Foreclosures

[mark1111]

I have a mortgage but don't in any way claim to understand banking or the financial market. With that said, what do you think would happen if the banks were to have a forgiveness period, of lets say 3-6 months.

A mortgage on average is for 30 years. People are having problems paying, causing a major upheaval in the economy. Banks are foreclosing on properties. This is a lose - lose situation.

What if the bank let people have a few months off, without paying the mortgage, adding those missed months on the end of the mortgage?

People still have their homes, banks would still get there loan payed back, only a few months later. Is this possible?

 

[metta]

I have a mortgage but don't in any way claim to understand banking or the financial market. With that said, what do you think would happen if the banks were to have a forgiveness period, of lets say 3-6 months.

A mortgage on average is for 30 years. People are having problems paying, causing a major upheaval in the economy. Banks are foreclosing on properties. This is a lose - lose situation.

What if the bank let people have a few months off, without paying the mortgage, adding those missed months on the end of the mortgage?

People still have their homes, banks would still get there loan payed back, only a few months later. Is this possible?

I think that many of the larger banks are doing just that now in some of the worst areas. I have heard of people being several months late in San Bernardino County and the banks have not taken the home back yet. I would think that they would own more in fees when all is done but I guess we will just have to wait and see.

I don't think that the banks should do that on a regular basis. But in the short term, it should be something that banks should consider.

 

[metta]

Another option:

OTS Plan: Negative Equity Certificates

The Office of Thrift Supervision is preparing a plan to help mortgage borrowers who owe more than their homes are worth and to discourage them from abandoning those properties, agency officials said yesterday.
Under the regulatory agency's proposal, still in its early stages, these borrowers would refinance into government-insured loans that cover the current value of their homes. The refinancing would pay part of what's owed to the original lender. For the remainder, the lender would get what the plan's backers call a "negative equity certificate." The lender could redeem the certificate if the home is eventually sold at a higher price. . . .

http://calculatedrisk.blogspot.com/2008/02/ots-plan-negative-equity-certificates.html

 

[drhladnjak]

I have a mortgage but don't in any way claim to understand banking or the financial market. With that said, what do you think would happen if the banks were to have a forgiveness period, of lets say 3-6 months.

A mortgage on average is for 30 years. People are having problems paying, causing a major upheaval in the economy. Banks are foreclosing on properties. This is a lose - lose situation.

What if the bank let people have a few months off, without paying the mortgage, adding those missed months on the end of the mortgage?

People still have their homes, banks would still get there loan payed back, only a few months later. Is this possible?

Like metta said, some banks are effectively already doing this where it makes business sense. Foreclosing on a home is not cheap. I remember hearing once that it costs a lender something like $50K to foreclose on a house and that doesn't include any losses incurred for the property selling for less than was owed on the property. Banks would much rather you pay your payments even if that means rolling the unpaid interest and missed payments into the loan.

The problem is that in many cases a 3-6 month break won't change a borrower's ability to pay in the long term. If their interest rate has gone up, the payment is now higher. If the buyer can't afford the higher payment, they can't afford the house. This is why the subprime mess has been so bad. A lot of people got so-called teaser rates of like 6% that lasted for a short amount of time (maybe a couple years). Now, those interest rates are resetting to the market rates for high-risk borrowers of 10%+. On a conventional loans, it's still a dramatic increase: 250K loan for 30 years 6%->10% is $1400->$2194/month. People who stretched their finances to get into a mortgage they could barely pay are pretty much fucked unless the lender reduces the interest rate.

Reducing the interest rates is complicated too. The higher rates are to reward investors for the higher chance of a borrower defaulting on the loan. Now that foreclosures and the number people who aren't paying their loans are both up, these loans aren't paying the anticipated returns to the investors who hold them. That's what all these "write downs" are about. The securities that consist of all these bad loans are worth less because they're not paying what investors thought they'd pay.

There's no easy solution right now. Too many people bought homes they couldn't really afford. It's hard to get around that. The only solution that will keep these totally screwed borrowers in their homes is large government or bank handouts. The banks are going to do it unless it's profitable for them and large handouts won't be. They'd rather sell the property at a loss and be done with it than fork over a bunch of money without a guarantee that the borrower won't get foreclosed upon down the road. The government might hand out money in one form or another, but that's essentially using taxpayer money to bail out those banks and/or borrowers who made bad decisions. In the financial world, this is known as a "moral hazard". If you bail people out who make stupid decisions, you just encourage them in the future to make more bad decisions because they know the government will come rescue them. It effectively punishes people who make good, safe decisions while rewarding those who make bad, risky ones.

 

[ejbonk]

US General Accounting Office expects 1.8 billion families will have their homes foreclosed on this year. That is a lot of Real Estate. Ca,Az,Nv,Oh,IL,La,Pa,Ny,Nj,Tx, and FL will be the hardest hit states in the country.

 

[LaloGS]

OK.
I'm not saying give someone a house. I'm just saying that in the midst of all our mega-materiality we could make some very simple but safe shelters(very basic apartments I mean,dignified but small) that any citizen could use in an emergency. It has to do with how we design our cities, partly.

And this is in a sense related to the sort of enviable development that Metta lives in. Because how can we live in a "nice place" with complete peace of mind when there are too many homeless people who don't want to be out on the streets, etc?
I think if we solved this problem which is far from insoluble, especially with the WWW-living data base at our finger-tips, that the enjoyment differential of our houses and hence their value would be all the more enhanced.
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What are you Kern? A pinko Commie? This is too humanitarian for America. We don't like helping out our poor don't you know?

 

[metta]

http://news.yahoo.com/s/ap/20080306/ap_on_bi_ge/home_equity;_ylt=Av1ZHBTnJawxZEy.4KIgzckDW7oF

Homeowner equity is lowest since 1945

Americans' percentage of equity in their homes fell below 50 percent for the first time on record since 1945, the Federal Reserve said Thursday.

Homeowners' portion of equity slipped to downwardly revised 49.6 percent in the second quarter of 2007, the central bank reported in its quarterly U.S. Flow of Funds Accounts, and declined further to 47.9 percent in the fourth quarter — the third straight quarter it was under 50 percent.
That marks the first time homeowners' debt on their houses exceeds their equity since the Fed started tracking the data in 1945.

Moody's Economy.com estimates that 8.8 million homeowners, or about 10.3 percent of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households, or 15.9 percent, will be "upside down" if prices fall 20 percent from their peak.

I still think that it will be an excellent time for people to buy when all of this hits bottom and interest rates being low. I read elsewhere where a large group of people that would normally buy are staying out of the market until things settle down.

 

[drhladnjak]

I saw this same figure in another article this morning. It's not terribly surprising considering how much more debt the average American carries today (compared to their income and assets) than 60 years ago. Still, it's telling in that it probably indicates that banks (and other lenders) are willing to lend money for mortgages much more loosely than ever before. At least in a general sense. Borrowing money for a house has become much more difficult as of late because of reasons we've already discussed elsewhere in this thread.

Agreed about it being a good time to buy whenever this bottoms out. Unfortunately, the top or bottom of a market is never known until a while after it's passed.

 

[metta]

I just found out that the house that was auctioned off was bought by the bank that had the loan. So what I learned from that is the banks have people at these auctions to make sure they meet the minimum amount they are willing to accept or they will buy it at the auction. That prevents people from getting as good of a deal as some people think they may get at these acutions.

So I was just talking to one of my friends/neighbors about this house and he told me it was auctioned off for $640k, which is below what they received offers for. I guess it had something to do with the laws and how long it had been on the market as a foreclosure.

My friend told me that he is still selling several homes, but they are the ones that are townhomes for under $417k and homes over $1 million dollars. In between that, they are just not moving right now. He thinks that when they increase the amount of the jumbo that they will start moving again. We have another home in my neighborhood that is in pre-foreclosure. They are trying to short it, meaning sell it for less than what the loan on the house is. The are asking $680k and the loan on it is almost $900k. A house of this size, approx. 3200 sq. ft, in the Los Angeles County is unheard of. Any gay boys that can get approved of easily wanna check it out? http://www.realtor.com/search/listi...90dc7d56&lid=1095573227&lsn=9&srcnt=35#Detail

Seriously, the smallest homes in this development sell for over $700k. They have priced this home below everything. The smallest homes are 2000 square feet.

The other homes of this floor plan are all asking over $1 million dollars for it. For example, here is one where they are asking $1.4 million: 11 Poppyglen Court

I was told that having 2 foreclosures in our area will not affect us, price wise. They wont be taken into consideration in an appraisal unless there were lots of foreclosures in our area. And most of our homes were built just prior to the push for crazy loans.

 

[drhladnjak]

It doesn't surprise me that the bank may not sell if the price is too low. However, the banks will only continue to hold it if they think they can sell it for more money at some in the not so distant future. In the end, the house has to be sold because banks aren't in the business of owning empty houses. In such a case, the bank would be holding an asset that costs money every month in property taxes, maintenance, etc. while not generating any income unless they can rent it out.

 

[ejbonk]

To get it off their books and to comply with Federal and State Bank regulations. With no acceptable offers for the balance of the loan in the acceptable amount of time put forth in the Federal Reserve Banking Regulations the foreclosed property must be sold at Auction. However ,If the Bank feels the Highest Bid is Unacceptable to them. The Bank may bid on the property,it's self and reset the clock to despose of the property at a price considered acceptable to the bank.

 

[Kulindahr]

I look at the housing situation and see this: a crisis of the rich, by the rich, and for the rich.

Every house price I see is one only rich people could afford anyway -- that's "of the rich".
All these prices got inflated by real estate folks and banks -- that's "by the rich".
And these now-cheaper houses are being snapped up by people with free cash, who know that in the long run real estate just goes up -- that's "for the rich".

 

[Kulindahr]

Thinking on the comments about the homeless....

This problem is also caused by bureaucrats who can't get it through their heads that not everyone can afford the standards they think are wonderful. I'm thinking in particular here of building codes. There are tens of thousands of people in this country (if not a factor of ten larger) who would be thrilled to have a nice, clean house built to the technological standards of the 80's. Often they live in apartments at the technological standards of the 60s, because the landlords have political pull.
But codes don't allow anything but the latest and best in a house, which keeps the price high, and keeps the poor stuck in places barely fit for a pet dog... or homeless.
Then there are "urban growth boundaries", which sound nice in theory but which in practice force housing prices every upward -- when there's only so much room, and more people want into it, there's only one direction prices can go.
We can't ignore inspections, either: by the time a $480k house here is finished, anywhere from $40k to $80k of the price is due to inspections, permits, and all the rest. A friend of mine is doing work, adding rooms to the house, which will increase its value perhaps $20k -- he's already dished out over $2.5k for permits and inspections, and there's not a single sheet of drywall in the space yet.

Meanwhile, out in the countryside, if you manage to buy a piece of land, you can't park on it and live there. You can't even park a trailer on it and live there. You can't put in a restroom with showers, and hook it to the sewer line, and live there. You can't take any intermediate steps at all; the only approved route is to put in water and sewer and cable and power, a proper foundation, and a totally up-to-code finished house on top.
Oh -- and you have to get a "habitability certificate" both before and after: the first to say the place is suitable for putting a habitation on, the second for saying that your habitation is suitable to live in.
And by the time you get there, there's a very good chance that you've paid more in permits and inspections and certificates than the ground itself is worth.

So as one major city decided, you can't make simple housing for anyone, even the homeless. No, you have to have bathrooms with showers, and kitchens separate from a sleeping area, all up to code -- and even if you build something that simple for the homeless and poor, the paperwork will cost more than the dwelling itself.

 

[star-warrior]

Our biggest investment will always be the house. Unlike your average car, a good house in a good maintained neighbourhood will always go up in price.

 

[tommyj]

US General Accounting Office expects 1.8 billion families will have their homes foreclosed on this year. That is a lot of Real Estate. Ca,Az,Nv,Oh,IL,La,Pa,Ny,Nj,Tx, and FL will be the hardest hit states in the country.

While the crisis is bad, its not that bad! There arent anywhere near a billion families in th US..Population is just past 300 million. So, I would say 1.8 Million is correct.

 

[rotary]

I was checking out mls.com for shits and giggles in Florida, and could not believe how low prices have fallen. $200k for absolutely gorgeous homes close to the beach, tropical weather...that's less than homes here where it's a frozen wasteland for half a year. My parents are considering a 2nd home in Las Vegas, as it seems a lot of Canadians have that idea.

 

[drhladnjak]

Unfortunately Kuli, this crisis is hitting the middle class the hardest. The banks will by and large survive. The execs at the banks may lose a lot of money, but they'll still have more than enough to get by on comfortably. The real losers are the biggest owners of the banks (mutual and pension funds which largely consist of the retirements of millions of middle class workers), people who bought a house they couldn't really afford (from the poor up through the middle class) and people who lose their jobs in industries like real estate, construction and banking.

Rotary, this is exactly why cities throughout the sun belt (Las Vegas, Phoenix, Atlanta, anywhere in Texas or Florida) have grown so dramatically in the past 10 years. With the advent of affordable air conditioning, people living in less pleasant northern climates have moved south in droves for mild winters and climate controlled summers. Detroit, Cleveland and other similar cities have actually been shrinking in population over that time.

Florida and Nevada in particular have been hit by huge surpluses of unsold houses and especially condos. In the bubble madness, builders just kept building to the point where there are more units than people who can afford to live in them.

 

[metta]

Unfortunately Kuli, this crisis is hitting the middle class the hardest. The banks will by and large survive. The execs at the banks may lose a lot of money, but they'll still have more than enough to get by on comfortably. The real losers are the biggest owners of the banks (mutual and pension funds which largely consist of the retirements of millions of middle class workers), people who bought a house they couldn't really afford (from the poor up through the middle class) and people who lose their jobs in industries like real estate, construction and banking.

Rotary, this is exactly why cities throughout the sun belt (Las Vegas, Phoenix, Atlanta, anywhere in Texas or Florida) have grown so dramatically in the past 10 years. With the advent of affordable air conditioning, people living in less pleasant northern climates have moved south in droves for mild winters and climate controlled summers. Detroit, Cleveland and other similar cities have actually been shrinking in population over that time.

Florida and Nevada in particular have been hit by huge surpluses of unsold houses and especially condos. In the bubble madness, builders just kept building to the point where there are more units than people who can afford to live in them.

The market is so strange in my area right now. Everything is in extremes....some people are dropping their prices, some people are keeping the prices higher than ever...a couple are losing their homes....some people are buying homes over $1.5 million and paying cash. I do see more foreclosures coming in the near future. Unless people are able to refinance their homes into something they can comfortable do, it will continue until all of those people have been foreclosed on. My home has probably dropped $100k-$200k....but it is only a drop if I sold it right now or within the couple of years. And I'm just guessing regarding the drop....none of the homes my size have sold recently.

There is a new listing that went up a couple of days ago that I'm curious to see how it does. It was originally a model home, purchased about 2 years ago, and the owners remodeled and upgraded everything even more. It is nicer than any model home.


Commercial Real Estate Questions:
http://www.justusboys.com/forum/showthread.php?t=209767

 

[ejbonk]

Associated Press

Influential Economist Who long predicted the housing market bubble cautioned on Tuesday that the slump in the U.S. housing market could cause prices to fall more than they did in the GREAT DEPRESSION and serious bailouts will be needed so millions do not lose their homes.

Yale University economist Robert Shiller,pioneer of the widely watched Standards &Poors/Case-Shiller home price index,stated "There is a good chance housing prices will fall further than the 30% drop in the historic depression of the 1930's. Home Prices have already dropped 15% Nationwide since their peak in 2006. I think there is a scenario that they could be down substantially more,"

Shiller's S&P/Case-Shiller Home Price Index is considered the strongest measure of home prices because it examines price changes of the same property over time,instead of calculating a median prices of homes sold during the month.

Shiller,who admitted he has a reputation for being bearish said"Real Estate Cycles typically take Years to correct."

Home prices rose about 85% from 1997 to 2006 with adjustments for Inflation,the biggest National Housing Boom in U.S. History. Shiller also Stated"Basically we're in Uncharted Territory. It seems We have developed a speculative culture about housing that never exsisted on a National Basis Before."

Many People became convinced that housing prices would increase 10% Annually,a notion Shiller called" Crazy".
Shiller stated "It is difficult to forecast home prices." Shiller has Endorsed Legislation proposed by U.S.Senator Chris Dodd,Democrat from Conn. and U.S. House of Representative Barney Frank,Democrat from Mass. that would allow the FEDERAL HOUSING ADMINISTRATION to back as much as $300 BILLION in Mortgages for struggling Homeowners. Servicers would have to agree to take a loss on existing loans,while borrowers would have to show they could afford to make new payments on their refinanced Mortgages.

 

[metta]

One of my friends that works in real estate told me that homes have dropped 55% in Moreno Valley, which is in Riverside County in California. You can actually buy a single family home for $150k there. It gets super hot out there and not a lot of people are willing to live out there. But still, I was surprised to here that they dropped that much.

Foreclosures to affect 6.5 mln loans by 2012-report

NEW YORK, April 22 (Reuters) - Falling U.S. home prices and a lack of available credit may result in foreclosures on 6.5 million loans by the end of 2012, according to a Credit Suisse research report on Tuesday.

The foreclosures could put 12.7 percent of all residential borrowers out of their homes, Credit Suisse analysts, led by Rod Dubitsky, said in the report. That compares with a foreclosure rate of 2.04 percent in the last quarter of 2007, they said, citing Mortgage Bankers Association data.

The new forecast includes 2.7 million subprime loans whose risky characteristics sparked the worst housing market since the Great Depression. Subprime foreclosures, on top of the 676,000 already in or through the process, will hit 1.39 million in the next two years alone, an upward revision from the 730,000 predicted by Credit Suisse in October.

Falling home prices have made an increasing number of U.S. homeowners more vulnerable to default, they said. Nearly a third of subprime borrowers owed more than their home was worth at the end of last year, and that figure will double to 63 percent in 2009, they said.

The shutdown of mortgage bond markets that financed many risky borrowers during the housing boom has also made it harder to refinance into affordable loans, they added.

"These factors, coupled with snowballing negative psychology, are contributing to a rapid rise in foreclosures," the analysts said.
Credit Suisse expects home prices will fall by 10 percent in 2008 and 5 percent in 2009, before rebounding.

Plans by lenders and lawmakers to curb foreclosures must be aimed at reversing price declines to be successful, they said. A public-private partnership to purchase delinquent loans at a discount could help set a floor in home prices, they said. (Reporting by Al Yoon; Editing by Neil Stempleman)

If we have 12.7% of homes in the US go into foreclosure, how would that affect the US and World economy? That is just an incredibly awful number.


http://www.reuters.com/article/bondsNews/idUSN2233380820080422