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Bank Of America To Start Offering Principal Reduction Forgiveness On Delinquent Mortgages
Breaking from Diana Olick: Bank of America will start offering principal forgiveness programs for most at risk mortgages. The bank will target subprime, pay option, and prime 2 year ARMs, no 30 year loans. Loans must have principal balance at least 120% of the value of the home. As the bank has over 1 million delinquent loans. The hit to BofA's balance sheet will be over $3 billion as the firm will need to write down its existing mortgage book (probably still at 99%) to fair value. Surely this is dictated by the government's desire to add some investor-funded oomph to its taxpayer-funded HAMP disaster. And with that, debt forgiveness for all begins! Max out all your credit cards now because the bank, per Barney Frank, will forgive it all. Oh wait, you already have... Carry on then.
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Debt forgiveness does not help and will not help. The system will continue to eat itself since humans are not giving the equation anything to eat. The credit system monster will continue to eat the non-performing liabilities. The fun hasn't even started yet. The only way you temporay stop the monster is to feed it what it was consuming in 2007... which was eating at a $4.5T rate, currently we are on a -$500B rate see Z1 federal reserve report. Good luck feeding the monster with negative food.
The system will bottom when a few billion non-performing liabilities are wiped from the books, wake me up in about 40 years.
The fed is still convinced it can print it's way out of this, and can do so as long as the money supply continues to shrink. America can also continue to borrow at historically low rates as europe is going to be hurting for the next decade.
The world's financial structure depends on the ability of central banks to keep inflating the float by ANY MEANS NECCESARY, and the central banks are "all in" at the poker table. They will do ANYTHING to make sure that these banks don't blow up. Because CDS have been permitted for use as capital reserves, if one bank goes down, they all go down. All over the world, and the whole game ends. That is why it will NOT be allowed to happen.
Those of us who lived within our means are truly the suckers.
But we learn. I've got a couple of blocks in Beverly Hills I'm thinking of picking up. Maybe Nicholas Cage's house and a few others. Maybe I can cover the vig, maybe not; the point is, if I can't, somebody else will.
God fuckin bless America.
The monster is going to feed on ALL this time. People in America were relative immune to the last cycle compared to most of the world. It won't be so pretty this time, all will pay the price for using the equation.
The result from using the equation is a big ass balloon payment at the end of the cycle. Non-performing liabilities are liquidated.
The system hasn't collapse yet because all you guys are still working like there is an out, there is no out from the equation. Until everyone gives up... slow death comes to mind.
Chindit - feeling the same this morning. No way to opt out.
Here's a business plan.
1. Start a REIT (send a few shares to cramer so you can be pimped by CNBC)
2. Buy any/every piece of shit real estate in this country you can get your hands on. The more ridiculously overpriced it is the better.
3. Never have any intention of paying off any of the debt taken on to buy it all, because obviously as it's real estate it's price will only go up.
4. If it doesn't and we're small fry, banks can give us principal reductions
5. If it doesn't and we're big time, Government will bail us out.
All the meanwhile we can pay ourselves gigantic mega star salaries and play dogfights in our private jets.
It's GUARANTEED to work.
You forgot to add that you'll pay your divs in shares instead of actual money.
.
Yay, I live within my means for years, don't get the fancy car, don't get the fancy house, live in a shitty apartment, and all the people that DID get those things now get a year without making their mortgage payments and have tanked the economy to the point where many people who did live within their means have lost their jobs.
And yet, they're still going to buy more house and car than they can afford after they get bailed out this time.
Those of us that lived sensibly and saved truly are the suckers.
I should have bought a Mercedes and a McMansion with an extra bathroom and granite countertops instead. At least I'd have a nice car and get to live rent free while the suckers try to live with all their "savings."
Oh wait, I'm the sucker, cause I saved and didn't do any of those things.
God bless the United States of Socialist America.
Caymans or Channel islands?
I'm in the same camp on this. Clearly I was a sucker for living within my means. I never bought a car I couldn't pay for on the spot, no 72 month loans.
Those of us who played by the rules clearly are now the suckers, but as another said the last curtain on this drama is a long way off.
My big question is who decides what the house is worth? And how much principal write-down will there be? If Uncle S is going to pop for these write-downs it would seem equitable to cut me a check.
That's been my complaint all along, that for those who didn't get involved there's no equity.
Jackasses...all of them.
I look for your posts and appreciate your insights but I must say that I disagree here, not that we aren't suckers rather at my age I have learned that it is better to act based on my principals rather than pursue lucre. I KNOW it costs, and it costs personally, but I have been through difficulty before and I'll make it through again. One of the treasures of experiencing survival is that it tempers your fear of the future.
If the financial system collapses we will experience hunger, cold, and sickness but we'll make it, and when we do we will realize that we don't need that system. It was not TBTF. Such a system may have many benefits but it is not necessary to our survival.
Crisis, when responded to with courage, cuts through lies and highlights truth, when responded to with fear, the result is failure.
From the Bible we know that "God works out all things, even the wicked for a day of disaster"
Sorry for the meandering thoughts, they just came out of my mind that way.
It was nice knowing you USA
While I agree with the ultimate sentiment, this play has dozens of additional acts to follow before the final curtain call. As desperation grows, as those who followed the crowd into the theater now realize it's on fire and reverse course to flee, there will be even bigger bailouts employed to keep us from recognizing our own culpability.
Like small lies that require constant feeding and reconfiguration (creating bigger and bigger lies which consumes all available resources and time just to sustain it) this Ponzi has a long way to go.
Exactly how much principal is forgiven and under what conditions should allow you to back into a figure that tells how much of an all-in-expense foreclosure-->liquidation is (the alternative) for the banks or at least the TARP banks.
BAC is up 2% on a combination of creative accounting and a $3 billion hit with a million delinquent mortgages. Pure textbook Graham and Dodd.
Billy Graham and Christopher Dodd.
I was thinking more Graham Cracker.
OK, so they have one million delinquent loans. The vast majority of them would probably be subprime, so how can they say it'll only hit them to the tune of 3 billion? That would be an average of $3,000 principal forgiveness which is nothing compared to average mortgage of $180 k.
So it doesn't look right, or sound right. They're facing a million potential walk-aways, where they lose probably 70%, or $125K per loan, or 125 billion dollars.
Not on a Discounted Cash Flow model. When you look out 100 years, this makes complete sense.
What makes complete sense? It seems to me that BAC faces a complete disaster, and the hit on its balance sheet is going to be a shitpot's worth larger than $3 billion. They're screwed, really. A million mortgages in some stage of delinquency? Call them all bad. Those folks are living rent-free now and they'll never go back to making monthly payments. Doesn't matter what kind of bullshit balloon ARM got them into there in the first place. The worse the mortgage type, the shittier the underlying ability to pay was on the outset.
And anyway, why hasn't BAC dumped these toxic mortgages on the poor taxpayers by now? How could they be exposed to a million bullshit delinquent mortgages? That's impossible to believe.
perchp...that $3bil would just be the first leg down of write-offs then. BAC may have already decided that one way or another they are going to be selling off a boatload of underwater residential real estate. By offering this "deal" to delinquent homeowners (which might not be much of an incentive if your numbers are good) the could be betting those homeowners will finally throw up their hand and walk away from the houses and mortgages which allows BAC to avoid the political hassle of foreclosure and probably some other expenses as well.
It only applies to approx 45000 loans. only pay option arm subprime no 30 year fixed, etc
Yeah, but the punchline is, a million delinquent loans. For one company, a million delinquent loans. Unbelievable.
Last I heard there is a 9% cure rate on those for a one month delinquency, a 2% cure rate for delinquencies over two months. That means that around 90 percent of those loans (at best) are going to blow up.
It doesn't matter though. The administration and the fed are like the two older kids playing a game with younger kids. They change the rules whenever they want to ensure they keep winning. If they start to lose (highly unlikely) they change the rules again. If it becomes aparent that they will lose they quit playing that game and start a new one. This is our current situation.
I imagine a lot of folks are psychologically ready to move on to a new chapter anyway. They've stopped trying to pay, don't answer the phonecalls, and are semi-ready to move when the Sheriff shows up.
All those packed restaurants? What % of the patrons are now enjoying more of their paycheck after defaulting on debts and saying "fuck 'em" every time a collection agency letter arrives. The smart ones send off the debt verification letters.
"Fuck 'em" as in, I can always Chapter 7 BK because my income over the last six months is less than the median. Why would they start negotiating with banks over defaulted credit cards and mortgages? They can come take back my car, if they can find it!
Bingo!
I've seen enough bankruptcies over the years that in the last 6 months the number of 55+ going BK and saying "F Chase" or "F BOA" I paid them all these years and now they bump me up to 32.99%?? F U!!!
You are right, a press release to sooth the sheeple, but behind the scenes extend and pretend.
Carry on
America punishes the healthy to give to the unhealthy (health care "reform") and punishes the intelligent to give to the unintelligent. Helping those that did not plan sufficiently for their mortgages is just the latest example of the latter.
These liberal tendencies in America having been putting downward pressure on the underlying genetics of the American people for the past century, and the pace is accelerating.
...and punishes the innocent to give to the guilty, and the true believers to give to the cynical manipulators
+1
"When you see that trading is done, not by consent, but by compulsion--when you see that in order to produce, you need to obtain permission from men who produce nothing--when you see that money is flowing to those who deal, not in goods, but in favors--when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you--when you see corruption being rewarded and honesty becoming a self-sacrifice--you may know that your society is doomed."
Atlas Shrugged
Debt forgiveness is better than Forclosure.
Why not give the advantage of the current Market price to thoes who are still in the Home? If the Bank Forcloses it will Sell the House for Market Value, probably at least 25% to 40% less than their loan amount. Plus, they will have all of the Attorneys fees, Taxes, Insurance, Cost of Sale, Transfeer Tax and Stamps, Real Estate Commissions if they Forclose. So, the Banks will come out ahead by Loan forgiveness rather than Forclosure.
When the Bank Forcloses and puts that House on the Market at 25% or 40% less than their Loan amount it hurts the pricing of all of the other Homes in the area. Which futher decreases Market Values. It becomes a downward spiral.
As an example I know of a Street where all of the Homes are the same where the Homes were selling for $185,000. A House was forclosed on and sold for $125,000. The next house that went to Auction sold for $109,000.
Banks are only hurting themselves by Forclosing and DUMPING Houses on the Market at Fire Sale Prices. Best to give the Homeowner the break than continue to KILL Home prices everywhere.
Debt forgiveness is better than Forclosure (sic).
For the idiot who took-out a loan they should never have gotten in the first place, and for the idiot bank that gave said moron said loan? Sure. But for those of us who are ahead on our mortgages, above water in spite of losing upward of a third of our home's "value". Not so much.
Why not give the advantage of the current Market price to thoes who are still in the Home?
Just keep rewarding stupidity and see what you get in return.
If the Bank Forcloses it will Sell the House for Market Value, probably at least 25% to 40% less than their loan amount.
Meaning that someone who was responsible with their money will have the opportunity to pick-up the property at a discount. You just told them to fuck off. Nice of you.
When the Bank Forcloses and puts that House on the Market at 25% or 40% less than their Loan amount it hurts the pricing of all of the other Homes in the area.
So instead let's continue to pretend that those houses are actually worth a 25-40 percent premium and give them a brand-new HELOC so they can run out and buy more crap they don't need. How's that working out for us now?
Best to give the Homeowner the break than continue to KILL Home prices everywhere.
Best to continue the extend and pretend ponzi than to recognize true market values. Ignorance is bliss, in other words.
The virtue of central planning over market principles.
And please don't take that personally, Waterfall. Didn't mean to get personal - it's just that as someone who bought less house than I could afford and have been paying it off faster than I need I'm really f-ing sick and tired of the extend and pretend games that reward moronic behavior at my expense.
Exactly.
People keep saying things like "but the alternative is worse". But is it?
Ultimately people that made the RIGHT decisions should be the ones being rewarded, but it's the opposite. Right now the attitude seems to be 'well everyone is screwed, so lets make the people that are a large part of the problem slightly less screwed (everyone else be damned)'
Here's a crazy proposal... Why don't we offer people a tax break based on how much ABOVE their monthly payments they make each month?
Or another crazy proposal - foreclose on deliquents, let property prices crater. Then to anyone that did the right thing, bought within their means, got a fixed rate loan with a sizeable deposit, is ahead of their payments etc, give some rebate based on how much they were completely screwed by everyone that did the wrong thing.
+ 1x 10 bazillion cajillion
Correct. I am in the same boat. The problem is there are SO FEW of us, that they can fuck us in every orrifice and feel like they are getting away with it.
Right, that's what I figured. While my 'crazy' proposals would in fact reward those that did the right thing, if those that did the right thing are in the minority what politician gives a flying rats ass what we think? They wont get any votes doing the 'right' thing if it only helps a minority, no matter how 'right' it is.
Such bullshit.
That's why allowing democracy to run roughshod over the rule of law is destined to fail.
What he said. If it was actually "for the people, by the people" Nedward would be considered the God of Common Sense - that is, intergrity and hard work do pay quite nicely.
Why not give it to the person who has been diligently saving their money and is now ready to buy. Why artificially keep prices higher just because no one wants to face the facts.
And furthermore, how do you think prices will be looking when the principal forgiveness recipients re-default and then get foreclosed. The point is simple: the market is wildly over-inflated and must heal. You can keep delaying it but it makes the final ride down that much more treacherous.
PS...it's not a firesale. It's actually called market price -- what a willing buyer is willing to pay for said product. It makes everyone feel better to say firesale cause then you don't feel like an idiot for buying a house at the top of the market.
This is however why resales of established homes are at their lowest point in damn history, or something like that.
Nobody is going to buy and leverage into inflated real estate. They will fuck themselves by playing games with large, leveraged assets eventually. Just a matter of time.
What are they going to do? Sell them to the same broke people that bought in first time around? Don't think so....
Patience.
Note to state and local governments and chambers of commerce:
The first region that allows its RE prices to deflate to the proper level will see a significant influx of smart buyers (read taxpayers) who have been biding their time.
Quick, Detroit, you know what you need to do!
Banks are only hurting themselves by Forclosing and DUMPING Houses on the Market at Fire Sale Prices. Best to give the Homeowner the break than continue to KILL Home prices everywhere.
Banks aren't doing that. They're holding foreclosed property in a shadow inventory, or are not foreclosing at all in order to keep the full value on their books. It's not working. Let the market find the true value instead of all this god-damned manipulation.
"Debt forgiveness is better than Foreclosure."
Except for the guy who sold at the top of the RE market and wants to rebuild what Wall Street took away. Fire sale bitchez! That's just what happened in the mid 90's with Real Estate. I want more Real Estate.
It may sound better when you say it like that but there's one big ugly thing about it, and that it isn't equitable to everyone. It favors a particular population who really doesn't deserve to get it.
Consequences. It never serves the public good to avoid the consequences, and until the consequences are felt nothing will ever be learned.
You can say what you want about the banks and the lenders and the mortgage originators, but in the end the buyer signed on the line. Why should they get a benefit that others will not get?
Sounds like cash flow desperation. They are going to have to write down those monster loans anyway so if they can sucker some cash out of people and prolong taking those losses right now they believe that housing prices can appreciate.
This appears to be the beginning of the end. This rally is over in my opinion.
+1 I've been wondering how long it will take before revenue loss will catch up.. this sounds as you said.. sypon the last drop.
This trick is to encourage people stay in their underwater home and keep pay their "principle". When they walk away and the home is sold in forclosure, BOA must write down principle all at once. This way, BOA can write down in 5 years period, the the loss will be smaller (per year). Hopefully, they can make moeny via trading to make up the smaller hole. This way, US Bank can recover all their loss. :)
Fucking assholes.
My home has lost value too, but unfortunately for me I'm way ahead on my mortgage payments. I bought a house within my means and have been paying it off ahead of schedule. So I'll take a hit if I sell before any sort of market recovery while some speculating jackass gets a handout.
Man I get angrier every day.
You and me both, man (see above).
Hey, I'll join you. Never thought I would become a raging capitalist but I think I just did. When is everyone going to finally see that this won't keep prices from falling. I seriously can't believe I thought it was a good idea to have 50% equity and do improvements to my home with cash. How stupid. And I don't even have a damn flat screen to show for it.
Our loan is down to 25% of what we paid for our place just a couple of years ago. WHAT A SUCKER!
My blood boils when I see people on the news etc complaining about how the bank is going to put them out on the street. Maybe next time buy a house you can afford asshole!!!!
me three.....
we're in a townhouse community (argh, don't get me started -- can't wait to get my own walls!). we bought the modest smaller version and have seen the neighbors in the big version next door (4 owners so far in 5 years) come in, leave a lot of consumer electronic boxes out on trash day, then disappear within a year while the "Bank Owned" sign appears in the window. this pattern has played out over the 120 units, about 1/3 of which have gone into foreclosure at some point. every single property is about 50k down from original purchase price.
that unit started out 40k higher than the one we bought. most recent occupant paid 30k less than we did for ours.
we overpay each month and are about 20k underwater. no bailout, no bank forgiveness options, just ants watching grasshoppers.....
Me 4.
Bought 10 years ago within my means. Paid extra principle every month. Still owe 30k more than the market value of my house right now.
Solution? We stopped paying 3 months ago, the plan being to wait until the bank calls us at which point we begin principle reduction negotiations. Let's share the risk, eh? We're both in this together. We'll split the mark to market differential 50/50, whaddya say? It probably won't work, and even if it doesn't, I am living free for a rather long period of time. This is making my personal cash flow statement and balance sheet look very attractive.
And you know what? Fuck the credit score, so they foreclose, and my score is in the 300's. I can live on cash [or gold, bitchez] for the next 7 years, made all the easier by the massive increase in cash flows I have right now.
If they are going to play a game, you gotta play too.
FTW.
This just tilts the rageometer up a little higher. I can hardly fault you for looking out for yourself (I would). But man this crap stinks.
Yes, it absolutely stinks. What else do you do though? All government and banking actions that are happening lately are clearly intended to punish those like me (and the other posters in this thread, and I would guess the majority of us reading this forum), who demonstrated solid personal fiscal responsibility over the last decade. I have no debt other than my (1) mortgage. I have religiously put 10-15% into my 401k every year. I help old ladies cross the street. etc. etc.
Through no fault of my own, but rather due to criminal negligence of others, my financial position is precarious.
I can't sit back and hope TPTB are going to solve all these problems and wrap them in a pretty bow. Insolvency of the US Govt is the more likely result.
I played by the rules up until now. The rules have changed and it took me a little while to get on board. I'm now playing by the new rules, and will continue to do so, until they change again.
Good for you singlemalt, you are doing the right thing, trust me man, i am in this corrupt mortgage business. Default now, all of you who are reading this and are underwater, when the government rolls out its program, it is goin to grandfather you in, you will need to have been delinquent before X date, so stop paying right the fuck now.
Me 5
Been renting and saving for years. Prices are still insane in my area, thanks to my tax dollars and future tax dollars and kids tax dollars being used to prop the market up, while those who took out ridiculous loans with a HELOC or two on top got to live in comfort with all their jet-skis and vacations and now can live for free in their McMansions - and the bankers who profited from the whole scheme make record bonuses.
Think it's time to impose my own personal economic sanctions on this festering shock-toilet. I ain't buying shit.
First buy what you'll need to survive in case it all goes up in flames. Think of it as life insurance.
I have two friends that are approaching retirement; they are "partners". One of them was in the Air Force and understands the idea behind prepared for the worst. Her partner, some 10 years younger, who watches American Idol and Dancing with the Stars, and considers it all mild, but not excessive, paranoia - and then we explained that not having at least a backpack 72-hour kit, per person, for evacuation, is, well, ignorant, and potentially fatal. Katrina was a wake-up call for all of those with ears to hear, and eyes to see, that the government isn't in the business to save lives.
So she agreed that some backpacks, hydration bladders, ponchos, dehydrated camping food, flashlights, water purification tablets, and sturdy hiking boots were not that bad of an idea.
Next month: "Investing in Precious Metals".
Me 6
I've never had any credit card debt and spent less than half what I was pre-approved for on my 30yr fixed. I never thought about walking away from an obligation before, but now I'm thinking about it more every day. So who should I be? The deadbeat happily stuffing cash in the bank while living rent free month after month, or the Mark, doing the right thing, paying up every month while the market steadily deteriorates?
One persons opinion -
My ZH brothers and sisters - if you own a home that is underwater, and you are hanging on because...well, unless you have a really good reason, let it go. Coming from someone who is in mortgage banking and has seen more than one cycle, it (foreclosure) is like bankruptcy, the sooner you clear the obligation, the sooner the clock starts on reestablishing credit.
Right now, the rule for past foreclosure is four years before you can get a new mortgage loan. And I'll bet dollars to doughnuts that this rule will be amended at some point anyway, just like it was in the late nineties, to something like two years. The reason being that lenders will need well qualified buyers, albeit at a lower price point, to move inventory. And even if you have to wait four years before you can buy again, the market will still be there - and so will a much better buying opportunity, most probably.
* Let it go. Just let it go. (*please consult with a tax attorney in you local jurisdiction)
P.S. If you live in the State of California, living rent free for 1-2 years while a lender gets around to finanlizing the foreclosure is becoming the norm. And you will have plenty of advance warning before you have to move - AND start taking back that PITI that's been going down the toilet every month. keep the fire insurance, though.;-)
Interested in your PS (being a CA resident and all). Is there somewhere I can find this data publicly available?
faustian -
I can't direct you to any particular resource on the subject of mortgage default and when the home is actually taken back from the bank, in this environment. However, based on trends, and servicing lender, the timeline on a traditional foreclosure in California has really been stretched. Even if your lender filed a notice of default today, and there was no backlog, or other insidious reason for not filing an NOD, you would be looking at 6-8 months. In the current environment, 1-2 years is becoming the norm. The only way to really find out is to just stop making your payments and see what happens. The perception among many people is that the lender will just show up one day, and you'll be out on the street, hence the decision for many people to continue making payments - it's what they want people to believe. The foreclosure process in California is black and white, and you can find this kind of info by doing a Google search. No matter what, you are in the drivers seat. Just make sure to discuss your particular situation with your CPA/Real Estate Attorney first. PEOPLE WHO ARE IN A POSITION TO GIVE A PROPERTY BACK TO THE BANK - AFTER PROPER CONSULTATION - ARE IN A POSITION OF POWER. WATCH - AS YOUR LENDER COMES GROVELING - AFTER NOT RECEIVING A PAYMENT OR TWO!
How does that work if you have a 1st and a HELOC?
Hi Joe -
Essentially, process is the same - stop making payments on both. Chances are the second will just slink away in the night as they have no reason to cure the first. The 2nd has to pay off the 1st 100 cents on the dollar before they get dollar one. If there is no equity, there isn't any reason for the 2nd to waste time/money.
Agreed, coming from someone else in the mortgage industry, default now, the sooner the better.
For those of you considering this option think about this. The only reason you should continue paying is 1) you are close to owning your home outright or 2) you are in your dream home and do not plan on moving for a long time. Otherwise there is no reason to continue the struggle.
All efforts until now have been for one thing, to keep asset prices inflated, this to will fail.
Consider this latest bit. BOA using mortgage forgiveness. First it is a pitance of what is sitting on their books. Secondly it does not allow for price discovery or RE comps. All is designed to keep the true value hidden from any potential buyer.
Real wages are dropping and unless RE follows this down the American Dream will be lost for a generation. The industry will be stuck in limbo with no new buyers, no move up buyers and nobody being able to sell.
Right now ... in CA at least ... RE is priced not on the value of the house but on the mortgage debt hanging over it. Shadow inventory is kept off the market to constrain supply and keep prices elevated. All efforts until now have not stemmed the foreclosure tidal wave, or even stopped the downward spiral of RE value.
When you look at it from the banks perspective, not foreclosing allows them to keep the asset on the books at 100 cents on the dollar. Foreclosing forces them to realize that loss and write it off thus dragging all other assets in the area down with it. This is a concerted effort that is doomed to fail.
We have an opportunity here to change this. Don't continue to struggle day to day with a mortgage for an overpriced asset. The best adivice is you are not alone. There are millions of us in the same boat and by that measure banks will be forced to rewrite the metrics they use for lending or turn away millions of potential customers. The same way banks used the 'fogging the mirror' metric to write loans during the boom years. If banks aren't making loans they might as well be out of business. They will be more diligent in using sound lending practices next time but they can just as easily overlook a foreclosure for a certain timeframe.
Save your mortgage payment. Pay yourself. Living rent free doesn't mean go shopping but saving a nice big fat downpayment.
Who needs to work? Stupid idiots. It is so true. It reminds me the last few years prior to the Soviet Union going down to Hell.
Well, nobody can fool the Mother Nature. Not even the pervert Barney Frank going to his synagogue can do anything about it. What a pity.
Does this mean we'll rally into the green today? Next stop SPX 1230!
Oh certainly..I mean the worse the news the longer rates have to stay low.Under no circumstances will rates be raised until we are well into another massive bubble. Someone really needs to end this party either China or bond vigilantes but even with 0% rates banks cannot outrun the losses on the assets especially if nobody is borrowing. What a joke this country has become.
All this is going to do is cause more people to stop paying mortgages. Whoever's bright idea this is certainly is not making friends with the rest of the banking sector. Someone at Bofa should learn that for every action there is a reaction.
Precisely, how do you think the people who have been struggling to pay their underwater, pay option, subprime loan feels knowing it they had just stopped paying 60 days ago the bank would whack 30% off the principal value?
They are so desperate to not have to take losses that they will do anything. They must really be losing it. Between credit cards and student loans and not a job on the horizon + ending unemployment benefits for millions I see no way out of this aside from dilution or nationalization. Then you have off balance sheet assets they need to raise cash for by Jan .2011.
We have ending MBS, 14 months of 0% rates and now they wanna anger people who have been acting responsibly for the past few years? These banks went all in once again last year hoping this was just a normal business cycle and they were wrong. The recovery is 6 months past due now.
You hit that ball right outta the park.
My little corner of the bankruptcy world had written off millions over the last few months.
It's accelerating!
I watched in Florida 2004- 2007 the Banks and RE Appraisers jack-up the prices in a very systematic manner so they could make bigger and bigger loans. Now it is time to pay the piper.
I feel no sorrow for the bankstas, we will all end up paying for it anyway.
Hey, I don't know if this little tidbit has been posted, but CALIFORNIA is extending their version of the "first time homebuyer credit" starting in May. 5% of sales price - up to 10K. And they are getting the money where?
California will be the first taken over by the federal government. The health bill is intended to BK the health insurance companies and the States.
The States better wake up quick or they will be in a form of receivership.
That would totally not surprise me.
California is the poster child for real estate desperation. RRE and CRE devaluation is crushing prop tax revenue. They ratchet down revenue projections on a weekly basis now.
If they were smarter, they'd stretch that homebuyer credit out for 5 years....because by year 2 they'll be defaulting on that too.
Doesn't debt forgiveness like this generate a 1099?
So while BAC may forgive $100,000, the IRS doesn't forgive the $25,000 tax due on the $100k...that they want NOW? Seems to me it woud be better to run, not walk, to the nearest exit.
Congress will find a way to not tax the forgiven amount.
Right. Would you trust them to do it if it were your mortgage?
I believe you would file that between open and honest.
bac should be down 1 buck today...we have criminal organizations bidding up financials
John McCloy has it right. All we have done from the beginning of this mess is kick the can down the road and offer an incentive for homeowners to walk away. What do we have to show for these efforts? More debt, more taxpayer obligations and a HUGE percentage of the American population who have become conditioned to not worry about running up too much debt and who will probably NEVER honor their obligation to repay their debt for the remainder of their lives.
interesting perspective on it..."HUGE percentage of the American population who have become conditioned to not worry about running up too much debt and who will probably NEVER honor their obligation to repay their debt for the remainder of their lives"...
and who was it who evaluated the creditworthiness of the borrower?
and further to those who extended the credit to these "credit worthy" borrowers--under what incentive compensation did you work? Would have have made the same lending decision if the money you were lending was YOUR money?
The debt ponzi scheme was created, intensified and unleashed as a means to make money TODAY without actually thinking about any negative consequences.
Extremely poor risk management by supposedly sophisticated financial institutions who now want to blame the extremely unsophisticated average Joe for spending money "given" to him because "They" told him he could afford to spend it.
lol.
BofA is desperate to do partial write-downs so as not to take the full hit currently...I'm watching it firsthand w. a close relative...their house was in foreclosure since mid-'09 and they moved out in advance of a planned auction of their home in 1/10...BofA has yet to auction and continues to contact me (I'm helping the family member deal w them) to see if I'd like to modify. One real-world example of the shit they're pulling...multiply by 1mil mortgages, actually go through the auction process and take the hit to book value, and I suspect BofA's capital "surplus" might not be so stable. They'll keep pulling these programs out of their asses as long as they can as it allows them to delay the inevitable.
BAC will sell these toxic mortgages to Fannie and Freddie at par, courtesy of the US taxpayer. This is why Geithner pulled his Christmas Eve stunt.
No sweat off Bank of Amicos balls, they will take a tax write off for any forgiveness and receive their most generous bonuses tax free!
Nice! so the STD ridden prostitute is going to be giving out free blojobs??! Line up boys~
If they are doing it with agency loans without wiping out second liens they are making the US taxpayer subordinate to BOA - we are FHA/FNMA/FHR. Investigate now
Are there ever these days where you felt like you were honest, got up early, worked your ass of and were so good in your life that it was sickening - and then it was all for naught and you were just a sucker the whole time?
That's how I'll feel when I drop that next mortgage check w/ the overpayment put towards prinicpal in the mailbox next month.
My butt hurts like I just crapped a habiniero burrito. What bloody rapage of anyone who plays it straight and makes an effort to pay up.
My wife is tasked as a DE-UW for BOA (Formerly Countrywide) central CA. Confirmed the internal program is already being implemented. If not for Modifications..the pipeline is drying up. 4 Loan Officers fired last week..firing most processors and closers next. Underwriters of course will be soon..but they hang on to them till the last because hard to find, and can double up and process and close in a pinch.
Wells Fargo VP we know…said that WFB has 30% of all California mortgages in the delinquent column. 1/3 of the portfolio! Folks…do you know what that means? He also said that basically all of the HELOC are in the late or not performing column. They have no recourse since most of the first are under water. You can bet that Chase and Citi are sitting in the same boat if not worse.
Stock up on your caliber of choice, and get friends and family to purchase the group standard (.223/.308) for common exchange purposes. It’s getting hairy, and fast.
dumb here, what does it mean? in plain english, please, no slang.
caliber of choice? (.223/.308)?
DE-UW?
Well, what it means is that we are scee-rued.
.223 Remington/AR-15
.308 Winchester/Long rifle
DE-UW Direct Endorsement Underwriter/FHA certified.
Sorry for lack of clarity.
FresnoDA
umh, why are we screwed? i would think the bank is screwed.
Thanks for the color. I posted something on that the other day - the mortgage origination business is going to be brutal, tons and tons of lost jobs, we could easily see half of the people in mortgage origination out of work in six months, there is NO business.
Timmary the tax cheat knows word is getting out, (no one is paying on underwater houses) so he wants to set up a good bank/bad bank for the MBS. The Fed has had their fill and quits buying the crap in a week or two. They may have the banks use reserves to get MBS sales off to a rip roaring start. Helicopter Ben says banks are so hopelessly undercapitalized, why even have reserves.
Great PR! Just like "loan modifications" you will not see many of these occur. It's bullshit.
If they forgive $50k the IRS will want $30k immediately and then the homeowner goes under anyway. Pooooof!
Here in California house prices have only declined modestly from the peak in many neighborhoods. The prevailing mentality is still to treat property as a great investment, perhaps the best investment for non-financial professionals. This has to do with the state's low property tax rate (one of the lowest in the country). It also has to do with Asian immigrants who see everything as cheap compared to real estate in Asia.
One indication of such mentality is the significant price rebound in late 2009. Many thought real estate had bottomed. In their minds price/rent or price/income ratios don't matter. Many bought 3 or 4 homes and plan to buy more like they are buying gold.
Given that more than half of the remaining mortgage problem is in California, banks have an additional reason to extend and pretend: there is an army of greater fools waiting in the wings.
At 1 million loans that are delinquent and me using the very conservative 150,000 dollars for each loan amount, it comes to 1.5 trillion dollars conservatively on their books. In all actuality it may be closer to 4 trillion but lets leave it at 1.5 trillion. At a 5% reduction of a 150 thousand dollar mortgage, it comes to be 7500 dollars. Times 1 million loans it's 7.5 billion dollars. There are a few problems that make me think that this is just a PR thing since the Fed is about to take the punch bowl away from the banks. One, time is not on the banks side and the process to get this started and to talk to each and everyone of these homeowners and the time between appealing for a reduction when it was denied etc. etc., will take for the full million homes years to get done. Two, even if it's for 45,000 loans, the bank is still on the hook for the 955,000 other delinquent loans modification or not. Three, if you reduce the principal of these loans what will it do to the debt traunches that where sold to investors as bonds. When they buy these mortgage securities or debt securities, by contractual law they are required to get what has been agreed upon. So if your Gunther bank in Germany and bought 1 billion in mortgage securities, you agreed to have a fixed interest (payments from the servicing of the mortgages) rate to be paid on whatever schedual that has been decided by you and the seller. If the buyer Gunther bank with his billion dollars in paper which he leveraged on his books to other places don't get those payments at the right amount and/or on the agreed upon schedual, then the issuer of the bond is in default and they have to buy back/give back with penalties all the money that was given to them for the bonds. Usually they always buy insurance on this in case of default (AIG anyone), but they can't count on that anymore it seems.
And four, if your house was bought in 2006 or earlier (heck even later). And you bought it for 2.5 million dollars or 725,000 dollars, and it's know worth a million dollars or 300,000 dollars respectively WHO IS GOING TO KEEP PAYING ON A MORTGAGE THAT IS MORE THAN DOUBLE WHAT THE HOUSE IS WORTH. Is the banks going to reduce the principal by 50 or 60 or 70 percent, no chance in hell. They are going to throw you chump change of 7,500 dollars or less to make it look like a good deal and think that you will take it, also I wonder in this reduction if they (I don't know if it's legal or not) will make you sign a paper saying that by allowing this reduction you forgo your rights in regards to the debt/mortgage. Meaning that you can't walk away from it, it follows you.
And the funny thing is that the commercial mortgages are just starting to hit. This is only to pretend and extend until they can figure out a way to another ponzi scheme.
Even if they made it law, can they really send anyone to jail for not paying their mortgage? The house is the collateral. That's why the interest rate is 4-6% and not 20-30% like an unsecured credit card loan.
Garnishing wages will only drive some to get fired. Then what? Do you reignite serfdom?
tried to follow your reason, your pretty nifty with numbers.
JPM is up to no good. a good friend walked from his mortgage because JPM servicing it was charging him and paying the whole property tax bill for the WHOLE building his condo was in. like $10,000. a year in addition paying his own property tax bill of $1000. JPM upped his escrow payment almost $2000. extra a month to collect for additional years of taxes. they wouldn't answer any of his letters. he walked they served him papers took 16 months. sent it into foreclosure and date for the court house steps (recourse state). 6 months later never went thru with the foreclosure. WTF! will JPM just forget about it? original price was $500,000.
This is easy. Even Barney Frank is bitching about all the 2nd lien HELOCs carried at par behind underwater mortgages. If FASB standards for uncollateralized loan revert to realism, BAC and others will need as many 1sts as possible to be at least partially collateralized to avoid total balance sheet implosion.
These fucking assholes, it's now official government policy.
http://finance.yahoo.com/news/Govt-to-unveil-plan-to-shrink-apf-19510432...
Every time I think this shit can't get any more fucked up, they go and prove me wrong.
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