patrick.net

okay let me elaborate on my own post -

"Huh?" as in "They are PAYING people to short sell a house?" As if getting out of the mortgage for much less than they owe isn't incentive enough?

Am I in crazy land???

I don't see this as a bad thing. Right now many people are living rent-free in their homes waiting for the bank to foreclose or their loan re-worked. The gov't is doing everything they can to keep people in their homes. What they really need to be doing is freeing up inventory by getting people out of their homes so that those of us who can afford them at reasonable prices can buy.

All I would like from my short sale in '08 is to not be sued one day (1st paid in full, 2nd got 100K out of 200K).

I wasn't astute enough to negotiate this when the house sold, so I'm just waiting for the process server at this point... credit life on hold with no incentive to save since it could one day be taken away. And when he finally shows up one day, I'm off to BK court to further postpone my return to economy stimulation for seven more years.

From the article:

Under the new program, the servicing bank, as with all modifications, will get $1,000. Another $1,000 can go toward a second loan, if there is one. And for the first time the government would give money to the distressed homeowners themselves. They will get $1,500 in “relocation assistance.”

This is probably another one of these idiotic idea from the govt. People are talking about 100K+ under water and they give you 1500 to vacate your home. The banks already do that. Whats new? Oh! Its an election year, I forgot.

Hey, an idiotic idea for a bunch of idiots. It just might work. :)

Afterall, an $8k carrot is enough to get people to spend up to $800k to buy a house. Cash for clunkers. Cash for caulkers. You don't have to pay people much to do dumb things in this country.

camping says

Hey, an idiotic idea for a bunch of idiots. It just might work.
Afterall, an $8k carrot is enough to get people to spend up to $800k to buy a house. Cash for clunkers. Cash for caulkers. You don’t have to pay people much to do dumb things in this country.

Well said, I cant rationalize any of this. Its the sane reason why you shouldnt buy makes people buy. Realtors scaring people that interest would go up pretty soon, isnt that reason you should stay away? 8K carrot for 800K house, wouldn't you save more than that just by going with redfin. Unbelievable, anybody with half brain would see through all this. Oh well, I am just another loser who will be left out forever.

"And when he finally shows up one day, I’m off to BK court to further postpone my return to economy stimulation for seven more years."

Before you do that, be sure to max out your credit cards. They got some nice tvs in Best Buy. Buy them by the dozen :-)

Yeah and just wait till they get the surprise 1099 from the bank. I just don't understand how a shortseller benefits at all. I guess the con buyer convinces the seller that they (the buyer) is doing them (seller) a service by "rescuing" their credit. How noble.

deanrite says

eah and just wait till they get the surprise 1099 from the bank.

The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion

http://www.irs.gov/individuals/article/0,,id=179414,00.html

1099s received for tax year 2009 are currently taxable in California, but the legislature, in its incelerity, is currently working to conform state law to the federal.

http://www.ftb.ca.gov/aboutFTB/newsroom/Mortgage_Debt_Relief_Law.shtml

HousingWatcher says

Before you do that, be sure to max out your credit cards. They got some nice tvs in Best Buy. Buy them by the dozen

I'll be honest... I'm afraid to pay off my credit card because if whoever holds the short sale debt is monitoring my credit report and sees the balance suddenly drop, it may make them think I have money, and if they think that, it could put me higher up on the list to go after. It's not a big balance, but still.

But I've done the basic means test and appear to be a candidate for Chapter 7.

My plan is, if they don't sue me before the statute of limitations is up, I'll pay down that card afterwards. Whatever interest I've paid in the meantime would be worth staying under the radar.

Troy, Thanks for the legislative update on "Don't 1099 Me, Bro: CA edition". These folks have been freed from the bondage of their usurious mortgage payments and can now rent at half the cost; personally, I'd like to see them make payments to the state for their speculative excess. I've already been table pounding for the Great Reset at the end of 2012 thanks to the federal mortgage debt forgiveness; if this passes, I can almost guarantee home prices in California won't rise 'til 2013. To top it off, I just did my taxes, and noticed a $400 increase in payments to the state. I tracked it down; my little tax credits running around in diapers are now worth $200 less a head.

What the Obama govt should really do is break up the banks that are "too big to fall" and make a law that would prohibit the creation of "too big to fall" banks once again.

America was supposed to be a "free-market" economy, meaning, the market forces should have decided the fate of the banks, small as well as "too big to fall". Instead, the govt corrupted the free-market by bailing out the big banks. All the wall-street/main-street crap has changed the rules of the market. The banks have passed on the cost of risk through the govt to the tax-payers. The clever ones among the tax-payers took a 0% down home loan and bought a house they can't afford. Now they have stopped paying mortgage but the banks are in no hurry to evict them the way they generally do. The govt bailed them out and they can afford to ignore the mortgage holders defaulting on loans. The govt will keep on printing money (political compulsion - homeowners vote bank) to recoup the bank's loss on these mortgages. Ultimately it will settle at an equilibrium where the dollar value will erode to a level where it will match the real value of the house, meaning, the price of the house will not fall but the value of the dollar will fall to match the real value of the house. This way the Banks, the govt and the home-owners, all are happy winners in the short run. The real losers are the tax-payers who save and China. No wonder China is off-loading the debt. Once the value of $ crashes, the $ savers are doubly *****d!

newbie says

Instead, the govt corrupted the free-market by bailing out the big banks. All the wall-street/main-street crap has changed the rules of the market

Actually the government regulated the "free market" for nearly 60 years. We had Glass-Steagall which prohibited mixing retail banks, insurance & hedge fund into a giant megabank burrito. Then a jerk named Phil Gramm & a bunch of other jerks were paid off by Wall Street to repeal Glass-Steagall in 1999 so that CitiBank could emerge astride the world. You've seen the result. However to pin this on "the gubmint" is not accurate, they were merely the toadies for the Wall Street sociopaths. Bankster Bailout was a CONSEQUENCE of arrogance & hubris it was not the starting point.

Blue Swan says

But under Obama, it’s like each and every day!

Publically-held Federal Debt:

09/28/2001 3,339,310,176,094.74
01/20/2009 6,307,310,739,681.66

Assets and Liabilities of the Personal Sector

4Q08: Total financial assets $38.2T
4Q08: Total liabilities $19.9T

4Q08: Net worth: $18.3T

1Q01: Total financial assets $28.6T
1Q01: Total liabilities $10.3T

1Q01: Net worth: $18.3T

Private capital formation we got for $3T more federal debt, 2001-2009: $0.0T.

Blue Swan says

But under Obama, it’s like each and every day!

Once again, I'll remind you that TARP was passed under Bush.

When someone blows out the bathroom, and renders it unusable.

My biggest complaint isn't the fatass who did it.

It's the smell he left behind.

You guys are distracted to damn easy. You're all fine damn Okey Dokes.

I have an interesting question. How much bad debt do banks hold vs solid debt? How many defaulters are there for every good loan? Even though the numbers are staggering right now for bad debt, it appears that total good debt far far exceeds bad debt.

If money is allowed to be printed because banks want it, all of the "good" debt becomes worth less to the bank, all of the people with a loan are now better off! If it was going to take you 30 years to pay off your home loan, but due to inflation it now only takes 5 years, who is better off, the bank or the house owner?

While bad debt will look better on their books, they are actually helping out the majority of the population with large loans and then followed up with inflation. The banks are the ones who will get hurt in this process. If they hold 10T in money now, and we had 100% inflation, then they're holding 5T essentially, while home owners are holding onto land worth the same amount.

Sure, banks will have larger deposits to play with, and larger loans to play with, but in essence, they were "wiped out" due to inflation, because they were holding the loans and the cash on hand.

pkennedy, I've heard that if the gov't wasn't propping up the big banks right now and letting them pretend that the loans are still worth 100%, many of them would go under because of their debt burden. So they are choosing to keep $5T instead of $0.

If that is the case, then many of these banks should be trying to dump *all* this debt quickly, and then to go on the offensive, pushing down housing prices until everything collapses around them. Something like wellsfargo buying up wamu for a huge discount.

There are many banks that are probably fairly well off - most likely the more conservative banks. They would be likely to profit handsomely if they could push housing prices down and force these other banks into bankruptcy faster.

pkennedy says

I have an interesting question. How much bad debt do banks hold vs solid debt?

Total household indebtedness was $10T in 3Q01 and peaked at $20T in 4Q08.

Wages haven't gone up since 3Q01 and if unemployment remains pegged nationwide:

I don't see wages rising any time soon.

Total market cap of the surviving banks is $800B or so. If 10% of the household debt taken on since 2001 is bad, that will wipe them out. 30% to 50% of the added $10T being unrepayable is not impossible. That's $3T to $5T.

If you're going to borrow, the money has to go towards capital investment -- earnings accretion -- not consumption. 42" plasmas were not capital investments, though boob jobs arguably were.

The national debt has risen from $3T in 2001 to $8T today. The FICA surplus is topping out and may go negative 6 years early unless wage earners get back to work.

tatupu70 says

Once again, I’ll remind you that TARP was passed under Bush.

Where do corporations like the ones in Silicon Valley keep their cash to pay their bills.

If you didnt have TARP where would you have received your payroll check from your employer or
your employer pay for their vendors bill ? How would your employers customer be able to pay for their
product purchase which generated revenue/cash for operations? Things to ponder on since bank accounts were impaired both personal and corporate... that is why every companies stock crashed when the first swing at passing TARP failed.

Troy says: If you’re going to borrow, the money has to go towards capital investment — earnings accretion — not consumption. 42″ plasmas were not capital investments, though boob jobs arguably were.

I believe the latter is considered an infrastructure improvement. ;o

Camping "gets it". You get a cookie, Camping!

Indeed, by changing the policy to helping people get out of their homes it benefits buyers by freeing up inventory AND lowering prices (the more short sales out there, the further push downward on prices) AND the greater availability of lower priced rentals which is a double push downward on prices overall.

The purpose of government policies is to benefit some particular group. They tend to favor owners/sellers because they're a bigger group to pander to (social democracy: two wolves and a sheep deciding what's for dinner) Perhaps they realize that since they can't stop prices going down and they can't "buy" votes that way, it's better to buy votes from the short sellers...

Hopey~Changey. Everyone enjoy the Hopey~Changey!

Paying people to leave their homes is really to increase inventory. Obama is squeezing every last drop out of the government support. You know it must be bad if even Obama wants to lock people into high debt before he withdraws government support. If everyone stays in their homes now, they will get foreclosed on when there is no government support, causing another crash then. This is all part of his exit strategy - to push everyone in before it collapses.

Obama has made it quite clear that his intent is to prop prices high since it's everyone's most expensive investment. You won't see anything from him helping buyers directly; only homeowners/sellers.