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IF YOUR NOT SUING YOUR BANK OVER THEIR FRAUD. YOU HAVE NOTHING REALLY TO SAY. THERE IS A WAY TO HELP YOUR PEOPLE IN YOUR DATA BASE AND BE THEIR HERO. SHORT SALE IS NOT THE ANSWER THAT FREE THE ONES THAT MADE THIS MESS.
the rules are the same.. or at least they were… sign for a loan .. then pay it back.. if you don’t… banks will take it back… end of story.. was there ever any other way??
I am so fed up with bailouts.. the borrower took a risk.. so did the lender… everyone should have known the risks. but if you change rules now, ie short sales, modifications, principle reductions, you are only asking for more bailout from more people all willing to jump on the band wagon. well I paid my mortgages (2 homes), even though it was upside down by 100,000. on both. I then refinanced them to a lower rate. I am fed up with the whiners! pay up or move out. but STOP whining about being fair… I bought some IBM stock too… do I get a refund if it goes down ????
Need Help. Can you tell me what the TIDEWATER ACT is? Can you get me something in writing or a link to go to. It seems no one knows what it is but yet a VA appraiser used it ti kill one of my transactions.
HomeSmart Pros Real Estate
Hey There. I found your blog using msn. This is a very well written article.
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It’s time to SUE the bastards. The banks in many cases have LOST the security of the house. They have become unsecured creditors for the debt and the real estate is free and clear. Litigation, funded by non-payments starts with a securitization audit.
I am seeing a number of these people resenting the banks and Fannie/Freddie. Principal reduction would be cheaper than foreclosure or Short Sale.
Hey I know people who are upside down on their car loans. What about them?
People need to suck it up, realize they bought at the wrong time, were greedy thinking home values would continue to go up and they could make a killing when they sold. Grow up and be a responsible person.
This is a huge problem with society, fueled by government.
Start taking responsibility for your actions,learn from your mistakes and move on.
They bought at the wrong time meaning when the banks were in the middle of their ponzi scheme defrauding investors worldwide. No one bought a home thinking housing prices would fall due entirely to fraud from the TBTF’s. You want responsibility? Get it from the banks and then you can go after the people. I’m not arguing with you, just saying that responsibility starts with the lender that committed global fraud through securitizations and manipulation of the housing markets.
We started down this road a long time ago. Once you have a society who is taken over by Government and free market is not allowed to flow up or down…you have Socialism..Or now it is called Progressive… either way we are closer to it than ever and now that we are here…I have to re-think the need for life insurance….long term care insurance….Insurance…oh thats right it’s mandated now…lets see…oh never mind I have to go back to work..I will think about that tommorow…..I jsut get so mad.
Look it’s OUR MONEY WTF! Step up and tell these clowns what to do. So far the people making these decisions have screwed it up. We the poeple need to step in and hire some good accountant business minds and take control of the B— S—! Thank you PS I am sick of the crap! We are smarter than they are.
..all I care about is people…far out! Do you get the munchies with that?
loppy comments as if there’s something wrong with putting people before profit. This country is we the people, not we the corporations. I’ll believe coporations are people when you can hang one.
Where in a loan agreement does it say that you are entitled to a loan balance reduction if the property value goes down? The answer. Nowhere. People sign a loan agreement to borrow money secured by the home. If reductions were to happen it would create a mess with everyine whining for their balance to be reduced too. It would also set a dangerous precedent which would make investors in fannie and freddie mortgage bonds need more of a risk premium meaning higher rates.
Where is it in the loan agreement that the banks can separate the note from the assignment? No where. The banks broke the contracts as soon they were signed by securitizing them.
The banks are not creating a world-wide market for MBS’s. Who is buying them? As far as I know banks themselves are buying the bonds with their 0 interest Federal Reserve loans. And they’re probably doing it because they know they are bigger and more systemic than ever before and will be bailed out. To my knowledge no worldwide investors will buy them because the corruption in the markets here has not been corrected. They don’t trust Wall St. So, please tell me who these “investors” are that you are so worried about. And give me a link if you can. Thanks.
I agree with Jeff, except like 5pence says the banks broke the agreement first. Also as Brian and Frank point out in the piece about the Biggest Bank Scandal Evah! These 16 banks screwed with the Libor as well and have basically compromised the entire lending landscape bending it to their own purposes for their profits. They’ve made their money on these deals already, took the money, ran and made more money with it. The investors are screwed either way and that includes the American Taxpayer via the GSE’s, so why should the American Homeowner/Taxpayer get screwed twice?
1. if all loans were give principal reductions wouldn’t that affect home values negatively?
2. big problem with move up buyers. He had equity when he bought now if he sells he’ll have less than 20% equity and will pay PMI. Don’t thinks he’s motivated.
3. gov’ts attitude to housing remedy is like Obamacare. Sensibly we all have the same principal reduction (health insurance plan) but in fact only certain people get that (Congress, unions get to keep their own cadillac plans) and so the housing industry doesn’t get better (Obamacare will fail).
Hi Brian and Frank,
One of the WORST banks out there that refuse to do ANYTHING for their customers is BMO HARRIS/M&I. I know of several customers that have tried to work something out and they absolutley refuse to do anything. If you do not have a government loan they will do NOTHING. At least government loans had some regulations/guidelines they are suppose to follow. I personally and professionally will never refer any of my clients to secure a loan thru that bank.
Those brilliant folks in DC have dabbled in housing, like a 7th grader doing a science fair project (no offense to 7th graders). It is just a game or an experiment to them. They don’t give a %&^$ about the outcome.
Bailout my friends (campaign contributors) and to heck with the rest. Government is not the solution, government is the problem. I heard that some place….
\I don’t like paying back that money I borrowed. I want to buy a jet-ski instead of paying my mortgage. Give me. You owe me. The bigger deadbeat I am, the more you owe me.\
Those people are long gone. How long are you going to hold a grudge? Jealousy is a wicked mistress and a worse master. What we are dealing with here is those struggling every day to make payments on their underwater homes – and can’t qualify for all those loser acronym programs that never were meant to meaningfully help any large amounts of homeowners. From an appraisers viewpoint, lowering principle will take the market down to more reasonable levels and recovery can begin as a bottom would be put in. There are still years of foreclosures making any short-term recovery impossible. In the Great Depression home prices fell 22%. Here and now they’ve fallen 33% and will they fall further unless there is a market correction? They sure will IMHO. I don’t care about banks or investors (suckers) all I care about is people.
Sounds like someone else might be jealous they are not ‘getting’ the assistance they feel they ‘deserve’…
I’m a self-employed appraiser – there are no benefits or bailouts for me. I had to sell my home and I still had equity. I did things the right way
You’re a small person that thinks everyone has an ulterior motive.
Hey guys, be sure to come back healthy. Great show today. I like the cartoon part. Clever.
This ruling is BS. That ‘non elected official’ needs to be fired! He is getting his pay from taxpayers, while he oversees a taxpayer owned entity that is technically bankrupt! If they closed freddie/fnma those loans would be sold for ten cents on the dollar! But the bonus is we would get ride of ‘regulators’ making decisions they were not hired to make!
I have written of this solution before, and here it is again:
Loans are moved to FHA/HUD.
Loans are split into 2 loans, 1 at market value, current rates, owner must qualify, (obviously)
2nd is at 1/4 % interest with nominal payment and huge baloon.
Investor of original loan get $$ today and potential money tomorrow if market returns to past heights. (It always has before!)
Option 1 is no 2nd loan, but borrowers give up their interest rate deduction for life!
Remember this mess was not caused by the borrower, but by the dealer of deadly securities. FNMA/Freediemac supported these deadly securities by supplying the funds to the ‘dealers.’
In otherwords, the GSE’s sold America out, and now some moron thinks its fine to tell the ‘victims’ ‘tuff doo to you!’
Final comment. I have worked real estate for 35 years, and I have seen the emotional, financial and life ending results of this BS. This guy is a jerk, and needs to be replaced. “Benefits too small compared with the costs and risks”
I could go on. but good luck to all the professinals having to deal with idiots like Edward DeMarco, ACTING director of FHFA.
Nice 180 guys. Let’s gift bad behavior, reward the 10% and screw the 90% still making their payments even if they did take every bit of equity on an 80-20 to buy a hauler and jet ski’s they could not afford. Lets reduce their principal so the rest of us respondsible people can let them sell and buy up while we foot their good fortune through higher taxes and lower return from my savings.
Next time you advocate rewarding the greedy and stupid I will remove you from my “Favorites” Who’s with me?
You’d rewarded the banks for their bad behavior and vent on people that had nothing to do with securitization or the meltdown??!!
The banks still owe us over $.15 trillion from the bailouts. How do you propose we get it and not face further austerity? It’s obvious you lack of facts has led you to your conclusions. Ignorance is bliss ehhh?
Correction – They still owe the taxpayers $1.5 trillion. Google Total Wall Street Bailout Cost for an enlightening summation.
Great idea, but you guys are contridicting yourselves. You all harped on and on about how the bond holders would be the losers if something like that happened. So no, I do not think that would be a good idea. Please do not continue to propagate the argument for the sake of argument. Takes away from your rightous stand for or against any subject. People tend to lose respect.
This is what Demarco says.
“Forgiving debt owed pursuant to a lawful, valid contract risks creating a longer-term view by investors that the mortgage contract is less secure than ever before.”
The problem with this is there is no legal valid contract. The banks broke the mortgage contracts with the borrowers through securitization where now no one really knows who owns the home. Reference this:
Long-standing black letter mortgage law – the 1872 US Supreme Court precedent Carpenter v. Longan, 83 U.S. 271, at 274, inter alia, which states any separation of the Note from the Deed of Trust is a Nullity. “The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity”.
The banks broke the contracts by separating the notes from the deeds. The mortages legally are null and void and all titles they touched are clouded. They shouldn’t even own the homes if they can’t legally prove they own them.
Now what sense does it make to force people to honor non-valid and non-legal contracts when the people are the ones that paid trillions for the banks to breaking their contracts with their investors. Enforcing illegal contracts on people when the banks have been forgiven for breaking all their contracts is punishment on the innocents that didn’t securitize – and for many it is cruel and unusual punishment and certainly not democratic or an expression of a free market at work.
If the banks can be bailed out of their contracts by the people there is no good reason for the people that paid for their bailouts to not also receive forgiveness in the form of principle reduction. Some of you people that post here are downright cruel and ignorant of the facts – but think expressing a bad attitude about this make you appear smart. It doesn’t. This whole “I got mine” and that’s all that matters attitude is what is wrong with this country and will lead to it’s ruin.
Interresting point and who knows how traders got around that since then, but legalities aside, two wrongs don’t make a right. Taking money from innocent third parites to fix others ‘mistakes’ is like paying for a crime one did not commit which is worse than the original offense, you don’t punish an innocent person for anothers indescretion.
Speaking as someone who is currently trying to get 8 mortgage loans modified (on both my primary and seven investment properties), I am hoping for a decrease of my interest rates to decrease my monthly money outlay (due to a recent hardship). I am not looking for principal reduction, even though all of my houses except for my primary are underwater.
I don’t think banks should give principal reductions. Even with an interest rate reduction, they will still be able to make good money off of my loans (which is O.K. – that’s why they are in business; that’s why we are all in business), but the difference will be that I will be able to keep paying the mortgages and not have to give the houses back to the bank. If it goes back to the bank, the tenants either leave or stop paying, and then the bank is left with an empty house, which then gets vandalized and trashed, which is not good for anyone – the neighbors, the homeowners in the area, the bank, the brokers trying to sell either houses or mortgages in that area, etc.
Oh, and for those above who stated that people who are trying to get modifications have a low credit score, mine is over 800, so it’s usually best not to generalize! I’m also current on all of my mortgages currently, BUT the reserves are getting very low that I have been tapping into in order to keep things going, and I’m almost to the point that it will be inevitable not to pay the mortgages on my rental properties so that I can put food on my family’s table. If the banks can modify my loans so that my cash flow increases, I can keep paying the mortgages and feed my family. Hopefully they come back with approvals soon!
Rate reductions are not the right way to go, as others have posted it’s a slippery slope. Rate reductions, like our current administration, is fostering an attitude of who is needier/poorer, to create dependency, making poverty a virtue, and success something that is bad or was miss-gotten instead of focusing on how we can all become more prosperous. This is in complete opposition to traditional American ideals and is leading us down the wrong road.
Stop drinking the Kool Aid….the REAL facts prove entirely different. If the government had kept their grimmy hands off and let the market work this melt-down would have lasted 1/3 as long and we would be going gang busters now!
A Sure Fire way to win this battle. Go all american way and walk away form your piece of $hit mortgage and go rent. Wait 2-3 years and purchase a home not in a declining market or not already so inflated it’s obvious. This is the real world now so I do not want to hear any crying about how this is bad advice or ethically wrong. Pleeeeease……Take a look at the government and the banks and look what it get’s you to play by your own rules!
What ever happened to the concept of “A Contract is a Contract”?
The government is NOT the answer… It is the problem!
Every time big brother forces the banks and investors to take a loss, the unintended consequences kick in. All we need to do is stop all these programs and stick to two rules… 1- A contract is a contract. 2- let the free market work.
If a lender chooses to modify a loan, because they see that as their best move in a certain situation, fine. That is the free market at work. If the government steps in an forces that lender to modify their contract, that is the beginning of the end of the free market.
I’ll take your suggestion and ‘leave a comment down below’: STOP YOU SNIVELING about principal reductions. They are not the answer. You are smart guys; I know. I’ve met you both in person and chatted for a long while about our industry of choice. You both know that all of these FNMA & FHLMC loans are in MBS’s. You also both know, or have been told, that a prinicpal reduction is treated completely different than a foreclosure loss on the balance sheet. Yes, the dollar amount is the same, but how you have to account for them in your financial loss collum is far more damaging as a write down (reduction) than loss on sale. Blame FASB for that one. So no lender that has an option should even consider it. THe Big 5 got a special dispensation to do them. The rest did not. Give it up or go back to school and then broadcast the result of your learing experience.
As to ‘creating more buyers’, again your thinking is flawed. As you have seen from prior posts this AM, and I’m sure experienced yourselves, the likely candidates for reductions have already screwed up their credit through poor payment history. If they were current on the debt, they should have refi’d under HARP 2.0. Our income is triple last years as a result. What a BONUS. In addition, a full third of the purchase business we are closing (way more than the past 4 years) are borrowers whose foreclosure or short sale are now over 3 years old. Their scores are now above 700, they saved up the down payment, and are now homeowners again.
So to the two of you, stop the pandering; it’s offensive. And to the rest who are cryin’ in their Hurricanes this morning; get off your collective dead arsses and go find those buyers who can qualify. I’m in Arizona – the second worst market in the West and my challenge isn’t complaining about those demanding principal reductions so they can go buy a new house (PURE BS from the two of you), but trying to keep pace with all the business we have in process.
So take a break this afternoon; go park it on bench in Preservation Hall. Perhaps a moment of clarity will occur. HEY, it could happen!!
Principle reductions should not be allowed! The money has to come from somewhere. All it will do is cause home owners to default on their loans on purpose to try for a reduction. If they were really is such a bad spot they should not be buying other homes. I agree with almost every position you guys take but not this one. I like a lot of people am underwater on my house by 30%. I know it will take many years to recover. However that does not mean that I derseve a reduction that will just cause the investors or tax payers to loose money. We need to be reducing big government not adding to it.
I think most underwater homeowners would be happy with a lower interest rate. I know I would. Skip the principal reduction, just give me a current market rate in the 3-4% range.
Kris. I’ll asume you’re not in the industry, or you would have already taken advantage of HARP 2.0. So here’s a suggestion: put out a plea on this site for a qualified Mortgage Broker in your area to contact you about this program. If I’m wrong about your occupation, crawl out from under that rock and get your personal bailout loan going.
Please read the posts from Florida Appraiser & Florida Realtor. This person, whom you so cheekily make assumptions about, may be in the same boat as they. I know I am. I saved my house and my credit by renting it out. However, this disqualifies me from HARP 2.0 unless I want to move back in. Until my income recovers, this is not an option as yet. So there is NO HELP for me until the economy turns around and by then, HARP 2.0 will probably not be around. So I just keep making up the difference between what I’m getting in rents and my monthly mortgage payments are. It’s the pits, but I choose to protect my credit and keep my contractual word. There’s nothing else I’m willing to do. I considered a strategic default, but my personal ethics wouldn’t let me do it. I felt it was kind of like honoring the marriage vows, “for richer or poorer, in sickness or health.” What do you think?
You can do a HARP 2.0 on an investment property. We do them every month. I can’t believe the number of people on this site that don’t understand this program.
So it seems that again the folks on the bottom of the food chain, the ones that actually make the economy hum, are the ones that are going to be forced to take their lumps and possibly lose everything, while most of the institutions that designed this whole crash got bailed out and are sitting on cash.
Hmmm. Would this be a case of disparate impact? Just askin’.
I’m in the same position. There is no unemployment, no benefits and no help for independent contractors. Business is finally getting better but it’s been so many bad years just trying to buy grocerys and stay in business that my credit is also ruined after having perfect credit my entire life! The banks won’t do anything to help me and it annoys me that some banks will help others.
I’m shafted in my situation. I can’t get unemployment as an appraiser (owner of a company) even though I pay it in. My home has 10% equity but without the income can’t improve on my loan. Also as you guessed over the past years with no income I have been late a few times and destroyed my credit. ANY SUGGESTIONS OUT THERE?
Principal reduction is a slippery slope. Those buyers signed a contract for a given amount and should be required to pay it back. If they need to sell, THAT would be the time to negotiate a short sale. My point being that not all underwater homeowners are looking to sell. Many just want a hand-out. Period. We cannot continue on this Socialist path started by the current clown-in-chief. Obomba is continue to find ways to buy votes, and principal reductions are one more way he was counting on. Hey, reduce my mortgage by $50,000 and I’ll vote for you, comrade!
In addition, just because a home is underwater now doesn’t mean it will be forever. The market forces should be allowed to work.
This is the same brilliant thinking that continued the Great Depression. Those that are ignorant of history are doomed to repeat it.
“Market forces should be allowed to work.” To all you Republicans; if they had (when Obama took office,) we’d all be stuck in Great Depression 2. To all you Democrats; yes Obama saved us from Great Depression 2 … temporarily. 7th grade math says that there is, and never was, any way out of this. The great correction is yet to come.
Obama didn’t save us from anything! Just made what is coming much, much worse. Nationalized some of our industry, blocked good job creation and anything that would help time and time again. He sat on his butt in the Gulf oil spill, Refused assistance from those who could have helped. Lied to us about Increasing Tax’s, then passed the largest tax increase across the board ever done, (Obama care) Folk’s that’s a tax on everyone, not just the rich guys except the Muslims. The fall out has already started on that one. He has floated more money than anyone in history which is the cause of the worst inflation we will ever see in the history of our country. All of it was some kind of an intentional mandate to take us farther down and take control of the collapsing banking system. There is no stability in our market and every thing he has done has made it worse. We didn’t chose a Democrat the last time around, we chose a communist. That way of doing things is foreign and we just can not deal with that in the USA.
Remember, Bush SR. No new Tax’s! and then he broke his promises. It cost him his re-election. This guy should go the same way.
Can anyone tell me who is going to pay for the principal reductions? Ya just can’t use white out or a delete button to eliminate this debacle.
such a policy could encourage underwater homeowners to deliberately default in hopes of getting a reduction, which would increase losses that taxpayers would have to cover.
Nick, that is a fair question. It will be the same people (you and I as taxpayers) who already have paid or are paying for the first half of the Great Principal Reduction. That was when the the taxpayers stepped in and allowed the MBS market held by the lenders to be purchased at full face value by the Treasury to keep the banks afloat. The banks were able to “sell” at full face value the GSE securities the banks held to the government by the Mark to Market accounting rule changes in around 2008. So ultimately the original security owners (the banks) received a principal reduction back then. But I guess it was okay for the banks to get a principal reduction but no one else, certainly not the taxpayers who paid for the real reduction in value of those securities.
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