Obama's refusal to push for mortgage cram-down is biting homeowners

[bijou]

brentspeak   (1000+ posts)           Wed Sep-30-09 04:41 PM
Original message
Foreclosures up 17%; Obama's refusal to push for mortgage cram-down is biting homeowners
   
Edited on Wed Sep-30-09 04:56 PM by brentspeak
As expected, Obama's "Making Homes Affordable" plan is way too weak to do much about the foreclosure tsunami. Basically, Obama's plan was this: give lenders (i.e. banks) taxpayer dollars, and hope that the lenders will be nice enough to lower underwater homeowner's mortgage rates. However, as the article makes clear, the plan is so unwieldy with all kinds of red tape/paperwork that many applications for help are simply being put in a banks "To do -- much later" wastepaper basket.

Rather than attempting to bribe banks with taxpayer dollars, cramdown -- allowing bankruptcy judges to force banks to renegotiate mortgage terms -- would be vastly more effective, more immediate, and way less costly.

Obama has yet to explain why he spinelessly caved-in on an issue he campaigned for as Candidate Obama. He can, however, make up for it by getting on the airwaves and the soapbox and push for cramdown. Do what presidents like TR, FDR, Truman, and Eisenhower did: tell the bank executives to go jump in a lake with a anvil tied around their ankles.

Commence the mole hunt!

Writer   (1000+ posts)             Wed Sep-30-09 04:44 PM
Response to Original message
1. I would like for you to explain why you're still a member of this site. n/t

geek tragedy (1000+ posts)           Wed Sep-30-09 05:04 PM
Response to Reply #6
13. No, it's your pathological hatred of all things Obama
   
and constant whining and bitching and moaning and trolling and spamming.

It has been years since you have said anything of merit on this site

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x8678045#8678053

[The Village Idiot]

DemoratUnderfoot.com has become ObamaUnder.com

[BEG]

Speaking of foreclosures, when we were making trips out here to California there were a ton of houses that were short sales.  I asked where all the foreclosures were.  Our realtor said that banks are holding off foreclosures and I can't remember why.  Any of you realtors or mortgage people know why?  Aren't there going to be a huge flood of foreclosed homes soon?

[Wineslob]

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Possibly, especially in your area. Too many home buyers were loan rate "drunk" and too many realtors were all too ready to gobble up the commissions on homes that should have NEVER sold for what they did.

The DUmmie has no clue that a 5.5 APR (which most mortgages were at during the home insanity 2-3 years ago) is a great rate, but the value of the homes were hyper-inflated. If you were stupid enough to get an ARM, shame on you.
Lowering the rate is not gonna help. What they want is for the banks to "eat" whatever the difference of the value of the homes were (at the time of closure) compared to what they are worth now, IE: reevaluate the value of a house and lower the principle to that.

NOT-GONNA-HAPPEN

[BEG]

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Possibly, especially in your area. Too many home buyers were loan rate "drunk" and too many realtors were all too ready to gobble up the commissions on homes that should have NEVER sold for what they did.

The DUmmie has no clue that a 5.5 APR (which most mortgages were at during the home insanity 2-3 years ago) is a great rate, but the value of the homes were hyper-inflated. If you were stupid enough to get an ARM, shame on you.
Lowering the rate is not gonna help. What they want is for the banks to "eat" whatever the difference of the value of the homes were (at the time of closure) compared to what they are worth now, IE: reevaluate the value of a house and lower the principle to that.

NOT-GONNA-HAPPEN

We didn't get an ARM, never had an ARM.  Our rate we got was 4.75%.  When we first started looking (June 2009) we got a rate at 4.5% but didn't lock it in.  Locking it in wouldn't have done any good though because the date we ended up closing was way past the expiration date of the 4.5% rate. 

[thundley4]

Why not make this "cram down" thing available to new car buyers?  After all, don't they lose half their value when you drive them off the lot?  It seems only fair to force the lender to reduce the amount of the loan by that amount.   

[TheSarge]

Writer   (1000+ posts)             Wed Sep-30-09 04:44 PM
Response to Original message
1. I would like for you to explain why you're still a member of this site. n/t

Once again Dummies are displaying that they are like oil and water when it comes to dealing with reality.

[Texacon]

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Possibly, especially in your area. Too many home buyers were loan rate "drunk" and too many realtors were all too ready to gobble up the commissions on homes that should have NEVER sold for what they did.

Wineslob, you have to remember one thing about a realtor.  It is the job of the realtor to get the best price possible for their client.  If you were putting your home on the market and others in your area were selling for $1,000,000 and your realtor said "Well, it is just this climate, we should realistically market your home for $600,000"  The realtor involved would be/could be fined or lose their license for not doing their job.  Heck, if they sold your home for the $600,000 while your neighbor with an exact duplicate got the cool Million for their home YOU could sue the realtor for breach of duty.

The market is what the market is.  At that time it was on a high and the realtors wouldn't have had a chance in hell of talking all those sellers into selling for far less than the buyers were willing to give.

Just a thought.

KC

[BadCat]

With both 30 and 15 year fixed rates at under 5%, I don't know what the DUmmies want the rates "crammed down" to.

Oh yes I do...ZERO PERCENT interest, and NO PRINCIPAL.

[USA4ME]

With both 30 and 15 year fixed rates at under 5%, I don't know what the DUmmies want the rates "crammed down" to.

Oh yes I do...ZERO PERCENT interest, and NO PRINCIPAL.

They still wouldn't budget for a loan.

.

[Chris_]

What are they smoking? I don't think the Rats will ever be happy

[ColonialMarine0431]

With both 30 and 15 year fixed rates at under 5%, I don't know what the DUmmies want the rates "crammed down" to.

Oh yes I do...ZERO PERCENT interest, and NO PRINCIPAL.

A squatter's paradise.

[USA4ME]

If you were stupid enough to get an ARM, shame on you.

But because of the price of homes in certain areas of the country, like CA and NY, the only way people could get a house was with an ARM.  There's nothing wrong with ARM's, it's just a tool to be used towards a certain goal.  Just this time a whole bunch of people got caught behind the 8 ball.

.

[LC EFA]

brentspeak   (1000+ posts)           Wed Sep-30-09 04:41 PM
Original message
Foreclosures up 17%; Obama's refusal to push for mortgage cram-down is biting homeowners
   
Edited on Wed Sep-30-09 04:56 PM by brentspeak
As expected, Obama's "Making Homes Affordable" plan is way too weak

...

Hang on a second. Wasn't the whole credit "crises" caused by a previous democrat trying to exactly the same thing ?

[GOBUCKS]

Why not make this "cram down" thing available to new car buyers?  After all, don't they lose half their value when you drive them off the lot?  It seems only fair to force the lender to reduce the amount of the loan by that amount.   

I also think the jug-eared muslim needs to do something to bail out the innocent investors who
are sitting at home right now with a basement full of $100 Beanie Babies.

Who's going to restore the value of Princess Bear and Bearsheeba?

[NHSparky]

Wineslob, you have to remember one thing about a realtor.  It is the job of the realtor to get the best price possible for their client.  If you were putting your home on the market and others in your area were selling for $1,000,000 and your realtor said "Well, it is just this climate, we should realistically market your home for $600,000"  The realtor involved would be/could be fined or lose their license for not doing their job.  Heck, if they sold your home for the $600,000 while your neighbor with an exact duplicate got the cool Million for their home YOU could sue the realtor for breach of duty.

The market is what the market is.  At that time it was on a high and the realtors wouldn't have had a chance in hell of talking all those sellers into selling for far less than the buyers were willing to give.

Just a thought.

KC

True, but another of their fiduciary duties is to sell your home, and if the comps in the area simply won't support it, they're not there to blow sunshine up your ass.

Case in point--when I was selling my home in CA, there was a 1 BR, 1 BA, 600 sq. ft. bungalow in Santa Ana which went on the market a full YEAR before our house went on for $550K.  The owners NEVER came down in price.  OTOH, we were already past the peak in 2006 when we put our place on the market.  We initially put the house on the market for $25-30K LESS than what a similar house in our development had sold for only six months previously, and even then, 1--we had to drop the price an additional $20K, 2--we almost had to drop it again and would have had an offer not come through, 3--it wasn't even for the full asking price (another $10K below asking price). 

But still, our realtor did good by us, even though we paid nearly $40K in realtor commissions, inspection fees, etc.  That same house today is worth at least $150K less than that.

[debk]

The foreclosure market is not anywhere near done.

A lot of the loans that were defaulted on because the ARM changed to the point where the homeowner couldn't make the payment...have already been foreclosed on.

Now we are seeing the foreclosures happening to people who could afford their homes...but have lost their jobs and are unable to get jobs at all or are getting them at a lower salary than the prior job and just don't have the income they previously did and are therefore unable to make the current payments.

They can't sell their homes now, because the dwelling can no longer be sold for the amount of money it was purchased for and the homeowner doesn't have the money laying around in the bank to pay the difference between what the house sells for and the mortgage amount due....without even considering a commission for an agent.

If a bank was willing to let a homeowner make payments that are at lower interest rate....and pay interest only...for 5 years.....the lender would still get money coming in, the homeowner would be allowed to stay in their home, and the bank would not end up with another foreclosure on their books. In 5 years time....it would go back to the original interest rate and includes some payment toward the principle. And hopefully, the homeowner would be in a more stable income situation. Or at any time, the homeowner sells the home.

Finding a lender that is willing to do this, is very difficult. There are, however, some out there that are willing to do it. I know Fifth Third is/was doing it, just as I described, because I know someone who did it about 5 months ago.

[GOBUCKS]

But because of the price of homes in certain areas of the country, like CA and NY, the only way people could get a house was with an ARM.  There's nothing wrong with ARM's, it's just a tool to be used towards a certain goal.  Just this time a whole bunch of people got caught behind the 8 ball.

It's chicken/egg. Had it not been for risky financing products like ARMs allowing so many people
to afford those crazy high prices, those crazy high prices would not have existed.

Real estate prices shot up due to so many people being able to afford higher and higher mortgages.
The only reason they could afford them was the availability of dangerous products like ARMs.

I had no idea things were so out of control that you didn't even have to document your income.
I remember two or three years ago driving through neighborhoods of $700K - $1000K homes with
little children playing everywhere - obviously the homes belonged to young families. I could
not understand how so many young people could afford such expensive real estate. Now I know -
they couldn't.

[Texacon]

True, but another of their fiduciary duties is to sell your home, and if the comps in the area simply won't support it, they're not there to blow sunshine up your ass.

Case in point--when I was selling my home in CA, there was a 1 BR, 1 BA, 600 sq. ft. bungalow in Santa Ana which went on the market a full YEAR before our house went on for $550K.  The owners NEVER came down in price.  OTOH, we were already past the peak in 2006 when we put our place on the market.  We initially put the house on the market for $25-30K LESS than what a similar house in our development had sold for only six months previously, and even then, 1--we had to drop the price an additional $20K, 2--we almost had to drop it again and would have had an offer not come through, 3--it wasn't even for the full asking price (another $10K below asking price). 

But still, our realtor did good by us, even though we paid nearly $40K in realtor commissions, inspection fees, etc.  That same house today is worth at least $150K less than that.

You're absolutely correct and you have NO idea how many listings I have lost because some piece of shit 'realtor' came into my area telling people they could sell their home for 2x what it should have gone on the market for. 

The last listing I lost like that I suggested the seller list for $99k.  The market would have supported it and she would have sold.  The realtor who came in behind me got the listing.  List price?  $175k!  She went through 2 realtors and 3 years before she came back to me.  By then the market had changed.  I listed and sold her home for $114k.  It broke her heart.  She felt like she was LOSING $60k! 

KC

[BEG]

You're absolutely correct and you have NO idea how many listings I have lost because some piece of shit 'realtor' came into my area telling people they could sell their home for 2x what it should have gone on the market for. 

The last listing I lost like that I suggested the seller list for $99k.  The market would have supported it and she would have sold.  The realtor who came in behind me got the listing.  List price?  $175k!  She went through 2 realtors and 3 years before she came back to me.  By then the market had changed.  I listed and sold her home for $114k.  It broke her heart.  She felt like she was LOSING $60k! 

KC

My realtor wanted to sell our house for 50k more than what we ended up selling it for.  I told her it wouldn't sell for that yet she still tried to get us to list it for that price.  I thought it should list for $30K more than what it ended up selling for but knew we wouldn't get it.  I assumed we would get $25k more than what it sold for, apparently I was wrong too.  We sold it TWICE for $20k more than it appraised for.  We should have sold it to the first people, after they got their appraisal they agreed to go over the appraised price by $8k.  We thought the appraisal was fluke, we found out the hard way that it wasn't. 

[Texacon]

My realtor wanted to sell our house for 50k more than what we ended up selling it for.  I told her it wouldn't sell for that yet she still tried to get us to list it for that price.  I thought it should list for $30K more than what it ended up selling for but knew we wouldn't get it.  I assumed we would get $25k more than what it sold for, apparently I was wrong too.  We sold it TWICE for $20k more than it appraised for.  We should have sold it to the first people, after they got their appraisal they agreed to go over the appraised price by $8k.  We thought the appraisal was fluke, we found out the hard way that it wasn't. 

Yeah, that stuff sux too.  Your realtor should know the appraisers in the area and if they are worth their salt.  Some appraisers come to our area and I can tell the sellers "we need to get another opinion" ... other appraisers come in and I can tell me sellers "This guy knows his business and if the buyers will go over this we need to take it".  Doesn't mean my advice gets taken but at least it is out there and off my conscience.

On the flip side, in 10 years I have had 2 deals where the seller wanted to list for more and I took the listing and I'll be damned if the seller didn't get what we were asking.  In one of those 2 cases the appraisal came in for what I suggested as list but the buyer was willing to come up almost 30% over appraisal to make the deal.  Blew me away.  Sometimes you just miss the market.

KC

[BEG]

Yeah, that stuff sux too.  Your realtor should know the appraisers in the area and if they are worth their salt.  Some appraisers come to our area and I can tell the sellers "we need to get another opinion" ... other appraisers come in and I can tell me sellers "This guy knows his business and if the buyers will go over this we need to take it".  Doesn't mean my advice gets taken but at least it is out there and off my conscience.

On the flip side, in 10 years I have had 2 deals where the seller wanted to list for more and I took the listing and I'll be damned if the seller didn't get what we were asking.  In one of those 2 cases the appraisal came in for what I suggested as list but the buyer was willing to come up almost 30% over appraisal to make the deal.  Blew me away.  Sometimes you just miss the market.

KC

The house we sold before the last house we did our own homework and felt we should list the house $25k over what our POS realtor told us to list it for. We sold it the first day it was listed (three bids) for $5k over the list price that we set.  Didn't have any appraisal problems that time.

[USA4ME]

It's chicken/egg. Had it not been for risky financing products like ARMs allowing so many people
to afford those crazy high prices, those crazy high prices would not have existed.

Real estate prices shot up due to so many people being able to afford higher and higher mortgages.
The only reason they could afford them was the availability of dangerous products like ARMs.

Maybe, maybe not.  But as far as ARM's go, I just can't call them risky.  That are what they are.  Like anything, it can be used properly or it can be misused.  Granted the CA home marketplace was overpriced, but it had been that way for decades.

.

[debk]

I had 3 ARM's on my house after I "purchased" it due to my divorce (I "got" the house but had to figure out what to do with 2 mortgages on it  ).

I had no problem with them except for the last one, and that was because Countrywide penalized me $7200 for selling the house 45 days prior to the ARM expiring. If I had waited another 30 days, I wouldn't have had to pay it. I was willing to wait, but the buyers wanted it closed before the end of the calender year. I wasn't going to lose the buyers over it.

ARM's work IF you know what you are getting and are very very clear on when the ARM will adjust. Many people got ARM's on second mortgages - at least around here....and that's has been a major factor in them losing their homes. Some of these ARM's have adjusted EVERY 6 MONTHS!

I did a report for the bank on a house that was being sold as a "short sale". The homeowner told me they got a first mortgage for 80% of the house and a second for the other 20%. Their first mortgage was staying constant, but the second was an ARM and was adjusting every 6 months. In 2 years time, their payment had gone from $600 a month to almost $1000! They told me they didn't know the conditions of the ARM until they went to the closing on the house. Which really didn't surprise me. It wasn't that they set out to do something stupid....it was a lack of knowledge of the process and a lender- who didn't make sure they understood what they were getting into BEFORE they signed on the dotted line.

As an realtor, and I've been one for over 12 years.....I do everything I can to protect my buyers regarding the house they purchase. I do everything I can to find them the best house for them and get the best price I can negotiate. I make sure that they understand the sales contract, get a home inspection and negotiate out the repairs, and that they follow their side of the contract and work with the sellers' agent to make sure that the sellers do their side of the contract. If there is a problem with the appraisal, try to resolve it.

I nag at lenders to make sure they are going to complete the loan process in time for the closing.....I DO NOT get into the buyers transaction with the lender. While I know how much a buyer can spend from a lender....I do not know how much money a buyer makes/has or what their debts are. It's none of my business. I'm a realtor not a lender. I get a letter from a lender telling me how much a buyer is qualified to spend...either before I write an offer, or within 24 hours of writing an offer. If I don't have a letter from the lender prior to writing the offer, I have spoken to the lender and they have told me what the buyer is qualified to buy. Unless the buyer tells me details about their loan, other than how much they are putting down on the property and maybe the length of the loan, I don't know details.

Realtors work within their individual state laws.

I have been on the sidelines the last several months, while my brother has purchased a home in the Chicago suburbs. There, a realtor takes them to look at houses and writes the offer, and negotiates the contract sales price. From that point on, a lawyer takes over to negotiate out the home inspection and any appraisal issues, does the title search and prepares the closing. Here, in TN....I do the home inspection and appraisal issues. Title companies do the title search and prepare the closing, though some people may prefer to use a lawyer or a bank, most are done by a title company. I can't think of any closing I have had that was done in a law office, and I bet I haven't done 5 closings with a bank.

[USA4ME]

I did a report for the bank on a house that was being sold as a "short sale". The homeowner told me they got a first mortgage for 80% of the house and a second for the other 20%. Their first mortgage was staying constant, but the second was an ARM and was adjusting every 6 months. In 2 years time, their payment had gone from $600 a month to almost $1000! They told me they didn't know the conditions of the ARM until they went to the closing on the house. Which really didn't surprise me. It wasn't that they set out to do something stupid....it was a lack of knowledge of the process and a lender- who didn't make sure they understood what they were getting into BEFORE they signed on the dotted line.

I could see that happening, but as a broker you can only do what you can do to explain it.  When you sit there and tell them "Ok, this is an ARM, the rate is capped the first year, but after that the rate can increase every 6 months, but it can't increase anymore than 2% every year," I always demonstrated the worst case scenerio for the customer.  But even if I hadn't, the customer has some obligation to say "Hold on, I don't fully understand this" or "Show me what that means.  Give me dollar amount."  I also explained to them that from time to time lenders change what they're willing to do at the end, and I had no control over that.

As far as not knowing the conditions of the ARM before they went to closing, I very rarely didn't know the conditions a few days (if not longer) before the closing took place.  On occasion, at the last second, the lender would switch the loan program for which we were trying to qualify to one the customer actually did qualify.  That was always frustrating to me because I always felt like the customer would think it was my fault and that I did it at the last second just to try and make more money or something, which was never the case, and I've been doing this for over 20 years.  In fact, it usually cost me money.  But regardless, it's a pain because now I've got to re-explain what the new terms and conditions are at closing, and things are usually hectic enough as it is.

I had a couple of realtors I worked with who I finally got to understand that they had to control the situation better.  I'm not the lender, and at the last second the lender decides something isn't right, they aren't going to lend, or they're going to change what they are willing to do.  If that happened, I needed the realtor on my side backing me up while I explain to the customer what happened and why.  Way too often I had the realtor in there fighting for the customer over something of which I had no control.  Now if I had been some new kid off the street I might could understand, but they knew me, and/or their office knew of me and we had done dozens and dozens of closings before, and now this one had some unexpected adjustments.  Raising the anxiety level of the customer doesn't help.  Even if you explain to them the new program, they're often so upset they don't hear half of what you said anyway.

I have sympathy for the customer because often times they feel cornered.  The lender changed the loan conditions, etc... and now they're at the closing and have to make a snap decision.  More often than not, they feel like they have to take what is being offered.  I'd have loved nothing better than for every deal I ever worked to have been exactly what I told the customer it would be when we first consulted, that would be wonderful PR that I could use, but that's not the real world.  I did my best to prepare them for the unexpected, but you can only do so much.

.