Originally Posted by Jerry
The Loan Ranger | The Big Money (via politico)
[T]he Obama homeowner bailout is expected to use government funds to supplement homeowners' monthly payments—in the short term, a lifeline not only for homeowners, but for financial institutions, pension funds, and other stakeholders facing insolvency because their mortgage-related holdings have plummeted in value.
Then what? That's where the picture gets gloomier. The tricks loan mods have been using to keep borrowers out of foreclosure are variations on the acrobatics lenders used during the bubble to shove customers into unpayable mortgages. A loan mod might forestall payments for a few months, then add the amount that didn't get paid to the final years of the mortgage. Or it could reduce interest rates by a few points temporarily—but sooner or later, that interest rate must rise back up and the borrower must pay off the remaining balance as if he or she had been paying the full interest rate all along. If that sounds like an Option ARM to you, you're catching on—many of these loans are in a state of "negative amortization," in which the total amount owed grows instead of shrinking over time. Sooner or later—sooner, if one hopes to be able to sell the house—the total comes due. The bailout will undoubtedly lower that shocker of a final bill, but the government's funds can only stretch so far.
People sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.
No matter how you want to look at it, people who are defaulting on their mortgages are being given equity in ther home at your expense, equity that -they- get to cash in on at the time of sale.
Why dont you have a problem with that?
For example, I live in a 72 unit condo complex. I purchased my condo very early and got a better price than most people in the building. When the units were being sold, there was such a high demand at the time, that some of the units that sold after mine went for 20-30% more in value than mine did.
The average unit in the building went for 15% more than mine did.
But personally, I would not have purchased my unit for any more than what I paid at the time.
Also, NONE of the units in the building sold for less than mine did. Every single one of them sold for what I bought at or higher.
Now, there are a couple of foreclosures and short sales in the building. The current value of the units is dictated by these foreclosures and short sales, but it is overly-deflated since they are currently selling at slightly below what I paid for mine (and they are selling at that price which is about 90-95% of what I bought mine at. One was on the market recently for a good deal less than that, but there ended up being a bidding war that broke out and it ended up selling at that price range as well. Happy times for me!)
But the thing is, for most of the people in the building, 90-95% of what I purchased for is a helluva lot less than what they purchased for.
So in a few years when they are able to sell, they might sell for 105-110% of what I purchased for in order to minimize their losses.
Either way if I sell for 105-110% of my purchase price, I come away with profits.
Because I bought before the over-inflation of the units in my building, I can potentially make a nice profit if I have the patience whereas, right now if I sold, I'd lose money.
To a degree, the future value of my condo will be dictated by the average purchase price of the units in my building and the surrounding buildings (the majority of which got converted to condos after my building was converted).
Having gotten mine at the lowest possible price at the time, it is unlikely that after the overly-deflated market rebounds to the correct values that the correct value will be less than what I paid, and in all liklihood it will be above what I paid by a small amount.
If I were to remove 40% of my principle balance though nefarious means, I could stand to make huge profits given these facts.
Last edited by Tucker Case; 02-18-09 at 12:06 PM.
Tucker Case - Tard magnet.
False premise. Foreclosure does not necessarily equal homelessness.or paying welfare to these people who will be homeless.
So... why do yo NOT have a proiblem with giving people tens of thosands of dollars in free equity?
I'm not sure if you qualify. I'm also not sure if the 80% is based on value at time of purchase or the current value.
But if you do qualify, you could only knock off 5 -10%. That's the current market value difference.
Originally Posted by Jerry