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"why did your firm loan money to anyone and everyone right up to the 11th hour?"
Cuz he is not lending out his own money?
I have to agree with Randy H (usually a good idea) that the tech wreck and housing bubble have more differences than similarities but one trait the aftermaths will share is, after the implosion it will become hard to find people that were flippers!
I dunno, really -- maybe they have more similarities than difference -- obviously not in proportional magnitude of correction, but in the greed factor, the 'dont' miss out, get on the gravy train, it's the next big thing' attitude, the way investors are always trying to ferret out maximum returns from anything, the easy money aspect, the illogic and mass psychology of following the herd and not doing due diligence checks on the investments, etc.
but, yes, it's usually a good idea to agree with randy ;)
Zephyr Says:
It’s always good to be prepared - and to know what to do in a difficult situation. Here are some helpful tips:
http://www.franksemails.com/misc/things-you-should-know.pdf
Now that's funny s#*t!
astrid,
Oh I'm sure of it! It's just one of those things that dawns on you as hit submit. Had it been his $$$ things would have certainly worked out differently! Good point.
Randy H
2006 Aug 9, 2:10am
I am such a contrarian that if I find everyone agreeing with me I'll disagree with myself. lol
DS,
Good evening, btw! True, the events leading UP TO the HB had similarities but the aftermaths will have a decidedly different outcome. Taking a whoopin' on your 5K ETrade account isn't the same thing as having your house repo'd. The impacts both on a personal and national level may well be more than the American consumer can "boot strap" their way through.
allah,
The only loan somone with a 529 FICO should be getting is a "hard money" loan (if they can get that).
The only loan somone with a 529 FICO should be getting is a “hard money†loan (if they can get that).
I think with their situation, the only advise they should be getting is to cut their loses and sell if they have equity, otherwise put the keys in an envelope and address it to the bank. There is nothing they can do! There is no way they are going to fix their credit no matter what they do, time is not on their side!
Peter P
2006 Aug 9, 3:44am
Of course, the part about House prices stabilizing was a joke, but hey, this whole thing would be bloody comedy if it weren’t so awfully tragic.
It can be bloody comedy even if it were awfully tragic. :twisted:
Think Dr. Strangelove.
George,
Nearly everyone that gets hired by a brokerage firm pitches bonds first. Usually the "trainee program" is based on starvation wages so people want out fast! Some of the classic lines I've heard over the years are:
Rates are going up! Buy bonds!
Rates are going down! Buy bonds!
South Carolina hasn't defaulted on a bond payment since the Civil War!
Mr.________, every time an AFC team has won the Super Bowl it's a good year for bonds! And the Dolphins are 4 point favorites!
BUY! BUY! BUY!
“If you ignore home equity households headed by someone age 75 or older have a typical net worth of just $19,025.â€
*shudder*
Any reason why the WSJ refers to >65 in the first sentence and >75 in the second? World factbook notes 12.5% of the US pop. is over 65, and average life expectancy at 78.
The Fed has paused. Good News! The time to get a loan is NOW!
I'm waiting for:
The housing market has crashed and prices are at 1999 price levels, now is the time to get a loan!
Often when thumbing through the "o'bits" you'll notice that so many that leave this world prematurely were "loved by all" or "an inspiration to everyone who's lives she touched" or "lived each day to the fullest"?
See that's why I'd like to go when it's "my time" and not a moment sooner b/c mine will read:
"He did have his days"!
"Ge.........nerally an (ok) guy"
"He could be a pain when he was sober (which thankfully wasn't often)"
George Says:
“Worked 80 hours a week at three jobs to pay off his adjusting 50-year Mortgage.â€
"He is survived by his 2 loving children, 3 grandchildren, and his 100 year mortgage."
SFWoman,
The other thing that occurred to me was that some of these people might be on the "live it up and die broke" retirement plan, in which case extracting equity would be a reasonable way to go. (And once your balance drops below 10K, take up skydiving.)
(I'd love to see some reasonable life expectancy figures at different ages; I think that last one I saw was about 2K years out of date.)
“Worked 80 hours a week at three jobs to pay off his adjusting 50-year Mortgage.â€
“He is survived by his 2 loving children, 3 grandchildren, and his 100 year mortgage.â€
:lol: + "His only regret in life was he didn't get a chance to liberate ALL of his equity to buy more useless crap before kicking the bucket."
“Worked 80 hours a week at three jobs to pay off his adjusting 50-year Mortgage.â€
“He is survived by his 2 loving children, 3 grandchildren, and his 100 year mortgage.â€
Imagine inheriting debt!
"I was barely scraping by and then suddenly my parents died and I was left with all their debt. I never owned a house, but I actually foreclosed one".
allah,
Unless the kids are dumb enough to be tenants in common with their parents or cosigned the loans or some other such lifetime arrangment, they're pretty safe. They just need to renounce claim to their parents' estates.
requiem,
So would taxpayers in Oregon. Our public employees have their guaranteed retirement benefits paid out based on circa 1970 mortality tables. Much of this data was skewed by the WWll generation and their general practice of working until you drop dead. Now we are by law required to keep them in the manner in which they have become accustomed for considerably longer! (Rather than take the same dollar amount and spread it out over a longer life expectancy). In the end, they'll win. Even if it means bankrupting the state. They're just soooo inflexible!
requiem Says:
> (I’d love to see some reasonable life expectancy
> figures at different ages; I think that last one I saw
> was about 2K years out of date.)
The best way to figure your life expectancy is to take the average age your relatives died (pulling out the 17 year old cousin that drove his car in to a tree drunk) then and add a few years since the average tends to trend up and then add a few more if your lifestyle is healthier than your average dead relative or subtract a few if you are not as healthy as your average dead relative.
Averages in a specific family will mean a lot more than national averages. If a 20 year old Japanese American girl and a 20 year old Samoan American girl wanted to find out how much they will weigh at 50 years old talking the average weight of their relatives at 50 (probably 120 for the Japanese American Girl and 260 for the Samoan American Girl) will be closer than the national average weight at 50 of around 160 for the "average American woman".
FAB,
Overall, I tend to agree. However just b/c the males or the females on your side of the family lived to be a ripe old age doesn't mean ANY of us should take that for granted! (Please note how heavily some boomers lean on this). Yeah "Gramps" lived to be 91 (but he didn't have his lips wrapped around a bong for 50+ years). On the flip side I see perfectly healthy people obsess about their relatives lack of longevity. It would be better if we thought of ourselves as the one that up'd the average?
Sad to note that many early traders and whalers described the Samoans as "almost God-like" in their physical perfection. Of course this was before Spam and Budweiser.
Thanks for the link!
FAB: What happens if you don't have any dead blood relatives?
Unless the kids are dumb enough to be tenants in common with their parents or cosigned the loans or some other such lifetime arrangment, they’re pretty safe. They just need to renounce claim to their parents’ estates.
I know that, but it just is very funny imagining something like that.
requiem,
Huh? You mean if you're adopted or made in a lab from donor egg and sperm?
Or that you come from a family of immortals.
Well, I stopped to think, and other than grandparents who died (rheumatic fever) a decade or two before I was born, the only dead relatives are those who married into the family.
(Of course, they are aging normally, which I guess goes against the immortality idea.)
You know (back to the original thread) so many FB's would probably be better off even in the short term just walking away. The sooner, the better. This obituaries schtick and some of the comments really got me thinking. Patrick doesn't say that home ownership is necessarily a bad thing. Ownership is not without it's postives but it's not worth it if it means ruining your life!
I fear this is exactly where so many FB's are heading. Tapping out what little savings they have DO have and yet unwilling to make the hard choices. Never mind letting go of the bimmer, they probably won't even let go of their cable TV and magazine subscriptions! Once they miss that SECOND payment and realize that they don't get "auto evicted" they'll check the state statutes and figure how long they can live there "rent free" while their ship comes in! Sure, they'll try to sell it (a few might even get lucky) but with all the inventory they'll begin the eventual slide into foreclosure.
If they let the H2 and bimmer go the auto lender will get stiffed but carpooling in a beater will soon lose it's stigma. Then they might have a shot. But if they're unwilling to let go of their health club membership? Forget it.
Man, when I think about the stuff Mr. and Mrs. FB (formerly Mr/Mrs Homedebtor) will have to do with out, it just gives me the willies!
Lattes: Gone.
Cell phone: For what? So you can have constant communication regarding how broke and behind on your bills you are?
Health Club: Want to reduce your "stress" level? Think how good you're going to feel being only 3 months behind on your second mortgage!
Store Cards: Pffft! So you can buy more stuff to gussie up the sh@tbox you're about to be thrown out of?
Who needs a health club when you have to bike to work cause the repo-man took the Lexus?
HARM Says:
Ben Jones gets interviewed by Newsweek:
http://msnbc.msn.com/id/14252223/
Yup, saw that. Did you notice on the list of other RE blogs, patrick.net?
Peter P
2006 Aug 9, 9:46am
Bay area house prices change finally went negative in July.
Even single-family detached homes? Wow.
I thought SFHs in good school districts are as untouchable as Al Capone.
Bay area house prices change finally went negative in July.
Which cities/counties are they using for this median of 800K + ? Per DQ, the median in Santa Clara county is "only" around 770K for resale SFH. There is a some difference in their calculation methods. Anyway, as long as all measure point downwards, it's fine.
BA is so so behind other cities. Our patience will be tested till the end.
The site
http://www.benengebreth.org/housingtracker/location/California/SanJose/
provides a good leading indicator. The asking price has been going down for last couple of months.
I thought SFHs in good school districts are as untouchable as Al Capone.
Oh yes, they are untouchable. The new wisdom is "East Bay, Livermore etc will do down. But this area [Sunnyvale-Cupertino], nah. May be 5-10K. That's it."
The arrogance, even in spite of all the MSM reports, is really annoying.
Peter P
2006 Aug 9, 10:39am
Oh yes, they are untouchable. The new wisdom is “East Bay, Livermore etc will do down. But this area [Sunnyvale-Cupertino], nah. May be 5-10K. That’s it.â€
Well, they used to say "California will not go down". Then they said "Bay Area will not go down. Now they are saying "Sunnyvale-Cupertino ..."
Yeah right.
Then they said “Bay Area will not go down. Now they are saying “Sunnyvale-Cupertino …â€
I dunno - I see Gilroy going down, probably Sunnyvale too (lots of condos)... but I'm betting that Palo Alto will stabilize.
Well some houses in Mountain View, between Los Altos and Sunnyvale have gone for below asking, some for asking and some for a bit more, and some had to be reduced first by 50-100K, the market seems to be in turmoil....
Randy H
2006 Aug 9, 2:16pm
sore,
Psychology factors usually cause corrections to overshoot. The worse the bubble, the more likely the overshoot of the correction. I highly doubt that Total Rent Costs will exceed or come within too close of Homeowner Holding Costs (PITI + PV of likely holding period). But prices will very likely fall below their "support level" before rebounding and flattening out.
This will be very frothy. Neighborhood by neighborhood. Averages and medians won't be much help once the correction is in full swing. Also keep in mind that it's uncertain yet what will happen to the middle IT of PITI. Taxes may go up or down, as may mortgage rates, causing the rent-to-own ratio to not track rent and housing prices 1:1.
If you want, you can download the model I created some months ago and shared here, called the Bubblizer. It lets you pick your own circumstances and express your own beliefs about the correction, and tells you how insane or sane you would be to buy under those conditions.
Randy H
2006 Aug 9, 2:42pm
By the way, for those of you who helped by contributing to creating the Bubblizer: thank you. I'm working on .
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If there's one thing that distinguishes your average Patrick.net blogger from your typical robotic SDCIA.com perma-bull, it's the ability to consider your opponent's P.O.V. and to see things from others' perspectives. This thread is dedicated to this proposition. I want you to put yourself into the mind of a F@cked Borrower.
Peter P has already suggested this concept --in jest-- with his thread, "A cry for help". I would like this one to be approached from a more serious mindset. Image for a moment that you --as our hapless friend from the SDCIA-- find yourself saddled with 14 underwater properties, all bought on margin with exotic financing, and are now unable to make the ARM-reset payments on your night manager's salary from Taco Bell. Never mind that you could have avoided your unsavory predicament by merely applying a modicum of logic, some cursory market research and a dash of high school math to the dubious principle of "it always goes up". It's too late for regret now --you let your greed get the best of you, and so here you are. You now have a "diversified" portfolio of 14 equity-negative properties in different states, and all of them are heading in one direction: down.
So, let's assume you've gotten past the denial, anger, bargaining and depression stages, and have picked yourself up off the floor (after spending several days there whimpering in the fetal position). You've finally reached "acceptance" and are ready to rationally assess your sorry situation with cold, hard-eyed reason, and you must determine a course of action before events progress to the point where your creditors begin making all your decisions for you.
At this point, you have basically three options, none of them particularly good from your P.O.V. Which one do you take?
1. Confront your creditors (MBS shareholders) and request permission to start making "short sales" (i.e., selling the property for less than the amount owed).
This option has a number of attractive advantages, particularly the ability to avoid bankruptcy and/or liens and legal actions against you, as well as the ability to be quickly rid of those 14 "equity alligators" before they eat your alive. If your creditors agree to this, it amounts to a non-BK debt forgiveness, and you will not owe any money after the sales.
It also carries a few drawbacks: (a) Exactly whom do you negotiate with? Your loans got bundled up as MBSs and sold off before the ink even dried. Do you call Fannie Mae, Fredie Mac, the Bank of China, Fidelity, Vanguard, CalPERS --other? (b) Your creditors will undoubtedly require you to bring your entire life savings to the closing table in order to minimize their own losses. Of course, being a reckless speculator who used other people's borrowed money, you're not likely to have much anyhow, so no biggie. But there's another drawback: (c) your creditors will have to report the amount forgiven to the IRS as "cancelled debt", which will be taxable as income. Given your 14 underwater properties, this amount may be quite large. Bailing on your creditors? Relatively easy. Bailing on Uncle Sam? Not so easy.
2. Leave 14 sets of keys on 14 granite kitchen counters and walk away.
Pros: Perhaps your creditors will eventually realize you have no money, no reasonable chance of paying off the debts, and just write them off and leave you alone. To borrow a phrase from J. Paul Getty, “If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.†Even better, if all of your mortgages are "firsts" (no refi's) and you live in a non-recourse state (CA), then your creditors basically have to eat the loans. You'll still be on the hook for tax on the cancelled debt, however.
Cons: Aside from trying to sue you for any current assets and garnish your future earnings (assuming any of your mortgages were refis/recourse loans), your creditors may also try to intercept your tax refunds, ruin your credit (ha-ha, I know --like you care!) and generally harass you and try to make your life miserable.
3. File for Chapter 7 bankruptcy.
Pros: Means a "clean start" no more debts, and no tax liabilities --if you can get it.
Cons: Thanks to the new creditor-friendly Bankruptcy "reform" law, you have to qualify for means-testing and prove you did not commit fraud to obtain the loans in the first place. Uh-oh. That last part could really bite you in the a$$. How much did you inflate your Taco Bell night manager's salary to get those 14 $0-down NAAVLPs? Don't remember? Better consult with an attorney first. If you can't qualify for a Chapter 7 under the new rules, then your only option is to file for Chapter 13 (repayment plan --not good) or reconsider options #1 & 2.
Discuss, enjoy...
HARM
#housing