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You're exactly right. Zillow.com just did a piece on this. They said that the government is prolonging the housing recovery. It should have bottomed out already, but they predict it won't bottom out and start to rebound until after 2014. The banks have something to do with this too, by not letting the foreclosures and short sales to get sold easily and quickly.
The banks are allowed to value the homes at their "mark to magic" values which could change for the worse if they let a foreclosure go through (lowered value) or a short sale (lost mortgage money).
Remember a few years ago they changed the accounting rules for banks..they do not have to mark to market anymore. Mark to magic is keeping their balance sheets in the black with all those overvalued homes.
Bingo! All of these silly efforts to keep losers in homes they can't afford is just delaying the inevitable. Things would have bounced back by now especially considering how low rates are today.
Yes, correct. It is making things worse. I heard all of this on a radio show yesterday when realtors, appraisers, mortgage lenders, builders etc. all called in to tell it how it really is. There are things going on behind the scenes that the average Joe is not aware of and the media is silent on. Like the National Assoc. of Realtors releasing inflated numbers of sold houses to try and deceive people into thinking right NOW is the time to buy, when in fact the bottom hasn't been hit yet. This is also where I heard about the builders building new homes/condos although they will sit empty because they will lose more money if they violate their contract. The builders are fully aware that the homes they are building are just going to sit. Some bankers even called in to explain the red tape involved trying to sell foreclosures and short sales and how the market won't completely bottom out and rebound until after all the "shadow" inventory is dealt with and off the books.
The banks are allowed to value the homes at their "mark to magic" values which could change for the worse if they let a foreclosure go through (lowered value) or a short sale (lost mortgage money).
Remember a few years ago they changed the accounting rules for banks..they do not have to mark to market anymore. Mark to magic is keeping their balance sheets in the black with all those overvalued homes.
They HAVE to get rid of this inventory in order for the housing market to fix itself. The longer they hold out, the longer you and I lose value on our homes.
They HAVE to get rid of this inventory in order for the housing market to fix itself. The longer they hold out, the longer you and I lose value on our homes.
Bank balance sheet vs Joe Main Street's home value ??????
We all know who wins.
Bank balance sheet vs Joe Main Street's home value ??????
We all know who wins.
But think about it. The banks are only hurting themselves. They are sitting on money that they can't get at. They have to be sold in order for them to balance their books. The physical home does nothing for them until it is sold. The longer they wait, the less the value of the home becomes as it sits with no electricity or heat/AC running. The damage being done to these homes is immense the longer they sit.
But think about it. The banks are only hurting themselves. They are sitting on money that they can't get at. They have to be sold in order for them to balance their books. The physical home does nothing for them until it is sold. The longer they wait, the less the value of the home becomes as it sits with no electricity or heat/AC running. The damage being done to these homes is immense the longer they sit.
If the value of the home is above the mortgage amount..they are in the black (that is mark to magic). Missed mortgage payments can get written off as losses.
They make out better financially if those homes just sit.
If the value of the home is above the mortgage amount..they are in the black (that is mark to magic). Missed mortgage payments can get written off as losses.
They make out better financially if those homes just sit.
How does the mortgage insurance play into this picture? I heard that the banks make their loan money back on the insurance then a profit on top of it. Not sure how that works but this could be the biggest gov backed ponzi scheme in our lifetime.
If the value of the home is above the mortgage amount..they are in the black (that is mark to magic). Missed mortgage payments can get written off as losses.
They make out better financially if those homes just sit.
That makes no sense whatsoever and this practice needs to be looked at. The market will never rebound with millions of homes sitting vacant because it will drag the value of your house down with it.
That makes no sense whatsoever and this practice needs to be looked at. The market will never rebound with millions of homes sitting vacant because it will drag the value of your house down with it.
Agreed... we would also see every major financial institution as insolvent...
FYI FHA/Fannie Freddie guarantee a huge amount of these loans now.. trillions
Agreed... we would also see every major financial institution as insolvent...
FYI FHA/Fannie Freddie guarantee a huge amount of these loans now.. trillions
Great point! +1
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