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| 5/23 |
| 2008/3/4-7 [Reference/RealEstate, Finance/Investment] UID:49335 Activity:kinda low 85%like:49333 |
3/4 Um, holy crap?
http://preview.tinyurl.com/2f8nqd (cnn.com)
\_ http://calculatedrisk.blogspot.com/2008/03/bernanke-to-lenders-reduce-principal.html
\_ http://preview.tinyurl.com/36bxx3 (calculatedrisk.blogspot.com)
Insert theme from your favorite horror movie here.
\_ Serious does this mean homes will be affordable
again? Seriously? Man I can't wait -bitter missed out guy
\_ Affordable is relative. The price of the home isn't nearly
as important as your monthly payment on it and how long you
have to pay that number.
\_ This makes absolute sense esp. for ppl with low IQs.
The rate at which home prices balloon or sink...
where do you take that into consideration? The
affordability index has been shrinking for the last
15 years, and given a historical cyclical market
isn't it prudent to wait for the other side of the
cycle? I mean, affordability is relative, but that
should not be the only factor used in such a
complex and expensive decision.
\_ And the final variable would be the interest rate. Thanks
for the math lesson. WTF are you trying to say?
\_ He's saying that if the interest rate doubles while
prices fall in half it doesn't make housing much more
affordable for people who are financing the purchase.
Maybe that's clear to you, but a lot of people seem
to overlook that the payment means more than the price
in many instances.
\_ People are supposed to save up a significant
downpayment, if banks are being responsible.
Prices should matter in the real world. In
fantasy bubble land where government saves the
day maybe it doesn't matter.
\_ No. This means that the shit that has been hitting the fan
for the last year is going to continue to hit the fan.
In fact, some of the shit that hit it already is going to
circle back for a few more wacks.
\_ If many homeowners are experiencing "shit hitting
the fan" doesn't it imply all the spectators will soon
be in a position to cherry pick shit soon?
\_ Not if the economy gets totally fucked by the housing
crisis. Hence the horror movie soundtrack, etc...
\_ We won't hit bottom until people think real estate
is dead. As long as there are a lot of spectators
thinking they are going to cherry pick we won't get
there. Serious investors aren't worried about
predicting a bottom. They bought 20 years ago, 10
years ago, 5 years ago, 2 years ago, and last week
- but they bought what made sense to buy. Finding
bargains might be getting easier, but financing what
you find is tougher meaning that only the all-cash
guys (you know, the pros) can stay in.
\_ Yes, this is exactly true. However, SFH have been
mostly financed by fairy dust the last few years,
so they are going to have the furthest to fall. Not
to say that the credit crunch won't hit multi-famliy
and commercial real estate, I am sure it will, but
the valuations are not as out of whack.
\_ I've paid my mortgage on time every month for years. Who is going
to 'fix' my loan so I don't have to pay so much anymore?
\_ One word for you: SUCKER!
\_ Obviously I should have defaulted then the gvt would have
rescued me from my own stupidity because clearly I would have
been a "victim" of a "predatory" loan. sigh. I need a nanny
state law passed to take care of me, too!
\_ Did you even read the article?
\_ Yes. I read both links. Did you?
\_ Yes. Where did you make the logical leap from a
voluntary agreement between a bank and a home owner
to a gvt bailout? |
| 5/23 |
|
| preview.tinyurl.com/2f8nqd -> money.cnn.com/news/newsfeeds/articles/newstex/AFX-0013-23516253.htm Edit Alerts TRADING CENTER Bernanke urges more principal writedowns to avert foreclosures UPDATE March 04, 2008: 11:08 AM EST (updates analyst comment) WASHINGTON, Mar 4, 2008 (Thomson Financial delivered by Newstex) -- Federal Reserve Board chairman Ben Bernanke today called for vigorous action by mortgage lenders to avoid foreclosures and help stabilize the housing market as well as the economy. He had nothing to say about current monetary policy or the economic outlook other than that he expects house prices to continue to decline. Bernanke said writing down the principal on many more mortgages could not only do more to stabilize house prices in the long term, but is in the lenders' and investors' best economic interest. In many cases, when a homeowner has little or no equity left, 'a stressed borrower has less ability and less financial incentive to try to remain in the home,' Bernanke said. Typical loan modifications have so far focused on interest rate reductions and principal writedowns have been 'quite rare', Bernanke said in prepared remarks to a community bankers convention in Orlando. That could simply be because the mortgage servicers are more familiar with rate reductions, he said. There are substantial incentives for lenders to modify loans to avoid foreclosure. Bernanke cited statistics from the fourth quarter of last year that showed total losses exceeding 50 pct of the principal balance plus another 10 pct of capital loss for expenses in a typical foreclosure. The barriers include rules of the trusts holding the mortgages, compliance costs and litigation risks. If house prices continue to fall they might be pressured to write down principal again. If house prices turn up instead, they will not share any of the gains. There has been some progress in reducing the disincentives for workouts, Bernanke said. While lenders and servicers in the HOPE NOW alliance and American Securitization Forum have worked out some standardized foreclosure avoidance plans, they may offer only 'temporary palliatives which may only put off foreclosure and perhaps increase ultimate costs,' Bernanke said. That would 'remove the downside risk to investors of additional writedowns or a re-default'. What Bernanke is trying to convince the lenders 'is that it is far more preferable that the markets absorb the losses caused by a combination of unwise lending, minimal risk management practices and outright loan fraud than having Washington craft a Resolution Trust Corporation style bailout of financial institutions, banks and speculators,' Brusuelas said. Bernanke also urged Congress to move quickly on modernization of the Federal Housing Administration rules that would allow it to guarantee many more refinancings. He also urged it to enact better supervision for Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) That, combined with new capital-raising would allow them to 'expand significantly' the number of mortgages they securitize and do more to help distressed borrowers. Asked about the burden new mortgage lending regulations might pose, Bernanke pointed out that the small community banks represented at the convention have only rarely gotten into the subprime business. If, however, they decide to begin helping distressed homeowners in their communities, the new regulations will at least put them on a level playing field with the non-bank mortgage lenders, who have until now dominated the field. com dem/ss/dem/jrr/dem/wash/cmr Copyright Thomson Financial News Limited 2007. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News. Business Leader Council Live Quotes automatically refresh, but individual equities are delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. MarketWatch, the MarketWatch logo, and BigCharts are registered trademarks of MarketWatch, Inc. Intraday data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. |
| calculatedrisk.blogspot.com/2008/03/bernanke-to-lenders-reduce-principal.html Bernanke to Lenders: Reduce Principal Fed Chairman Bernanke today called for lenders to reduce principal on homeowners with negative equity. He also noted that for properties foreclosed in the fourth quarter, the estimated total losses exceeded 50% percent of the principal balance. Bernanke argued this gives lenders significant incentive to avoid foreclosure and write-down principal. Reducing Preventable Mortgage Foreclosures This situation calls for a vigorous response. Measures to reduce preventable foreclosures could help not only stressed borrowers but also their communities and, indeed, the broader economy. At the level of the individual community, increases in foreclosed-upon and vacant properties tend to reduce house prices in the local area, affecting other homeowners and municipal tax bases. At the national level, the rise in expected foreclosures could add significantly to the inventory of vacant unsold homes--already at more than 2 million units at the end of 2007--putting further pressure on house prices and housing construction. Bernanke notes that temporary measures just postpone foreclosure, and he urges lenders to consider reducing principal for homeowners underwater: Measures that lead to a sustainable outcome are to be preferred to temporary palliatives ... In cases where refinancing is not possible, the next-best solution may often be some type of loss-mitigation arrangement between the lender and the distressed borrower. Indeed, the Federal Reserve and other regulators have issued guidance urging lenders and servicers to pursue such arrangements as an alternative to foreclosure when feasible and prudent. For the lender or servicer, working out a loan makes economic sense if the net present value (NPV) of the payments under a loss-mitigation strategy exceeds the NPV of payments that would be received in foreclosure. Loss mitigation is made more attractive by the fact that foreclosure costs are often substantial. Historically, the foreclosure process has usually taken from a few months up to a year and a half, depending on state law and whether the borrower files for bankruptcy. The losses to the lender include the missed mortgage payments during that period, taxes, legal and administrative fees, real estate owned (REO) sales commissions, and maintenance expenses. Additional losses arise from the reduction in value associated with repossessed properties, particularly if they are unoccupied for some period. A recent estimate based on subprime mortgages foreclosed in the fourth quarter of 2007 indicated that total losses exceeded 50 percent of the principal balance, with legal, sales, and maintenance expenses alone amounting to more than 10 percent of principal. With the time period between the last mortgage payment and REO liquidation lengthening in recent months, this loss rate will likely grow even larger. To date, permanent modifications that have occurred have typically involved a reduction in the interest rate, while reductions of principal balance have been quite rare. The preference by servicers for interest rate reductions could reflect familiarity with that technique, based on past episodes when most borrowers' problems could be solved that way. But the current housing difficulties differ from those in the past, largely because of the pervasiveness of negative equity positions. With low or negative equity, as I have mentioned, a stressed borrower has less ability (because there is no home equity to tap) and less financial incentive to try to remain in the home. In this environment, principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure. Of course, if it becomes common for lenders to reduce principal, their phones will be ringing off the hook! |
| preview.tinyurl.com/36bxx3 -> calculatedrisk.blogspot.com/2008/03/bernanke-to-lenders-reduce-principal.html Bernanke to Lenders: Reduce Principal Fed Chairman Bernanke today called for lenders to reduce principal on homeowners with negative equity. He also noted that for properties foreclosed in the fourth quarter, the estimated total losses exceeded 50% percent of the principal balance. Bernanke argued this gives lenders significant incentive to avoid foreclosure and write-down principal. Reducing Preventable Mortgage Foreclosures This situation calls for a vigorous response. Measures to reduce preventable foreclosures could help not only stressed borrowers but also their communities and, indeed, the broader economy. At the level of the individual community, increases in foreclosed-upon and vacant properties tend to reduce house prices in the local area, affecting other homeowners and municipal tax bases. At the national level, the rise in expected foreclosures could add significantly to the inventory of vacant unsold homes--already at more than 2 million units at the end of 2007--putting further pressure on house prices and housing construction. Bernanke notes that temporary measures just postpone foreclosure, and he urges lenders to consider reducing principal for homeowners underwater: Measures that lead to a sustainable outcome are to be preferred to temporary palliatives ... In cases where refinancing is not possible, the next-best solution may often be some type of loss-mitigation arrangement between the lender and the distressed borrower. Indeed, the Federal Reserve and other regulators have issued guidance urging lenders and servicers to pursue such arrangements as an alternative to foreclosure when feasible and prudent. For the lender or servicer, working out a loan makes economic sense if the net present value (NPV) of the payments under a loss-mitigation strategy exceeds the NPV of payments that would be received in foreclosure. Loss mitigation is made more attractive by the fact that foreclosure costs are often substantial. Historically, the foreclosure process has usually taken from a few months up to a year and a half, depending on state law and whether the borrower files for bankruptcy. The losses to the lender include the missed mortgage payments during that period, taxes, legal and administrative fees, real estate owned (REO) sales commissions, and maintenance expenses. Additional losses arise from the reduction in value associated with repossessed properties, particularly if they are unoccupied for some period. A recent estimate based on subprime mortgages foreclosed in the fourth quarter of 2007 indicated that total losses exceeded 50 percent of the principal balance, with legal, sales, and maintenance expenses alone amounting to more than 10 percent of principal. With the time period between the last mortgage payment and REO liquidation lengthening in recent months, this loss rate will likely grow even larger. To date, permanent modifications that have occurred have typically involved a reduction in the interest rate, while reductions of principal balance have been quite rare. The preference by servicers for interest rate reductions could reflect familiarity with that technique, based on past episodes when most borrowers' problems could be solved that way. But the current housing difficulties differ from those in the past, largely because of the pervasiveness of negative equity positions. With low or negative equity, as I have mentioned, a stressed borrower has less ability (because there is no home equity to tap) and less financial incentive to try to remain in the home. In this environment, principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure. Of course, if it becomes common for lenders to reduce principal, their phones will be ringing off the hook! |
| cnn.com -> www.cnn.com/ About 250 prisoners freed from Abu Ghraib The United States today freed about 250 detainees from Abu Ghraib prison, site of alleged abuses that prompted global outrage and led to days of hearings on Capitol Hill. Today marks the first mass prisoner release since the abuse scandal broke several weeks ago. Defense Secretary Donald Rumsfeld had visited the prison Thursday. |