It is generally accepted now that the housing bailout plan passed last August, didn’t do a thing to bailout housing. Now there’s talk of a new bailout plan. We don’t know what this new plan would look like, but according to CNBC:
Any new plan will also have to be more well-received and highly regarded, unlike its predecessor, the Hope for Homeowners mortgage modification program of last July, which now seems hastily conceived, poorly received and otherwise forgotten or written off by most in Washington.
There’s a reason the old housing plan didn’t work, and to a large extent, it’s the reason the new plan won’t work. Too many of these properties are missing their owners.
According to CNBC’s Diana Olick:
I bumped into an MBA type here on my way to Starbucks, who told me he was chatting up a loss mitigation type from Freddie during one of the closed sessions over the weekend, and this Freddie guy said part of the trouble is that in a full 45 percent of the delinquencies, they’re finding nobody home.
That’s right. 45 percent!
These folks have either up and left or never lived in the homes to begin with. They’re just walking away and frankly have no interest in modifications.
Many properties were purchased by speculators. With their profits gone- they’re gone. Even owner-occupiers, who were encouraged to buy all the house they qualified for, are suddenly going "What was I thinking?", and leaving. Economic problems exaserbate the situation.
Congress will undoubtedly pass some new bailout plan, which will lighten taxpayers wallets, but won’t help housing. These houses are empty, occupied only by the ghosts of dreams of rampant appreciation. How do you help a ghost?
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In the IE the prevailing attitude is “why would I want a bailout?”
If it’s a rental house, the owner would rather skim the rents while awaiting foreclosure until the tenant wises up and moves on. Some angry tenants are actually refusing to pay the rent and daring the owner to file an eviction. Can you imagine how that would play out in court? “Your honor, my tenant has failed to pay the rent, but never mind that I have failed to pay the mortgage, taxes, and HOA”.
If the house is owner-occupied, it gets even better. A Countrywide foreclosure takes 9 months to a year. That means 9 months to a year of living house payment and rent payment free, so why not stay as long as possible. Hey, you can even get “cash for keys”. That explains why so many in my neighborhood are keeping silent about being in foreclosure and quietly maintaining their houses until they are kicked out.
The part the politicians and governmental agencies refuse to acknowledge is that the prevailing attitude has become “Foreclosure on my credit? Who cares, everyone else is getting foreclosed upon, and besides, after x years I can buy again for much cheaper.” I have heard this so many times recently from neighbors who are planning to walk.
Foreclosure is losing its stigma and the underwater debtor has no desire to keep the existing home at the current mortgage amount.
Get a clue, media and government. People do not want a bailout. They want to live for free for up to a year, then rent for much less than the house payment, then buy again when prices hit bottom. This attitude is becoming entrenched and will lead to further price “collapse” (thank you IGOR).
People used to be concerned about things like foreclosure and credit. They just aren’t anymore. Why would you worry about your credit or ability to buy again, down the road, when all you hear from the government and media is “we have to find a way to free up credit and start lending again.” When I hear this all I think is that these people must beleive credit won’t be a problem eventually.
TernKut is spot on. Mortgage modification is a joke. The second lien holder offered us 3% for 3years. Down from 13.5% on a $60K second that has absolutely no value whatsoever. The valuation has dropped at least $40K into the first at a minimum or $$90K if the house sale next door is any indication of the fiasco in Las Vegas.
Why is this? The Original builder is still building them “new” for $100K+ UNDER what they sold the identical house for 3 years ago.
We had three buyers that made realistic offers for a “short” sale. No response from the lender. Screw ‘em. I got a job in another state. Vegas is a dying city.
As far as credit goes – FICO is a joke. You can still get credit if you can fog a mirror. The lenders can’t help it. It’s in their genes. They need to lend money.
Not for one minute do I pretend to be an economic expert, but our government constantly seems to be offering the wrong solution / approach for the matter at hand.
Unfortunately, there are no easy solutions. You have to wonder if these stimulus / bailout plans are intended to have more of an impact in regards to consumer “feel good” confidence leaving the American people with the false hope that the small rebate will have a drastic impact on our economic circumstances.
A staggering notion that “45 percent of the delinquencies” result in “finding nobody home”.
We can’t see these ghosts but we can see where they used to live and, from time to time, can increasingly feel a mysteriously sharp pain emanating from our empty pocketbooks.
At this point, I’m not quite sure how you can help the ghost when you’re so busy trying to protect yourself from them and the policies that created their existence.
I know the person who bought my house in 2004 back in Chandler never moved in yet the loan was clearly geared towards an owner occupied home.
My understanding is this was for tax reasons which makes me think all hte investors out there who lied are/should probably be hearing from the IRS at some point