Feldstein's mortgage proposal

[kerry]

http://www.nytimes.com/2011/10/13/opinion/how-to-stop-the-drop-in-home-values.html

This is interesting. It makes both the homeowner and bank suffer some pain. The homeowner by changing the terms so that other assets of the homeowner become attachable and the bank by losing money via mortgage reductions.

Is it better than continuing foreclosures at the current rate? I know a person who is considering simply walking away from this house since he bought it with a no-principal loan about 5 yrs ago. I don't know if he would be motivated to stay in is house if this option were possible. He might.

What effect would it have on the overall economy?

[spdrun]

I kind of like the foreclosures -- looking at foreclosed properties in CA and Phx this week as I write this. As to the people who bought for a higher monthly payment than prevailing rent in their area, they weren't too bright, were they now?

This being said, that proposal is pretty fair and reasonable, especially for zero-down loans. Your friend was essentially renting his house from the bank. Like any landlord who wants to keep making money, if market rents drop and tenants threaten to leave, the bank needs to drop the rent payments.

[Hatterasguy]

This is still happening in some states, in my area prices are steady or going up. I picked up a nice $30k-$40k adjustment on new construction over the past 6 months.

Mortgages are already recourse loans, if the bank auctions off your house and their is a difference in what they get vs what you owed they can go after you for the difference, and if you have other assets they will.

[MercFan]

We keep looking at Foreclosed properties in our area.... it's frustrating. We submitted an offer to the bank on a decent property. The properties in and around the area are 170-180K for homes in the same neighborhood (according to Zillow.com). We bid 170K because it needed some work and it's a Foreclosure... it took four long months for the East Coast banks to respond to our offer - the offer that they would kindly accept is: $185K.

Why bother with those guys... why would anyone wanna deal with them?! Waste of time and effort...

[kerry]

Originally Posted by MercFan

We keep looking at Foreclosed properties in our area.... it's frustrating. We submitted an offer to the bank on a decent property. The properties in and around the area are 170-180K for homes in the same neighborhood (according to Zillow.com). We bid 170K because it needed some work and it's a Foreclosure... it took four long months for the East Coast banks to respond to our offer - the offer that they would kindly accept is: $185K.

Why bother with those guys... why would anyone wanna deal with them?! Waste of time and effort...

There was an auction on a foreclosed house in my neighborhood a couple of years ago. It went for about half of the outstanding loan.

[elchivito]

Correct me if I'm mistaken, but aren't the major banks pretty well cashed out of the houses they've had to take back? Didn't they get paid thru TARP or something for those losses? It that's the case, then whatever they accept in a sale is pure gravy at this point. Seems like on desirable properties they can afford to sit for a while.

[MagnumPI]

Why would you want to stop the fall in house prices? Real wages are down from 20 years ago and yet home prices are more than double. It's absurd. The market needs to liquidate.

[MTUpower]

It's a better idea than the last few about housing from the current administration, and it spends money directly.

[Skippy]

Originally Posted by MagnumPI

Why would you want to stop the fall in house prices? Real wages are down from 20 years ago and yet home prices are more than double. It's absurd. The market needs to liquidate.

I'm guessing you're in the same position as me: No house currently owned, but looking to buy in the near future. I passed on a foreclosure a couple blocks from me primarily because it doesn't have a garage. I think it's already been sold. I know they were asking about $78k for it. There's another house (with garage) nearby going to auction next week. I'll be checking it out this Sunday and if I like what I see I'll bid on it. Based on the amount of interest I've seen, I probably won't be the winning bidder, but I might get lucky. In any case I think it will go for under a hundred grand. Six years ago it probably would have moved at about a quarter million, and there's no way I'd be in the market right now.

So, for those in my situation, a housing market free-fall is not a bad thing. If you're unfortunate enough to be holding a mortgage from about 3-8 years ago, you may have some of my sympathy. The exception there is the people who went with interest only loans, no money down loans, or the infamous ARM. They made imprudent decisions, as did the banks that approved them. I realize the logic there was to sell that debt as quickly as possible and let someone else take the fall, so in a way approving risky loans could be viewed as a good business decision, but that's kind of short term thinking caused some real problems for the long term.

[spdrun]

Originally Posted by Skippy

So, for those in my situation, a housing market free-fall is not a bad thing. If you're unfortunate enough to be holding a mortgage from about 3-8 years ago, you may have some of my sympathy. The exception there is the people who went with interest only loans, no money down loans, or the infamous ARM.

The exception for ME is also anyone who bought with a monthly payment of taxes + mortgage + expenses of significantly more than the place would rent for. Unless you have inside info about neighborhood improvements that would be virtually guaranteed to raise the value of the house over the period you plan to hold for, this is an epic fail.

(I own an apartment in NY. I can rent it at a slight profit. With anything I end up buying on the West Coast, the profit will be more than slight, hopefully.)

[MagnumPI]

Originally Posted by Skippy

I'm guessing you're in the same position as me: No house currently owned, but looking to buy in the near future. I passed on a foreclosure a couple blocks from me primarily because it doesn't have a garage. I think it's already been sold. I know they were asking about $78k for it. There's another house (with garage) nearby going to auction next week. I'll be checking it out this Sunday and if I like what I see I'll bid on it. Based on the amount of interest I've seen, I probably won't be the winning bidder, but I might get lucky. In any case I think it will go for under a hundred grand. Six years ago it probably would have moved at about a quarter million, and there's no way I'd be in the market right now.

So, for those in my situation, a housing market free-fall is not a bad thing. If you're unfortunate enough to be holding a mortgage from about 3-8 years ago, you may have some of my sympathy. The exception there is the people who went with interest only loans, no money down loans, or the infamous ARM. They made imprudent decisions, as did the banks that approved them. I realize the logic there was to sell that debt as quickly as possible and let someone else take the fall, so in a way approving risky loans could be viewed as a good business decision, but that's kind of short term thinking caused some real problems for the long term.

Pretty much. I saw the housing bubble when it was taking place. All the same info was available to anyone who wanted to bother with educating and informing themselves. So, my sympathy is mostly reserved. Although, the Fed and it's shareholders are culpable anyhow. Plenty of blame to go around. It was actually the housing bubble that turned me on to the Austrian school, and made economics interesting to me, so, cool beans there.

But I see a house as a place to live. Not equity, not investment, not a vehicle for mountains of debt. But now, I'm in an area that's overpriced all the time, so no buying for me.

Good luck, hope you nab a good n'. I wish there were more jobs out there in Vegas, you can buy a whole block out there for the price of a house in my hood.

[spdrun]

So buy a house or three in LV and turn it over to a management company. Stick it to the poor SOBs who are getting foreclosed on and twist hard. Keep your house as a home, buy in LV, Phx, or SD county as investment. You may only have one chance in this lifetime to buy this low. Enjoy the hell out of it!!!

[The Clk Man]

I'm glad that I stayed with my fixed rate 4.7% I believe for 15 years. I was leary of those adj. mortgages.