President Obama has lost his mind. I guess I shouldn’t be too surprised that Obama would embrace HELOC abuse as a good idea. After all, Obama HELOCed his home in Illinios before he became president.
Personally, I find this outrageous.
Our commander-in-chief, the leader of our nation, has embraced HELOC abuse as a noble behavior that should be encouraged by a taxpayer bailout. The dipshits who lose their home from excessive borrowing should be given a pass, and everyone who chose not to participate in the madness should pay for it.
I think that sucks.
Obama’s ‘Responsible’ Reno Homeowners: Are They?
Published: Friday, 11 May 2012 | 3:06 PM ET
By: Diana Olick — CNBC Real Estate Reporter
As part of his “To Do List,” President Barack Obama visited Val and Paul Keller on Friday. The White House described them as “responsible” homeowners who owe more on their mortgage than their Nevada home is currently worth.
They owe $168,000 on their mortgage, but their Reno home is currently valued at $100,000.
The president is doing so to, “help demonstrate a concrete and tangible example as to why this broader push [to refinance] is so important not only for millions of Americans but for our economy,” said Shaun Donovan, secretary of Housing and Urban Development, in a conference call with reporters before the event.
These people, like the hundreds I have profiled over the years, demonstrate concrete and tangible examples as to why this broader push to refinance is so ghastly, unfair, unnecessary, and absolutely the wrong thing to do.
During that call, Donovan used the words “responsible homeowners” more than a dozen times, in describing whom the administration’s proposed refinance programs should help.
It is not the Kellers’ fault that home prices in Reno are down 52 percent from the peak, right? The Kellers bought their house 14 years ago, and they have not been late on a mortgage payment, according to Donovan. They were able to take advantage of the newly expanded government refinance program through Fannie Mae and Freddie Mac for severely underwater borrowers, and they are in fact putting some of their savings on the monthly mortgage toward paying down principal.
But were they responsible?
Responsible Homeowners are NOT Losing Their Homes:
A “responsible homeowner” is a buyer who, if they utilized financing, did not stray from the conservative parameters set forth by lenders (prior to the bubble) and financial planners. This includes using a maximum 28% debt-to-income ratio on the mortgage, at least a 20% down payment and fixed-rate conventionally amortizing financing.
Few who fit this definition are going to lose their homes; although, some of them may chose to walk away from the debt because they are hopelessly underwater. The only ones who fit the above definition who are in danger of losing their homes are those who lose jobs; they are the truly sad casualties of the housing bubble. Unfortunately, this is becoming more common due to the financial crisis caused by all the homeowners who borrowed irresponsibly.
Responsible borrowers are not the ones defaulting on their mortgages; irresponsible homeowners are.
If “responsible homeowner” is defined as a buyer who believed they could manage their monthly payment and did so until the loan terms changed, then by this definition, many responsible homeowners are going to lose their homes.
Almost everyone who signed up for a toxic loan thought they could make the payment; most did for a while. Many were convinced they could make the payments by a predatory lender out to make a few bucks on the origination. Many more believed they could supplement their incomes with the rapid appreciation they would enjoy as their house values rose to infinity. Does ignorance to their inability to sustain their housing payments make them responsible?
In the political debate surrounding foreclosure moratoriums and homeowner bailouts, the politicians are using the latter definition of “responsible homeowner.” The ignorant and those who knowingly took excessive risk are being rewarded with a government bailout. The prudent are the ones paying the bill.
The Kellers bought their home before the height of the housing boom. The trouble I’m having understanding this whole scenario is that the median home price in Reno is actually 7 percent higher today than it was 14 years ago. If the Kellers had a “responsible” loan, that would be a 30-year fixed, in which case they should have paid at least some principal on the loan over the last 14 years. And didn’t these “responsible” borrowers, the Kellers, put some money down on the home?
We went looking: According to Washoe County records, the Kellers purchased their home in June 1998 for $127,000. So why do they have, according to the White House, a $168,000 mortgage?
So what did these “responsible” loan owners need the HELOC money for? Did they have a personal family catastrophe for which there is no insurance? What makes their borrowing okay? And if it is okay, shouldn’t the government then sponsor a similar loan programs for renters?
White House officials now confirm to CNBC that the Kellers did a cash-out refinance in 2007, when their home had appreciated to $250,000.
I hope this is a huge embarrassment for them (I know I am doing my part to make it so). Someone didn’t do their homework when researching the perfect “responsible” loan owner to pick for their bailout poster child. Perhaps, as I pointed out above, the task was made more difficult by the fact that responsible homeowners are not losing their homes.
Again, it’s not illegal, but are these the “responsible” borrowers that the administration is looking to help? They took out a $178,000 loan, using the $51,000 to pay down debt on the family construction business, so Paul could retire.
This is their justification for the loan? They were substituting one debt for another? The guy didn’t manage his business well enough to retire without debt, so he piles it on his house? What kind of dumbass takes on a huge debt as they go into retirement?
Had they not taken that money out, and continued paying on the original mortgage, they would not be underwater today.
Exactly. Responsible homeowners are not losing their homes, irresponsible loan owners are.
Think about it. If this guy had paid down his debt and enjoyed fewer entitlements, he could have paid off his house and his business loans. It’s done every day by ordinary people who really are responsible. Those people don’t need bailouts.
“This is a family, first and foremost, that has met their responsibility, remained on time with their mortgage and used their equity in their home in a way that so many Americans do, to send their kids to college, support a small business or save for retirement,” said Donovan, whom we contacted after learning of the refinance. “They deserve the chance to benefit from these record low interest rates because they have met their responsibilities.”
Just because a lot of people do it doesn’t make it right. If everyone wanted to embark on a personal Ponzi scheme and inflate a massive housing bubble which crippled the economy for a decade, would that make it right? Oh wait, we did that, didn’t we?
Another administration official familiar with the Kellers’ case says the couple were responsible because despite the incredible runup in home prices, they did not take all the equity out of the house. “She did not use her home as an ATM in the sense that we saw during the crisis, because she didn’t cash out all of the equity leaving her no cushion.”
Oh, I see. She didn’t take it all, so that makes her responsible? I can’t believe someone on the White House staff actually said something that stupid. A lot of HELOC abuse is bad, but a little is okay?
She had a 71 percent LTV (loan to value ratio), or 30 percent equity in her home. That is by almost any definition a very responsible position to be in,” he added.
If they are so responsible, why are they losing their house? It isn’t the LTV that’s the problem. The fact that the guy was retiring and giving up his source of income just prior to taking on a large debt is the issue. There are many homeowners in Orange County who couldn’t afford to take on the debt required to purchase their homes at peak prices. That’s why so many who went to the housing ATM lost their homes.
In the past, Obama has criticized borrowers, who at the peak of the housing bubble, pulled money out, referring to it as using their house as an ATM.
I hope Obama has the good sense to fire the staffer who picked this family as an example of “responsible” homeowners.
LTV, Donovan and the other administration official claim, is not a minor issue. So it seems they are defining “responsible” as a borrower who maintains an equity cushion in the house, even when that house price has nearly doubled in just eight years.
Again from Responsible Homeowners are NOT Losing Their Homes:
To see the truth in the importance of these definitions, we need to look no further than the astute observations on this blog. One of our frequent commenters is a responsible homeowner. He purchased near the peak, but he did so with terms that his family can afford. He meets the parameters in the first definition. He is in no danger of losing his house in foreclosure. Yes, he is annoyed that the values have dropped–who wouldn’t be–but he is not going to become a foreclosure statistic.
If you want to know what the lenders really worry about it is that guys like him may chose to go into foreclosure and walk away from the debt. There are already enough irresponsible homeowners on their way to the meat grinder. A wave of walkaways would make sausage of the entire banking industry.
The reality is responsible homeowners are not losing their homes; some may lose their houses because of a job loss, and some may chose to walk away, but very few truly responsible homeowners are endangered. The foreclosure crisis is caused by the irresponsible.
“This was truly 100 year flood, and so lots of people who had 20, 30, 40 percent equity in their homes now find themselves underwater,” says the White House official, who also commends the Kellers for not walking away from their mortgage.
There it is, their biggest fear is the walkaways yet to come.
Is this behavior really acceptable?
Am I the only one who thinks doubling a home mortgage and losing the family home is a bad idea? Is this now considered a wise idea, a sophisticated debt-management system? Are the HELOC abusers who spend all their equity merely victims of a down market? 
Would the virtue of their innovative and enlightened financial management become apparent if that pesky recession hadn’t intervened?
Apparently our current president does not understand what a Ponzi scheme is. The economy flourished briefly in the 00s because the growth of borrowing created a false prosperity. Politicians no longer seem to care if prosperity is durable and based on fundamentals. Any prosperity — even the completely false and unsustainable variety built on Ponzi debt — is acceptable as long as politicians get reelected.
I say no.
This is wrong. We cannot have a prosperous society built on a foundation of borrowed money. Debt is not wealth. Consumption is not production.
This needs to be called out and exposed for what it is. HELOC abuse is an outrage. It’s villainy perpetrated on savers and producers by lazy and entitled fools who want something for nothing.
When it was merely borrowers stiffing lenders, the two parties to the transaction had to wrestle with the ramifications of their decisions. Borrowers experienced a fall from entitlement, and lenders experience the loss of their loaned capital. This put a natural check and balance in the system which made it function. However, once the US taxpayer got dragged into this mess in massive bailouts of both lenders and loan owners, then the vile Ponzi scheme being perpetrated became a theft of public funds. The parties to this private transaction reached into our pockets and stole our money, and there is nothing we can do to stop it.
What are we to do? If we can’t beat them, should we join them? Will our home lending system degrade into a contest to see who can steal the most from the US taxpayer? At this point, everyone has incentive to max out their debts and leave taxpayers holding the bailout bag. Why not? That policy now has Obama’s endorsement.
Perhaps they had a good reason…
The former owners of today’s featured property were very similar to the “responsible” loan owners Obama wants to bail out. They only refinanced a few times near the peak, and I’m sure they had a noble reason for pissing away their home equity.
- Today’s featured property was purchased on 6/29/1998 for $450,000. The owners used a $337,500 first mortgage and a $112,500 down payment. Very responsible.
- On 6/24/2003 they obtained a stand-alone second mortgage for $58,000. About what the “responsible” loan owners borrowed. They undoubtedly had a great reason.
- On 4/11/2005 they refinanced with a $550,000 first mortgage.
- On 6/11/2007 they refinanced with a 650,000 Option ARM.
They must have had a good reason they pulled $312,000 out of their house, didn’t they?
The renters who didn’t have access to money like this, well… they should be asked to pay back these people’s debts because… well… I guess because those homeowners were so responsible.
Rancho Santa Margarita Overview
Median home price is $366,000. Based on a rental parity value of $564,000, this market is fairly valued.
Monthly payment affordability has been improving over the last 3 month(s). Momentum suggests improving affordability.
Resale prices on a $/SF basis increased to $225/SF to $229/SF.
Resale prices have been falling for 12 month(s). Price momentum suggests falling prices over the next three months.
Median rental rates increased $83 last month from $2,283 to $2,366.
Rents have been rising for 12 month(s). Price momentum suggests rising rents over the next three months.
Market rating = 5
Proprietary OC Housing News home purchase analysis 
21831 VIA DEL LAGO Rancho Santa Margarita, CA 92679
$599,900 …….. Asking Price
$450,000 ………. Purchase Price
6/29/1998 ………. Purchase Date
$149,900 ………. Gross Gain (Loss)
($36,000) ………… Commissions and Costs at 8%
============================================
$113,900 ………. Net Gain (Loss)
============================================
33.3% ………. Gross Percent Change
25.3% ………. Net Percent Change
2.1% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$599,900 …….. Asking Price
$119,980 ………… 20% Down Conventional
3.78% …………. Mortgage Interest Rate
30 ……………… Number of Years
$479,920 …….. Mortgage
$134,928 ………. Income Requirement
$2,231 ………… Monthly Mortgage Payment
$520 ………… Property Tax at 1.04%
$325 ………… Mello Roos & Special Taxes
$150 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$260 ………… Homeowners Association Fees
============================================
$3,486 ………. Monthly Cash Outlays
($356) ………. Tax Savings
($719) ………. Equity Hidden in Payment
$152 ………….. Lost Income to Down Payment
$95 ………….. Maintenance and Replacement Reserves
============================================
$2,658 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$7,499 ………… Furnishing and Move In at 1% + $1,500
$7,499 ………… Closing Costs at 1% + $1,500
$4,799 ………… Interest Points
$119,980 ………… Down Payment
============================================
$139,777 ………. Total Cash Costs
$40,700 ………. Emergency Cash Reserves
============================================
$180,477 ………. Total Savings Needed
——————————————————————————————————————————————-
This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707
949.769.1599……
sales@ochousingnews.com…..
We're sorry, but we couldn't find MLS # S697268 in our database. This property may be a new listing or possibly taken off the market. Please check back again.
 |
$619,000 21822 VIA DEL LAGO |
0.03 miles 4 bd / 2.5 ba 3,184 Sq. Ft. |
|
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$549,900 32031 LOMITA Dr |
0.2 miles 4 bd / 3 ba 2,522 Sq. Ft. |
|
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$575,000 21831 CAMINITO Dr |
0.27 miles 5 bd / 3 ba 2,733 Sq. Ft. |
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$749,000 39 HIGHPOINT |
0.36 miles 4 bd / 3.5 ba 3,069 Sq. Ft. |
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$669,000 43 SUMMITCREST |
0.41 miles 4 bd / 2.75 ba 2,900 Sq. Ft. |
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$600,000 21412 SILVERTREE Ln |
0.52 miles 5 bd / 3 ba 3,000 Sq. Ft. |
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$649,000 36 GREENSPRING |
0.59 miles 4 bd / 2.75 ba 2,900 Sq. Ft. |
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$699,000 27 BANSTEAD |
0.76 miles 5 bd / 3 ba 2,750 Sq. Ft. |
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$849,900 14 PROMONTORY |
0.8 miles 4 bd / 3.25 ba 3,000 Sq. Ft. |
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$835,000 21341 HUNTKNOLL Ln |
0.86 miles 4 bd / 3 ba 3,000 Sq. Ft. |
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40 Responses to “Obama extolls HELOC abusing Ponzis as “responsible” homeowners”
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Easy credit, the drug of the 2000′s. I feel like the last 3 presidents have been pushing this drug. It’s extremely scary that our government wants us to spend much more money that we can afford.
They’ve been pushing that drug because economic growth rates would have been recorded as negative. But, you can only substitute shortfalls in income with debt until you cant.
The federal reserve now considers debt growth the same as economic growth and prosperity. Not surprising from the most powerful entity in an industry that profits from creating debt.
We received a flyer in the mail this weekend from an agent touting another recent “responsible homeowner.” Well, not really a responsible homeowner, but she touted his trouble and her efforts to stave off foreclosure by doing a short sale. The guy featured even walked away with a $33,000 check from the bank at the end of the day despite having defaulted many moons ago and staring down a foreclosure auction date.
The best part? The “responsible homeowner” was proudly featured on the front of the mailing next to a “sold” sign in front of “his” home.
I wish I had a copy of that flyer. It would make the basis of a great post.
Think of the moral hazard here. They guy overborrowed, quit paying his mortgage, squatted for a while, and was given an additional $33K for his trouble. He will certainly want to own a house again in the future.
I’ll see if I can dig it up, but we may have tossed it already.
Now that I think about it, I probably won’t use it. I don’t like to feature individuals unless they are famous.
Here it is in web-page format.
http://deannarehnert.com/2012/04/huntington-beach-man-avoids-foreclosure-and-walks-away-with-33000-cash/
I’m pretty sure this is the property judging by the realtor’s recent sales and comparing the picture of the guy in front of the house with pics from the listing (bought in 2006 for $700k and just sold for $439):
http://www.redfin.com/CA/Huntington-Beach/7671-Seine-Dr-92647/home/3720717
Huntington Beach Man Avoids Foreclosure and Walks Away with $33,000 Cash
By DeAnna Rehnert | Published: April 4, 2012
After spending over 2 years of being upside down on his mortgage, unable to make payments on his loan, and after multiple frustrating attempts at loan modification, something very interesting happened. Shortly after calling us, we met and discussed all of his options, including how we might best help him avoid foreclosure and help him get a new start.
We were able to complete a short sale on his home, he was able to avoid a deficiency judgment, and walk away from a property that he was upside down in.
And the best part? The bank wrote him a check at the close of escrow for $33,000:
Feel free to delete my follow up post with property info and link to flyer if too much personal identifying info can be had.
And, for what it’s worth, I occasionally get asked for referrals for attorneys who can help borrowers in this type of situation. I tell them that their best bet would be to find an agent rather than any one of the attorneys I had experience against (not to mention that most of the attorneys I had experience against have lost their license to practice).
I always tell them to find an agent with SS experience since they would have a much better grasp of how things work in the real world compared to an attorney who is just going to get in the way of actually completing a sale, and who is going to cost you money to do so. I certainly think that this is a good advertisement for this particular agent if targeted to an area with lots of pre-foreclosure activity.
That’s fair advice, but I am very curious as to how a realtard gets around the whole unauthorized practice of law issue when they get this deep into advising “clients” in these matters.
I’m not sure there is much law involved with negotiating a short sale, or at least not much more than your everyday real estate transaction that realtors have done for ages. This used to be an area fraught with peril for those doing it before the legislature stepped in and did some legislating to “encourage” SS (completing a SS but not eliminating the deficiency comes to mind).
That being said, I’m not sure anyone knows what the outcome of a potential SS will be until the end. The whole process is goverend by the Pooling/Servicing agreements that control the servicer behavior (remember that the servicer must act in the best interest of the investor/holder of the note). There have been some legislative changes to alter the economic incentives for all parties involved to give the investor incentives to modify mortgages/approve SS, but at the end of the day, it comes down to the investor and what their guidelines are. I understand certain “banks” may be easier to work with in approving SS or doing loan mods, again, this may all turn on who actually holds the paper and what policies they have in place. I’m not really sure how an attorney is going to change guidelines/agreements that are in place that are for the benefit of the investor, not for the benefit of the borrower. The best advice is simply to have an agent who understands the process and has been in the trenches on this many times to help with issues that may or may not arise.
Advising on the foreclosure, the short sale process, and negotiating the short sale are all defined and understood duties of a real estate sales person. What happens when the borrower asks, “Well, will I owe any deficiency after the sale or will there be any tax consequences?” Any answer necessarily involves legal advice, I would think.
Credit markets deteriorating fast signals the 4th annual ”housing has really bottomed this time” sell-side propaganda tour has come to an abrupt end.
Paging MellowRuse (the lurker
)…. how’s that Dow 13k work’n out for ya? LOL
Under 12,000 by end of trading on Friday?
That would certainly shake things up
I think your beef is with PinkTaco. If you’ll remember, I’m the one that advised you and Lee in Irvine to go all in on stocks… on July 7, 2009. Do you remember where the Dow was that day? Since I know your brain cells have been ravaged by LSD and booze, let’s refresh your memory:
Mellow Ruse says:
July 7, 2009 at 3 pm
Well, it’s happened folks. The DOW 50 day moving average crossed
the 200 day moving average on July 2nd. This is an extremely bullish
technical signal for the stock market.
For comparison, this same “golden cross” happened on Sept 12th,
1932…. the height of the Great Depression. Anybody that bought the
DOW that day would have booked a 42% return by Sept 12th, 1933, one
year later.
el ORACLE and Lee have been informed.
Ha! hook, line and sinker…..
Anyho….still laugh’n. The ”LSD and booze” part was pure genius. You should consider doing some local ‘stand-up’
You’re a proud new papa? Congrats! Well done muchacho — I wish you all the best.
P.S. The reason I’m lurking is due to my decision to follow your advice
You are, after all, the one that kept advising me to “go back to school”. Add that to the recent addition to my family and life’s a tad busy right now. I’m still reading.. or more like scanning.. when I can, but there’s not a lot of time for commenting.
I appreciate your continued readership, and I miss you pithy comments.
S&P uses a good methodology to estimate shadow inventory, so their estimates of clearing time are better than most. They underestimate future distressed inventory, so their estimates are still too optimistic. It will take longer than they estimate to clear out the garbage.
Their estimate has improved by one month since the last quarter. The report touts this as an improvement. However, since three months have past and the estimate has only improved by one month, the problem is actually getting worse, mostly due to slower liquidation rates.
Shadow Inventory: 46 Months to Clear Distressed Housing Supply
It will take 46 months to clear the market’s supply of distressed homes, or the shadow inventory, according to estimates from Standard & Poor’s Rating Services based on first-quarter 2012 data.
The agency’s latest estimate came in one month shy of the liquidation timeline determined in the fourth quarter of 2011.
While national residential mortgage liquidation rates appeared stable over the first three months of this year, these rates varied widely between local markets, which prevented any significant reduction in S&P’s months-to-clear estimate, the agency explained in its report.
Regional variations in how quickly servicers can clear the backlog of nonperforming loans are primarily due to differences in foreclosure procedures, judicial vs. non-judicial.
As of first-quarter 2012, S&P says its months-to-clear estimate in judicial states was almost 2.5x as long as non-judicial states.
S&P includes in the shadow inventory all outstanding properties on which the mortgage payments are 90 or more days delinquent, properties in foreclosure, and properties that are REO. The agency also includes 70 percent of the loans that became current, or “cured,” from 90-day delinquency within the past 12 months because S&P says these loans are more likely to re-default.
S&P’s calculation of the months to clear the shadow inventory is the ratio of the total volume of distressed loans to the six-month moving average of liquidations. Although S&P’s analysis of the shadow inventory uses only non-agency loan data, the agency’s analysts believe the months-to-clear is similarly high for the market as a whole.
The volume of these distressed U.S. non-agency residential mortgages—which excludes loans from government sponsored entities, such as Fannie Mae and Freddie Mac—remained extremely high at $354 billion in the first quarter, according to S&P. The agency does note, however, that the industry’s distress volume has declined in each quarter since mid-2010.
To put the shadows into perspective, S&P says this latest number, which is based on the original balances of the loans, represents slightly less than one-third of the outstanding non-agency residential mortgage-backed securities (RMBS) market in the United States.
The New York City metropolitan statistical area (MSA) has the highest months-to-clear in the nation, at 202 months.
S&P also reported that the U.S. monthly first default rate fell to 0.67 percent in March 2012, the lowest level since May 2007. The first default rate is the percentage of loans that became 90-plus-days delinquent in that month for the first time, as a percent of all loans that have never before been at least 90 days or more past due.
This means that properties are entering the shadow inventory at a slower rate. S&P says with this improvement, the speed at which servicers can liquidate or cure nonperforming loans will determine the size of the shadow inventory going forward.
Default rates have been falling since first-quarter 2009 and the average national liquidation rate has stabilized, according to S&P—both factors that bode well for getting a handle on the magnitude of the industry’s shadow inventory and its inevitable impact.
Clearly, optimism bias is prevalent amongst big-3 rating agencies, hence, their findings carry minimal weight.
It’s hard to rate something that your analysts don’t understand. I’ve dealt with the Big 3 for years now, and their competency level is on par with the government… always a few steps behind.
While not Irvine, I toured a few open houses this past weekend in Palos Verdes. One realtor was keen to closely follow me around the house (a pet peeve) while praising the value of the home. She proceeded to tell me the owners had already accepted an offer, but were taking backup offers. Then she pulled out the offer sheets and ask how much I wanted to offer, and the price listed was a bit high and could be negotiated down. I don’t think she noticed the sale flyer had the house marked down from $1.4 million to $1.2 million, and she was still talking about going lower, even with an “accepted offer on the table.”
Even though I had no intention of making an offer, that’s when I decided to have some fun. I asked how low the owners were willing to go. The realtor, thinking she had me on the hook, spun that question into telling me there was only a six week supply of homes for sale in the Palos Verdes area, and if I was interested, I should make an offer today. I could barely contain my laughter when I asked if that included the shadow inventory. I’ve never seen person bolt away as fast as she did. She damn near left skid marks.
That’s amazing. She tells you how motivated the seller is, but once you show interest, she starts telling you all the reasons you should be motivated. The cognitive dissonance is remarkable… well, perhaps not. This is a realtor we’re talking about.
The Monthly Orange County Mortgage returning to pre-bubble norm
During the bubble years when credit was easy the average Orange County mortgage skyrocketed. Now, that credit standards have been reestablished mortgage payments are returning to normal. This is having the highest impact in the more expensive homes.
Orange County homebuyers have the smallest mortgage payments in a decade.DataQuick provides The Register with a measure of the estimated house payment a recent homebuyer gets. They track purchase prices, mortgages, loan terms and and downpayments to create the estimate.
In March, latest figure available, the typical payment by this math was $1,779 a month. That was down 17 percent in a year and off 50 percent — yes, half — from the peak of $3,551 set back in June 2006.
MORE
I predicted prices would nearly cut in half back in 2007 because I knew the cost of ownership was double what it should be. I suppose I should have been more nuanced with my predictions and instead of predicting a nominal price decline of such proportions, I should have predicted a cost of ownership decline of 50% because that is the metric I was basing my analysis on. I didn’t think the federal reserve would oversee a decline of interest rates from 6.5% to 3.8% to soften the nominal decline in prices.
I don’t think anyone saw that coming. I’m still amazed that we are t the level. Eventually, someone is going to figure out we owe $16 billion dollars.
I had these same questions when reading about Obama visiting responsible homeowners benefiting from HARP2. The answers are expected.
I’m tempted to write a letter to our President explaining our “responsible ‘home-ownership.’” But just like this story, with enough detail, it’s very hard to find a sympathetic borrower situation.
Facts that engender sympathy: We bought when the bubble started deflating; we never cashed-out; we financed just 2.8x our then HHI at 30Y fixed; we used piggy-back financing because our marginal tax rate is so high; and we have great credit and have paid-down other debt since the house purchase.
Facts that don’t elicit much sympathy: We could refinance today into an existing program (98% LTV FHA) by draining our savings and possibly using our personal LOC; our HHI is 50% greater than it was 5 years ago (just good fortune and growing careers); and our HHI is high enough that Obama and CA democrats want to tax it much more.
Now do you feel like “helping” us refinance? Of course not. However, we paid $80K in 2011 in federal & state income/payroll taxes, so I think we deserve a 115% LTV FHA refi.
The key thing that makes people like you who are responsible less sympathetic is simply that you don’t need it. Since you were conservative in your borrowing, you will be fine even if no aid is offered. The same is true of every conservative borrower. The only people who need aid are the ones who can’t afford their houses, and by definition, they were not responsible. This is the basic conundrum facing politicians as they posture to justify a loan owner bailout. Any bailout will only go to those who don’t deserve it because they were not fiscally responsible.
Way off Topic Again…
But what do you think of this summary when the Federal Reserve Purchase MBS from the banks at 100% face value. This is not my writing, but it was sent to me from a friend.
I didn’t do the quote right.
The Federal reserve swapped 100 cents on the dollar for the declared value of Mortgage Backed Securities (MBS’s) trusts held by the “Too Big To Fail” they did this knowing full well the MBS trusts were not worth 100 cents on the dollar AND the MBS trusts had been executed frauduently during their creation.
The problem in the United States is that the Mortgage Backed Securities (MBS’s) are worth less far less than they should be because:
Many of them have involved millions of mortgages executed fraudulently with the MERS system which resulted in broken chains of title (i.e. the recovery process requires the seller to repay the original purchase price to the holder, the “banks” would have to pay par value back to the Federal Reserve and a host of other entities. This is a problem because the banks don’t have that type of capital.)
The same mortgage has been sliced and diced among multiple MBS’s. This is criminal fraud on a scale never achieved before. It is the largest applicable situation for use of the R.I.C.O. Act put in place in the early 1970’s to enable the breaking up of organized crime by allowing the seizure of not only the “illegally gotten goods” seized at the scene of a crime but ALL the personal assets of ALL of the individuals deemed to have conspired together to see the crime committed.
Both sets of crimes have been documented for easy prosecution (e.g. the facts are prima facie and any assistant D.A. should be able to get plea deals from the small fish in less than five minutes – because a conviction would take a couple of days and these dear folks would be going to prison to shower with Bubba for twenty years) by the MERS systems and all of the documentation required to create the trust documents known to us a MBS’s. In point of fact, the MERS database makes documenting the crimes committed remarkably easy.
And two months ago, the Obama Administration pushed through a settlement for $ 25 billion (actually less than $ 5 billion cost to the banks – the rest is covered under HARP and HAMP – i.e. the taxpayer)
Wow. $312,000 of HELOC abuse.
That’s the cost of a 4 year UCI undergraduate education….for 5 persons.
Way to go Mom and Dad.
I wonder how many 18-year olds look at their parent’s Hummer sitting in the driveway and realize thier parents could have paid for their college education rather than getting that vehicle?
Speaking of optimism bias…
“Tax receipts are coming lower than expected”
Calif: $16 Billion Budget Deficit, 4 Million on Food Stamps, $884 Billion Unfunded Pension Liabilities
http://confoundedinterest.wordpress.com/2012/05/14/california-screamin-brown-follows-french-prez-hollandes-grecian-formula-for-fiscal-soundness-raise-taxes-on-rich-to-pay-down-16-billion-deficit/
Without the real estate Ponzi scheme, California struggles. The troubles won’t change until house find a durable bottom and we start the cycle all over again.
Ron Paul unofficially out of race?
http://abcnews.go.com/Politics/OTUS/ron-paul-ends-presidential-campaign-continues-delegate-strategy/story?id=16344597#.T7F5ROj1Ec8
With the delegates he has, he will be a force at the nominating convention. It should be fun to watch.
IrvineRenter,
Are you askomg why is Obama trying to bailout the banks and loan owner while giving the the tip of his shoes to the renters?
The banks and the loan owner support and live off the fractional banking system and generates huge commissions, fees and huge campaign contributions. It is an ecosystem in itself. WS gave record amounts to Obama for the last election and got a huge ROI. It’s doubtful if more WS investment in BHO will product a similar ROI for the up coming elections. WS is looking for a new quarterback. BHO is looking for a new sugar daddy and has found one last week.
What do renters do or provide? They live month to month using cash for housing, not generating loan nor RE fees-commissions. Renters give very little campaign contributions, and have little to no power to influence the elections. Renters can give neither what the banks nor politicians want nor can they take it away. Renters are only good for a steady stream of involuntary tax dollars.
All good points. I forgot that politicians no longer act for the greater good of all the citizenry.