Congress needs to consider that not everyone WANTS to be kept in their homes:
At a House Financial Services Committee hearing Thursday, Treasury Secretary Henry Paulson told lawmakers they should send troubled homeowners one simple but urgent message: "Call your lender or mortgage counselor today."
He noted that 50 percent of foreclosures occur without borrowers ever talking to their lenders, and said that he has gotten reports that lenders have tried to reach distressed borrowers to work out more affordable loan terms. "Yet those calls rarely get returned," he said.
Many of those who are losing their homes to foreclosure are speculators- they bought the house to make money. A lot of them have now realized that they are NOT going to make money. When rents are so low that you’d need a 50% [or better] reduction of your loan balance to be cash positive on a rental, calling the lender can seem pretty pointless.
Sorry Mr. Paulson. Not all property owners want a bailout- some of them just want to bail.
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Twist-
You’re absolutely right. As an owner of several rental properties myself, my rule is by at 20% below the market and put 20% down and finance on a 30 year fixed rate. If one follows these simple rules, homes can be a great investment. Buying on speculation, or the “greater fool theory” seldom works unless you’re one of the first in the cycle. From a business point of view, it does make sense to walk away from a house you do not live in, can not sell, rent, hold, or afford. Other than bad credit, what do they have to lose? T.
i really think that this needs to be brought back to the forefront in this housing mess. i dont think those clowns in congress realize that the majority of the homes bought in those new developments were bought by speculators, and most of those people that were spectulating are real estate agents. it would make me hurl if they do anything to help these sharks out!
Abloggerhere-
I don’t like the bailout plans anyway, but you’d hope that they wouldn’t apply to non-owner occupied. How can Congress “keep you in a home” you never lived in, and maybe only saw it once or twice?
twist:
But…but…..but, the loan app says primary residence!
But…but…..but, the loan app says primary residence!
And the stated income is $200K, wink, wink.
Why would someone lie?
Why would an owner occupant, who knows they over-paid for the place, and is 20-50% underwater, even want a refinance bailout? They will be stuck for at least 10 years, without any equity buildup. Like Cramer said, Just Walk Away.
Investors are already letting properties go.
Some sales agent talked these people into sinking their small retirement funds into real estate. They bought 4 single family properties. They are now letting all 4 go back to the lenders.
They owe more than the places are now worth. Rents are several hundered dollars lower (like $700.00) each month less than the mortgage on all the properties. Of course, bought with little down and teaser rate loans.
Just more people that climbed on the greed wagon and now are jumping off on the down hill side. I expect to see allot more of this.
For Q2 2007, Dr. Kennedy has calculated Net Equity Extraction as $140.3 Billion, or 7.1% of Disposable Personal Income (DPI). Note that equity extraction for Q1 2007 has been revised upwards to $131.3 Billion.
MEW may be the new direction in bank fraud. Cant sell the house, you owe close to current market price, but you have a 100k line of credit. Extract 100k, and let the bank foreclose. The new Ghetto Judo.
Mike-
Arizona has passed a law that is going to make it tougher to hire illegal aliens after 1/1. I believe it was SteveC that the latest if for some Mexicans headed home to do a cash refi on the way out.
Fraud isn’t dead in spite of tightening lending standards.