer “maintain payment on the mortgage and cover basic living expenses at the same time". (see HAMP Directive)

To demonstrate this, applicants are required to submit recent paystubs and bank statements. The statements are to help further corroborate the income they report (lest they forget to include all of their paystubs) and also to demonstrate that their monthly expenses are as described on their application. Which is to say that they have already ‘cut back to the bone’ and STILL are unable to make ends meet.

So how do these look in practice? The very first ‘HAMPlication’ that your correspondent pulled up recently showed a wanton disregard for minimizing spending. On the contrary, it looked like “cutting back” for this applicant does not involve such Draconian cuts as eliminating:

• visits to the tanning salon

• the nail spa

• some kind of gourmet produce market (have you seen the price of arugula?)

• various liquor stores

• A DirecTV bill that must involve some serious premium programming or pay-per-view events (or both?).

• And over $1,700 in retail purchases, including: Best Buy, Baby Gap, Brookstone, Old Navy, Bed, Bath & Beyond, Home Depot, Macy’s, Pac Sun, Urban Behavior, Sears, Staples, and Footlocker.

And that was just in one month! They were seeking to reduce a $1,880 mortgage payment that had just gotten to be a real cramp to their ability to keep a roof over their heads.

This woman could stock Mariah Carey's closet….

I have documented hundreds of cases of HELOC abuse and borrower entitlement. We know many people took on Option ARMs as a way to reduce their housing cost below rental parity, and most of these people would take out another if they were still offered. Between the payment savings and the HELOC abuse, many borrowers built lives of luxury and entitlement that they don't want to give up. They are owed it; it is their borrower's birthright.

I’d like to say this is the exception, but it’s much closer to the norm. Many people who request HAMP modifications submit bank statements that demonstrate little if any “belt-tightening” going on.

Somehow, we now expect the same people who asked for ‘liar’s loans’ to be truthful on when it comes to ‘hardship affidavits’?

I discussed that phenomenon in Reverse Liar Loans. The incentive to lie is huge, and now it is on the other side of the ledger.

Success of HAMP depends on expanding entitlement

The success if HAMP is hampered by the standard of entitlement. The only way to increase the effectiveness of HAMP is to increase the lifestyle entitlement allowed under the system; otherwise, borrowers are going to walk away.

Let's say the woman in the above example told the lender, "No, I refuse to give up the spending. If you don't modify my mortgage, I will continue to squat until you foreclose." Some borrowers are using attorneys to send this message right now. The banks are too overwhelmed with foreclosures to bargain so they amend-pretend-extend until such time they can force the borrowers out.

HAMP must succeed

In any negotiation, you must know your next-best alternative to a negotiated agreement. For lenders, they have two options: (1) allow the borrower to squat in the home, or (2) foreclose and take the losses. Option one is appealing if they can get the borrower to agree to repay later — empty though that promise may be. Borrowers know this, so they use it to game the system. Option two used to be unavailable because of depleted capital ratios and government moratoria. It is still not desirable, but now lenders are strong enough to foreclose if they determine the borrower is truly a deadbeat.

I reported Monday that Bank of America to Increase Foreclosure Rate by 600% in 2010. If you assume straight-line increase in the foreclosure rate, they will foreclose on less than 300,000 borrowers. They currently have 1,200,000 in default, and that number is growing daily.

7,500 — January, 2010

10,375 — February, 2010

13,250 — March, 2010

16,125 — April, 2010

19,000 — May, 2010

21,875 — June, 2010

24,750 — July, 2010

27,625 — August, 2010

30,500 — September, 2010

33,375 — October, 2010

36,250 — November, 2010

42,000 — December, 2010

282,625 — Total 2010 BofA foreclosures

When you consider the math, Bank of America — and this goes for the other lenders who are all in the same difficult spot — must have the HAMP program succeed. If they have to foreclose on all their delinquent borrowers, prices will be crushed — along with the entitled dreams of their owners.

This is particularly true in the yet-to-be-deflated markets like Orange County or the Bay area. Prices in those markets were inflated by debt, and they will be deflated by its removal. By delaying the removal, lenders hope to keep prices high and prevent the downward spiral of strategic defaults sure to accompany a price collapse.

Making HAMP work

Making HAMP succeed requires one simple thing: allow borrowers to keep more of their entitlements. Fewer borrowers qualify when the program qualifications are onerous, and the only way to reduce the burden on borrowers and qualify more for the program is to let borrowers keep their lifestyles.

We are establishing a multi-year entitlement for over-extended homeowners paid for by frugal homeowners and renters. You won't see it — except maybe here — because the terms will be buried in some obscure HAMP agreement we needed to save the us from the second Great Depression, right?

We will let the woman in the example above keep her $1,700 a month for buying consumer goods because it stimulates the economy. We will continue to let loan owners send their children to private schools and take big vacations — live an entitled life well beyond the people who are actually working to pay for it — to stimulate the economy or some other bullshit reason.

The moral hazard we are creating is huge. Lenders know they can do whatever they want, and now borrowers know they can overextend themselves and the government will bail them out too. What incentive is there for prudent lending and restrained borrowing? None.

The rich bankers get richer; the entitled loan owners keep their indulgences; the frugal who might want to have the same lifestyles are being burdened with taxes and debt to pay for the entitled, and in paying, they deny themselves the very things the government bailouts are providing to others.

I think that is wrong.

I also think that is how this problem gets resolved.

Squatting Irvine Style

Last weekend, I featured a property squatter living in Newport Coast. On Friday, I have a post coming out on one in Laguna Beach. Today, I want to look at a stylish squatter in our own back yard.

  • This property was purchased on 1/28/2005 for $1,638,500. The owner used a $1,000,000 first mortgage, a $473,300 second mortgage, and a $165,200 down payment.
  • On 9/15/2005 he refinanced with a $1,323,000 Option ARM with a 1% teaser rate. Steward Financial made the loan. Great stewards of money, right?
  • On 9/15/2005 he also obtained a stand-alone second for $245,700 also from the good stewards.
  • On 2/28/2006 he obtained a HELOC for $357,396. It is unclear whether or not the second mortgage was rolled into the HELOC.
  • Total property debt is at least $1,680,396 plus negative amortization and many months of squatting.
  • Total mortgage equity withdrawal is $207,096. Not bad for a near-peak purchase.

Remember, my numbers may be $357,396 too low.

And, as Paul Harvey used to say, here is "the rest of the story."

Foreclosure Record

Recording Date: 11/23/2009

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 08/19/2009

Document Type: Notice of Default

Foreclosure Record

Recording Date: 06/30/2009

Document Type: Notice of Rescission

Foreclosure Record

Recording Date: 01/23/2009

Document Type: Notice of Default

This debtor has not made a consistent payment since September 2008 at the earliest. He has been squatting for at least a year and a half and likely much longer.

Do you think he has had any good parties?

Squatting in luxury like this would be great!

I want to kick back with a Margarita, enjoy the view, and watch the proletariat go to work to pay for me to relax and enjoy Margaritas. Who says it's bad to be a debt slave?

Irvine Home Address … 33 TALL HEDGE Irvine, CA 92603

Resale Home Price … $1,299,900

Home Purchase Price … $1,638,500

Home Purchase Date …. 1/28/2005

Net Gain (Loss) ………. $(416,594)

Percent Change ………. -20.7%

Annual Appreciation … -4.4%

Cost of Ownership


$1,299,900 ………. Asking Price

$259,980 ………. 20% Down Conventional

5.11% …………… Mortgage Interest Rate

$1,039,920 ………. 30-Year Mortgage

$272,538 ………. Income Requirement

$5,653 ………. Monthly Mortgage Payment

$1127 ………. Property Tax

$375 ………. Special Taxes and Levies (Mello Roos)

$108 ………. Homeowners Insurance

$350 ………. Homeowners Association Fees


$7,613 ………. Monthly Cash Outlays

-$1508 ………. Tax Savings (% of Interest and Property Tax)

-$1224 ………. Equity Hidden in Payment

$521 ………. Lost Income to Down Payment (net of taxes)

$162 ………. Maintenance and Replacement Reserves


$5,564 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$12,999 ………. Furnishing and Move In @1%

$12,999 ………. Closing Costs @1%

$10,399 ………… Interest Points @1% of Loan

$259,980 ………. Down Payment


$296,377 ………. Total Cash Costs

$85,200 ………… Emergency Cash Reserves


$381,577 ………. Total Savings Needed

Property Details for 33 TALL HEDGE Irvine, CA 92603


Beds:: 3

Baths:: 0004

Sq. Ft.:: 2863


Lot Size:: 4,912 Sq. Ft.

Year Built:: 2004

On Redfin:: 209 days

MLS#:: S587843

Property Type:: Residential, Single Family

Community:: Turtle Ridge


Very nice 2 level detached home in Turtle Ridge. This offers a gourmet kitchen with granite countertops and travertine floors, master bedroom with retreat and spa like master bath, solid wood staircase, tumbled marble in baths, incredible views and much, much more.

Perhaps, I am not over it

Someone recently quipped in the comments that I do not appear to be over the housing bubble. They are probably right.

I am over the fact that we created a housing bubble, and I have come to accept the greed, incompetence and willful ignorance that overcame everyone involved; however, our government's response to the collapse of the housing bubble still pisses me off.

It is wrong.

Someone needs to speak out against what they are doing, and rather than look to someone else, I am doing it.

Perhaps if the powers-that-be stopped creating moral hazard with an array of bailouts and market props, I might fade into the Internet and go away — but that isn't what they are doing! I will continue to point out the problems they create until they stop doing it. I wish it didn't make me so angry. Fortunately, I am good at expressing it and letting it go… at least until I read the next news story about some stupid bailout, and I get angry all over again….

47 thoughts on “Loan Modifications Succeed by Increasing Borrower Entitlements

    1. Walter

      I wish the horse was dead. When I saw that Cali created another buyer credit, my jaw dropped and I realized the horse is still galloping down the trail.

      Hats off to IR for chasing the horse.

  1. awgee

    Why should you be over the housing bubble? It is continuing with government support. The Federal Reserve has created $1.25 Trillion out of thin air and bought MBS to prop up home prices and they have been “successful.”

    Oh yeah, today is the last day the Fed is buying MBS.

    Unless it changes it’s mind. IMO, the Fed will change it’s mind and the Fed will be buying more mortgage backed securities when it sees that home prices are decreasing again.

    Imagine for a second what home prices would be without $1,25 Trillion of created money to buy paper. Is there really anybody stupid enough to think the bubble is over?

    1. Planet Reality

      Common sense says that we are at a nominal price bottom.

      Unfortunately it is not a positive bottom, quite the contrary. It is an extremely destructive bottom with government controls.

      1. Ohhh ninja, puh-LEEEZE

        Common sense? Take your common sense and put your money where the mouth is: buy a home or two now. Make it a real nice one because if the bottom is in then it would have to be a great investment especially at these rates.

    2. swiller

      But but but, you are supposed to be hopping mad at all the people making money hand over fist at YOUR expense. You need to be hating on people, don’t you get it. The government doesn’t control things, PEOPLE do, now stop trying to place the blame on the top, and start hating on your neighbor like the blog wants you too. Do you honestly wonder why people like David from AZ LOVE this blog?

      I’ve been reading this blog for many months, and what started out good, is quickly becoming the same ol same ol’ CRAP. It may be time for me to move on, as the increasing attempts to create ill will and division, will not help people, nor solve any problems. On the bright side, perhaps soon everyone will be of like mind and form a nice tight clique where opinions do not deviate, and everyone feels justified hating their neighbor. Best of luck with that.

        1. Swiller

          I think government bailouts were wrong….for banksters, or home owners. I think principal reductions and modifications are wrong, and they shouldn’t have been done. I think the ones responsible for creating this bubble should be held liable, tried by a jury, and punished. (This will never happen as the Senate, House, President(s), Federal Reserve, banksters would all be indicted)

          I think we should stop hating the people around us, as it solves nothing. We need to focus our energies at the top, because that is where things really make a difference. All these people living off “your” money, wouldn’t be living off your money if all the above mentioned didn’t approve. We wouldn’t be in this situation if regulation was in place so banksters couldn’t hand out money to anyone who could fog a mirror.

          Sure I’m pissed I lost my a$$ and years of investment, but I’m not gonna blame the person down the block for it. Even if they are scamming the system, I look with disgust on their actions, but I still hold the SYSTEM responsible for not only letting this happen, but planning it and feeding it. I think the government and the banksters want americans so laden with debt, they have no time to THINK about things like freedom.

          1. change

            how do you expect to change the system? irresponsible system will fail if we responsibly opt out. we still have freedom to opt out and change the system to work responsibly. this blog plays role in educating the masses, for people to not participate in this irresponsible system. if it takes hate and blame for people to think twice about participating, it for good use.

          2. nefron

            Why not blame the person down the street, if he/she went and got a loan they couldn’t afford, or used a HELOC to finance a conspicuous consumption lifestyle?? You SHOULD be angry at them. U r sticking your head in the sand. I think you’re blaming the banks because it’s easier to blame a faceless institution than the guy down the street. Well, it took two to tango on this one, the banks are hugely at fault, too. But they had to have willing customers to make this work. Put the blame where it belongs and let the people who created it deal with the consequences of their actions. I don’t hate them. I just want them to pay for their stupid decisions. I have enough bills to pay, including my ridiculously high taxes.

          3. Freetrader

            It’s the SYSTEM, man. Not my fault if I stole money from the banks, the government, and the taxpayers. The SYSTEM made me buy that Porsche, and borrow money to pay my personal bills. I’m a victim of the MAN, man. S’not my fault man. Hey, you want some dope?

          4. chuckconners

            My deadbeat neighbors had so many boats,hummers and other toys parked on their property you couldnt see the front yards.These are the same bozos who skip out during the night(you can always tell when the u haul shows up).Thanks for running our property values down even more,posers.What happens to the wives who had all the lipo and enhancements who have to schlep the laundry and groceries up stairs to the apartment in Santa Ana or whereever these land barons end up ?

      1. winstongator

        Why is Congress considering financial regulation reform? Is the path forward from here to just keep doing what we’re doing today? Change is coming very soon wrt Fed MBS purchases, or should that continue indefinitely? Should Fannie/Freddie be able to tap Treasury whenever they want?

        Do we want people who completely missed the bubble shaping policy going forward, or should we listen to people who:
        Identified something was wrong,
        Had an idea what actions were causing the problems.

        Acknowledging the housing bubble & its importance in the recession is not a universal idea among policymakers.

      2. Marc

        I don’t think the point of this blog it to be upset about your neighbors because they won the lottery but to provide market analysis that no other blog provides and make a difference (more and more people are reading this blog and nefron even shared it with his reps).

      3. AZDavidPhx

        Oh Swiller knock it off with the hatred canard. We all want what is fair. Expressing outrage over the unfairness that has been inflicted upon us by housedebtors does not rise to the level of hatred. You are whipping up a silly hysterical fantasy.

  2. nefron

    I have emailed all of my representatives again today, after skimming today’s blog. The second time in what, five days – I emailed after Saturday’s blog. I’ve had enough. I have kids, I’m trying to be responsible, I’m waiting for prices to come down just a little more, and this is what is going on. It’s one thing to keep blowing air into the bubble, but the thought of my kids, having to slave away in some crappy job, to pay off the sweaters in that closet and pay off BMW’s for these jerks just makes my blood boil. And meanwhile, I’m renting, getting about 0.1% interest on my savings and expecting it to be worthless in a few years.

    I’ve had it. I don’t know anything about those Tea Party people and get the feeling they are a bunch of crackpots, but I am ready to sign up.

    I am through with the Democrats and the Republicans. I am emailing the link to this blog to everyone I can think of, including the White House. I know they don’t read emails, but hey, it’s the principle of the thing.

    1. John

      Good for you, nefron!

      I feel the same way as you regarding Tea Party.

      MAKE SURE we all kick out those politicians that try to reinflate the housing bubble this Nov.

      Two of the son of the bitches that should be kicked out are:

      Anna Caballero

      Ron Calderon

      This bitch and asshole started the bill for a SECOND round of $200,000,000 of your hard-earned tax money that goes into giving $10,000 tax credit to keep home price high in CA affecting this May 1.

      Spread the words.

      Come on Good People of this wonderful blog. WE CAN DO IT!

      1. wheresthebeef

        I agree with you guys 100%. I am sick and tired of all this bullshit. The so called “leaders” of this country are nothing but a bunch of corrupt, self serving whores.

        In case the idiots in Sacramento haven’t been keeping up with current events…we are fucking bankrupt in this state. With expected 20B plus deficits for the next 5 years, why the hell would they throw another 200M in the incinerator? I’ll tell you why, because they needed to repay their homebuilder and CAR donors for the last hooker and blow party they were invited to. These assholes will probably raise taxes again and substantially cut services.

        What is going on at all levels is getting to the point of insanity. You get punished for living within your means, saving money and not making poor financial decisions. Meanwhile we get to subsidize the opulent lifestyles like that HELOC bitch in her Newport Coast mansion. Fuck all these greedy people gaming the system, gambling Wall St. bankers who enabled this mess and the corrupt politicians who threw the taxpayers under the bus.

        Sorry about the profanity, I needed to vent. Like I always, playing by the rules in this society gets you nowhere!

  3. CDM_Renter

    Planet Reality – “Beating a dead horse will leave you angry and tired.”

    You should listen to your own advice.

      1. Muzie

        I don’t have any debt whatsoever myself and you still grate on my nerves. What would debt have to do with anything anyway?

        I think lots of people come to this blog for some psychological release. Obviously many are just waiting for some price decrease or another, and I think the blog is a good place for them to congregate.

        Your psychological release seems to be an odd mix of playing a fake role of the enlightened one mixed in with random lame attempts to win petty internet arguments no one really cares about.

        I’ve followed this blog since not too long after its inception and there’s always been smart asses trolling the blog at one point or another just to take a piss. They always move on, you’re just the particular fad of the moment.

        1. wheresthebeef

          That clown Newport Skipper was the last troll here. There’s always a new one every few months.

          Planet Reality, are you a real estate agent or did you just purchase a home in Irvine? I’m guessing one or maybe both, that would explain some of your rambling.

      2. CDM_Renter

        No, I do not have any debt. It’s quite perplexing to me why you would ask such a silly question.

        “…if I was angry about something.” It appears to me that you tend to get your knickers in a twist on a regular basis…just sense that anger vibe.

        IR invests time and energy to write today’s blog, and then you respond with a snide comment at 6.44 am. Wanker.

  4. winstongator

    You are not over the housing bubble, because the bubble is not over yet. The bubble will be over when the foreclosures that need to happen have happened, and prices have stabilized at sustainable levels. The bubble will be behind us when unemployment is closer to 5% than 10%. It will be done when we have financial regulation in place that limits the abuses that inflated the bubble.

    I am also holding out for an exit strategy for the GSE’s. Either pared down pure public programs, or split up into 5 or 10 pure private programs.

    1. Geotpf

      Whether or not the bottom has hit depends on the speed in which foreclosures hit the market. If it’s a huge flood all at once, then the market will go down further. If its just a few at a time, even a lot more than are currently being released, then prices will probably remain mostly flat.

      1. matt138

        If the gov/t gave everybody a job we would have 0% unemployment. Joking.

        If we let prices and wages fall/rise naturally and allowed the private sector to function sans gov/t subsidy, we would see very few unemployed.

        1. matt138

          Read america’s great depression by murray rothbard. it is overly detailed and numbers oriented but explains how the expansion of the money supply and manipulation of interest rates create feast/famine boom/bust scenarios of far greater proportion than the free market would ever allow. Thank you politicians and thank you federal reserve.

  5. winstongator

    Just thinking of baby-fannies competing with each other I realized that a lot of our problem is from risk-correlation during crisis (‘during a crisis all correlations go to one’).

    It would take a period of home price decline to bankrupt a baby-fannie. That decline would spank every fannie, making it seem like one giant fannie all over again. I’m not sure the degree to which breaking up TBTF institutions improves the situation. If every SETF (small-enough-to-fail) acts identically, what’s different?

  6. Perspective

    I would like to be provided with one example of a family that truly deserves some type of additional taxpayer assistance to avoid foreclosure. I’ve read many media articles of hard-luck stories, but there are never enough details about their finances to conclude help is deserving. This “deserving family” doesn’t exist for my standards, because I can’t even come-up with a hypothetical of a deserving situation.

    Can anyone even fabricate a family deserving of additional taxpayer help to avoid foreclosure? There are just three reasons you have trouble paying your mortgage:

    1) You bought too much house,
    2) You spend too much, and/or
    3) You don’t earn enough to service the mortgage debt.

    Your “help” is the very consumer-friendly foreclosure process.

    1. winstongator

      My only point would be that it might be possible for the bank to renegotiate for a principal balance higher than their recovery in foreclosure. In that case, homeowner ‘keeps’ home, and bank improves their bottom line. Potential buyer has to find another home, and this might be a flipper, so assessing the collateral damage there is mixed.

      In this scenario, the homeowner would need to share future appreciation w/bank & take a credit hit.

      The problem, imo, is that even at a principal balance equal to what they’d get net in foreclosure, many ‘owners’ still can’t afford the payments. Nothing will ‘fix’ that (unless you call foreclosure a ‘fix’)

    2. awgee

      Deserving is irrelevant. It is wrong to steal from one person to give to another. It matters not if the other “deserves” it. That is a matter of opinion and should be a matter for private charity, not government force.

      1. Swiller

        Agreed awgee, but try and stop paying taxes and see what happens. Labor should not be taxed…purchases should.

        Coincidence that Income Tax and the Federal Reserve were passed in the same year of 1913?

        Now people are pissed because Jack down the block is getting something for nothing, but they aren’t. It’s human nature. Right is right, regardless if the government says it’s right OR wrong. Taking money by force is wrong. Putting someone in jail for a non-crime is wrong (smoking pot, prostitution). Giving people money for nothing through subsidies is wrong.

        The only thing the government should have been doing is regulating banksters so we wouldn’t get ripped off and screwed, but the banksters bought out the politicians through “contributions”, and now the banksters get our money. They LOVE IT when articles like the one today comes out and re-directs the very real, and very deserving anger onto your neighbors and let’s the scum buckets fade into the background.

        Round up the posse, and get out to vote for more of your Defacrats and Banana Republicans. If you are really mad, go look in the mirror, flip yourself off, and accept your blame. The first step towards recovery is acceptance.

        1. matt138

          Tax consumption. Dont tax savings. Don’t tax earnings. Allow free market interest rates by removing gov/t guarantees (fannie/freddie). That solves/avoids most of our current problems.

          If you are thinking to yourself, “hey those are crazy ideas, that’ll never work”; take a step back and look at current policies and our current situation. Am I the crazy one?

  7. tlc8386

    I totally understand the anger and agree this is not over yet. The hard part is the fraud for me and the manipulation of the system where it’s all about me and crap on you.

    When you see this in life especially here so prevalent in SCAL you begin to hate living here. Even as a renter now 5 years the neighbors look at you like how did you get your money not how are you I see your son moved out but how did you buy that.

    The Quality of people is surely lacking this is what the housing bubble has done.
    And those who missed the chance at free money or a nice home are really pissed.

    Many here also forget the damage done to other areas that have no chance of returning to normal.
    Those folks who can manage to pay their bills staying in a dead town have no hope of ever getting their money back out of their home.

    And so many fraud cases as well. So many were swept up into this mess and had no idea their mortgage would increase to the point where they lost their home. Those folks I can feel for their stupidity.

    But everyone thought housing would go up forever. Very few of us didn’t get caught in some way or another.

    The biggest mistake was allowing Wallstreet to get their hands onto the American dream. Regulation is surely needed and I mean strick new rules to keep Wallstreet out of the housing market.

    Just like with students loans they need to be cut out of the housing market. The bankers only motive is making money. That in itself is the breeding ground for fraud.

    1. wheresthebeef

      That scumbag is expected to survive. Too bad for the little boys.

      I sure hope the police are guarding that room. There are few things in this world where I would go absolutely postal, this would be one of them.

  8. newbie2008

    The home gamers are an easy target produced by the banksters. The home gamers see the bank getting bailed out and shout me too! The banks need them to further the bailout packages and wealth transfers. Renters and lower middle class may be shouting me too, but the political hacks will say I’m trying the best I can while plotting with the banksters.

    The house gamers and banksters demand another round, which they are getting. I don’t know how to stop this madness and theft. Maybe BHO will pull out the defective CDO card on the banksters to get the money back or nationalize the banks, but he’s already been paid and is surrounded by GS banksters and paid congressmen to make sure he complies. Socialists generally want nationalized large corp GSEs that the elite run and that feed up upon one another. Nazi Germany is an excellent example of applied socialism. Too bad for Germany, the other socialists and communists leaders didn’t want to be second fiddle.

    One issue that keeps most working people’s political influence low is that they have to work more than 45 hours M-F and hours with family. Not much time for activism. The house gamers, GSE’s and banksters work is activism for bailouts.

  9. newbie2008

    I forgot to mention that the first new order fell apart when the world leaders and banksters started stabbing each other in the back.

    I think the banksters will start stabbing the home debtor stogies in the back soon for these home debtors will no longer be useful. A new generation of useful stogies will be needed by the banksters.

  10. Cmann

    In 1993, 6 months after my husband and I bought our first home (at 26 percent ratio) rather than the 33 percent that was allowed, we almost both lost our jobs in the same month. Neither possible job loss had anything to do with our own performance at work but with employer downsizing etc. Long story short….even though I
    we purchased a home responsibly we were very worried (we had no other debt). At this time homes were also decreasing in value….at one point our home decreased by about 20%. Our first thought was how do we make sure that we keep our home….second job? cut expenses? We had no thought or desire to have assistance from ANYBODY!! Why? Because I was raised with the old fashioned values of hard work, responsibility and perserverance. Our home was our HOME, not something to be treated like a bank. Today, because we faced this difficult time way back when, our home is almost paid in full. We still have no other debt whatsover. Stupid us…….

    I’m sorry for the people who are in the situation of potentially losing their home. However, I believe the only people who should be helped are those who are victims of this tragedy….those who lost their jobs or suffered furloughs due to the dominoe affect. Focus this aid on unemployment benefits given with proof that the unemployed person (or underemployed) is seriously searching for a job. 3-6 months reprieve from mortgage payments? Seriously? While you consider forgiving principal for others??? You are simply delaying the inevitable….focus on JOBS and on helping those who LOST THEIR JOBS DUE TO OTHER’s GREED AND STUPIDITY. That being said my husband and I are lucky to be employed so I am not writing this because I have been a victim in that respect. I have lost close to a half million in my home value and stocks/investments. Regardless this entitlement to the irresponsible sickens me. And yes, I am in real estate and don’t think our BROKE state should be giving an additional homebuyer credit…are they FOOLS? Oh, right, they are.

    One last thought…….when someone loses their home to foreclosure or short sale or whatever, they ARE NOT HOMELESS!!!! They can RENT, GET EDUCATED ABOUT PERSONAL FINANCE and start again when they can actually buy a house while understanding how to manage their money responsibly. Did anyone ever think this correction needs to happen……what are our kids going to do about housing in the next 10 to 15 years? Oh ya, since their paychecks will amount to lunch money after the taxes they will pay they won’t ever have to worry about actually being able to purchase a home.

    Stop the governement entitlements now… your representative, the White house, the media….if enough people speak (you don’t have to be a hater to have an educated opinion) then someone will finally listen……hopefully. Otherwise, the values in our society have officially been decimated and America is nothing but an embarrassment to morals and integrity.

    1. Joe R

      This is a great post! Thanks for sharing your
      experience. I’m waiting for RE prices
      to reset so I can buy a nicer place.
      I do not think I can afford such a
      place at housing bubble prices. No
      one really can, you know. If the
      government continues to play games,
      we won’t see a reset until wild
      inflation brings price/value parity
      eventually. Welcome to the Weimar

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