Real Estate Crash thread

**Benny Profane** · 09-23-2009, 08:18 AM

Originally Posted by mcsquared

Or you could be one of the Benny Profanes sitting in some apartment on a mattress stuffed with that $200-300 a month you saved.

And, next June, when my lease is up, I can move my big ass and my leather couch and stuff anywhere I damn well please without confronting an ethical dilemma of walking away from an underwater mortgage.

**AKPogue** · 09-23-2009, 08:19 AM

Originally Posted by mcsquared

It is kind of an interesting ethical discussion. One of those "would you steal to feed your family" kinds of things that is, unfortunately, not a mere hypothetical for lots of people these days.

So it sounds like you would be saving $200-300 a month by bailing and renting. I guess you gotta ask yourself if the $200-300 a month is worth the moral compromise? If at some future date you want to be able to say to your children that although you may not be rich, you kept your word even though the rest of the world didn't. Things will come back around. And when they do you might be one of the few who never missed a payment. Or you could be one of the Benny Profanes sitting in some apartment on a mattress stuffed with that $200-300 a month you saved.

It is a good point that you bring up, but when the other side doesn't care about or want to help you out why would it be a moral compromise. If the bank was working with him and he screwed them then it would be different. However these banks have brought about this crisis on themselves. Granting out loans that they had no business giving and now that everything has gone to shit they won't work with the people that are going to keep them solvent. My personal opinion is that if the other side is crooked than moral compromise goes out the window.

**Benny Profane** · 09-23-2009, 08:26 AM

Originally Posted by AKPogue

My personal opinion is that if the other side is crooked than moral compromise goes out the window.

I was thinking the other day how that this will be the real damage done to our already morally compromised society. It's pretty fucking hard to talk to kids and try to tell them to think right after all this.

**khakis** · 09-23-2009, 08:29 AM

oh I wouldn't walk and rent. He's gonna be in the area for another 7-8 years, I'd only walk after buying another, better house for half price and moving into it. That's more like $700/month savings, plus building equity on a house that may (hopefully) appreciate over that time period.

**mcsquared** · 09-23-2009, 08:35 AM

Originally Posted by AKPogue

It is a good point that you bring up, but when the other side doesn't care about or want to help you out why would it be a moral compromise. If the bank was working with him and he screwed them then it would be different. However these banks have brought about this crisis on themselves. Granting out loans that they had no business giving and now that everything has gone to shit they won't work with the people that are going to keep them solvent. My personal opinion is that if the other side is crooked than moral compromise goes out the window.

I agree. But unfortunately, it isn't just the bank he would be screwing over. Even if we postulate that the bank is an evil empire, his loan is owned by hundreds or thousands of people. Peoples pensions, peoples salaries all depend on people living up to their obligations. Not to mention his neighbors who are also struggling with the same dilemma. Indeed, questionable ethics permeate this entire crisis. But at some point people need to stop trying to figure out who fucked who harder and dig in their heels for the struggle otherwise you are just passing your problem onto somebody else.

**AKPogue** · 09-23-2009, 08:41 AM

Originally Posted by Benny Profane

I was thinking the other day how that this will be the real damage done to our already morally compromised society. It's pretty fucking hard to talk to kids and try to tell them to think right after all this.

This no different than any other scandal throughout history and we will see more. There will always be shitbags trying to steal other people's money. Just got to tell kids the difference. I try to follow the Golden Rule but that doesn't mean I am going to let people walk over me and treat me like shit.

Originally Posted by khakis

oh I wouldn't walk and rent. He's gonna be in the area for another 7-8 years, I'd only walk after buying another, better house for half price and moving into it. That's more like $700/month savings, plus building equity on a house that may (hopefully) appreciate over that time period.

How would he be able to buy another house? Just interested to know. I know guys that have 800 credit scores, no debt besides their mortgage, and make $100k plus a year and banks are giving them a hard time refinancing.

**Benny Profane** · 09-23-2009, 08:54 AM

Originally Posted by AKPogue

I know guys that have 800 credit scores, no debt besides their mortgage, and make $100k plus a year and banks are giving them a hard time refinancing.

Read that link StuGotz posted on top of the page. Interesting.

**GiBo** · 09-23-2009, 08:59 AM

Good points all around. I have flip flopped between the devil on my right shoulder and the angel on my left for the last two years. I always seem to come back to mcsquared's POV: If I just always do the right thing, somehow I will come out alright in the end. Then I do the math and I realize the 'right thing' doesn't pencil out. But should it? How much is my integrity worth? Is there solice 15 years from now to be able to say, "Hey, alot of us did it!" ?

I look at it like this. Imagine if the rules of this game were such that if your house increased in value, the bank could come to you and say, "Hey, we're holding 90% of your house and we kind of want to cash out. So either give us some of the increased equity or were selling." Isn't it the same thing? We both went in assuming certain risks. Now after it goes to shit I say I'm out?

It's interesting that the guys I know in the bussiness world seem to have a "Hey, it's just bussiness" attitude. Part of me thinks that's what got us in this mess. But then part of me realizes that's why those guys are rich and I'm not.

Shit. I'm back to looking back at forth and the devil and angel!

**khakis** · 09-23-2009, 09:03 AM

Originally Posted by AKPogue

How would he be able to buy another house? Just interested to know. I know guys that have 800 credit scores, no debt besides their mortgage, and make $100k plus a year and banks are giving them a hard time refinancing.

I know it happens...I did it in May (refi, not walk). I know they look at the amount owed on your liabilities, but does underwriting appraise them when they are writing a new loan?

**khakis** · 09-23-2009, 09:10 AM

look at it this way:
if you were able to "pull a fast one" and save $700/month for 8 years, that's $67,200. Then if you were able to sell the new house for a profit rather than take a bath selling your current one
The fact that you're even considering it tells me that you should go ahead and do it. If you were going to lose sleep over it you wouldn't have posted the thread, and just went ahead and kept making your payments. At least for the 4 years until your ARM goes through the roof and you find yourself in a really bad spot.

**liv2ski** · 09-23-2009, 09:25 AM

Originally Posted by Benny Profane

A conventional lender wouldn't even answer a call for a decade, I'll bet. They're making it hard on anybody and everybody today, even if they have 25% down and a good job. If it wasn't for the FHA, the entire bottom of the market, which is pretty much the market, wouldn't even exist today. It's kind of amazing that they are still lending at 97% first loan and 125% HELOC, but, hey, they have you and your children to support the profligacy.

Benny, the problem with getting conventional loans is:
Anything over 80% ltv requires PMI and in declining areas like CA, the PMI companies basically don't want to insure loans at this point unless it is a golden package at 90% ltv (85% ltv on condos) or less.
I agree with your comment that without FHA financing for high ltv loans, the entry market would be fucked, as is the jumbo market. Now I will remind you I have been in the mortgage biz since 1984 and in that time both FHA and VA have remained solvent and fine even after the comparable loss in values from 1991-1995 to what we are seeing today. So I am not worried about FHA going away. Frankly all of the shit loans that were originated in the last 5 years were conventional stated income loans, as no one wanted a full doc FHA/VA loan at that time. Yes the pension funds, hedge funds, etc that invested in those loans are getting fucked, but that is part of the business cycle. I see FHA tightening up their lending standards, so really, I think that program will be solvent to support high ltv loans and the market. It is the Jumbo values that need huge down payments or low ltvs for conventional financing. Frankly, the real estate loan market is likely very similar to what we had in the 1960's. Conventional lenders want 20%+ down and if it is your first or 2nd home, you go FHA/VA.

**Toadman** · 09-23-2009, 09:31 AM

Originally Posted by AKPogue

How would he be able to buy another house? Just interested to know. I know guys that have 800 credit scores, no debt besides their mortgage, and make $100k plus a year and banks are giving them a hard time refinancing.

Sounds oddly like an experience I had trying to re-fi. Not to mention the closing costs on re-fi's are ridiculous.

**GiBo** · 09-23-2009, 09:34 AM

Well, Wells Fargo isn't helping their cause. I tried calling again to see if I could get anywhere with them on a refi. The first guy said he could do 125% of current value, I'd have to eat the rest- um ya, no thanks. Then he sent me into phone land to "someone else who could help me." I entered all my info, sat on hold for 15 minutes and then the call just ended.

If I could get out of the ARM with a decnet rate, they stand a chance of getting the money I borrowed. If not, they stand a pretty good chance of not getting it. WTF is wrong with these people?

**AKPogue** · 09-23-2009, 09:34 AM

Originally Posted by Benny Profane

Read that link StuGotz posted on top of the page. Interesting.

That is interesting. Funny thing is these guys have no intention of defaulting and why would they if they were trying to refinance just to get a better loan.

**Benny Profane** · 09-23-2009, 09:45 AM

Originally Posted by liv2ski

Benny, the problem with getting conventional loans is:
Anything over 80% ltv requires PMI and in declining areas like CA, the PMI companies basically don't want to insure loans at this point unless it is a golden package at 90% ltv (85% ltv on condos) or less.
I agree with your comment that without FHA financing for high ltv loans, the entry market would be fucked, as is the jumbo market. Now I will remind you I have been in the mortgage biz since 1984 and in that time both FHA and VA have remained solvent and fine even after the comparable loss in values from 1991-1995 to what we are seeing today. So I am not worried about FHA going away. Frankly all of the shit loans that were originated in the last 5 years were conventional stated income loans, as no one wanted a full doc FHA/VA loan at that time. Yes the pension funds, hedge funds, etc that invested in those loans are getting fucked, but that is part of the business cycle. I see FHA tightening up their lending standards, so really, I think that program will be solvent to support high ltv loans and the market. It is the Jumbo values that need huge down payments or low ltvs for conventional financing. Frankly, the real estate loan market is likely very similar to what we had in the 1960's. Conventional lenders want 20%+ down and if it is your first or 2nd home, you go FHA/VA.

I think most aren't aware that the government, using your tax dollars, is continuing the same lax lending practices to keep the bubble inflated, and maybe re-inflate it.

http://online.wsj.com/video/meet-gin...A172A44B3.html

The Next Fannie Mae
Ginnie Mae and FHA are becoming $1 trillion subprime guarantors.

http://online.wsj.com/article/SB1000...183078806.html

**Platinum Pete** · 09-23-2009, 10:11 AM

I'm not cool with people walking away from their mortgages because they are underwater. You made the choice to purchase that house and your due diligence failed, the bank is sticking to it's end of the deal and you're ready to fuck them and everyone who will have to bail them out, and make it more difficult for everyone else trying to get a loan, and bring down the value of those in your neighborhood further. The root of this is your bad decision, not the banks - and you're going to make it a lot of other people's problems. I have no respect for that position.

**Woolly the Mammoth** · 09-23-2009, 10:20 AM

Wow there is some really good discussion in this thread, some of which is a little over my head. So let me see if I'm understanding things correctly- the entire market is being buoyed by the government lending to first time homebuyers, which is artificially keeping prices high. The first-time homebuyer credit is about to expire, so that market will dry up, and then prices will really decline, right?

**grapedrink** · 09-23-2009, 10:33 AM

1. banks don't give a shit about you so don't even consider their 'feelings' on the matter or the ramifications to their bottom line. they would fuck you over in a heartbeat..

2. platinum pete is absolutely right but in the end who cares what he thinks, if the roles were reversed do you think he (and others) would give a shit what you think? do what you need to do, if you can cut your payments in half and save 100k in the process with no skin off your back.. thats a no brainer. the system is fucked, you're not going to fix it by doing the right thing (throwing your money down the drain) while everyone else gets a free do-over. the law should be that the only way to default on a mortgage is through personal bankruptcy after which you can't credit of any kind, especially not a mortgage, for 7 years. but it doesn't work that way..

**ass-to-mouth** · 09-23-2009, 11:23 AM

Stay for Ken Lewis. Stay for Angelo Mozilo. Stay for David Lereah. Stay for Joe Cassano. Stay for Alan Greenspan. Stay for John Thain's $25,000 dollar toilet. Stay for Larry Kudlow. Stay for Alan Schwartz. Stay for Hank Paulson. Stay for Ameriquest - "Proud sponsor of the American Dream". Stay for Barnie Frank. Stay for the thousands of hardworking blooduckers at Goldman Sachs. Stay for Dick Fuld. Stay for Jim Cramer. Stay for Larry Yun. Stay for Danny Mudd. Stay for KB Homes. Stay for Ray McDaniel. Stay for 4matic's neighbor who sold his house in 3 days for $30,000 over asking. Stay for Dolly Lenz. Stay for the United States of Motherfucking America. Stay for the poor slobs who payed way too much for my mom's house.

**Benny Profane** · 09-23-2009, 11:28 AM

You forgot Stay for your mother.

**ass-to-mouth** · 09-23-2009, 11:37 AM

Originally Posted by Benny Profane

You forgot Stay for your mother.

Added.

xyz

**cramer** · 09-23-2009, 12:16 PM

I know, I've had two very good finance guys (who I respect as people too) tell me it was the smart thing to do. Just seems wrong to me. But damn, I'm going to lose my ass! And for what? My varible will adjust in four years and the bank won't even discuss re-working the loan. I know it's just my upbringing that gets me all moral on this shit, but they don't seem to give a shit about my situation so why should I care about them?

I owe $225k on a house that would go for about 115-125k.

I'd try to shortsale if i was you. You take a couple hundred hit points on your credit but after 3 years, you are a first time home buyer again and your credit will have come up enough to get into an FHA (620 credit score) and try again if you chose to do so. Whether you foreclose or short sale, your credits going to take a major hit. But you'll have an easier time getting a home after 3 years with that short sale being the one on there. Thats what i would do if i was in your position and just wanted out of the situation. Tough call either way. If i could afford my house, i wouldnt walk. But with your adjustable, who knows how much rates go up in the next few years. I'm assuming quite a bit.

**cramer** · 09-23-2009, 12:33 PM

Wow there is some really good discussion in this thread, some of which is a little over my head. So let me see if I'm understanding things correctly- the entire market is being buoyed by the government lending to first time homebuyers, which is artificially keeping prices high. The first-time homebuyer credit is about to expire, so that market will dry up, and then prices will really decline, right?

I think it depends where you live. Most suburbia already hit rock bottom and all the houses are sold. I can do an MLS search right now and there is like a quarter of the houses listed from when i was looking. Just looking at my neighborhood it makes sense. The builder foreclosed, so the bank finished the houses, like 55 of them. None are left. All sold in the last year.

As for first time buyers, they are coming out of the woodworks. Free money, cheap houses, low fixed interest rates. Its what we've all been waiting for. Market collapsed and everyone sitting on the sidelines gets to live the american dream now.

**Platinum Pete** · 09-23-2009, 12:33 PM

Originally Posted by ass-to-mouth

Stay for Ken Lewis. Stay for Angelo Mozilo. Stay for David Lereah. Stay for Joe Cassano. Stay for Alan Greenspan. Stay for John Thain's $25,000 dollar toilet. Stay for Larry Kudlow. Stay for Alan Schwartz. Stay for Hank Paulson. Stay for Ameriquest - "Proud sponsor of the American Dream". Stay for Barnie Frank. Stay for the thousands of hardworking blooduckers at Goldman Sachs. Stay for Dick Fuld. Stay for Jim Cramer. Stay for Larry Yun. Stay for Danny Mudd. Stay for KB Homes. Stay for Ray McDaniel. Stay for 4matic's neighbor who sold his house in 3 days for $30,000 over asking. Stay for Dolly Lenz. Stay for the United States of Motherfucking America. Stay for the poor slobs who payed way too much for my mom's house.

Ditch because you're angry and want to throw a tantrum that none of the people you're upset with will even notice. Ditch because you'll show all those selfish, shallow, "it's just business", no-ethics, assholes that you can be one too - just without the benefits they enjoy. Burn your neighbors, burn the folks who don't fit the normal mortgage math and are making their payments and improving their neighborhoods, burn the banks so we can all pay in to bailing them out more. Fuck everybody over - who cares about them?- because the banks won't show you sympathy on mortgage modification.

**ass-to-mouth** · 09-23-2009, 12:34 PM

Originally Posted by Woolly the Mammoth

The first-time homebuyer credit is about to expire, so that market will dry up, and then prices will really decline, right?

I've talked to several people, mortgage brokers and dirt merchants, who expect the credit to be extended for at least another six months (June 1, 2010).

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