[jpk]

Originally Posted by tony soprano

What price should the govt. pay for these homes?

The principal balance. The government is already guaranteeing and backstopping the bad mortgage related assets and lord knows what else on the banks books. If they just took the house directly it would be a better use of the money than throwing it into the black hole of the banks books like they are today.

We nationalized Fannie, Freddie, AIG, and Citi. You really think those shares are worth anything other than a big negative number transferred to the taxpayers? We should have just taken the houses instead.

[jpk]

Originally Posted by jjameson922

That's a great idea but I see a big but in there....if the government seizes the home, puts it up for auction and it does not sell, you suggest it become greenbelt. Greenbelt is generally commercial so let's say if in a residential area, the property the razed house stood on now becomes vacant land. The vacant land would have maintainence costs on it until it sold as buildable property and if the area had a surrounding neigghborhood that had depreciated or, was inner city, who would ever buy that vacant land and build a home on it now that it costs more to build than what the value of the surrounding homes would be. Even though the theory sounds great at the start, what does the government want with vacant, unusable land?

Scrap the stupid stimulus bill and use a tiny fraction of the money for sodding and landscaping lots where homes were razed. Once all the massive foreclosure glut is eliminated, people will either buy cheap houses at government auction or buy from normal homeowners. You won't have everyones home value destroyed because there is a foreclosure on the block that a bank can't sell at any price. That toxic supply was just eliminated and replaced with a government landscaping job for unemployed construction workers. Now if more people want to buy a house in the city they have to eventually start building again. That's the beauty and simplicty of the whole idea.

[dmilll]

The article below is from Business Week:

Report: 1 in 5 Mortgages Are Underwater - BusinessWeek

"Nevada has the highest percentage of negative equity: More than half of all mortgage borrowers in that state are now upside down. The average loan-to-value ratio for properties with a mortgage in Nevada was 97%, or less than $8,000 in equity. That leaves the typical mortgaged homeowner with virtually no cushion for the rapidly declining home values."
___________

Whether any of these relief plans put a floor on prices remains to be seen. What concerns me is that even with favorable interest rates, what's going to stop many of these mortgages from going back into default? In addition, how are lenders going to respond if bankruptcy rules are amended so that judges are able to re-write the terms of an existing mortgage?

It's unfortunate that many people are in this position and I hope those who are behind due to factors like losing their job get the help they need. However, there are many others who "own" homes they could not possibly afford using traditional lending practices of years past. Those along with others who used their homes as ATM's to fund an unsustainable lifestyle should not be bailed out with taxpayer dollars!

[olecapt]

The thing generally has low impact on Las Vegas. And those that may find it useful are probably people who don't need help but are jumping on an opportunity to refi at a lower mortgage rate. Hey I will if the interest rate gets low enough.

Las Vegas will be helped only by a cram down. The bankruptcy court change presently in the house would likely do it...but that has a long way to go and may have trouble in the Senate. I don't think it will lead to a raft of bankruptcies...but the threat might well lead to a real dicker.

Note that we are all presently taking it in the wallet for the foreclosed houses. I would guess the net worth of basically every home owner in Las Vegas is dropping 2 to 4% per month. And that is real money. So when you say you don't want to pay to bail out the miscreants make sure you understand you already are...and at a very high rate. You are losing twice a years taxes every month.

[dmilll]

Originally Posted by olecapt

The thing generally has low impact on Las Vegas. And those that may find it useful are probably people who don't need help but are jumping on an opportunity to refi at a lower mortgage rate. Hey I will if the interest rate gets low enough.

Las Vegas will be helped only by a cram down. The bankruptcy court change presently in the house would likely do it...but that has a long way to go and may have trouble in the Senate. I don't think it will lead to a raft of bankruptcies...but the threat might well lead to a real dicker.

Note that we are all presently taking it in the wallet for the foreclosed houses. I would guess the net worth of basically every home owner in Las Vegas is dropping 2 to 4% per month. And that is real money. So when you say you don't want to pay to bail out the miscreants make sure you understand you already are...and at a very high rate. You are losing twice a years taxes every month.

Either way, I think that prices will continue to trend downward until a real floor is reached.

If the bankruptcy court change goes thru, lenders are going to be even more selective giving out mortgages to potential buyers knowing full well they could lose big if things go south. Having fewer buyers will continue to put stress on prices.

With prices dropping each month, I realize that people are losing real money but keeping "miscreants" in homes they cannot otherwise afford is not the answer. If anything, this will only keep prices artificially high until the next set of defaults take place.

As everyone knows, home prices over the last few years grew a lot faster then people's incomes and are now just falling back in line with historical norms. Granted, prices have fallen more quickly than most people anticipated but the truth is a home (or anything for that matter) is only worth what someone will pay for it...

[tony soprano]

Originally Posted by jpk

The principal balance. The government is already guaranteeing and backstopping the bad mortgage related assets and lord knows what else on the banks books. If they just took the house directly it would be a better use of the money than throwing it into the black hole of the banks books like they are today.

We nationalized Fannie, Freddie, AIG, and Citi. You really think those shares are worth anything other than a big negative number transferred to the taxpayers? We should have just taken the houses instead.

First, there isn't enough money remaining in the TARP to purchase the entire foreclosure inventory. Secondly, backstopping distressed mortgage derivatives, even those trading at huge discounts, is still much cheaper than razing the homes. If I hold distressed paper, under mark-to-market accounting, I may value it at 35 cents on the dollar. When/if the housing market improves, that might improve to 55 cents on the dollar. What improvement will I see with a razed building or empty lot?

[gulfer]

Tony, you were right on my numbers. It was 300 million people X 10K = 3 Trillion dollars. I actually don't have a problem with the lowering of the interest rate. I do know that my tax dollars will pay some of that since the government will offset. While price depreciation is happening monthly, technically that is on paper, like a stock. You only really lose or gain when you sell.

[tony soprano]

Gulfer, I don't really have a problem with the subsidized interest rates either. Even extending the term of the loan is reasonable. Forced principal reductions (what the House will be voting on today*) is problematic to me. I think it comes with a number of unintended consequences.

*It looks like it may have passed the House and is on its way to the Senate.

[olecapt]

Originally Posted by gulfer

Tony, you were right on my numbers. It was 300 million people X 10K = 3 Trillion dollars. I actually don't have a problem with the lowering of the interest rate. I do know that my tax dollars will pay some of that since the government will offset. While price depreciation is happening monthly, technically that is on paper, like a stock. You only really lose or gain when you sell.

Don't bet on that gulfer. A loss is a loss whether recognized or not. When your stock portfolio drops $10K...you are really 10K poorer whether you recognize it or not. Your net worth fluctuates all the time.

And RE values are well below any sustainable level already. We are in an entirely artificial situation. Remember gas prices suddenly rocketing past $4.00? That too was artificial. And it would be good for all of we could figure a way to bring some stability to all this.