patrick.net

Don't know what I make of this. Makes me wish I had spent every last dime my mortgage broker qualified me for back in 2005.

Does that write down comes from taxpayers?

bubblesitter says

Does that write down comes from taxpayers?

Depositors, shareholders, Mutal Funds, Pension Accounts, etc etc etc.

Seriously though - part of the problem that I have with all of this is that, to the best of my knowledge, the write-down is not recorded at the county level - so the "recorded" sale price for anything sold at the tail end of the bubble is overstated. If we study the data years (or decades from now) we'll have to look at any prices from 2004 onward with suspicion. Kind of like the steroid problem in baseball and its impact on the record books - how do you know what is real if prices are being altered after the fact. It really gets under my skin, given how often I was outbid from 2004 to 2008. Shoulda, coulda, woulda. Like my old roommate used to say "nice guys finish last". Should have spent every last dime, coulda borrowed a boatload, woulda then cried poverty and lived rent free fore a year or more.

Savings, prudence and hard work have not gotten me nearly as far as I had expected.

I am a man without a country.

This economy is ran by the government and their TBTF club. Our free markets are too distorted to make common sense.

Im with you, bro. 27 years old, wife and two children, living well below my means, humble home, very mundane life some would say. Am saving diligently for retirement, so much so that I need to ask myself whether I am not 'living' enough in the present. And all I see around me are idiots who don't know how to make their income and expenditures balance, morons who will take out loans for anything and everything that someone will lend them overpriced money for. Someone I know actually had the nerve to say that the government should wipe the student loan debt clean, a week later they "buy" a brand new souped up mustang, the payments and insurance are probably more than my mortgage, taxes and utilities combined. People are so pathetic. If I hear one more fucking old fart say something about this "new generation" who doesn't save for anything, I am going to eviscerate them with a butter knife.

Forgive me, for I think I’ve told this one before.

In 2005 my landlady happened to be a mortgage broker. Out of curiosity we sat with her to figure out what we could afford. Granted, my wife was going to school for her Masters, so she was only working part time at an internship making slightly more than minimum wage. I was earning a decent salary, but living in a high cost area we were still living paycheck to paycheck more often than not. We saved a few hundred a month when we could, but inevitably a car would need fixing or taxes would be due or something else would happen that really limited our ability to build a safety net.
Granted I took 15% off the top and put it into a 401(k), plus fully funded a Roth IRA – but it left me with almost nothing substantial left.

Long story short the landlady preapproved us for $300k! No money down. She was so blow away by our good credit scores, given our age, she didn’t seem to think the student loan debt was a problem (despite that fact that in 2001 I was denied a mortgage BECAUSE of my heavy student loan debt). Then she gets the “well do you get a bonus – we can include that as income too…” and “we can put you into a low rate ARM and you can always refinance….” She said with a little “work” she might be able to stretch us into the $400k to $450k range.

Needless to say the little red light went off… something didn’t seem right… so we sat down with our accountant. He brought us down to reality. Explained why it was better to rent, and told us that give our incomes at that time the MOST we could afford would be $200k – and even that would be stretching ourselves very thin.

I used to wonder how everyone was affording this. Now I see… it really WAS all smoke and mirrors.

I once had a high school English teacher who taught me “Success in life is about knowing the rules. You may not like them, but if you know the rules of the game, you can use them to your advantage and get ahead”. He’s right… problem was I was using an outdated rulebook.

The worst part is, I can see the banks side of it, and see that from their perspective this is the lesser of two evils.

EastCoastBubbleBoy says

so the "recorded" sale price for anything sold at the tail end of the bubble is overstated. If we study the data years (or decades from now) we'll have to look at any prices from 2004 onward with suspicion. Kind of like the steroid problem in baseball and its impact on the record books -

Correct.. all the past sales history provided by NAR and any organization is invalid. No different than a company having to restate past financial statement over the past reported years due to accounting errors and/or fraud.

EastCoastBubbleBoy says

- how do you know what is real if prices are being altered after the fact

Follow Shillers rule.. home prices, over time, appreciate at the rate of inflation.

Therefore pick a year prior to the bubble (1997) and factor in inflation (30-40%) as appreciation.

thomas - appreciate your points - but at least with corporations (or even government numbers) said revisions are reported. I have yet to hear of a mechanism to record which specific properties have had (or will shortly receive) principal reduction, and the amount of said write-down. They record mortgages at the county level – will they also record the principal reductions?

Fairness would take the 29 billion and give us all a rebate check. Then let the housing freeloaders suffer. They should lose their homes. Now, what do they learn? Risk everything and if the downside does happen they will be bailed out at the expense of everyone else. Sounds like welfare to me.

I get the double evil here, but would rather go through a major recession and come out stronger for it. Now we just skim along for decades to come. One step back for capitalism, one giant leap for socialism.

Capitalism is broken in this day and age.

This news is better than the $8000 first-time home buyer tax credit.
One is pushing the house price up by $8000.

This is pushing down. Now these people can sell their houses $100,000 less.
I wish BoA can do this to ALL underwater houses, not just 200,000 borrowers.

Will they be taxed on the writedown?

EastCoastBubbleBoy says

I have yet to hear of a mechanism to record which specific properties have had (or will shortly receive) principal reduction, and the amount of said write-down. They record mortgages at the county level – will they also record the principal reductions?

Sadly and troubling for the average buyer, there isnt one. With all the Govt intervention actual price discovery is unclear and untimely.