Guest Post: Obama's Re-Fi Plan: The Perfection Of Debt-Serfdom

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Wed, 10/26/2011 - 11:11 | 1812598 RacerX
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wow, this sounds like a GREAT plan!  (if you're a banker)

and don't forget about state & local govt's--that get much of their tax revenue from "home property values". They're key-stakeholders in this game too!

The King is dead! Long live the King!

Wed, 10/26/2011 - 11:14 | 1812622 trav7777
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bbbut...Oblama was on LENO.

I guess he hadn't had some adulation lately and was desperate

Wed, 10/26/2011 - 11:19 | 1812652 malikai
malikai's picture

Leno? In a just world he'd have been on COPS.

Wed, 10/26/2011 - 11:25 | 1812691 SilverIsKing
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Dexter

Wed, 10/26/2011 - 11:34 | 1812714 redpill
redpill's picture

It's a full banker buffet alright.

1) Resets the mortgage so people wind up paying way more in the long run (described here: http://www.zerohedge.com/news/gses-expand-housing-subsidy-refinance-mode...)

 

2) Increases homeowner cash flow in the short run, therefore lowering chances of default.

 

3) Gives the banks a brand spankin new set of documents including Deed of Trust and Note, so all these pesky fraudclosure issues go away.

 

4) Giveaway to the transaction folks whether it be banks or brokers, more churn fees.

Wed, 10/26/2011 - 11:48 | 1812804 AldousHuxley
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Folks, YOU WILL NEVER OWN A HOME outright.

 

Government is the ultimate owner. That's why you pay the property tax. 1% every year at least. Same as wealth/asset tax.

 

Any guarantees that property tax won't go up next 30 years? Hah.

Wed, 10/26/2011 - 11:52 | 1812819 redpill
redpill's picture

There are a few counties in the US where there are little or no property tax, but as I recall most of them are not places you'd actually want to live!

Wed, 10/26/2011 - 12:04 | 1812889 AldousHuxley
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some may even give you free land....homestead act.

 

caveat: raising a family 200 miles from any civilization may not be worth the free crappy land.

 

market is sort of free and working, so free stuff means market value is zero to negative.

 

over the 30 years of home "ownership" assuming inflation = property value growth:

 

MORTGAGE $300,000

INTEREST TO BANKSTERS $270,000 (@5%)

PROPERTY TAX $90,000 (@1%)


SECRET: The real wealthy owners of America don't get mortgages.

 

Wed, 10/26/2011 - 12:16 | 1812953 pan-the-ist
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This isn't really about debt serfdom, it's about haircuts on MBS's that are still in Joe Six-Packs retirement portfolio.  Haircuts there make everyones savings go nuclear and the game is over.

Wed, 10/26/2011 - 12:25 | 1812993 AldousHuxley
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you mean the avg. balance of $50k in boomer's 401k "retirement portfolio"?

most Joe Six-Packs have maybe six dollars in his portfolio.

 

It is actually about not making foreigner governments mad. US government bond is pretty much all home mortgages repackaged anyway. US told China that we will go invade oil rich countries and give them oil discounts if they hold on to Fannie and Freddie.

Wed, 10/26/2011 - 13:13 | 1813164 Council of Econ...
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It's all in the name.  Root words of mort gage = death pledge. 

Wed, 10/26/2011 - 14:46 | 1813688 AldousHuxley
AldousHuxley's picture

I like it...

 

Morgue-gage: aka. "debt till you die suckers!" -world banksters.

Wed, 10/26/2011 - 12:03 | 1812870 franzpick
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Tax strikes are probably punishable with 30 days in the electric chair, so maybe it's time for a 'homeowner' de-occupy movement of strategic default, or the increasingly popular buy (something at half price) and 'walk' for those still in position to do that.

It's just a matter of time before the homeowner populace sees through the continual Case-Shiller understatement of home price declines and overestimate of recent sale values (by excluding distressed sales and by monthly price averaging).

Mortgagors of the World Disburse will be my sign at the desert cities civic center camp-in this weekend.  

Wed, 10/26/2011 - 12:14 | 1812945 Fox Moulder
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I haven't read the fine print, but it also probably turns a non-recourse morgage into a recourse one. I.e. if you sign you can't walk away from the debt.

Wed, 10/26/2011 - 12:38 | 1813051 legal eagle
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In Nevada, it may do the opposite.  Last year the legislature passed a bill making Nevada like California, where banks cannot seek deficiency judgments.  Under the old rule, they could.  So, lets say you have a 2005 mortgage and want to walk away from the house.  Well, it may be better to go ahead and refinance, then the new law would apply, presumably, and when you walk away the bank cannot seek deficiency.  So, in Nevada this might turn a recourse debt into a non-recourse debt.  That is, unless there is a special provision......

 

Wed, 10/26/2011 - 15:43 | 1813960 Bollixed
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The problem lies in the Feds ability to tax the forgiven debt as income.

They have you coming and going. Somebody has to pay for Barney Franks pension.

Wed, 10/26/2011 - 17:40 | 1814310 Goner
Goner's picture

This is not an issue since the Mortgage Forgiveness Debt Relief Act of 2007. I dont know if the new plan impacts this at all but I doubt it.

1.  Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

http://www.irs.gov/newsroom/article/0,,id=205004,00.html

Wed, 10/26/2011 - 12:40 | 1813055 legal eagle
legal eagle's picture

Yes, along with that war criminal GW Bush, who should have been hanged along with Saddam.  Come to think of it, GW killed MANY more people than Saddam ever did.

Obummer just continued the same despotic policies.

Wed, 10/26/2011 - 12:46 | 1813073 DCFusor
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"GW killed MANY more people than Saddam ever did"

 

Forgetting the Iran-Iraq war, are we?

Wed, 10/26/2011 - 12:59 | 1813122 malikai
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We did give the Iraqis and Iranians the weapons to fight that war - and help us test them.

Wed, 10/26/2011 - 15:40 | 1813949 AldousHuxley
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some of them may have been defective weapons sold for full price.

 

Sort of like USAID genetically modified crops  that was rejected by EU health regulators got "donated" to African countries. But US did take full credit for par value...

"US donates $$$ every year to poor African countries!!! so when US comes after your oil, gold, and other wealth, US will be preferred over China"

Wed, 10/26/2011 - 13:13 | 1813167 Blano
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And the Kurds after Gulf War 1.

Wed, 10/26/2011 - 11:30 | 1812717 AldousHuxley
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obama....still kissing up to wall st. with bailouts.

 

folks, remember, refinancing just eases cashflow requirements, but in the long run it is more money for the banks.

Also, holding up inflated housing prices = holding up taxable assets for your governmint --> more taxes.

 

In california, people are selling as prop 13 tax limit eventually catches up thus taxes become bigger liabilities in terms of total cost while home valuations are falling.

 

Home is not a good investment unless valuation growth exceed that of inflation.

Folks, even if you are not losing money on a home, when inflation is 4-5%, you are losing 4-5%.

Wed, 10/26/2011 - 11:37 | 1812746 redpill
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Prop 13 only applies at the maximum assessed value the property ever had.  If your property taxes in California go down because of market conditions, they can re-hike them again by any amount up to the former peak before they are restrained by the Prop 13 1% increase limit.

The way things are going, the only reason to own a home will be as an income property (which is quite doable in the market today given so many people are going back to renting).

Wed, 10/26/2011 - 11:38 | 1812762 malikai
malikai's picture

Or when M1 is cruzing along at 30%, M2 at what 10-15%, what's that mean if your home is worth say 75% (lucky!) of what it was three years ago?

Wed, 10/26/2011 - 12:17 | 1812962 AldousHuxley
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That it is a depreciating asset just like any other consumption when you compare "growth" vs inflation.

 

Fed is inflating to discourage you from walk away from your mortage and punishing banksters for frivolous due diligence and risk management by making you think you are not losing money because home values are "stable" whereas inflation is showing up everywhere else except in your wage.

Same bs they are pulling with stocks and QE.

 

Your home value doubled? well in next few years everything else except your home will double in price.

 

Except banksters fooled you into spending more on a bigger house = more maintenance fees, more taxes, more insurance, etc.

 

 

 

Wed, 10/26/2011 - 13:36 | 1813265 Troll Magnet
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Will my iPad double in value?  (Sorry.  Couldn't resist)

Wed, 10/26/2011 - 13:39 | 1813281 malikai
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How much gold and silver is in it?

Wed, 10/26/2011 - 15:39 | 1813943 Silverdes
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If it doesn't, you can always just eat it!

Wed, 10/26/2011 - 15:51 | 1813989 AldousHuxley
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iPad will depreciate faster than gadahffi's portfolio managed by Goldman Sachs unless you got one with gold plating.

 

 

 

 

Wed, 10/26/2011 - 11:29 | 1812704 johnQpublic
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as long as your home can be siezed for non-payment of taxes, you own nothing

 

if it can be taken, you dont own it

all one is ever doing is renting a home

 

you only truly own what you can carry on your back

your right to drive can be taken on a whim, putting you on foot or worse

rule by force, hidden in plain sight

refi yourself into bondage

woohoo

do you suppose alcoholism is up in the US these days?

Wed, 10/26/2011 - 11:51 | 1812812 SwimmininNawlins
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I know alcoholism is up in "my" house these days.

Wed, 10/26/2011 - 12:08 | 1812907 JB
JB's picture

I can't afford to be an alcoholic any more... :(

Wed, 10/26/2011 - 13:37 | 1813271 Troll Magnet
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weed consumption is WAY up in my home.  come to think of it, it's always been way up there.  good times.

Wed, 10/26/2011 - 14:04 | 1813418 Strider52
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Most people can't afford to pay attention, except to who got kicked off Dancing With Stupid People.

Wed, 10/26/2011 - 12:26 | 1812942 Libertarians fo...
Libertarians for Prosperity's picture

 

 

That's just more libertarian nonsense.  You guys are FREAKS!

If you want to take this to such stupid extremes, YOU can be seized.  Everything can be seized.

You're just trying to romanticize the image of a man roaming the plains with nothing but his gold and his guns, trying to flee the supposed "slavery of serfdom" - i.e. the modern world.  Dukes of Hazard meets Gunsmoke with undertones of Tarzan

 

 

Wed, 10/26/2011 - 13:06 | 1813143 Hook Line and S...
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Bad job Lib! Trying to discredit all the preceeding statements by associating hyperbole with reality as a whole doesn't do the trick. Try again would you? You're on to something, state it in a logically balanced way next time. 

Wed, 10/26/2011 - 13:10 | 1813155 FeetOnTheGround
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"Libertarian nonsense?"  Being as individually free as possible is nonsense?

BTW, you CAN be seized!! Ever try not paying child support (or any other court-ordered debt)?? Have you recently tried violating a restraining order?

Maybe you can name a few assets that CAN NOT be seized? Because most everything I can think of CAN easily be seized (of course, right after the legal paperwork has been duly filed, stamped and approved). Does 'drug asset forfeiture' count? How about failing to pay your property taxes - do you think the city/town/state is going to send you a bouquet of roses for not paying up?  Get enough traffic tickets and your driver's license will likely be seized right along with your car. Sell raw milk, and your milk, cash and property will be seized.  .gov can seize entire country's bank accounts!

I guess Libertarians could be considered 'FREAKS.' If by that you mean they are currently a minority, with viewpoints greatly differing from 'mainstream' persons when it comes to what it really means to be free.

Funny, but I don't see much romanticizing going on here - unless you mean banks (who stand to lose a great deal) snuggling up to whomever they think will best help them protect THEIR assets at every turn.

Wed, 10/26/2011 - 13:21 | 1813197 legal eagle
legal eagle's picture

That is why people of means should consult with an asset protection attorney.  The government cannot seize what you do not own.

I create asset protection trusts, both domestic and abroad, to hold family's nest egg so future creditors, including the government, cannot get to those assets.

If done correctly, it is all perfectly legal.  11 states have statutes that allow asset protection trusts.  I prefer domestic entities over foreign entities, but that is a long story as to why.

I had a doctor come into my office who had saved $2M cash over his career, he was now retired and in his 80s.  He wanted to protect that cash so it would go to the next generation and I explained he could use a Nevada asset protection trust to do just that - since he had no creditors chasing him.  He said he would think about it over the weekend.  Unfortunately, Saturday he was driving down the road and hit a pedestrian.  He came into my office Monday panicked saying he wanted to go ahead with the trust.  I said, so sorry Charlie, too late.  Once you have creditors including potential judgment creditors chasing you then you cannot fund such a trust.  It is obviously an American story because in the end we negotiated with the pedestrian to take just the insurance money and the we were able to go forward with the trust.  I love happy endings.

 

 

 

Wed, 10/26/2011 - 13:56 | 1813357 Troll Magnet
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legal eagle,

if one wants to contact you personally to discuss establishing an irrevocable trust for domestic and foreign assets, how would he do that? 

Wed, 10/26/2011 - 14:13 | 1813480 legal eagle
legal eagle's picture

Sorry buddy, do not give out my professional details here.

Sufficed to say, if you search lawyers in Nevada, or Alaska, the two most favorable jurisdictions for asset protection trusts, you will find several.  There are a few websites for Nevada lawyers that explain everything, including one by Jeffrey Burr and one by Steven Oshins.  They have nice detailed websites.

Wed, 10/26/2011 - 15:56 | 1814005 AldousHuxley
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rememeber, government can always change the laws/rules.

 

How about buy a gold coins and just hand it over? no portfolio to manage, no taxes, and nobody will be aware of the change of ownership?

Wed, 10/26/2011 - 14:17 | 1813513 Chupacabra
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Why is he a "FREAK" for stating a fact?  If you don't pay your property taxes, the government can and will seize and sell your home to satisfy the liability.  The government can also raise property taxes, in essentially an arbitrary and unchecked fashion, if they so choose.  If you don't pay, men with guns come to remove you from "your" property.  This is fairly straightforward, yet it seems to upset you.

Wed, 10/26/2011 - 15:12 | 1813841 DaveyJones
DaveyJones's picture

I always use television shows for political analogy

Wed, 10/26/2011 - 13:06 | 1813144 NumNutt
NumNutt's picture

You are correct in this line of thinking, that is why I have opted to move onto my boat, all the comforts of a home, I own outright, and no property taxes. Win win!

Wed, 10/26/2011 - 14:59 | 1813776 lemonobrien
lemonobrien's picture

you have to pay to doc it.

Wed, 10/26/2011 - 18:36 | 1814502 NumNutt
NumNutt's picture

Total years slip fee is less then half of one months mortgage payment I was making on my house. Oh and when I get sick of winter I go south with everything. Plus I can take my entire 'home' and go on minnie vacations on the weekends. Don't think I will ever own another house again.

Wed, 10/26/2011 - 14:48 | 1813686 saiybat
saiybat's picture

They make it pretty clear in China when you buy a home there you buy a 70 year lease and chi-com can still take it from you at any time for any reason.

Wed, 10/26/2011 - 16:40 | 1814162 AldousHuxley
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I thought it was 100 years. ie. Hong Kong leased to British Empire. China got it back eventually...show syou Chinese are long term thinkers versus shortterm for Europeans and even shorter for Americans.

 

Regardless, when you hear that in China you never OWN a home/land but LEASE from the government may initially blame COMMUNISM. But in US it is the same game. 30 year mortgage is a LEASE TO OWN to see if you are a rich enough citizen. Then if you qualify you get to LEASE indefinitely for only 1% a year while YOU pay the upkeep, YOU pay the utilities, YOU pay the maintenance.....good deal for the government.

 

 

Wed, 10/26/2011 - 11:35 | 1812705 DormRoom
DormRoom's picture

actually, it is a good plan.  But higher food & energy cost erode most saving gains from debt refinancing at lower interest rates.  This is a fatal flaw to the Fed ZIRP plan.  It lowers the interest rates, so more people can deleverage faster, but CPI inflation, from commodity speculation, due to cheap lending to hedgefunds, erodes its effectiveness.

 

Bernanke looks @ the Japanese ZIRP playbook as a guide, but the Yen isn't the world reserve currency, so US ZIRP has huge limitations, unless CME hikes margins, and unwinds leverage.

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