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A New Wave of Defaults?
I have been working with a young couple for a year now. They have been
up against it. They look pretty typical. They bought an apartment with a
first mortgage and low down payment. Then they made improvements with a
HELOC. He lost his good job and now works for less. She works long
hours and they have a kid.
They are underwater on the 1st mortgage so the HELOC is worthless. Their
monthly cash flow including debt service has been negative for a long
time. They have been paying the mortgage(s) by drawing down more on the
HELOC.
I advised them a year ago to stop the madness. They tried to contact
their lenders for assistance but were told they did not qualify for a
re-financing, as they were current on their mortgage.
I told them to stop paying. But they would have none of that. They had
built up a credit rating that they were both very proud of. They did not
want to lose that. But more importantly they felt that walking on IOUs
was something that morally they could not do. I told them they were
nuts but that I was proud to know them.
I sent them a link to last week’s Barney Frank letter to the big banks
telling them to write down non performing second mortgages. I sent them
the link for the BoA story and their program to write down principal for
delinquent mortgage debt.
They called just now. They made up their minds. They will not pay either
the 1st or the 2nd this month. The “entrance fee” to getting the debt
relief they need is to not pay any longer. The cost will be a tarnished
credit. They no longer care.
Does this story mean anything in the Macro Big Picture of defaults? I am
certain that it does. A rising trend is about to become a rogue wave.
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To the nearest state fusion center, no doubt.
Like Ayn Rand wrote: "From each according to his ability to each according to his need"
Today means ".... to each according to his needs, wants, desires, free of charge, work or effort - from each according to his willingness to be fleeced by our corrupt government."
I give you "Peggy the Mooch"
http://www.youtube.com/watch?v=P36x8rTb3jI
That MIAC report was a peek into their views - what do we not know about?
Don't be stupid. It's people like you that we use to pay the criminals and those rich people who gambled poorly and now need to be repaid. There is no way you will see a red cent from this.
Now go back to your cave, and keep paying your mortgage like the good sheep that you are. You'll be rewarded with no Social Security and higher taxes.
macfly, I have done everything right too. For many years I was in one of the or the highest tax bracket — subsidizing damn near every political group there is — on tax forms, even the cost of an entertainment ticket (adult, not student or senior).
Now all these irresponsible people (I want to call them F------) want, no, expect me to bail them out of their speculation. Yeah, their speculation. They decided to go shopping for a house. Now it's the banks fault for lending them the money, and the appraiser's fault and the real estate agent's fault, and everyone's fault but their own that they bought more than they could afford, with no plans for down times, and the ones that really get me are the ones who took money out to buy soft consumables and put their jet skis on their mortgage. Now they want to stick their grubby hands into my pocket book and yank out my hard earned money. F' them. It infuriates me.
My late great uncle, the Wall Street commercial bond salesman (turned down a seat on the exchange), told me at age 19 or 20, that houses are not investments! Houses are consumer items.
swamp, I'm with you 100% on this. I've got a few years on me, too. I bought the house to live in it, not to bragg about how grand it was. I sent in those checks and finally wore out the mortgage. Anyone who had to get a HELOC was dodgie in the first place.
While wearing out the mortgage, we also wore out seven or eight vehicles. I didn't buy them to make money on either.
With those obligations also came the full costs of the tuition bills for the children. If you are up to date on a modest home, you don't qualify for any discount coupons on that either. I can promise that I've paid for a whole lot of tweed, just didn't get to wear it myself. Health insurance, oh yeah, I paid that too and got to pick up the tab for those with the pre-existing condition of lazy. And all with those after tax dollars.
Now these dumb butts age getting to make their tuition payments. Who knew that doing a refi to pay for ski trips, fine wines, boats, and nice jewelery could be such a good deal. Spend after tax money for everything, then get the debt forgiven with no tax on that either. How sweet.
I didn't and don't really give a damn what the house is worth. It still works as good as it ever did, and a whole lot better than any of those vehicles that I've scrapped out.
So, I'm with you all the way. Move their butts into a FEMA trailer and wish them good luck. They will get to go outside and meet their neighbors. No ballet lessons for Mitzy, so what. Learn how to repair shoes and make some money.
BTW, unemployment is now about two years (not that original six months adjustment period), Obama is paying 2/3 of the Cobra health insurance, all of the food bill with stamps, SCHIP for the children, free cell phones, and there will be no tuition costs for them. Why the hell would they ever get a job? I'm with you all the way. If they want some of my money, they can at least come do some work for me. And if they have the deposit, I might rent them something provided they have good references.
Just because someone says they want their mortgage renegotiated doesn't mean that they are saying they want a government hand-out. It's a business deal. Renegotiate and cut losses or take your collateral back and take a much bigger loss. That's how a real free market works. It's logical.
You got it right. It's the banks fault for lending them the money. That is their business to calculate risk. Instead they created it, sestemic risk, a house of cards. They fucked up royally huh?
No problem for them though...their buddy Paulson saved the day by reading from the children's book.."the sky is falling the sky is falling".
The problem is the government is covering their losses, giving them no reason to negotiate. Meanwhile the government is saying to the public we want the banks to help people. BS. If they did then they would let them all go under and let all this bad debt get washed out. Sooner or later somoene with a brain would own these mortgages and do what is neccesary to preserve what real value is left in them (by renegotiating or foreclosing on a case by case basis). But noooo, we have the insanely large banks that can't handle those micro tasks of a mortgage at a time. They only want to push an easy button...which is to drop some campaign bucks and lobbey money and keep their bonus. So we get good money thrown at bad over and over and phoney accounting and fraud and deception in order to make everything appear ok to us and everything be just groovey for real for their wallets. It's not. Everyone knows it. It's only a matter of time before the chirade ends.
Everyone underwater should stop paying now. I think that's the only non-violent way to change the course now.
You lost me when you placed the words government, negotiate, and business in too proximal a location.
Negotiate? How about negotiate a rental?
I don't condone the banks but I don't condone the buyer either.
If the banks are getting bailed then guess it is the taxpayers who pay. You try to hide the public cost by stating it's a private deal. Like hell it is.
Obvioiusly it's not a private deal. I'm stating that it SHOULD be a private deal. Take that up with your government. Don't blame the individual. There was no public vote on how to handle this and if there was I'm sure it wouldn't have been "bail out the fat cats" that won. In fact the voters tossed the originators of this bailout shit out of office...only to find that Obama kept the same guys and the same scheme going. Proof that our votes are meaningless. That's just misplaced aggresion to blanket blame all underwater home owners. I mean, sure their were some people that were irresponsible but the fall out has gone far beyond those folks now. You righteous folks who think it's the public's fault are not helping anything. We were scammed..shame on us...but they are the scammers! Please redirect your anger to where it is most useful.
"There was no public vote on how to handle this and if there was I'm sure it wouldn't have been "bail out the fat cats" that won."
Oh, but there was. Congress received anywhere from 100 to 300 to one input from their constituents _against_ the bailout (which, of course, was only the most publicly visible part of a _vastly_ larger taxpayer-funded bailout). What did they do? They first voted down the bailout (for appearances) and later did what they'd been bribed to do when they voted for it.
Is not our treasury using its HELOC (T-Bills) to make the payments on its primary (2s and 5s) and secondary (10s and 30s) notes?
Swamp and Juicy, I commend you both for your reasoned and intelligent discussion, above. I pray more people are able to understand and communicate like the two of you, then we might get through this. Unlikely, though.
I think this is the trend that actually brings down the country, and it ain't that far away. Seriously, I can see your point. It is a good one. Why should you be treated LESSER than someone who acted LESS responsibly? You shouldn't, simple.
I don't have a mortgage and have converted all assets to cash, however, if I did, I would empathize with you. I empathize with all in your position.
So, do what feels right. We bailed the banks, Wall St, Washington, out with no say in the matter. Could be time to turn the tide.