Tuesday, October 7, 2008

The latest from Mr. Mortgage

This one makes a good point about some of the workouts the banks are offering to upside down borrowers. The most popular workouts are ones that lower the interest rates way down for a few years but keep the principal balance of the original loan. This is just a stall tactic to keep the banks from having to post that loss on their balance sheets. % years from now house prices will still be much lower than those bubble prices. So those people will find themselves right back in the same boat. Mr. Mortgage recommends fighting for a principal reduction and a slightly higher interest rate on a 30 year fixed. That makes sense to me. But a lot of those workouts will require you to make up that rightdown amount when you sell. These mortgage workouts sound like a nice fix but in many cases the best solution is still to simply give the home back, take the credit hit and buy again a few years down the road.


8 comments:

Market said...

Fight for a principle reduction?? So that people who bought houses they could not afford can stay in those houses they still can't afford? And what about the people who have heloc'd their homes to death? Should they also fight for a reduction? Anymore, it seems to be the American way.

jennalee ryan said...

id be pissed if i was one of those that already lost thier house...and now everyone else gets to keep theirs at an affordable payment and reduced principle

Martin Burtin said...

Pissed like when Indymac failed and they assured your family that the deposit was Fdick insured, and then you find out that some of it, due to technicality, was not insured after all? So you loose half of that uninsured money, and now with the bailout, people will get $250K insurance, but your family got screwed too early, so you don't get any benefit. You mean that kind of pissed?

vipertom1970 said...

are you guys familiar with Chase Ranch, Mirasol build by Brook Field.

if you are, then is $500,000 for plan 3 a good price ?

jennalee ryan said...

dang, martin, did that happen to you? yes...that kind of pissed. wow...

Martin Burtin said...

Yep, had a family trust, but come to find out, it has to be just certain very close family relationships for the trust to be insured. Neither the bank officers or the lawyer who drew up the trust was aware of any problem. When I sniffed that Indymac was toast, my family contacted those "professionals" and they assured us the accounts were totally Fdicked, no worries. Problem is, the Feds had a different story, after the Indymac takeover.

tedthompsoniii said...

Interessting "pre-bubble burst" article on the sale of Golden West to Wachovia. 206 was indeed an amazing year: http://www.post-gazette.com/pg/06130/688947-28.stm

golfer_X said...

Viper
I wouldn't say anything in Corona for $500k is a good deal (short of an Amberhill estate home). Chase Ranch is nice and 500K is about what the bigger homes are fetching right now. But I doubt they will be worth that a year from now. So I would say, No $500k is not a good price. Right now it's in the ball park of what homes in the tract are selling for.