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Walking away from mortgage loan
Old 03-08-2008, 09:50 AM   #1
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Walking away from mortgage loan

It may not be politically correct, but I do not feel that taxpayers should bail out these home buyers who have a mortgage loan that is more than the market value of their home. Or the ones who moved into home they could not afford with an ARM and now can not make the payments. They are adults who took the risk or made an unwise financial decision and should pay the consequences. Some were flipping properties. So what if they have to move out of their home? What's wrong with renting?...I rented for many years. Besides, they could just walk away, let the bank foreclose, and gut their credit record. Then when they need a future loan they just say they were "caught up" in the 2008 mortage mess, like millions of others.

FYI, I owned home in an oil state back in 1984-1988. I bought right before the oil crash and home values nose-dived, mine included. I had to sell my house for a loss. I took over $10,000 to closing to "sell" my home. The idea of walking away and letting the bank foreclose never entered my mind.
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Old 03-08-2008, 10:00 AM   #2
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Agreed. But I am not crazy about investors paying for it either. I wold like to see some of those CEO's (country wide, citi, etc) go to jail or get sued for negligence.


These @ssH0!3s never fail to disappoint. And they walk away with massive amounts of money.

Recover the funds from them first.
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Old 03-08-2008, 10:25 AM   #3
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The big argument on Maria TV CNBC yesterday was whether Congress had any business interfering in CEO compensation. Of course the "free-marketeers" were slobbering all over themselves about letting the "market" decide, and how comp is aligned with "shareholders", etc.....

While I agree that you have to pay for talent, and that a contract is a contract, I would submit this:

Me, Mister Poor-Ass, buys a thousand shares of XYZ corp for $100 bucks/share. I have 100 Gs in the games. Due to crappy management, stock goes to $50; I lose $50000 of my hard-earned moolah.

Conversely, Mister Mozillo CEO gets 1,000,000 shares, for $10 a share (you know, as an "incentive" to align him with the shareholder. Odd, though, the other shareholders actually BOUGHT their shares at FMV...).

Say now that the shares drop 50% as before. Mister CEO's $10M investment is still $50M, a 400% gain, compared to my 50% loss. Boy, do I feel their pain...

I call it the "Bernie Ebbers" effect. Worldcom was cooking the books to beat heck. Competiters are scratching their heads wondering how the heck MCI is making so much money. Same competiters start taking foolish risks and making foolish investments, to try to keep up...

So, to be fair, I agree with Kudlow that most of the Congress critters have never run a business, and probably aren't the ones to be setting compensation. But these so-called "free-marketeers" have often ran their companies in the ditch, leaving the shareholders, and sometimes taxpayers, holding the bag, while they walk away with what amounts to a smack on the wrist...
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Old 03-08-2008, 10:42 AM   #4
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Wow ... no payments due until you flip the house ... amazing.

Quote:

Borrowers paid Lending One a high interest rate - 15 percent, plus three to five points at closing.

Ameribank assumed the risk for an 8 percent cut of the interest, buying loans in Florida, Ohio, Louisiana and eight other states, said David Hartman, who took over as Ameribank's chief operating officer and president in October.

But the borrowers didn't have to repay any of the money until after the houses they bought had been renovated and sold.

''It was stupid beyond belief,'' Hartman said of Ameribank's decision
Rural W.Va. bank lost big on loans here
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Old 03-08-2008, 11:02 AM   #5
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But these so-called "free-marketeers" have often ran their companies in the ditch, leaving the shareholders, and sometimes taxpayers, holding the bag, while they walk away with what amounts to a smack on the wrist...
If they've run the company into the ditch without breaking any laws, I can't see that it is any business of the govt.

The real questions are:
1) Why do Boards of Directors offer these outrageous compensation packages? Especially--shouldn't the packages reward a CEO who improves the company for the long term, not some guy who works the accounting, spinoffs and aquisitions to produce a temporary, unsustainable spike in share prices at the cost of the company's long term health?

2) Why don't shareholders punish companies (through lower share prices) when the CEO compensation packages are scandalous? Seems that would make the BoD think twice about the packages they offer.

Maybe questons 1 and 2 are linked. Many shareholders also don't care about the long-term health of the underlying company, they want the promise of a short-term runup in share prices (which is what many CEO compensation packages reward).

Hmm-maybe a private company has some really significant long-term competitive advantages compared to a public one.
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Old 03-08-2008, 11:03 AM   #6
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Originally Posted by HFWR View Post
The big argument on Maria TV CNBC yesterday was whether Congress had any business interfering in CEO compensation. Of course the "free-marketeers" were slobbering all over themselves about letting the "market" decide, and how comp is aligned with "shareholders", etc.....

While I agree that you have to pay for talent, and that a contract is a contract, I would submit this:

Me, Mister Poor-Ass, buys a thousand shares of XYZ corp for $100 bucks/share. I have 100 Gs in the games. Due to crappy management, stock goes to $50; I lose $50000 of my hard-earned moolah.

Conversely, Mister Mozillo CEO gets 1,000,000 shares, for $10 a share (you know, as an "incentive" to align him with the shareholder. Odd, though, the other shareholders actually BOUGHT their shares at FMV...).

Say now that the shares drop 50% as before. Mister CEO's $10M investment is still $50M, a 400% gain, compared to my 50% loss. Boy, do I feel their pain...

I call it the "Bernie Ebbers" effect. Worldcom was cooking the books to beat heck. Competiters are scratching their heads wondering how the heck MCI is making so much money. Same competiters start taking foolish risks and making foolish investments, to try to keep up...

So, to be fair, I agree with Kudlow that most of the Congress critters have never run a business, and probably aren't the ones to be setting compensation. But these so-called "free-marketeers" have often ran their companies in the ditch, leaving the shareholders, and sometimes taxpayers, holding the bag, while they walk away with what amounts to a smack on the wrist...
if you feel that strongly about it don't buy stock in these companies and don't buy any funds that buy stock in these companies.

reason these people made out like bandits is because on the way down they sold tons of stock that was bought up by joe sixpack
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Old 03-08-2008, 11:16 AM   #7
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if you feel that strongly about it don't buy stock in these companies and don't buy any funds that buy stock in these companies.

reason these people made out like bandits is because on the way down they sold tons of stock that was bought up by joe sixpack
My little pittance of a portfolio wouldn't even move the needle...
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Old 03-08-2008, 11:25 AM   #8
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Agreed. But I am not crazy about investors paying for it either. I wold like to see some of those CEO's (country wide, citi, etc) go to jail or get sued for negligence.


These @ssH0!3s never fail to disappoint. And they walk away with massive amounts of money.

Recover the funds from them first.
Amen!

Those that profited, or attempted to profit, should be the ones paying for the mess.
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Old 03-08-2008, 11:32 AM   #9
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Well, I'm not on a rant here...

My port is down 5% from its' all-time high...
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Old 03-08-2008, 11:38 AM   #10
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My port is down 5% from its' all-time high...
Got me beat - I'm down 6.7% from the high. Of course we've been drawing it down to pay 100% of our living expenses for the past 33 months, but that's not much of an excuse...
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Old 03-08-2008, 02:15 PM   #11
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My little pittance of a portfolio wouldn't even move the needle...
the point is not to make a difference in the world, but practice what you preach


99.999999% of a CEO's pay is stock sales. if you think CEO's shouldn't be paid as much don't give them your money by buying the stock
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Old 03-08-2008, 02:31 PM   #12
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the point is not to make a difference in the world, but practice what you preach


99.999999% of a CEO's pay is stock sales. if you think CEO's shouldn't be paid as much don't give them your money by buying the stock
Point taken, though I'm an indexer, so hard to accomplish...

Still, throwing brazillions of cheap options at CEOs doesn't necessarily align their interests and mine...

Can I buy the S&P 499...
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Old 03-08-2008, 09:13 PM   #13
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used to be CEO's got paid in cash and the democrats complained about it, so around 1990 they started getting stock options. no the dems are complaining again.

funny how they do it in an election year in a downturn
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Old 03-09-2008, 10:18 AM   #14
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Much of politics is for "show"...
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Old 03-10-2008, 01:11 PM   #15
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It seems helping delinquent home owners is alot like helping a stray cat ...

Quote:

Nationwide, more than half the borrowers who lose their homes through foreclosure never answered their lenders' calls or letters, according to Freddie Mac. And an MBA analysis found that 23% of loans in foreclosure last fall were to homeowners who had no contact with their lenders, and that an additional 18% were to absentee owners.
The numbers help explain why it's so difficult to reverse the trends of rising foreclosures and falling property values. Even some homeowners who can afford to pay their mortgages are defaulting, Lauria says, because their house might have lost 30% of its value, and they figure it will be a long time before it's worth what they paid for it.
Mortgage lenders see more borrowers give up - USATODAY.com
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Old 03-10-2008, 02:57 PM   #16
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Much of politics is for "show"...
Understatement of the day.......
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Old 03-10-2008, 03:07 PM   #17
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Originally Posted by al_bundy View Post
used to be CEO's got paid in cash and the democrats complained about it, so around 1990 they started getting stock options. no the dems are complaining again.

funny how they do it in an election year in a downturn
Granting stock options could only encourage CEOs to take unthinkable risks and to focus completely on short-term profits.
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