Mike’s post and the informative discussion that followed has been reposted on his own blog, Diggerdog, where you are free to continue the conversation without fear of censorship if you can find the link. As I sit here contemplating my implied gag order, fears about lawsuits and concerns about my own personal safety, please enjoy this video compliments of Incline Jim. It’s a pretty grim take on the upcoming Option/Arm/Alt A Tsunmai yet to come, produced by 60 Minutes.
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BanteringBear
Thank you, Diane, and Incline Jim, and 60 minutes, for spreading the truth, and sharing what I, and many others, have been talking about for YEARS. This situation, as described in the video, IS NOT going to get better anytime soon.
Some valuable information there. Vacant inventory up from 2.2 million properties to more than 4.5 million, and GROWING. Buy soon, Smarten? Not a chance! On several occasions, I have posted the following link to the Mortgage reset chart. Anyone talking about a “bottom” or a “recovery” in the near term is delusional (not referring to you, Smarten).
And then there’s the commercial real estate issue. Look around you, people. Empty commercial properties everywhere. It’s deeply concerning to say the least, what our bankers and politicians have created. They sold this country down the river in the name of greed. How and when we will ever recover from this I do not know. I’m trying to remain positive in light of a meltdown almost guaranteed to be worse than the great depression.
RoyalFlush
http://rediggerdog.wordpress.com/
GreenNV
http://rediggerdog.wordpress.com
Just bear in mind that the intent of the article was to look at the psychology of home trashing. The profession of the previous owner was only a sad coincidence, and in no way influenced my decision to write the post. Ignore the comments that veer into the realm of personal attacks (though I understand the sense of outrage at anyone who would do this to a house). The rest of the discussion is among the finest this blog has seen.
In an ironic twist, comments on diggerdog are moderated. It’s not censorship, I just haven’t figured out how to change the settings.
Reno Ignoramus
Well Bear you are right that some of us have been talking about this for years. There is nothing, absolutely nothing, in that 60 Minutes clip that has not been said, many times, on this blog.
The only difference is that now it gets on prime time tv. Just another piece of evidence that the “hostile pessimists” were right all along about the future of the housing market.
smarten
I saw the 60 minutes piece and my immediate reaction was, DUH! This is a subject which has been discussed many times on this blog going back well over a year. Yet mainstream journalism is only waking up to the subject?
Thanks for the warning BB. My wife and I looked at a potential home to purchase yesterday [it’s a REO]. Had quite a discussion with the listing broker afterwards who IMO is one of the most knowledgeable and articulate Incline brokers we’ve come across [and NO, he doesn’t work for Chase], and we’ve come across most. His comments [downhill for the next 1-2 years] and yours [yes, I DO listen] have convinced us to stay put. We’re still going to look at everything out there but unless we’re in LOVE, the price is attractive and the financing is available and attractive, we’ll continue as renters.
BanteringBear
I had posted, on a since disappeared thread, that I see walking away from an overbearing mortgage payment on an upside down house, a difficult yet prudent choice for many. I stand by this. Why? Because, as I’ve harped on before, these foreclosures need to happen, in order for the market to reprice itself and bring back long term stability, and also for the sinners to be punished.
In my opinion, when two parties enter into a contract which is hopelessly flawed, as is the case with millions of mortgages, they both need to take their medicine. I am not in favor of bailouts- for banks or home debtors. What should happen with these bad mortgages, is for them to go the traditional route of foreclosure, with the debtor’s credit tarnished, preventing them from buying for at least a few years (with a large down payment requirement), and the bank suffering monetary losses. Both would be taught a valuable lesson, which they would hopefully learn from.
When we start bailing out banks, we send a message that their reckless behavior will be forgiven, even monetized, and in turn they’ve learned nothing. This inevitably leads to the same result down the road. Should they have to pay the ultimate price, bankruptcy, then so be it. Another institution with a better business plan will certainly pick up the slack.
When we bailout irresponsible borrowers, we also send a message that they will be rewarded for poor choices. I do not believe that these people should be allowed to stay in these homes they cannot afford. It’s one thing for a bank and a borrower to hammer out a new agreement regarding the interest rate, but quite another when we have a government mandating cram downs and putting moratoriums on foreclosures. What this does, in essence, is punish the responsible individuals who sat on the sidelines, aware they could not afford such hideously overpriced shelter, and society as a whole, who ends up subsidizing the losses through higher taxes, and a lower standard of living.
Paul
Diane, you comments are very cryptic and I’m not sure what implied gag order you’re referring to. Surely RSAR is not trying to go after you (actually Mike, a guest commenter, who I assume is not a Realtor) for reporting information gleaned from the public records. RSAR should clean its own house instead of trying to silence the messenger.
And don’t loose sleep, truth is an absolute defense to a libel allegation,. It seems very unlikely that anyone, offended that their home foreclosure was reported here, would get an attorney to file a frivolous libel suit, much less be able to come up with a cash retainer for such attorney.
smarten
BB, I agree with much of what you’re saying.
However, don’t you think we’re in this mess, in part, because upside down borrowers have this “no harm, no foul” mentality? I believe that if they believed there were a consequence to walking away [losing the property PLUS still being on the hook personally for hundreds of thousands of dollars (and probably for the rest of their lives)], you wouldn’t see as many foreclosures. And that would be a good thing as well.
I’ve stated before that if all we were talking about were subprime mortgages and the subprime borrowers who secured them, the market would be able to absorb this level of foreclosures. However the derivatives and credit crunch they caused have taken us over the top.
You may very little regard for the financial institutions that originated many of these mortgages. However in large part, they’re NOT the ones holding the paper [they’re nothing more than servicing agents] so the message you send is not to the institutions you abhor. Translation: they very well may NOT have learned the very lesson you seek to teach.
MikeZ
I had posted, on a since disappeared thread, that I see walking away from an overbearing mortgage payment on an upside down house, a difficult yet prudent choice for many. I stand by this.
Ditto.
I’ll go even further – it’s both legal *and* ethical, IMO. Not only is walking away within the terms of the mortgage, these times call for self-presevation.
And if the lenders don’t like it, they can forgive principal and bring the borrower back above water.
That’s a *real* modification.
That’s *real* help.
But what they’re doing now, instead, “modifications” that simply roll the delinquency to the end of the term are complete shams and that’s why they’re seeing >50% recidivism in less than a year.
Reno Ignoramus
Remember this?
“We’re so confident in the Northern Nevada economy, that we’ll guarantee the Reno area median new home price to the end of 2007. If it goes down, we’ll refund you the percentage change applied to your Talon Pointe base house purchase.”
Ryder Homes
December, 2006
What’s Ryder Homes saying now?
BanteringBear
Smarten-
I have absolutely no data on how many upside down borrowers are voluntarily walking away from homes without even trying to work something out with the bank, so I cannot speak to what impact this may have on the overall situation. But my hunch says that the willingness to do so has more to do with an inability to actually afford the payment, than it does the lack of desire to service the debt.
While the trillions in subprime loans are a big problem, and were a trigger of sorts, I agree they’re only a piece of the pie. What’s coming down the pike in Alt-A and prime loans is equally troubling.
I agree that the CDS’s are quite problematic, and the government needs to address them. It’s quite difficult to accurately project what their total impact will be. In light of the Madoff scam, and the subsequent losses worldwide, our entire financial system is under even heavier scrutiny, and I would imagine some sweeping changes are in store.
As far as lessons learned, by both the institutions as well as individuals, I don’t hold out a lot of hope. It seems we’re destined to make the same mistakes over and over.
Reno Ignoramus
As of today, the US has an effective ZIRP. 3 month Treasuries have a yield of zero. The dollar has dropped 15 cents against the Euro in about two weeks.
By the time the Alt-A and option ARM defaults starting rolling in, which is only now just beginning, what exactly is the FED going to do? What bullets will the Fed have left to fire?
BanteringBear
“…what exactly is the FED going to do?”
Pray. Pray that they can inflate this mess away.
kookimebux
Hello. And Bye. 🙂
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