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Old 10-01-2008, 09:02 AM   #41
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Originally Posted by jIMOh View Post
How about a plan which does two things

1) allows anyone upsidedown on a mortgage to refinance using fair market value for the 1st mortgage and guarantee a fixed rate loan of 6% for a good or excellent credit score and higher rates for lower scores.

2) the difference between purchase price and fair market value (above) is put on a second mortgage which is in deferrment (no interest paid by borrower) with the interest paid by the federal government and a lien on the house held by the IRS.

If person sells the house, the IRS collects on the lien and pays back the treasury
If the person gets foreclosed on, the IRS knows and write some fines into legislation to make this a BAD situation for the borrower.
If the house appreciates enough, the homeowner should have a way to refinance the IRS lien off the house if they pay the principal amount back to the treasury.

Give a 30 year timeframe for this and do not allow the deed to be transferred without IRS lien being dealt with (so parents do not die and have kids inherit house lien free).

Would this work?
Don't know if it will work, but you may be on to something- convert the shortfalls into something the IRS can collect- those folks are ruthless, and really hard to just walk away from...
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Old 10-01-2008, 09:06 AM   #42
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I haven't kept up on everything on this, but this little excerpt really got me angry:

U.S. Senate moving toward alternative energy credits - MarketWatch

Quote:
.... as the U.S. Senate moved to vote on the $700 billion bailout package, which includes tax breaks for alternative energy. The measure includes tax credits for the production and use of solar energy and wind power
They are having trouble passing the bill. The bill should be about the financial situation. Yet, they try to cram these other things into it.

Alternate energy bills should be a separate issue (one that I have strong opinions on).

Congress - DO YOUR JOB!


-ERD50
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Old 10-01-2008, 12:15 PM   #43
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First how do you know that government can't make money buying severely beaten down securities? Unless you know the prices of the securities, the interest rate, the percentage of non-performing loans, credit score and other factors you really have no clue. Most importantly these mortgage securities aren't just toxic waste as they have erronously been described.

The are mortgage on homes in very desirable locations in the county like California and Florida. If the value of the securities is less than the value of the homes the taxpayers can (and I think we will make money.) Many understanding is that many of the MBS are trading below 50 on the dollar, and since housing price have not dropped 50% there is significant collateral available.
Lots of interesting conjecture. Lets look at one hard bit of evidence: The folks with the best knowledge of what might be behind these securities (and who work in RE finance for a living) are not rushing in to buy these great bargains. Gee, why would that be? "Here's free money folks, all you want, scoop 'em up while you can!" And yet-nobody thinks they are worth even the beaten down amount. But somehow you have faith that government functionaries, with no "skin in the game" and using my tax dolars, are better able to judge the marketplace and what these securities are worth. That's a leap of faith.

Here's an idea. If you think these securities are such a great deal, buy them with your own money. Do it today before the government rushes in and you'll make even more. Because one ancillary negative impact of government action will be to drive away private investors and risk-takers after the prices get bid up--the window is closing, don't be left behind! Jump in now, let us know how it goes.
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Old 10-01-2008, 12:19 PM   #44
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Originally Posted by ERD50 View Post
I haven't kept up on everything on this, but this little excerpt really got me angry:

U.S. Senate moving toward alternative energy credits - MarketWatch

They are having trouble passing the bill. The bill should be about the financial situation. Yet, they try to cram these other things into it.

Alternate energy bills should be a separate issue (one that I have strong opinions on).

Congress - DO YOUR JOB!


-ERD50
The reason most bills fail is the watering down and/or tack-on legislation that gets put in. Obviously the House GOP folks and even some Dems had a problem with it. Back to the rewrite folks........
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Old 10-01-2008, 12:21 PM   #45
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This IS their job these days. Wait for something that has to be passed to come along and then see how much crap you can stuff into it that'd never pass on its own.

I still love the commercial with the firemen running congress. Key on that is to require that all bills be kept simple.



I think the reason why regular investors arent taking these is because the income flow is potentially erratic. Its a cash flow issue. The feds have a somewhat smaller concern with cash flow than an institutional or retail investor.

At least thats the excuse. Who knows if its a good deal...
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Old 10-01-2008, 12:28 PM   #46
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fyi: tonight
An exclusive conversation with Warren Buffett - Charlie Rose

last night charlie had very interesting interview with harvard economist Martin Feldstein but the video is not yet posted on charlie's website. you might check for same later today or tomorrow.
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mortgage default question
Old 10-01-2008, 01:05 PM   #47
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mortgage default question

One thing I'm unclear on: What percentage of the mortgage defaults are financially solvent people walking away from underwater loans due to declining home values, vs. folks actually unable to meet their payment obligations (due to balloon payments, job loss, etc...)? If its primarily the former, is part of the issue that its too easy to walk away once underwater?
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Old 10-01-2008, 01:39 PM   #48
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as it was explained by feldstein last night, currently there are 10 million homes valued 20% under mortgage. that number could rise by another 10 million and the percent figure could rise to 30-40%
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Old 10-01-2008, 01:57 PM   #49
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as it was explained by feldstein last night, currently there are 10 million homes valued 20% under mortgage. that number could rise by another 10 million and the percent figure could rise to 30-40%
So, the message Congress is trying to send is: "As long as you owe LESS or equal to what your house is worth, continue making your payments. "If you owe MORE than what your mortgage is, then we'll take care of you".......
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Old 10-01-2008, 02:10 PM   #50
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sorry, no idea. you guys certainly understand this better than i. i'm just scared to death (and taking steps about that--new thread to follow).

what this economist on rose said last night has been said by others here, that the tide needs to be stemmed at the source, housing. i need to listen to the interview again in hopes of understanding it, but he said something to the affect of creating government bonds (at least that's what i think i heard--or how i interpreted what he said) payable to homeowners whereby their mortgage payments will be reduced so they can stay put. the figure he gave was up to $80k per home. but as i said i really do not understand how all that works.

my unknowing opinion is that the government should help people stay in their homes, even at a cost to me who did not benefit from this disaster, but for that gifting, the government should benefit later with a percentage of cap gains on those houses should life improve into our future.
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Old 10-01-2008, 02:13 PM   #51
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Sounds like the only thing missing is "Solving World hunger". Still don't see why the solution to the S&L "crisis" won't solve the sub prime "crisis". Let them fail ... the FDIC will pick-up the pieces and liquidate assests at market prices.

Anything else is akin to tying leg braces to your 18 month old so he learns to walk. Your short sighted solution does more harm than good.
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Old 10-01-2008, 02:44 PM   #52
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Your short sighted solution does more harm than good.
um, i don't know who you think you are chatting to but (as your comment came right after mine) if you think i have a short sighted solution then i can assure you that i have no solution, i'm no economist. i simply think something should be done to stop a complete collapse. i have no idea what that is. mostly i was merely reporting on what some economist said. there's a big difference between short sighted and thinking outloud, trying to understand all this. perhaps your curt outburst better reflects something short about you.
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Old 10-01-2008, 02:57 PM   #53
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Sounds like the only thing missing is "Solving World hunger". Still don't see why the solution to the S&L "crisis" won't solve the sub prime "crisis". Let them fail ... the FDIC will pick-up the pieces and liquidate assests at market prices.

Anything else is akin to tying leg braces to your 18 month old so he learns to walk. Your short sighted solution does more harm than good.
S&L was a bunch of small banks no one outside the area ever heard of. Today we have the big banks failing first. Stronger ones will take their place, but the fact they are failing is causing a crisis of confidence where banks around the world won't lend to each other or almost anyone else. the way corporate america operates, you have to have short term credit or start laying off people
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Old 10-01-2008, 02:58 PM   #54
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From my reading of the NEW SENATE BILL (which BTW is now 451 pages long) I would not bet on it passing the HOR. The BIG FDIC change EXPIRES on 12/31/2009. What a dumb thing to do (either raise it or don't but a 15 month change makes no sense to me. Everything will be fixed by then? I would not bet on it. And they have loaded it down with a bunch of unnecessary "stuff". I am almost thinking they do not want this thing to pass at all. Yesterday the Senate was not going to go before the HOR now they are going to pass this "new" thing then give it to the HOR, leave town, and say "take it, pass it, or leave it". Talk about arm twisting.
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Old 10-01-2008, 03:21 PM   #55
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a 15 month change makes no sense to me
Anything with an expiry or ridiculous terms on it is simply creating a situation where another bill and renegotiation will have to take place, allowing for more pork and bits of unrelated crap to be stuffed into something that "has to pass by mm/yy". Everyone agrees to it because by the time the next round of negotiations go through, some will have retired, some will have been voted out, and the old guard can let the young turks get a win while still getting what they want.

Standard politics.
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Old 10-01-2008, 03:22 PM   #56
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One thing I'm unclear on: What percentage of the mortgage defaults are financially solvent people walking away from underwater loans due to declining home values, vs. folks actually unable to meet their payment obligations (due to balloon payments, job loss, etc...)? If its primarily the former, is part of the issue that its too easy to walk away once underwater?
This afternoon, I just had a brick contractor (30 years of age), who was here to give me an estimate on some repairs, tell me that 4 houses on his street have been foreclosed. He paid $130K for his house and says that these newly foreclosed homes are going for $40K. He fears thinks that they will be turned into HUD homes and will attract a low income tenant or owner. He said he plans to give his house back to the bank (even though he can afford to make the payments) because he thinks he'll never be able to sell if for anything close to what he paid for it. His plan is to move further out into the suburbs where he can get a much nicer, larger, newer house for about 40% off what it sold for a few years ago.

This is worrisome.

omni
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Old 10-01-2008, 03:32 PM   #57
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OAG.. yeh, I am seeing the same thing from both sides.. Neither really wants it in any form (though Dems were more on board both at the outset and now with more add-ons .. Rs offered their own add-ons in the fullness of time as well).

Neither wants to be seen as the party that wrecked the deal..
but neither wants to be seen as the party that got the deal done, either!!

It's kind of hilarious to watch them all squirm, especially as they are all getting constituent feedback that is running 100 to 1 or 200 to 1 against it. Yet at the higher level they can't savage each other enough for the other side's not helping in getting "something" done.

What seems to be happening is that each hates it enough to work hard to set up the other party as the wrecker.
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Old 10-01-2008, 04:04 PM   #58
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His plan is to move further out into the suburbs where he can get a much nicer, larger, newer house for about 40% off what it sold for a few years ago.
Somebody needs to tell him "you'll be renting" or "you'll be paying cash" because no lender will touch this stinker.
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Old 10-01-2008, 04:15 PM   #59
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Ding ding ding!
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Old 10-01-2008, 04:23 PM   #60
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OAG.. yeh, I am seeing the same thing from both sides.. Neither really wants it in any form (though Dems were more on board both at the outset and now with more add-ons .. Rs offered their own add-ons in the fullness of time as well).

Neither wants to be seen as the party that wrecked the deal..
but neither wants to be seen as the party that got the deal done, either!!

It's kind of hilarious to watch them all squirm, especially as they are all getting constituent feedback that is running 100 to 1 or 200 to 1 against it. Yet at the higher level they can't savage each other enough for the other side's not helping in getting "something" done.

What seems to be happening is that each hates it enough to work hard to set up the other party as the wrecker.
Quit being logical, you'll never make it on CNBC......... Just kidding, spot on analysis........
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