Posts Tagged ‘Underwater Mortgages’

There are several excellent points in this article. First, debts that cannot be repaid won’t be. A person underwater by tens or hundreds of thousands of dollars is eventually going to default (the majority of them anyway). There are exceptions, bust most will not stand by and pay a premium for years on end while their neighbors pay a fraction of the cost for the same housing. Further, as the banks are bailed out again and again and no relief is given to the homeowner, default becomes palatable.

Second, the government has sacrificed our economy to the banks profit. The bailouts and continued programs purported to “help homeowners” – themselves just thinly veiled bailout vehicles for the banks – can be characterized in no other way.

Finally, the government as a sovereign entity holds absolute power over the corporation. That they have not forced resolution only backs up the second point; the economy takes a back seat to corporate profit and political power.

This will not end well. Instead, it will end in the destruction of millions of financial futures.

Millions of lives have been financially ruined (through some fault of their own, to be sure…but there are contributing macro factors). Millions more will be ruined as they struggle to hold on and continue to pay their mortgages in the hope the banks and politicians will act to stem the tide, rather than profit from it.

Read the whole thing.

 

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The bank settlement doesn’t address the rampant fraud perpetuated by the banks. When asked, prosecutors and politicians say this is just the initial step. I don’t agree; when the dust settles (what little dust this will create), the banks will point to this settlement and say, “But we’ve paid our dues.” Further, politicians will look to this and say, “We made the banks pay!” Neither of which is true.

 

There are entirely too many “coulds” and “mights” in this article. One other detail jumps out; if California receives 9 to 15 of the 25 Billion, a “couple hundred million” per remaining state is not valid. These banks are being given a free pass, especially when you consider how much the taxpayer has given them. We are literally paying the settlement for them.

 

 This is being touted as good news.  It is not.  For relative chump change, these banks will be indemnified for their crimes.  The same banks will then charge fees, recouped from the payout no doubt, to help a limited number of people. Be assured they are right now looking for any loophole that will allow them an out.    Be also assured their friends in the judicial and legislative systems are helping insert more of the same loopholes. 

 Most states allow a lender to pursue a deficiency judgment for years after a foreclosure.  Further, acknowledging that debt to a collector during those years can “refresh” the statute of limitations on thr debt.  This is why a short sale or bankruptcy is the preferable route; it deals with the debt up front.  

Banks are not your friend.  They are not your ally.  They do not – as an institution – have your best interests at heart. 

 Damn criminals.  That’s all I have to say about that.

 As always, Mish has great words.  However, the comment thread is even better than Mish’s post…it gets deep fast.

Everyone’s favorite bank makes it right.  However, this does highlight a problem with their system.  There should be a human review before the computer makes any move to start the process. I don’t look for them to fix it. 

The Today Show had a segment about the low mortgage rates.  One of their takeaway points was to pay down your mortgage if you’re more than 125% underwater (to take advantage of refinancing).  Even if you were to do this, you’d still be at the mercy of the government program(s) to do this, and the bank has little or no incentive to actually help you.

Here’s what I wrote:

http://www.facebook.com/topic.php?uid=12566691349&topic=18154

Love your show, Today folks, but have an issue with something I heard this morning in regard to refinancing and underwater mortgages this morning on your show. If a person is 125% or more underwater, there are no good options. Additionally, for all the talk of government programs, the banks have no incentive to actually assist the homeowner. Further, advising the homeowner to pay down the mortgage to the point where they can refinance is not a realistic option. Dropping tens of thousands of dollars against an extremely undervalued liability is not the best use of their money. In most cases, the best bet is to cut their losses. For those who would talk of moral hazard, we crossed that threshold $2 Trillion dollars ago.