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Banks Commence Wholesale, Unsolicited Mortgage-Debt Forgiveness

Tyler Durden's picture





 

It was just a matter of time before wholesale debt-forgiveness became the primary source of wealth in the US. The time is now. The NYT reports that "big banks are going to borrowers who are not even in default and cutting their debt or easing the mortgage terms, sometimes with no questions asked. Two of the nation’s biggest lenders, JPMorgan Chase and Bank of America, are quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk." To be deemed in "special risk" one needs to simply have an Option ARM mortgage, and be underwater, even if still current on mortgage payments. End result: an up to 50% cut in the actual mortgage obligation. To wit: "Ms. Giosmas, who lives in Miami, was not in default on her $300,000 loan. She did not understand why she would receive this gift — although she wasted no time in taking it. Before Chase shaved $150,000 off her mortgage, Ms. Giosmas owed much more on her place than it was worth. It was a fate she shared with a quarter of all homeowners with mortgages across the nation. Being underwater, as it is called, can prevent these owners from moving and taking new jobs, and places the households at greater risk of foreclosure." Whether this is a strategic step by the banks who wish to avoid tens if not hundreds of billions in fraudclosure and putback related legal costs, charges and reserves is for now unclear, although all signs point to yes. Next up: everyone in America stops paying their mortgage, or demands a 50% haircut on existing debt, now that the example has been made. And in the meantime, banks will somehow continue to keep the mortgages, which they have now cut by up to half, at par on their books following some brand new, thoroughly senseless announcement by the FASB which says banks can mark anything to whatever price they chose in perpetuity. Because otherwise, the TBTF lenders will suddenly find themselves in a massive deficiency on their Tier 1 capital, also known as completely insolvent.

More from the NYT:

“I used to say every day, ‘Why doesn’t anyone get rewarded for doing the right thing and paying their bills on time?’ ” said Ms. Giosmas, who is an acupuncturist and real estate investor. “And I got rewarded.”

Option ARM loans like Ms. Giosmas’s gave borrowers the option of skipping the principal payment and some of the interest payment for an introductory period of several years. The unpaid balances would be added to the body of the loan.

Bank of America and Chase inherited their portfolios of option ARMs when they bought troubled lenders during the housing crash.

Chase, which declined to comment on its program, got $50 billion in option ARM loans when it bought Washington Mutual in 2008. The lender, which said last fall that it had dealt with 22,000 option ARM loans with an unpaid principal balance of $8 billion, still has $33 billion of them in its portfolio.

Bank of America acquired a portfolio of 550,000 option ARMs from its purchase of Countrywide Financial in 2008. The lender said more than 200,000 had been converted to more stable mortgages.

More details on the example that prompted the NYT article:

Ms. Giosmas bought her two-bedroom, two-bath apartment north of downtown Miami for $359,000 in early 2006, according to real estate records. She made a large down payment, but because each month she paid less than was necessary to pay off the loan, her debt swelled to about $300,000.

Meanwhile, the value of the apartment nosedived. By the time Ms. Giosmas got the letter from Chase, the condominium was worth less than half what she paid. “I would not have defaulted,” she said. “But they don’t know that.”

The letter, which Ms. Giosmas remembers as brief and “totally vague,” said Chase was cutting her principal by $150,000 while raising her interest rate to about 5 percent. Her payments would stay roughly the same.

A few months ago, Ms. Giosmas sold the place for $170,000, making a small profit. Having a loan that her lender considered toxic, she said, “turned out to be a blessing in disguise.”

And so America is now well en route to another spike in class warfare tensions, as has been the default case for the past two years between those who act in a prudent financial way, and everyone else, who are now getting bail outs from the same banks that were bailed out by those stupid enough to pay US taxes in the first place:

The banks say cutting mortgage balances would be unfair to borrowers who remain current as well as impractical because so many loans are securitized into pools owned by investors. Bank of America’s chief executive, Brian T. Moynihan, told the attorneys general in April that cutting principal for current borrowers would send the wrong message to all those who have struggled to pay their bills. His counterpart at Chase, Jamie Dimon, bluntly said it was “off the table.”

Having an option ARM loan, however, apparently qualifies the borrower for special help. The loans, with their low initial payments and “teaser” interest rates, were immediately popular with buyers who could not afford or did not want to pay the soaring prices on houses. The problem was, eventually the rate would reset or the loan balance would have to be paid in full. “Nightmare Mortgages” they were called in a 2006 BusinessWeek cover piece.

Lastly, to all those who were predicting an Option ARM housing market collapse once loans go from Adjustable rate to fixed, the banks now have an answer.  And it is wholesale mortgage debt reduction.

Option ARMs were never quite as bad as predicted, partly because the crisis pushed down interest rates so far that the resets were relatively mild. Many owners did default on them, but others, like Ms. Giosmas, were quite happy to pay less for years than they would have under a conventional loan. She used option ARMs on her investment properties too.

“They saved me,” she said. “Why would I want to pay a lot more every month? I’d rather have it in my pocket.”

Not surprisingly, this will be the same rhetorical question posed next by everyone who still has a mortgage, and not only by those, roughly 28% of all, who are underwater on their mortgage. Which means that wholesale mortgage reduction for everyone in America is next on the docket. Which also means that the "rent" component of personal income is about to surge from the current $50 billion annualized to well into the triple-digits, or about 1-2% of GDP, just enough to offset recession yet again.

And that's how you create wealth in the modern, centrally-planned USSA.

 


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Sun, 07/03/2011 - 12:19 | Link to Comment Mr. Anonymous
Mr. Anonymous's picture

Maybe I'm stupid for thinking Ms. Giosmas is an idiot, but doesn't that 'forgiven' 150,000 loan go from likely being a 'no-recourse', or at least bankruptcy dischargeable debt to a private bank, to an unexpungeable, debt slavery bond to the United States treasury via the IRS?

Isn't this how 'forgiven' debt is treated in US tax code?

Sun, 07/03/2011 - 13:25 | Link to Comment glenlloyd
glenlloyd's picture

Well they aren't doing this out of the kindness of their hearts, there is some other underlying motivation and it could very well be conversion of non-recourse to recourse loans.

I would be very leary of anything rewritten voluntarily by tbtf banks.

Sun, 07/03/2011 - 13:30 | Link to Comment Herbert_guthrie
Herbert_guthrie's picture

I agree.

Either misdirection play or squeezing out a few more dollars from the hopeful before foreclosure?

Sun, 07/03/2011 - 14:24 | Link to Comment random shots
random shots's picture

Loans that are seeing principal reductions, like the one in the NYT article, have already been written down to "Fair Market Value" when they were first acquired. So a $500K outstanding loan was written down to $350K for reporting purposes.

However, they still required the owner to pay the $500K loan. Banks are now providing principal reductions to owners because they figure they can no longer milk the borrowers who are current (default risk is rising).

They offer principal reductons to owners to keep them chained to their mortgages. Banks get good PR from the sheepies without having to take additional writedowns

Sun, 07/03/2011 - 14:43 | Link to Comment Burnbright
Burnbright's picture

Ding Ding, we have a winner. Also as stated above I imagine it has to do with rewriting a contract so that it makes better terms for the bank.

Sun, 07/03/2011 - 15:28 | Link to Comment chumbawamba
chumbawamba's picture

Agreed.  And also, this gets everyone's mind off the foreclosure fraud debacle.  I guess now we'll forget that our homes are hopelessly encumbered by fraudulent securitization and we'll just go on pretending that it'll all work out because we have title insurance.  The banksters start handing out candy and everyone swoons.

You know, if people wised up we could turn this scam around on the banks.  If we formed large unions amongst mortgagees based on originating bank and then agreeing to go on a payment strike until more candy was dispensed, we might actually be able to turn the tables.  We could be like sluts leading the banks around by their horny cocks, telling them they can't bend us over until they give us some candy.

MOAR KANDEE.

I am Chumbawamba.

Sun, 07/03/2011 - 16:01 | Link to Comment Troll Magnet
Troll Magnet's picture

I'm a little confused by this part in the article:

Ms. Giosmas bought her two-bedroom, two-bath apartment north of downtown Miami for $359,000 in early 2006, according to real estate records. She made a large down payment, but because each month she paid less than was necessary to pay off the loan, her debt swelled to about $300,000.

So, if your monthly payment is say $1,000 but you pay $500, do banks still consider you "current" on the loan? 

 

Sun, 07/03/2011 - 16:05 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

"said Ms. Giosmas, who is an acupuncturist and real estate investor."

So we're bailing out real estate investors now, are we?  And who do I mean by 'we'.  Why I mean taxpayers and savers.

The banks should have gone under and MsGiomas should have coughed up the property directly to the market place.  Fuck this.

Sun, 07/03/2011 - 16:13 | Link to Comment Thorny Xi
Thorny Xi's picture

And those of us who paid cash for our homes after 2002?  Or paid off mortgages?  Who find our property reassessed for 50% less than it was "worth" last year?  Where's our check from the government, FASB, a bank or somebody to make US "whole?"

 

F this!

 

 

Sun, 07/03/2011 - 16:40 | Link to Comment Popo
Popo's picture

It's too late for you.   But for those who still have a mortgage, the lesson is clear:   Stop paying.   Now.

Mon, 07/04/2011 - 00:06 | Link to Comment Troll Magnet
Troll Magnet's picture

I understand your underlying sentiment but I cringe whenever someone says "Stop Paying Now" because you're basically telling mortgage holders to take a gamble that they will somehow be forgiven and come out alright when in fact they could lose their homes, credits destroyed, lives ruined, etc, etc. 

Mon, 07/04/2011 - 00:21 | Link to Comment nope-1004
nope-1004's picture

You should change your name from Troll Magnet to "Scared Bankster Troll".  Appreciate your bankster insight, but the truth is everyone needs to stop paying their mortgage, now!  The bait and switch they are pulling by further entrapment of those that have a mortgage is clear.

Remove the chains people.  Rid the banks of their grip on you and STOP paying your mortgage.  A precedent has been set.

The outcome will be a new market, clean, no bank manipulation, with no more phony funny money games.

Mon, 07/04/2011 - 07:51 | Link to Comment What does it al...
What does it all mean's picture

1.  The timeline on this story is old.  it is back in 2010, or before.

2.  This could very well be a planted story in NY Times to prevent the housing from totally collapse...  (Except that it might have the opposite effect and it might just collapse anyways.)

3.  Have you guys ever though that this could be a disinformation tactic set up by the banks?

Mon, 07/04/2011 - 08:48 | Link to Comment Troll Magnet
Troll Magnet's picture

Yeah, that is IF you can get every single homeowner with a mortgage in America to Stop Paying Now.  Keep dreaming.

I have a home with a fair amount of equity in it and I also have a mortgage.  I guess I can Stop Paying Now just so a bunch of anti-banksters (myself included) can pat me on my back and tell me that I did the right thing but will you compensate me if I lose my house? 

Mon, 07/04/2011 - 04:52 | Link to Comment Popo
Popo's picture

Bad credit does not equal "lives ruined".  

Don't forget:  The banks ***DESPERATELY*** need you to borrow.   Without you borrowing,  there are no banks.

Let them tell us all we have "bad credit".

Then what?

Mon, 07/04/2011 - 09:00 | Link to Comment Troll Magnet
Troll Magnet's picture

In a perfect world you can enlighten everyone and get every single person to revolt against these criminals but that's not the world we live in.  Those who are casually telling people to just stop paying mortgage is basically telling people to jump out the window and see if you can land on your two feet. I mean, shit, you're talking about people's wealth here.  Some, myself included, have equity and money invested in our homes.  You think people like me are willing to take a gamble that my not paying mortgage will pay off in the end?  You're dreaming. 

Until I see banksters in handcuffs and laws being enacted to ameliorate this fucked up situation, I'm taking no chance that's going to cost me my home. 

Sun, 07/03/2011 - 17:02 | Link to Comment trav7777
trav7777's picture

what about those of us who GTFOd and now rent?

Where the fuck is MY check?

Sun, 07/03/2011 - 17:26 | Link to Comment Bananamerican
Bananamerican's picture

same here...

we sold and took our chips off the table in late '06.

This would still have the effect of lowering prices though wouldn't it?

Lawd knows we've been waiting for supports to get kicked out....

 

Sun, 07/03/2011 - 21:19 | Link to Comment Careless Whisper
Careless Whisper's picture

 

 

OK there's 347 comments here right now and I haven't read any of you drama queens do the simple math. Enough with the MERS and who owns my note routine. This re-fi from Chase is very simple. Completely done to benefit Chase. The lady had an option arm; she was paying 1% interest, with the rest of the interest - probably another 6%, being accrued and added on to the principal - negative amortization as they say. After 5 years she would owe about $390,000 on her $300,000 mortgage. Her condo currently being worth $150,000; who knows what it will be in 5 years. At that point she mails the keys to Chase. Instead of receiving 1% per year on $300,000 in interest ($3,000), Chase now gets 5% on $150,000 ($7,500) and no foreclosure and the loan stays performing. Plus the new loan docs will be more legit as Chase has discontinued using MERS entirely.

 

Sun, 07/03/2011 - 21:43 | Link to Comment swmnguy
swmnguy's picture

You win some sort of prize.  A calculator or something.  Thanks for stating that clearly.  I hadn't quite figured out where the hook was yet.

Sun, 07/03/2011 - 22:08 | Link to Comment tip e. canoe
tip e. canoe's picture

principal goes down

but above water, interests

Chase free money yo

Sun, 07/03/2011 - 21:09 | Link to Comment Attitude_Check
Attitude_Check's picture

You "win" as the prices of housing accelerates downward.  Did you see she sold her property for $170K after the mortgage principle was dropped.  Now imagine the downward pressure on housing prices if this becomes wide-spread.

Sun, 07/03/2011 - 22:30 | Link to Comment dark pools of soros
dark pools of soros's picture

anyone with a clear titled, fixed rate loan won't get anything either - don't be surprised, this is the era of gamblers never lose and playing safe costs twice as much

Mon, 07/04/2011 - 07:21 | Link to Comment csmith
csmith's picture

Exactly. This is simple damage control on the craziest loans with open-ended losses attached. Pick-a-pay borrowers who simply say 'tack it onto principle" every month are essentially INCREASING their loan amount each time they do so, and the eventual loss.

Sun, 07/03/2011 - 17:46 | Link to Comment foofoojin
foofoojin's picture

you showed that loss on your taxes? right? spead the lose out over several years? right? right?

 

Sun, 07/03/2011 - 19:43 | Link to Comment Anonymouse
Anonymouse's picture

Exactly.  I paid off my mortgage in 2008, as I made my personal balance sheet even more conservative than it had been.  What a fool I was.  It never occurred to me that all I had to do was increase the risk to get a substantial portion forgiven.

Sun, 07/03/2011 - 16:09 | Link to Comment Solarman
Solarman's picture

It was a neg am loan which allowed her to pay less than she owed.

Sun, 07/03/2011 - 16:51 | Link to Comment MIDTOWN
MIDTOWN's picture

The banks were offering interest only lines of credit secured against the real estate, I opened a 10 year interest only line to purchase a condo. This was a great vehicle for investors to acheive positive cash flow.  When prices began to fall, I sold the condo. This type of loan is a huge risk in a declining market.

Sun, 07/03/2011 - 17:17 | Link to Comment piceridu
piceridu's picture

It's called a pick-a-pay loan...you can choose as one of the options to pay a neg am and the neg am gets added to your principle amount each time you choose that pay option.

Sun, 07/03/2011 - 22:13 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

If the borrower is payng less than the interest, the unpaid interest is added to the principal balance.

Say a mortgage payment is $600.  At this point in the loan monthly interest on the current balance is $500 with $100 going to principal. 

But the loan allows a lower monthly payment in the first 3 years, say $300 for example.

The $300 payment all goes toward interest, leaving $200 interest unpaid.  The $200 unpaid interest is added to the principal balance.

Mon, 07/04/2011 - 09:49 | Link to Comment FEDbuster
FEDbuster's picture

The ability to pay a partial or no payment at all was one of the selling points of the "Option ARM".  It was truly one of the craziest mortgages during the height of the boom.  Negative amortization made it illegal in some states. 

What we need to be fair is a massive debt "Jubilee", in which all debts in society are eliminated.  Not these one off gifts to certain mortgage classes.

Sun, 07/03/2011 - 22:02 | Link to Comment tip e. canoe
tip e. canoe's picture

i prefer the term "self-organized collective of autonomous individuals" over "union", but that's a spectacular idea.

Americons love KANDEE, you know.   i want mine in root beer barrels.

Sun, 07/03/2011 - 18:46 | Link to Comment Milestones
Milestones's picture

Frankly, I'm kinda caught out here in left field and need some help or some one else does. As I see it there are two totally seperate problems involved in this whole scum bag mess. One the problem with the MERS involvement in the individual contracts and the other being the issue of securitaziation of this said contracts. The questionable actions of MERS which is a state issue as these individual contracts are a state action via county jurisdiction and the and the issue of rolling into large commercial papers and sold under the watchful (ha) eye of the SEC, a Federal agency as well as all the ABC  agencies of the Federal gov'n.

One, How in the hell are all these apparent air head State A.G.'s going to settle anything in the name of the individual property owner in their state? Article ! Section 10 (1) says Powers denied individual states. (1) No state shall enter---pass any bill of attainder or ex post facto law, or law impairing the obligation of contracts---.

In a word, if I wish to tell my mortgagee to go pound sand the D.A. has no authority to bind me; it is a contract. Further, if these people who are holding this securitized bundle of mortgages or the sellers of those securitized notes don't have my promissary note, no-one can forclose on me and they can all get fucked.

It sure strikes me that these large banks have some very large problems that this little gimmick plan is nothing more than puff the magic dragon dressed up in a pin stripped suit.

Maybe I'm kinda dumb and am tracking this wrong, but I think I'd have to tell some one to show me a lot more than what I've seen.       Milestones

 

Sun, 07/03/2011 - 20:23 | Link to Comment MachoMan
MachoMan's picture

I'm going to make this as clear as I possibly can and hopefully no one else revisits the issue again, ever...  The state A.G.s can only bind their respective states to an agreement and NOT you.  As a result, in general, your vested rights cannot be effected.  One notable exception is with procedure...  they can change the laws for how a particular cause of action is brought or, alternatively, when a right to bring a cause of action accrues...  I'm having a hard time picturing any scenario in which said exception could be utilized in any material manner for mortgagors.

Sun, 07/03/2011 - 21:05 | Link to Comment FreeNewEnergy
FreeNewEnergy's picture

Milestones, your'e dead on. Banks are desperate, but this latest maneuver was designed to just keep suckers paying. There's blood in the water and sharks are circling...

Mon, 07/04/2011 - 06:25 | Link to Comment Mentaliusanything
Mentaliusanything's picture

Yes - Banks bending over to help the little people. Please

or

as a little robot was want to say

"warning Will Robinson Warning"- its all to much really!!!!!!!!

BTW congrates Chumba ya survived 1 year and 52 weeks (WTF) 

Oh well ----- Happy fucking 2nd Birthday from Auzztrralia 

Sun, 07/03/2011 - 16:04 | Link to Comment Urban Redneck
Urban Redneck's picture

Doesn't BofA have a loss sharing agreement with the US government- so the government will make BofA whole on the initial write down amount, and BofA then gets a new length of rope with which to re-bond the debt slave (absent any of the MERS sideshows)?

Sun, 07/03/2011 - 16:28 | Link to Comment random shots
random shots's picture

Tyler,

Wholesale debt forgiveness has been going on since at least 2009. Nothing new other than Zero Hedge is now getting around to talking about it.

"Wells Fargo Cuts as Much as 30 Percent in Principal" (Dec 2009)

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aOg9hp8gv3i8

Sun, 07/03/2011 - 21:01 | Link to Comment bankonzhongguo
bankonzhongguo's picture

Bullshit! 

I have yet to meet, hear or otherwise see any document related to California principal write-downs or a mortgagor.

Its like the Easter Bunny and Sasquatch.

If its everywhere, then please point to a link on the Wells Fargo website.

Not some plant story in Bloomberg or the NYT.

My best friend is in it deep with Wells Fargo for months on Merced County property. 

No discussion of mortgage reduction whatsoever.

 

Sun, 07/03/2011 - 22:15 | Link to Comment random shots
random shots's picture

Because Tyler has blown this story out of proportion. Tens of thousands of principal write downs (from the NYT article) versus 11 million mortgages underwater (CoreLogic data) is at most 1% of loans being modded.

As for Wells, google Wachovia MAP loan mods to see people discussing principal reduction offers.

Mon, 07/04/2011 - 02:19 | Link to Comment Widowmaker
Widowmaker's picture

I agree.

What is the big secret?

Money for nothing -- now that's a laugh. 

To all those that were bailed out, including the unsuspecting - YOU'RE FUCKING WELCOME.

Meanwhile, the rest of us pay taxes on top of taxes...

Where's my $150k bonus for a bank's speculative failures?!

Mon, 07/04/2011 - 10:03 | Link to Comment FEDbuster
FEDbuster's picture

If you are in the AZ legislature, and you can drop a bill that would make it harder to foreclose on citizens of your state, then the banksters will cut your mortgage in half:

http://mandelman.ml-implode.com/2011/04/az-rep-seel-drops-amendment-requ...

Sun, 07/03/2011 - 18:19 | Link to Comment Coke and Hookers
Coke and Hookers's picture

Exactly. The banks calculate how much writedown they need to 'give' to keep people from defaulting. This is the equivalent of a plantation owner increasing the food ration just enough to keep the slaves from revolting or running away. The plantation ain't gonna manage itself.

Sun, 07/03/2011 - 13:42 | Link to Comment Mr. Anonymous
Mr. Anonymous's picture

Oh, you can bet your bippy these are going from no-recourse to recourse, that's the minimum in the poker game.  But I think foolish, imprudent people like Ms. Giosmas are gonna find a fat tax bill to go with their new no-recourse debt.

Sun, 07/03/2011 - 14:51 | Link to Comment A Man without Q...
A Man without Qualities's picture

Doesn't the loss on the property offset the gain on the loan?

Sun, 07/03/2011 - 14:57 | Link to Comment graspAU
graspAU's picture

IMHO - From the borrower's perspective the debt forgiveness is a gift in the year it happened. A loss on the property would only happen when you sold and moved out. Lots of people will stay. 

Sun, 07/03/2011 - 16:39 | Link to Comment sleepingbeauty
sleepingbeauty's picture

She did sell hers, but I am with you that many won't.

A few months ago, Ms. Giosmas sold the place for $170,000, making a small profit. Having a loan that her lender considered toxic, she said, “turned out to be a blessing in disguise.”

I never did get that about the states. If you get a loan amount forgiven for any reason, it is considered income. So when you go into bankruptcy or credit proposal or whatever it is called you have to default for more than needed to pay the IRS at the end of the year.

Sun, 07/03/2011 - 19:46 | Link to Comment Boop
Boop's picture

Not in the case of bankruptcy - at least in the situation where the debt is discharged rather than defaulted upon.

Mon, 07/04/2011 - 14:23 | Link to Comment eaglefalcon
eaglefalcon's picture

>quote

I never did get that about the states. If you get a loan amount forgiven for any reason, it is considered income. So when you go into bankruptcy or credit proposal or whatever it is called you have to default for more than needed to pay the IRS at the end of the year.

>quote

 

That is technically not correct.  The forgiven debt is only taxable TO THE EXTENT MS GIOSMAS IS SOLVENT at the time of the forgiveness.  Let's say, before the bank forgives some of her mortgage debt, Ms Giosmas owes the bank 300K, and the house sells for 170K in a fair market, and Ms Giosmas owns 30K in bank deposits and other assets, she is INSOLVENT by

170K + 30K - 300K = -100K

Now let's say the bank forgives half of Ms Giosmas' balance, which is 150K.  Now Ms Giosmas' net worth becomes positive, and she is SOLVENT by 50K (150K -100K = 50K).  Therefore she needs to pay IRS tax on part (50K) of the forgiven debt instead of the whole amount (150K)

However, Ms Giosmas real financial situation is probably not as rosy and described above.  Let's say she owes 30K of medial bills and 21K credit card debt.   Then even after the forgiveness she is INSOLVENT by 1000 dollars.  In that case, she doesn't have to pay any income tax at all on the 150K wirte-off

She needs to file Form 982 (Reduction of Tax Attributes) with IRS.  Tax attributes is sort of like tax credit but much more complicated.  But since Ms Giosmas like most people doesn't have any tax attributes anyways, she doesn't lose anything on that deal

Sun, 07/03/2011 - 16:03 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

"But I think foolish, imprudent people like Ms. Giosmas are gonna find a fat tax bill to go with their new no-recourse debt."

Foolish and imprudent?  She may have been foolish and imprudent, but now ... winning.  Fat tax bill?  Guess again.

Sun, 07/03/2011 - 23:19 | Link to Comment snowball777
snowball777's picture

She pocketed $20k over the reduced mort amount,...but will eat the taxes on her $150k in principal reduction which is considered as income for (drumroll) ~$36k of tax liability.

Know anyone who might benefit from an upswing in tax revenues about now? Meredith do!

Sun, 07/03/2011 - 16:48 | Link to Comment macholatte
macholatte's picture

 .....foolish, imprudent people like Ms. Giosmas....

 

Maybe not so foolish or imprudent. She gets $150k and all I get is to stare out the window. Where's MY check?

Oh, and that income tax business, that will be forgiven too.

My guess is that most of the banks that are telling people about the loan forgiveness are merely in the servicing business now and have sold nearly all of their portfolio to Freddie, Fannie, the Fed or etc. The Fed will buy up all the bad paper and I, the American tax payer, gets fucked again, and again, and again. Just like that silly Energizer bunny.... the screw job keeps on going.

What was that definition of kleptocracy again?

 

Sun, 07/03/2011 - 20:02 | Link to Comment sun tzu
sun tzu's picture

There's no tax bill resulting from mortgage debt forgiven from 2007-2012

Sun, 07/03/2011 - 13:44 | Link to Comment Amish Hacker
Amish Hacker's picture

Or it could be that the banks have so royally screwed up the chain of title with robo-signing that they currently have no legally enforceable claim on the property. Better to start over again, forgiving half the original amount of the mortgage, but with a new note that the borrower concedes is legitimate.

Sun, 07/03/2011 - 13:51 | Link to Comment Mr. Anonymous
Mr. Anonymous's picture

That's a good point, but I thought the Bankstas were working with the Feds and States Attorney Generals to develop a workout for the MERS/Robosigning issue that's bankster friendly. Am I wrong on this point?  Because certainly what you're saying makes a lot of sense if I am and would portend some fascinating capital rebalancing issues if true.

Sun, 07/03/2011 - 17:44 | Link to Comment Amish Hacker
Amish Hacker's picture

imo you are not wrong that the mortgage mess will be resolved in a way that is Banksta-friendly, but I think the banks fear the legions of downstream MBS counterparties more than they fear the homeowners. Potential expenses from putbacks and litigation expenses would exceed losses from partially defaulted/renegotiated mortgages. Lenders won't foreclose, because then they would be stuck with a house worth only its current market value, not the original value of the loan. And above all, the Bankstas would like to avoid criminal charges of fraud, which are certainly called for here, though I doubt we will ever see them, for the reasons you outlined above.

Sun, 07/03/2011 - 19:13 | Link to Comment Janice
Janice's picture

Funny that you say that....After being lobbied by the big banks, the Florida Legislature passed a law which basically states that if a mortgage is transferred in a business transaction, no recording of the individual notes is necessary.  Thanks Florida Legislature, for denying me my property rights and depriving my local government of much needed funds. 

My original mortgage was with AMRO, then Citimortgage bought the mortgage arm of AMRO.  Since it was a business transaction, no note re-assignment was necessary (Thanks again dumb-ass Florida politicians!).  The AMRO MBOs were packaged and re-sold to investors.  I have asked CitiMortgage for a copy of my original note, but all they send me is a copy that says "this is a copy" with some lady's signature.  They have sent me the exact same "copy" three times, each one stamped "this is a copy" and the same signature in the exact same place.  I called and asked if they have my original note and I get..."we are a servicing agent".  I don't think they have my note as I believe that it went with the original MBS transaction to investors.  I don't even think CitiMorgage has the "rights" to my money and they don't know who does.  However, since I caused a stink, every month we get a Fed-Ex package delivered to our door requesting that we refinance for "better rates". 

I think the same as you do.  CitiMortgage cannot prove that the "own" my note, and that there may be several future claims to my mortgage/property.  I also believe that they want folks to re-negotiate the mortgage documents to cover this shit up. 

My local government Clerk of the Courts is still ignorant...I'm waiting on the government employees to catch up and wise up...if they ever do.

Meanwhile, we sit tight waiting for the learning curve to kick in.

 

Sun, 07/03/2011 - 21:09 | Link to Comment dogbreath
dogbreath's picture

ding ding ding WE HAVE A WINNER!!    and the new note will be dutifully registered at the appropriate  county registrar

Sun, 07/03/2011 - 21:12 | Link to Comment dogbreath
dogbreath's picture

and the MBS holders will negotiate in the back rooms away from the prying eyes of ZH and others whereby the notes will have semi legitamate security in the form of the new registered notes on the properties

Sun, 07/03/2011 - 13:45 | Link to Comment ibjamming
ibjamming's picture

The banks know that their MERS system is illegal making ALL the mortgage notes transferred through it garbage.  The courts are ruling...no note...no foreclosure.  The banks know that the ones they're already foreclosing on will probably get away scott free.  They want a NEW...LEGAL...note with the "maybe they'll fight us" crowd to lock them in with a good note.  Half the money is better than no money.  The rest are honorable and made an agreement to pay...so they will...so the bank won't offer them a deal.  IF they call, they'll get one too.  I'd bet anyone sending a request for the note will get an offer to refinance.

Sun, 07/03/2011 - 16:52 | Link to Comment DrunkenMonkey
DrunkenMonkey's picture

We have a winner.

Sun, 07/03/2011 - 13:50 | Link to Comment disabledvet
disabledvet's picture

Fear of "the Salami" aka "Uncle Salami" aka "Uncle Sam."  The government bailed out the banks not to save the banks but to save the government.  I see nothing empirically that says "the government" in the generalized FEDERAL sense of the word can't do anything it wants.  Interest rates are at or near zero.  Borrowing continues apace and un-abated.  Billionaires keeping "billionairing", the war keeps "mongering"--clearly there are conflicts in the budgetary "cake cutting" contest, but the slabs keep getting lopped off and served.  taxes remain stationary with tax returns still coming with refunds, there are no shortages and what the Japanese call so perfectly "shocku's" save for ironically enough those in Japan and Europe--the other largest economies in the world and the USA's primary competition for the last 40 years.  There could be an oil "event"--as a hopeful bear in this space (key word HOPEFUL) the anti-market move of collectively opening up various SPR's by the oil consuming nations i found alarming.  The price has been falling all summer.  Should I worry now?  A sudden move in response to this collective action to say $150 a barrel would be devastating in my view--and certainly to me personally and my industry in general.  We're hanging by a thread as an industry right now as it is...Still "i have seen the future" and "it's just a matter of time."  Of course matters of time actually feel like this:

http://www.youtube.com/watch?v=gtgP0EQmWVk&feature=player_detailpage

Sun, 07/03/2011 - 21:12 | Link to Comment rufusbird
rufusbird's picture

Nice read...

Sun, 07/03/2011 - 16:23 | Link to Comment oldman
oldman's picture

The most profound post of the week

I'm too happy from the music to read anymore

Thanks, disabled

Sun, 07/03/2011 - 17:36 | Link to Comment disabledvet
disabledvet's picture

you're welcome!  "make some money."  that's the only avenue for "payback" i've ever seen available to "we the sheeple" (of which i am a card carrying member.)  needless to say none of them care about jobs--or at least your job or mine--i'm still curious about why they keep targeting vets, though.  our numbers are growing massively--and so are their wars and committments to said wars.  where's the peace in any of this oh world of "fair, balanced and unafraid"?

http://www.youtube.com/watch?v=TR5Qo4Pnc94&feature=player_detailpage

Sun, 07/03/2011 - 13:54 | Link to Comment ISEEIT
ISEEIT's picture

This smells like Chicago. Follow this story far enough and you land at Holder/Geitner and the entire Leftist establishment desperate to save the punk ass obama. Obama is about as authentic as a paul krugman 'editorial'. Obama is about as credible as Keynesian economic theory.

That doesn't matter though to the Leftist thugs who decide that reality is what they pretend it is. This crap is just the beginning. Watch what happens these next 16-17 months. Will blow your mind. Couple desperate immoral extremist with power and black swans will be as common as seaguls in Seattle.

Sun, 07/03/2011 - 14:15 | Link to Comment Mr. Anonymous
Mr. Anonymous's picture

No, it doesn't smell like Chicago.  There's no grand 'Leftist' scheme here.  It's just more Washington D.C./Bankster BS.  The same crap that has been going on since 1913 and before.  As long as we let them continue to divide and conquer us along the lines of Left and Right, the true masters shall continue to grow their power unabated. One world bound to the banksters and global elite.

Sun, 07/03/2011 - 16:04 | Link to Comment Troll Magnet
Troll Magnet's picture

Wake up, man.  There is NO left establishment in America.  Democrats?  Puh-leaze...

Sun, 07/03/2011 - 16:28 | Link to Comment oldman
oldman's picture

No, TM

What the dudes call 'Left' is to the right of Reagan, who was a leftie

there hasn't been a Left in the US since Kent State

Sun, 07/03/2011 - 20:06 | Link to Comment sun tzu
sun tzu's picture

What you LSD dinosaur hippies call "extremist right winger" is anyone to the right of Marx.

Sun, 07/03/2011 - 23:25 | Link to Comment snowball777
snowball777's picture

Anything short of child labor and a corporation with a monopoly market position on clean air is "socialism" to you vapid troglodytes.

Your methhead friend from the Dept of the Interior says your booty bump is ready, "sweetcheeks".

Mon, 07/04/2011 - 02:25 | Link to Comment Yen Cross
Yen Cross's picture

 +1 The )inverse(converse was a nice touch!  

Sun, 07/03/2011 - 20:04 | Link to Comment sun tzu
sun tzu's picture

You mean anytime one of your lefty leaders shows his true colors, he's no longer a lefty. Yet you lefties keep voting for Pelosi, Reid, Obama etc, all millionaires off your backs

Sun, 07/03/2011 - 21:55 | Link to Comment oldman
oldman's picture

I was just kidding but using truth in doing so. I had no idea anyone would reply to such an antiquated thought as 'left' and 'right' this late in the dinosaur age.

Really, Sun Tzu, do you care what policy is used to work out a solution to something that has its own life and is out of human comprehension, let alone any human capacity to 'manage'?

We are so far out of this-----how about 100 nuclear plants with a 40 year life beginning to collapse---let's get together and stop calling names unless we are just playing.

there is no end time for the universe, only for humans, all other species and our mutual habitat-----this has been the only true problem during my lifetime and still we are just playing around calling each other 'rightie' or 'leftie'. WE ARE THE SAME, Brother

Oh, I apologize for my vehemence---there is no reason to get so excited about something no one comprehends----sort of sorry I responded

Mon, 07/04/2011 - 01:10 | Link to Comment oldman
oldman's picture

double-post

Mon, 07/04/2011 - 02:23 | Link to Comment Yen Cross
Yen Cross's picture

 Sun Sue. You got 777,ed.

                                     YEN

Sun, 07/03/2011 - 14:24 | Link to Comment random shots
random shots's picture

See Above Post

Sun, 07/03/2011 - 14:58 | Link to Comment Michael
Michael's picture

If you knew for a fact there will be a crash of the bond, stock, money markets, and dollar crisis by midnight on Black Monday October 10th 2011, wouldn't you want to take down as many son of a bitch homeowners that bankrupted your company with you?

And to rub it in, you knew they had money because they were paying the full amount on their loan before modification.

Sun, 07/03/2011 - 15:30 | Link to Comment Jack Napier
Jack Napier's picture

Hmm, an interesting and plausible theory Michael. The only thing that doesn't add up to me is that they enticed people into these loans. People who did the smart thing by going with 30 year fixed mortgage loans aren't getting any help. Seems like class warfare to me. Anybody with an ARM would probably have been destined to default even if they are still above water, because you don't get to have lots of money by making stupid decisions like taking a loan that can have any interest rate the bank chooses. The people who are truly not at risk of default get no breaks.

Sun, 07/03/2011 - 15:51 | Link to Comment Tedster
Tedster's picture

Remember reading somewhere, Option Arm loans were a perfectly legitimate product, for people who could afford to pay cash outright for a home. More of a convenience than anything, and they were able to use their money in presumably more profitable ways. It's really amazing that this kind of thing was pushed on the Great Unwashed. What's next, loans denominated in foreign currencies?

Sun, 07/03/2011 - 19:09 | Link to Comment WonderDawg
WonderDawg's picture

"What's next, loans denominated in foreign currencies?"

Take a look at Hungary if you want to see how that worked out for them.

Sun, 07/03/2011 - 19:51 | Link to Comment Boop
Boop's picture

Or Iceland.

Sun, 07/03/2011 - 16:49 | Link to Comment sunnydays
sunnydays's picture

They are probably doing it due to their fraud and the people who they are forgiving the debt may be ones that would challenge their rights of foreclosure.  Banks are not doing anything for others.  They are doing it for themselves.  They will probably have all kinds of small print in the new contracts saying you can never fight us in a foreclosure etc. 

 

People need to look this gift horse in the mouth - because it is really a Trogan horse!  The people are going to be screwed one way or another!

Sun, 07/03/2011 - 13:40 | Link to Comment LetThemEatRand
LetThemEatRand's picture

Why won't I be surprised if we learn soon that the tax code is going to altered in order to prevent this outcome?   The banks are obviously doing this to benefit themselves (presumably they figure they lose less than if the homeowner defaults), and everything that benefits the banks eventually becomes the law of the land.

Sun, 07/03/2011 - 13:43 | Link to Comment Mr. Anonymous
Mr. Anonymous's picture

+1

Sun, 07/03/2011 - 16:17 | Link to Comment Thorny Xi
Thorny Xi's picture

IIRC, tax code has already been altered, in the Recovery Act, to prevent tax liability on the difference between loans due and amounts collected after foreclosure sales ... so you can bet this little detail is a done deal.

Sun, 07/03/2011 - 13:49 | Link to Comment ibjamming
ibjamming's picture

Why?  The government wants it's money too.  Of course the bank won't tell you you'll have a big tax bill.  Maybe those making under $50,000 will get a tax break.  I don't think they'll just forgive it...that will REALLY piss off those of us who buy with cash!

 

I mean WTF?  I paid the same price as he did...yet his price is now getting cut in half?  where is MY deal?

Sun, 07/03/2011 - 13:54 | Link to Comment Mr. Anonymous
Mr. Anonymous's picture

Zactly.  Can't really see how any of this can end well.

Sun, 07/03/2011 - 13:57 | Link to Comment LetThemEatRand
LetThemEatRand's picture

Good point.  They will probably continue to make the "gift" taxable until word gets out and people stop accepting the write-downs.  They do, after all, want to screw as many people as possible for as long as possible.

Sun, 07/03/2011 - 14:01 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

How exactly is this income? Why would there be taxes on it? The property market value dropped, it didnt stay the same.

Sun, 07/03/2011 - 14:07 | Link to Comment LetThemEatRand
LetThemEatRand's picture

I'm no tax expert, but I don't think the home value matters. If I loan you $1000 and then out of the goodness of my heart I tell you "don't worry about," you just got a $1000 taxable gift.   Doesn't matter what the loan was for or why I decided to write it off.  From the IRS site:

"What is considered a gift?
Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return".  http://www.irs.gov/businesses/small/article/0,,id=108139,00.html

Sun, 07/03/2011 - 14:11 | Link to Comment Mr. Anonymous
Mr. Anonymous's picture

Bingo.  It's why, if you're broke and can't pay your credit cards, the LAST thing you want is to make a settlement.  Bankruptcy dischargeable debt becomes Uncle Sam's blood money via the 1099.  And, no, the collection company doesn't volunteer that little nugget.

Sun, 07/03/2011 - 19:55 | Link to Comment Boop
Boop's picture

This is not true!  If a loan is forgiven/settled, you owe taxes on it. If it is discharged in bankruptcy, no taxes are due. (Unless I'm somehow misinterpreting "Bankruptcy dischargeable debt becomes Uncle Sam's blood money via the 1099.")

Sun, 07/03/2011 - 14:34 | Link to Comment traderjoe
traderjoe's picture

I can't search and cite right now but it's my strong recollection that a law was passed that exempted the foregiveness of mortgage debt from taxation as income.

Sun, 07/03/2011 - 15:00 | Link to Comment decon
decon's picture

You're correct as per IRS website;

"The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.

This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition."

Sun, 07/03/2011 - 16:32 | Link to Comment Urban Redneck
Urban Redneck's picture

But how does the IRS treat the TBTF in the write-down are they allowed to take a deduction for the full write-down to offset current earnings (which might be increased by a like amount if they have a loss-sharing agreement with the government)?

Sun, 07/03/2011 - 16:41 | Link to Comment oldman
oldman's picture

i wonder how many bankers and real estate syndicators are being forgiven????

Sun, 07/03/2011 - 15:00 | Link to Comment graspAU
graspAU's picture

You have to decouple them, the property and the loan are two seperate things. Yes the property is collateral for the loan, but really the loan is based on your ability and promise to to repay, nothing else. Cutting the mortgage down is a 1099 gift in the eyes of the IRS.

Sun, 07/03/2011 - 16:13 | Link to Comment Bicycle Repairman
Bicycle Repairman's picture

Apparently you were both imprudent and foolish by the new definition of these words.

Sun, 07/03/2011 - 18:06 | Link to Comment max2205
max2205's picture

The amount is so arbitrary fraud will run rampant. Toilet backflushies

Sun, 07/03/2011 - 15:40 | Link to Comment Popo
Popo's picture

so ... if people are getting their debts forgiven... Why is anyone still paying a mortgage?

Just stop paying today and start clamoring for Debt Forgiveness 2   (DF2).

To be more clear:  We now completely understand the weakness in the system.  And the weakness is default.   They are not prepared to deal with the possibility that you might not pay.  AND WHEN CONFRONTED WITH THAT POSSIBILITY,  THEY WILL BACK DOWN AND FORGIVE YOUR DEBT.

 

This is a MAJOR lesson.

 

Stop paying.

 

Now.

 

Sun, 07/03/2011 - 16:46 | Link to Comment oldman
oldman's picture

This is what I consider non-violent and 'doing nothing'. I believe that it is one of the easiest ways of beating these guys at there own game.

Maybe we can form a gang  called 'do nothing dudes'

this is becoming interesting

Sun, 07/03/2011 - 17:02 | Link to Comment Sunshine n Lollipops
Sunshine n Lollipops's picture

Wouldn't be hard at all to recruit new members:

'If you decide to join us, you need to know that you will have one extremely important responsibility.'

'What's that?'

'You'll be required to do absolutely nothing.'

'Nothing?'

'That's right. Nothing.'

'Ummm. . . . are there dues?'

'Nope.'

'Meetings?'

'Nope.'

'Do I get a jacket or something?'

'Not at this time.'

'How 'bout a hat?'

'Maybe.'

'Okay. I'm in.'

Sun, 07/03/2011 - 17:56 | Link to Comment oldman
oldman's picture

OK, Sunshine

You win the lottery

you are the person to head up

the 'do-nothing' party

Not paying is the vote of the do-nothings

with no more than two million votes

WE WIN

remember---even the peace candidate Nader got over a million votes

two million do-nothings is a slam dunk!

Sun, 07/03/2011 - 18:18 | Link to Comment Sunshine n Lollipops
Sunshine n Lollipops's picture

But I don't even have a mortgage. Oh, all right. But as someone who has mastered doing nothing, this is a little out of my comfort zone. First off, we need Tyler to sell hats and t-shirts with our gang name and credo. WB7 could pump out something awesome without breaking a sweat.

OK. My work here is done. It's out of my hands. Now come on, everybody, let's suit up and get out there and start doing nothing! 

Time for a nap.

 

Sun, 07/03/2011 - 18:47 | Link to Comment oldman
oldman's picture

Exactly!  Time for a nap you are the leader we are looking for

I have no mortgage, no house, no home save any place my friends and family will allow me to lay my heade at night

as for me, this is already too much activity

I'm off to play with my grandson

we will draw a pond of water, put some fish in it and fish for our dinner

with chalk on the sidewalk

'this is a lot of work'

Sun, 07/03/2011 - 18:55 | Link to Comment Sunshine n Lollipops
Sunshine n Lollipops's picture

That's funny.

It's been my life's mission to inspire others to experience the pure joy and inner peace one can only get from doing nothing. Mostly I lead by example.

Well, you and I are having fun with this. Let's see if anyone else stops by.

Sun, 07/03/2011 - 22:35 | Link to Comment Blanche DuBois
Blanche DuBois's picture

I am CRYING, I am laughing so hard!!! Thanks...I needed this!!

Sun, 07/03/2011 - 23:38 | Link to Comment oldman
oldman's picture

Thanks Blanche,

It's like this everyday for the do-nothings

we laugh an inordinate amount of the time, What else is there to do when you do-nothing? 

Before you ask, we will not have a treasurer but applications are being accepted for the Vice-presidencies which will be numbered from one to infinity. Even if you do nothing, you are still important and have a certain dignity.

Mon, 07/04/2011 - 01:25 | Link to Comment Blanche DuBois
Blanche DuBois's picture

Great! Thanks, oldman, for giving me some dignity since it appears the bankstas have stolen from me what little was left.

Sincerely,
DO NOTHINGS, LLC

Blanche, VP of Nothingness Dept.

Mon, 07/04/2011 - 10:37 | Link to Comment FEDbuster
FEDbuster's picture

I am just guessing, but the "Do Nothings" won't have to sell candy, poppies or any other crap to raise money for the club, will we?  We won't have to put on funny hats and ride in miniature cars in parades, will we?  No softball teams, civic duties, etc...?  And of course, no clubhouse or meetings, right?  Just thinking and typing is almost too much work. 

I do think the late, great George Carlin would have approved and accepted an honorary membership (as long as he didn't have to do anything for it).

The Dude Abides  http://www.youtube.com/watch?v=K2PPgcNjols

Mon, 07/04/2011 - 11:44 | Link to Comment oldman
oldman's picture

Do-nothing dudes do not a thing

Carlin was a closet do-nothing

George was one of us but had to make a buck

we allowed him to because he was a funny guy and nice to have around and also bought the beer

we were fond of him, but he did not receive any compensation/was not a do-nothing dude, officially

Oh, some of us talked about letting him in, but doing-nothing is not voting, not meeting etc

You are on edge----if you have to ask about doing-nothing

we just can't give you the same comp----------------

OK---You are on the edge, but you just have to do-nothing for------

but the problem is that doing nothing IS something and so you are in when doing not a thing and out when thinking, putting words to it, or complicating it in any way

This is the trap of doing that un-does the do-nothing dude

I'm outta here, NOW!

 

Sun, 07/03/2011 - 21:25 | Link to Comment FreeNewEnergy
FreeNewEnergy's picture

Eh, as already having done nothing on my inherited foreclosure property for two years and still inhabiting the place, do I qualify as secretary of nothingness?

Sun, 07/03/2011 - 22:05 | Link to Comment oldman
oldman's picture

Why, hell yes, Free New Energy!!

I'd forgotten about offices, but we need you.

As secretary of nothing, you will be charged with writing down nothing about the nothing we say or do.

By the way, the salary is nothing with as many days of vacation as you want.

Welcome aboard, pending the approval of Sunshine n Lollipops

Mon, 07/04/2011 - 00:24 | Link to Comment Sunshine n Lollipops
Sunshine n Lollipops's picture

Wow, oldman, this thing is really taking off! Tyler and WB7 better be gearing up for this tsunami of listless rebellion we've unleashed.

I wonder if the new guy wants to be club president? I'm thinking about stepping down, as the demands of the position have literally exhausted me.

Mon, 07/04/2011 - 00:37 | Link to Comment oldman
oldman's picture

Good to hear from you Sunshine,

I, too, am exhausted from this thing.

there is interest and I have to back away as it might require doing sometrhing(I can't even type this word 'something'). I suggest that it be allowed that everyone and anyone can be president, after all, doing nothing does not allow for responsibility except for doing nothing and that is nothing

I can't even think; I'm just confusing myself-----I'll ask for a dream to come up with something of the nothing type of answer we're looking for.

Every thing will be OK by daylight

Mon, 07/04/2011 - 00:59 | Link to Comment Sunshine n Lollipops
Sunshine n Lollipops's picture

Yep. This is one crazy can o'worms we opened here. The response has been overwhelming. But, now that it's up and running--make that galloping--I guess we can get back to doing what we do best--nothing. Well done, oldman.

Mon, 07/04/2011 - 08:06 | Link to Comment pierre66
pierre66's picture

Tens of Millions of American Do-Nothings add up to a whole lot of SOMETHING!

Starve The Beast......

Mon, 07/04/2011 - 11:01 | Link to Comment FEDbuster
FEDbuster's picture

I hope this is a "Big Lebowski" Dude like "Do Nothing" club, and not an Atlas Shrugged secretly productive in a hidden valley "Who is John Galt Do Nothing" club. 

Will the club celebrate America's fuck off letter to King George today?  As a potential "Do Nothing" member I like to officially celebrate the "fuck off letter days" July 4th and April 15th. Of course, we will celebrate by doing nothing. 

Mon, 07/04/2011 - 14:00 | Link to Comment oldman
oldman's picture

Pierre!!!!

You put words to a 'knowing' that this oldman has had buy been suspicious of for many years.

You are one of us           WELCOME

Two million not paying their bills and fief to da mastah keeps the monster from burying itself in the sand to escape----in time, the wind will blow the ashes away and the phoenix will have to return organically

Whewwww!!! I'm exhuasted after that last run of words----gotta take a nap

Mon, 07/04/2011 - 00:39 | Link to Comment oni_baba
oni_baba's picture

Can I contribute the campaign song"  http://www.youtube.com/watch?v=4HmJX11_AQE

Mon, 07/04/2011 - 00:53 | Link to Comment oldman
oldman's picture

oni_baba,

You have truly hit the mark with this.

There is simply nothing more to say.

Though, I do not speak for anyone I can assure you that 'do-nothing dudes' will do nothing to overturn this election anymore that I will do anything to elect it.This is the perfect balance and harmony of doing nothing.

Welcome on board and you receive the same compensation package: no money but all the vacation you want whenever you want it.

Thanks oni_baba

Mon, 07/04/2011 - 04:55 | Link to Comment Popo
Popo's picture

This is exactly why most managed economies are non-productive.  Nobody works.  Why should anyone work in a rigged game where government handouts are the norm?

 

Mon, 07/04/2011 - 12:44 | Link to Comment oldman
oldman's picture

Dear Popo,

I am surprised at your words. You began this whole 'do-nothing dudes' madness with your call "Not to pay" about 24 hours ago. You were the inspiration for the whole blogalogue that we were having fun with and  that was exploding in an organic manner like a flower in bloom.

But doing nothing is not responding to the conditioning and positioning of others, so we thank you, we love you, and will always remember you with affection------

by doing not a thing

Mon, 07/04/2011 - 21:53 | Link to Comment Sunshine n Lollipops
Sunshine n Lollipops's picture

Y'know, oldman, the irony of the situation is that the kind of people who would make the very bestest members won't even bother to chime in. It's simply too much effort. So we'll probably never know how many 'silent' members belong to the swelling ranks of this worldwide non-movement, but I'll bet there's at least 5.

I hope they don't ask us to make speeches at the victory celebration.

Sun, 07/03/2011 - 16:05 | Link to Comment sun tzu
sun tzu's picture

You normally get a 1099-C or 1099-A for cancelled debt and it is taxable as ordinary income. Congress passed a law to exempt mortgage debt if it is your primary residence. 

Sun, 07/03/2011 - 17:53 | Link to Comment disabledvet
disabledvet's picture

she's still buggin' me about ya sun tzu.  she told me "have him take a look at this then!"

http://www.youtube.com/watch?v=Ew7y_Uz4gT0&feature=player_detailpage

 

Sun, 07/03/2011 - 16:07 | Link to Comment gringo28
gringo28's picture

actually, what i want to know is if Treasury has given a special release from taking the forgiven principal as income? i bet not but who knows? it should be considered income lest this is just another example of rewarding bad behavior.

Sun, 07/03/2011 - 19:06 | Link to Comment Withdrawn Sanction
Withdrawn Sanction's picture

Maybe I'm stupid for thinking Ms. Giosmas is an idiot, but doesn't that 'forgiven' 150,000 loan go from likely being a 'no-recourse', or at least bankruptcy dischargeable debt to a private bank, to an unexpungeable, debt slavery bond to the United States treasury via the IRS?

Yes.  Sometime early next year she will receive a 1099-C and will then owe her marginal tax rate on that $150,000 as if it were cash income.  Good luck to her coming up w/$30K to $50K in cash to pay the Feds...who are far less forgiving than the dopes at BofA.

Sun, 07/03/2011 - 20:48 | Link to Comment PulauHantu29
PulauHantu29's picture

"Forgiven debt" on your principle residence is NOT income under a law passed by Timmy and Barry I think. Check with your tax expert but I remember thinking what a nice deal these folks are getting for being deadbeats.

It pays not to pay, evidently.

GL!

Sun, 07/03/2011 - 21:37 | Link to Comment Newtons Lawyer
Newtons Lawyer's picture

I didn't see anywhere that this was her homestead.  Since she says she is a RE investor, perhaps this is a rental property.  Either way, I would suspect that the banksters are looking through their books to see title problems and addressing them this way.  Hard to say whether they sold the balance of the "written down" portion of the paper or the tax consequences. 

Sun, 07/03/2011 - 21:37 | Link to Comment nedwardkelly
nedwardkelly's picture

Fuck this fucking bullshit. Bought at the peak, paid a big deposit, paid off my loan in only a few years. My reward, a house worth far less than I paid for it.

Meanwhile these fuckoff banks get bailed out, to later turn around and throw free cash at idiots that took out ARM's.

Mon, 07/04/2011 - 03:46 | Link to Comment toto
toto's picture

It is called σεισ?χθεια.

Mon, 07/04/2011 - 04:05 | Link to Comment Buck Johnson
Buck Johnson's picture

I think your right and I believe it's another reason also.  The other reason is this quote "Chase was cutting her principal by $150,000 while raising her interest rate to about 5 percent. Her payments would stay roughly the same.".  This answers the bond issue of default.  They set up the payments and the interest rates where the payments never change, and in so doing bonds are safe for now and as you said they made some deal where the forgiven amount will be tied to the person via the IRS.

Mon, 07/04/2011 - 04:07 | Link to Comment Buck Johnson
Buck Johnson's picture

I think your right and I believe it's another reason also.  The other reason is this quote "Chase was cutting her principal by $150,000 while raising her interest rate to about 5 percent. Her payments would stay roughly the same.".  This answers the bond issue of default.  They set up the payments and the interest rates where the payments never change, and in so doing bonds are safe for now and as you said they made some deal where the forgiven amount will be tied to the person via the IRS.

Tue, 07/05/2011 - 00:55 | Link to Comment Milstar
Milstar's picture

Only if it was a cashout refi then the borrower may have IRS taxes owed on it.  If the bank writes off a 150k, they then take the loss but the borrower has lost nothing unless the fine print lists it as being repayable in x yrs afters, or a 2nd lien loan attached to the property.  In this case it looks like a gift (not taxable gift) to the borrower. 

Sun, 07/03/2011 - 12:15 | Link to Comment Rainman
Rainman's picture

Ah-Ha ! I've been looking for the sucker at the mortgage payoff table and can't find him, so it is me. I LOVES AMERIKA !!

Sun, 07/03/2011 - 13:53 | Link to Comment CrashisOptimistic
CrashisOptimistic's picture

Don't be silly.  Of course those of us who paid off our mortgage properly and now have a house that is decreasing our net worth every day . . . of course we're going to get refunded some money that we paid on a mortgage that would otherwise have been reduced.

Of course we are.

Sun, 07/03/2011 - 14:04 | Link to Comment Id fight Gandhi
Id fight Gandhi's picture

In the USSA savers are losers. They have no place unless they have crippling debt that follows you for life and suck the teats of uncle sugar.

Sun, 07/03/2011 - 15:30 | Link to Comment MarketWatchTerrorist
MarketWatchTerrorist's picture

A life time of debt based indentured servitude.  It begins at college age when the child takes on their first student loans, preferably massive and crippling.  It continues with a car loan if they manage to land a job after college.  Then comes the first condo/townhouse mortgage.  Followed later on by a wife/kid(s) and her desire to upgrade to a single family home.  This ensures a nice path for young people in America from cradle to grave.

 

Birth -> Behavioral Adjustment and "Education" via the public schools -> first debt load in college and proving one is a properly broken slave by completing the 4 year program without the nannying of the K-12 system -> more debt via consumer bull shit and cars -> more debt via a massively inflated price on a poorly built wooden home -> children to pay for -> death

 

No retirement.  A life of indentured servitude planned out for you by your benevolent masters.  You should be thankful.  You wouldn't want to be one of those icky Europeans or South Americans with 6 weeks of vacation and free time to read, paint, hike, bike, or pursue other such idle hobbies.  Idle hands are the devil's play thing, all you need is a strong back.

 

Now get back to work, slave.

Sun, 07/03/2011 - 15:57 | Link to Comment DosZap
DosZap's picture

You have to remember in THIS life,90% of the time ,

 "No good deed goes Unpunished".

Sun, 07/03/2011 - 16:05 | Link to Comment Oh regional Indian
Oh regional Indian's picture

IFG, your statememnt is now true for the better part of the world.

When I left India in 1995, you could get 14% on a 10 year CD in a bank.

When I came back in 2006, it was 4.5%

Meanwhile the stock market had gone from 3,000 to 16,000 and crashed back to 8,000 and now is at 19,000 and change. The mantra is Sensex 36,000.

Credit for crappy assets (Apartments, Cars, Motorcycles, Holiday Homes, travel...) is aplenty.

Try starting a business though.

There you have it, in a nutsqueeze.

ORI

http://aadivaahan.wordpress.com/2011/06/30/desiderata/

Sun, 07/03/2011 - 16:30 | Link to Comment dugorama
dugorama's picture

ok,so borrow some fixed rate money, get leveraged, acquire some rent producing assts  can't win if you don't play

Sun, 07/03/2011 - 15:19 | Link to Comment HungrySeagull
HungrySeagull's picture

That aint gonna happen.

If a check showed up in the mail from our bank for half the mortage we paid free and clear...then I will eat my shoes.

Sun, 07/03/2011 - 21:38 | Link to Comment nedwardkelly
nedwardkelly's picture

of course we're going to get refunded some money that we paid on a mortgage that would otherwise have been reduced.

Well, either that... or after the banks mark down all these adjusted loans on their books to their new values we get to bail them out again. I'm betting the bailout option is more likely.

Sun, 07/03/2011 - 12:16 | Link to Comment johngaltfla
johngaltfla's picture

And so America is now well en route to another spike class warfare, once again between those who act in a prudent financial way, and everyone else, who is now getting bail outs from the same banks that were bailed out by those stupid enough to pay US taxes in the first place

 

Actually Tyler, I disagree with this statement. This is going to encourage more people to abandon their legal, binding contracts and default en masse. Thus why I think the risk of "class warfare" is low; in fact this is going to encourage a total abandonment of the current housing model because of this insanity. This is the "lemming" behavior model where if three neighbors get away with it, everyone else in the neighborhood says "why should I pay" and begin the process of default.

This returns to the age-old argument about the stupidity of the new FASB model which covers every aspect of accounting to validate fraud but does not address the cash flow and servicing issues. Your analysis though that Tier-1 capital is substantially below requirements is spot on and technically I would venture a guess that as a result of the real estate situation, commercial and residential, the banking industry has at least 30% of its members walking around as Zombie banks.

Good thing Turbo Timmy doesn't have the money to give to the FDIC to shut them down. And if anyone has checked lately, you might want to take a sneak peek at the banks in arrears to the FDIC for that special assessment. I stand by my prediction of a recession starting at the end of Q3/start of Q4 and lasting through Q1 of 2012 until Ben decides to go Wiemar on America.

Sun, 07/03/2011 - 13:18 | Link to Comment Iam Rich
Iam Rich's picture

Well, what is my advantage in defaulting if I am at about 50% LTV.  The bank I'm sure would love to take my home.  How does this proposal lead to wholesale default behavior for those with substantial equity?

Sun, 07/03/2011 - 13:22 | Link to Comment johngaltfla
johngaltfla's picture

It's all about location. But consider this:

How fast will the value of your home deteriorate if just half of your neighbors elected to default.

In Sarasota County we have some neighborhoods that have seen 75% to 80% declines from the peak which is one of the reasons S&P zinged us with a BBB rating downgrade (4 levels) on Friday.

If you see the actual value of your home decline by 50% in less than a year, and you're upside down, many people will consider telling the banksters to go piss up a rope.

Sun, 07/03/2011 - 16:04 | Link to Comment DosZap
DosZap's picture

I spoke with an old fella at dinner Tues night, he's from AZ.

He just picked up a $350k home, @ time of purchase, 5yrs old, for $50k cash.

This is just a smattering of what is out there.Some bank took a huge haircut on that one, likely the FM/FM group, meaning WE the taxpayers.

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