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This could be a big problem

by Kay King
8 replies
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California city backs plan to seize negative equity mortgages | Reuters

The company behind this story includes a former BOA person who was one of those responsible for the mortgage problem when the economy went bust.

What a dangerous precedent this is! Freddie Mac and Fannie Mae advised today they will not insure or back or buy any mortgages in this city going forward.

No lender is going to approve a home loan in this city going forward - why would they?

This is probably one of the craziest and most disturbing stories I've seen come out of the Great Recession. What are those people thinking?


Edit: Apparently the plan is to refinance the homes through the FHA....which brings up another set of problems

http://online.wsj.com/article/SB1000...158186954.html
  • Profile picture of the author HeySal
    What they are thinking is: "Wow, it's really kewl that this country operates on fiat currency instead of REAL money."

    This is just one of the many reasons that there are counties who are in process of successfully seceding from CA to form a new state. They are sick of having a gov that supports this type of corruption.
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    Sal
    When the Roads and Paths end, learn to guide yourself through the wilderness
    Beyond the Path

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    • Profile picture of the author Kay King
      It's gullibility, too, Sal. They pushed this telling homeowners they would "reduce the principal they owe". The banks will take a bath on this and no one cares what happens to the banks.

      But down the line the homeowners are going to be unable to sell or finance property in that town.

      It's a total abuse of eminent domain. This same company is presenting this idea to quite a few other cities but this one was the first to "bite". Dangerous precedent.
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  • Profile picture of the author HeySal
    There's being an erosion of private property almost globally right now. If we don't stop - like we should have during the "bailout", it won't be long before everyone but the extremely wealthy lives in assigned housing.
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    Sal
    When the Roads and Paths end, learn to guide yourself through the wilderness
    Beyond the Path

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  • Profile picture of the author SteveJohnson
    I have a hard time feeling bad for the banks. They would rather foreclose on a property with the relatively certain knowledge that their return will be pennies on the dollar than to renegotiate a mortgage balance with a homeowner and restore the loan to a performing asset. They refuse to do it because they know, at some point, some politician will arrange to bail them out of their losses.

    That said, I'm totally against a government entity using eminent domain abilities in this manner. It's a noble sentiment, but so open to abuse and fraud it's ridiculous.
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  • Profile picture of the author trader909
    I am losing faith in our "big brother society " daily.
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  • Profile picture of the author seasoned
    The ULTIMATE in STUPIDITY!!!!!!!!!!!! OK, maybe not ULTIMATE! I think I HAVE seen worse. This IS up there though!

    Did YOU know that like 8 years ago they were actually ADVERTISING underwater loans!?!?!? SERIOUSLY! I saw them go as high as 150% of the value, though most were only 125%! The idea was that you would get the loan AND 25% of the homes value in CASH!

    GRANTED, I haven't seen those in a while, and they WOULD all HAVE BEEN paid down to maybe 100% or so by now, but that is "WOULD HAVE BEEN"! If we factor in the decline of the markets, ESPECIALLY in places like california, they may not have been paid down AT ALL!!!!!!

    And WHO is to say what a house is worth ANYWAY? BESIDES, the ability of the person, and their ethics, should be the key determinant! That IS the idea behind that stupid company "fair issac"(AKA the company that created the FICO score). A homeless bum can't just walk into a bank, and buy a million dollar home. HECK, I had a nice job, wanted to buy a car with a 4y loan, and I STILL had to have my father cosign for my first car!

    Steve
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  • Profile picture of the author seasoned
    BTW HISTORICALLY, a bank gets FOUR times what the home is worth! Lately, it has been TWO times. SO, after about 15 years, on a 30 year loan, EVERY one breaks even! Historically, after 15 years, they make 100% profit.

    GRANTED it isn't what all wanted, but there are worse investments. And people don't invest in loans! They invest in POOLS of loans. So if 50 lose money there may be another 50 to GAIN money on.

    Of course, these numbers only work on 30 year or greater loans. If they are paid off earlier, they make less money.

    Steve
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  • Profile picture of the author bizgrower
    This is way to reminiscent of Enron when the politicians were buffaloed, or worse, by the industry insiders.

    I don't understand how the proposal would work in terms of whose name is on the mortgage and deed/title (whatever terms they use in CA).
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