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Thread: Freddie Mac. Betting against home owners.

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    Re: Freddie Mac. Betting against home owners.

    Quote Originally Posted by Dittohead not! View Post
    I'm not sure I understand that either. How can they keep homeowners from refinancing at a lower rate? They can refuse to refinance themselves, of course, but there are tons of lenders out there. Why not go to the credit union or a private bank and do a refinance?
    As I understand it, nearly all lenders at the time were betting on homeowners failing. And while more sound, private banks are harder to refinance through or even finance through, and they were on the bandwagon as well. A friend refinanced through a local bank only to learn they sold the loan. He was furious. If he'd wanted to something not local, he'd have financed that way.

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    Re: Freddie Mac. Betting against home owners.

    Quote Originally Posted by apdst View Post
    Because no one has the 20% down payment that has been made legally mandatory by the Frank-Dodd bill.

    The government is, "helping", us again.
    The Frank-Dodd bill mandates a 20% down?

    But the local builder is advertising 0% on houses they seem to be having trouble selling for some reason. How can they do that?
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    Re: Freddie Mac. Betting against home owners.

    Quote Originally Posted by MaggieD View Post
    Trying to purchase a home in foreclosure (or a short sale) in the Chicago area is a whore's nightmare. Make an offer. Wait two weeks or more for a counter. Banks are not organized. There's no one in a decision-making position. Everything's by committee, for God's sake. There is a very real carrying cost to banks sitting on these properties, though...and, of course, the foreclosure process itself if they have to go there.

    Overall, I completely agree with you that banks have totally mishandled the process. A guy's upside-down to the tune of $300,000 mortgage versus $200,000 value. Bank forecloses. (That's where the real cock-up is.) People get to live in the homes for 12-14 months while foreclosure moves like a turtle....not paying their mortgage. Banks are losing THAT money...plus the legal fees to actually foreclose. Then they have to spend $10-$20,000 to get the house ready for sale...then they price it at their own whims instead of listening to Realtor values and it continues to sit. It must cost them $200,000 when it's all over. Orrrrrr, they could rework the mortgage with the current owners, forgive principle and only be out $100K. I can't figure it out.
    I don't think it costs near 200K for them, though. Maybe 80K. Having the home owner sit in the house for free costs them nothing, because they were just going to let it sit empty, anyway. So, in essence, it's not losing money...it's just not making as MUCH money. Also, you make the offer, which COSTS you 1K just to make, and then you wait usually well PAST the 90 day time limit on that offer, just to get ONE counter offer. To me, that spells apathy, because they KNOW selling it NOW equal loss, or, to put it more accurately, LESS gain. Legal fees...they pay those already anyway. Most larger banks keep a tank of lawyers on hand, on the payroll. So, that's a cost that is already rolled into the normal operating costs. And then, on most shortsales, they spend 0 dollars...they don't even clean out the previous owners crap they left behind. My house came with an above ground pool in the garage, all in pieces...and a lawnmower, a few scattered tools in the basement, and a flee ridden mattress in the upstairs room. And I've seen much, much worse. 905 or more of foreclosed and shortsale homes are "as is", which also makes it hard...for first time home buyers...because, hey, we now need 20% of the total price of the home up front, UNLESS you go with the FHA loan. BUT, if you go FHA, you're home has to be "turn key". Has to pas an inspection...can't be a "fixer upper". Go figure.
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    Re: Freddie Mac. Betting against home owners.

    Quote Originally Posted by apdst View Post
    Because no one has the 20% down payment that has been made legally mandatory by the Frank-Dodd bill.

    The government is, "helping", us again.
    That's not right. Please show a link on that. 20% down payments are mandatory. It's being discussed as a rule change, along with other draconian rule changes...most likely won't happen.
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    Re: Freddie Mac. Betting against home owners.

    Quote Originally Posted by Dittohead not! View Post
    The Frank-Dodd bill mandates a 20% down?

    But the local builder is advertising 0% on houses they seem to be having trouble selling for some reason. How can they do that?
    That means that contractor likely has his own financier, who is willing to take that risk. Not sure, though.
    Quote Originally Posted by calamity View Post
    Reports indicate that everyone knew he was hauling a bunch of guns up there. But, since you brought it up, there's something which should be illegal: guns that breakdown.

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    Re: Freddie Mac. Betting against home owners.

    Quote Originally Posted by KevinKohler View Post
    I don't think it costs near 200K for them, though. Maybe 80K. Having the home owner sit in the house for free costs them nothing, because they were just going to let it sit empty, anyway. So, in essence, it's not losing money...it's just not making as MUCH money. Also, you make the offer, which COSTS you 1K just to make, and then you wait usually well PAST the 90 day time limit on that offer, just to get ONE counter offer. To me, that spells apathy, because they KNOW selling it NOW equal loss, or, to put it more accurately, LESS gain. Legal fees...they pay those already anyway. Most larger banks keep a tank of lawyers on hand, on the payroll. So, that's a cost that is already rolled into the normal operating costs. And then, on most shortsales, they spend 0 dollars...they don't even clean out the previous owners crap they left behind. My house came with an above ground pool in the garage, all in pieces...and a lawnmower, a few scattered tools in the basement, and a flee ridden mattress in the upstairs room. And I've seen much, much worse. 905 or more of foreclosed and shortsale homes are "as is", which also makes it hard...for first time home buyers...because, hey, we now need 20% of the total price of the home up front, UNLESS you go with the FHA loan. BUT, if you go FHA, you're home has to be "turn key". Has to pas an inspection...can't be a "fixer upper". Go figure.
    Yeah, I think you're right. Closer to the $80,000...but don't forget that they lost $100,000 right out of the box when the homeowners defaulted on the mortgage. So we're at $180,000 loss v renegotiating with the homeowner and only losing $100K.
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    Re: Freddie Mac. Betting against home owners.

    Quote Originally Posted by MaggieD View Post
    Yeah, I think you're right. Closer to the $80,000...but don't forget that they lost $100,000 right out of the box when the homeowners defaulted on the mortgage. So we're at $180,000 loss v renegotiating with the homeowner and only losing $100K.
    But they DIDN'T lose that money. Your typical, single family, middle classer type house costs between 50-70K to build, depending on state. That's total, materials, labor, etc. Add another...what, 10-20K for property, TOPS, and you got a house that costs the bank UNDER 100K. And they went and SOLD it for 250-300K. So, yes, it's a profit loss...but not a NET loss. This is what I mean when I'm talking about the bubble, and the monopoly fueled greed that keeps these houses unsold. They've recouped the cost to BUILD the house. Or, if you wanna talk about older houses, built in the 50s, 60s, 70s, etc...those houses were ALSO owned by banks. Banks have been in this business for a pretty long time now. And in the 50s, it cost UNDER 1 grand to have that same, typical house built, land and all! Even adjusting for inflation, that's some nice profit margins. In short, the house never loses. Banks don't lose money on houses...they only fail to make quite as much as "projected". And since we live in an economy to RUNS on tomorrows earnings, "projections", this IS, indeed, a problem. But who's? Mine? Or the banks? I'm not the one that advised to start counting chickens before they hatched...
    Quote Originally Posted by calamity View Post
    Reports indicate that everyone knew he was hauling a bunch of guns up there. But, since you brought it up, there's something which should be illegal: guns that breakdown.

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    Re: Freddie Mac. Betting against home owners.

    Quote Originally Posted by KevinKohler View Post
    But they DIDN'T lose that money. Your typical, single family, middle classer type house costs between 50-70K to build, depending on state. That's total, materials, labor, etc. Add another...what, 10-20K for property, TOPS, and you got a house that costs the bank UNDER 100K. And they went and SOLD it for 250-300K. So, yes, it's a profit loss...but not a NET loss. This is what I mean when I'm talking about the bubble, and the monopoly fueled greed that keeps these houses unsold. They've recouped the cost to BUILD the house. Or, if you wanna talk about older houses, built in the 50s, 60s, 70s, etc...those houses were ALSO owned by banks. Banks have been in this business for a pretty long time now. And in the 50s, it cost UNDER 1 grand to have that same, typical house built, land and all! Even adjusting for inflation, that's some nice profit margins. In short, the house never loses. Banks don't lose money on houses...they only fail to make quite as much as "projected". And since we live in an economy to RUNS on tomorrows earnings, "projections", this IS, indeed, a problem. But who's? Mine? Or the banks? I'm not the one that advised to start counting chickens before they hatched...
    If a bank loans $300,000 to buy a house and has to liquidate it at $200,000 plus expenses, the bank that made the loan loses $100,000 plus expenses. What the house cost to build in the 1950's is immaterial. Your completely wrong here.
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    Re: Freddie Mac. Betting against home owners.

    Quote Originally Posted by KevinKohler View Post
    But they DIDN'T lose that money. Your typical, single family, middle classer type house costs between 50-70K to build, depending on state. That's total, materials, labor, etc. Add another...what, 10-20K for property, TOPS, and you got a house that costs the bank UNDER 100K. And they went and SOLD it for 250-300K. So, yes, it's a profit loss...but not a NET loss. This is what I mean when I'm talking about the bubble, and the monopoly fueled greed that keeps these houses unsold. They've recouped the cost to BUILD the house. Or, if you wanna talk about older houses, built in the 50s, 60s, 70s, etc...those houses were ALSO owned by banks. Banks have been in this business for a pretty long time now. And in the 50s, it cost UNDER 1 grand to have that same, typical house built, land and all! Even adjusting for inflation, that's some nice profit margins. In short, the house never loses. Banks don't lose money on houses...they only fail to make quite as much as "projected". And since we live in an economy to RUNS on tomorrows earnings, "projections", this IS, indeed, a problem. But who's? Mine? Or the banks? I'm not the one that advised to start counting chickens before they hatched...
    Banks don't build houses.

    If it cost the builder 80K to build the house, and the builder sold it for 200K, who gets the additional $120? Is that all profit to he bank? Of course not.

    First, there's the cost of the property, then there are the various and sundry fees and taxes on builders. After that, the builder, not the bank, keeps a profit, if all goes well. The bank loans out the entire $200K less whatever down payment the buyer has. During the housing bubble, that down payment wasn't much.

    So, if the house is now in default and is worth $100K, the bank has lost the other $100K.
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    Re: Freddie Mac. Betting against home owners.

    Quote Originally Posted by KevinKohler View Post
    But they DIDN'T lose that money. Your typical, single family, middle classer type house costs between 50-70K to build, depending on state. That's total, materials, labor, etc. Add another...what, 10-20K for property, TOPS, and you got a house that costs the bank UNDER 100K. And they went and SOLD it for 250-300K. So, yes, it's a profit loss...but not a NET loss. This is what I mean when I'm talking about the bubble, and the monopoly fueled greed that keeps these houses unsold. They've recouped the cost to BUILD the house. Or, if you wanna talk about older houses, built in the 50s, 60s, 70s, etc...those houses were ALSO owned by banks. Banks have been in this business for a pretty long time now. And in the 50s, it cost UNDER 1 grand to have that same, typical house built, land and all! Even adjusting for inflation, that's some nice profit margins. In short, the house never loses. Banks don't lose money on houses...they only fail to make quite as much as "projected". And since we live in an economy to RUNS on tomorrows earnings, "projections", this IS, indeed, a problem. But who's? Mine? Or the banks? I'm not the one that advised to start counting chickens before they hatched...
    In developed areas of New England, that formula does not represent reality. We are experiencing real losses here.
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