The "Obama Bear Market"...

[Whomp]

Judicial Cram Downs help the home owner and I have no beef with that. They give a home owner big time leverage to renegotiate loans with a lender and avoid foreclosure/bankruptcy which costs the banks more anyways so I don't see the problem.

If we cram down these loans, the value of my house will go down simply because my neighbor can now sell their house for less than me. So even though I didn't need the cram down help, I'm carrying an inflated mortgage compared to him. Under that scenario, all you're doing is rewarding future home speculators to buy his home instead of mine.

Instead make the cramdown a 2nd lien (without a principal or interest payment) where the owner keeps a percentage of the cramdown but the rest goes to pay off the first lien. There's also the issue that it's arbitrary so hard limits need to be put in place.

 

[illram]

If we cram down these loans, the value of my house will go down simply because my neighbor can now sell their house for less than me. So even though I didn't need the cram down help, I'm carrying an inflated mortgage compared to him. Under that scenario, all you're doing is rewarding future home speculators to buy his home instead of mine.

Instead make the cramdown a 2nd lien (without a principal or interest payment) where the owner keeps a percentage of the cramdown but the rest goes to pay off the first lien. There's also the issue that it's arbitrary so hard limits need to be put in place.

Why blame the cram down for lowering the value when the root of the problem is the value is already lowered? Your inflated mortgage might suck but if the market value is now low, there will be others besides the guy getting a cram down who can still legitimately undercut you. I don't buy the "if I lose everyone has to lose" idea. (If that is what you mean?) And I was under the impression that the classic cram down is not arbitrary but just a reduction of the principal to market value.

True, the guy who can pay the mortgage isn't going to be able to sell for less than the guy who gets a cram down and has less money on the hook, but the guy who can't pay is also going through bankruptcy and ruining his credit for 10 years.

Also I see these as playing out primarily (anecdotally according to friends that are re-negotiating loans for home owners) as leverage for re-negotiating loans. In other words the banks would be a lot more edgy when they see a debtor with an attorney who is willing to go to court and get a cram down, and they will renegotiate the loan and avoid court/foreclosure, which in my opinion is a win win. Bank gets paid, debtor stays in their house, no one is wasting time and money on lawyers cry in court and you avoid the unsightly "FORECLOSURE" sign sitting in your neighbors front yard.

 

[Whomp]

Why blame the cram down for lowering the value when the root of the problem is the value is already lowered? Your inflated mortgage might suck but if the market value is now low, there will be others besides the guy getting a cram down who can still legitimately undercut you. I don't buy the "if I lose everyone has to lose" idea. (If that is what you mean?) And I was under the impression that the classic cram down is not arbitrary but just a reduction of the principal to market value.

True, the guy who can pay the mortgage isn't going to be able to sell for less than the guy who gets a cram down and has less money on the hook, but the guy who can't pay is also going through bankruptcy and ruining his credit for 10 years.

Also I see these as playing out primarily (anecdotally according to friends that are re-negotiating loans for home owners) as leverage for re-negotiating loans. In other words the banks would be a lot more edgy when they see a debtor with an attorney who is willing to go to court and get a cram down, and they will renegotiate the loan and avoid court/foreclosure, which in my opinion is a win win. Bank gets paid, debtor stays in their house, no one is wasting time and money on lawyers cry in court and you avoid the unsightly "FORECLOSURE" sign sitting in your neighbors front yard.

The value has already been lowered but that's not an issue here. The issue is equity in the property. Why should someone who has $200,000 equity in their property see it worth only $150,000 because their neighbor with no equity got crammed down and can walk away from the $50,000.

All I'm suggesting is the guy who gets crammed down portion takes as big of a hit when he sells as the guy who has equity by putting the crammed down portion as a no interest/no principal 2nd lien on the home. Under the current scenario the responsible neighbor is a loser in all scenarios.

 

[illram]

The value has already been lowered but that's not an issue here. The issue is equity in the property. Why should someone who has $200,000 equity in their property see it worth only $150,000 because their neighbor with no equity got crammed down and can walk away from the $50,000.

All I'm suggesting is the guy who gets crammed down portion takes as big of a hit when he sells as the guy who has equity by putting the crammed down portion as a no interest/no principal 2nd lien on the home. Under the current scenario the responsible neighbor is a loser in all scenarios.

By no principal lien are you talking about a lien on the house that doesn't need to get paid and doesn't accrue interest until the 1st mortgage is paid?

I mean if that works it sounds good, but you still have to factor in the problem that the more the homeowner owes the more he is likely to wind up defaulting again, and then you have the same problem. Foreclosure, bankruptcy, cheap house next door to yours.

And if a cram down can be wielded as a negotiation weapon then I think you would see more loans being renegotiated to avoid it, which may not result in a lower price for your neighbor's house anyways.

 

[GenMarshall]

Ouch. Looks like its going to get worse before it gets better. Hang on to your hats people....

Discuss.

I hope you are not with the Rush Limbaugh crowd in hoping that he fails . Also, this is not the Obama Bear Market when the recession happened in Bush's Administration under his watch.

 

[Whomp]

By no principal lien are you talking about a lien on the house that doesn't need to get paid and doesn't accrue interest until the 1st mortgage is paid.

I mean if that works it sounds good, but you still have to factor in the problem that the more the homeowner owes the more he is likely to wind up defaulting again, and then you have the same problem. Foreclosure, bankruptcy, cheap house next door to yours.

And if a cram down can be wielded as a negotiation weapon then I think you would see more loans being renegotiated to avoid it, which may not result in a lower price for your neighbor's house anyways.

I'm saying rather than eliminating the money owed from the cram down it simply moves to second slot.

IE if the mortgage is reduced from a 1st of $500k and is reduced to $450k then the first is $450k and a second comes in at $50k (no cost but also means it has to be paid before any new HELOC is offered). So if the property is sold down the road for $550k then the first and second are paid off then the homeowner is paid $50k but only a fractional margin on the $50k on the second. This way it's not a $100k free ride and there's stakeholder on both ends of the transaction.

 

[Ziggy Stardust]

Pop quiz!

Which candidate, in a rare moment of accurate self-reflection, in the 2008 election said something along the lines of: "Can we stop talking about the economy please? It ruins our chances for election!".

a. Obama
b. Biden
c. McCain
d. Palin

 

[JollyRoger]

17,137.36

 

[Timsup2nothin]

Ouch. Looks like its going to get worse before it gets better. Hang on to your hats people....

Discuss.

Gee. Too bad you hung onto your hat. If you'd invested your hat in the stock market looks like you would have a couple hats now.

 

[Ziggy Stardust]

I thought that was a pretty easy pop quiz.

You guys are really ill informed.

 

[Timsup2nothin]

I thought that was a pretty easy pop quiz.

You guys are really ill informed.

2008 is deep in the memory banks, but that sounds like a McCainism. Obviously the democrats wanted to talk about the economy, and I'm not sure Palin even knew there was an economy.

 

[Zack]

17,137.36

This could help Obama politically.

 

[jackelgull]

You mean help him with his education "reform" efforts? Sorry to break it to you, but despite anyone's best efforts, school will be the place children go to to be told what to do and quite often how to think.

 

[plarq]

Today I learned: never let your political points through stock market. Money doesn't follow you ideology.

 

[Colonel]

Ahhhh!!!!! Necro thread!!!!! Kill it kill it!!!! Ahhhhh!!!!!

 

[Zack]

You mean help him with his education "reform" efforts? Sorry to break it to you, but despite anyone's best efforts, school will be the place children go to to be told what to do and quite often how to think.

Look at post #3 of this thread, then look at my post again.

 

[jackelgull]

I really put my foot in my mouth for that one.

 

[classical_hero]

But most companies are doing well outside of the US and in real terms people are earning less than they were before the President took office.

 

[peter grimes]

A heck of a lot of people would be earning more if this corporate-conservative Congress would get out of the way and allow a hike in the minimum wage. At this point it's pretty hard to ignore the evidence from areas that have a higher minimum wage that it's a net gain for not just the workers but businesses and therefore the economy as a whole.

Don't like giving poor people money for food? Raise the minimum wage.
Don't like writing unemployment checks? Raise the minimum wage.
Don't like anemic economic growth? ....

 

[timtofly]

Would that not just raise the price of goods? The rich are not going to change their lifestyle to allow a higher wage? It just means people will have more money, but still the same purchasing power.