Monday, March 15, 2010

1099 releif

The Ca assembly passed the short sale tax relief and have sent it off to Arnold to sign. I read he may veto is as there is some additional provisions he does not like regarding tax fraud. I'm sure this will eventually get passed and the short sellers will get off the hook. However not everyone will get off. Both the state and federal tax relief only applies to purchase and refi loans. Home ATM loans (HELOCs) are still taxable. This is why the short sellers really need to get some good tax advice before selling. Vacation and rental properties are also not eligible for tax relief.

Here's some scary data for Housing Wire.

Using LPS data, for all loans more than 90 days in arrears, the average days delinquent is now at 272 days—up from 204 days in early 2008. For loans in foreclosure, the aging numbers are even more staggering: loans in this bucket average 410 days delinquent, up from 260 days delinquent in early 2008.

Ponder those numbers for just a second. On average, severely delinquent borrowers have gone more than 9 months without making a mortgage payment—and yet foreclosure has not yet started for them. For those borrowers who are in the foreclosure process, it’s been an average of 13.6 months—more than one full year—since they last made any payment on their mortgage.

So, can short sales ride in to save the day for these 7.4m troubled borrowers? What about for the many millions more who are current on their loans, but are underwater on property value and unable to sell? For some, short sales will be an important solution—but don’t kid yourself: the hype currently surrounding short sales and the HAFA program will prove to be short-lived, and REO expertise will be prove to be the key to recovery, as it has been in prior cycles.


Here's some government propaganda regarding the HAMP program (Loan Mods). Check out the chart on page 6. Before mods the average back end DTI was 76.4%! Damn Batman after you pay taxes what's left to buy food and pay utilities. It really does make you wonder what in the hell banks were thinking making these loans. 76 freaking pecent DTI...amazing. And the scary part is the back end DTI after mod is averaging nearly 60%. These people are still one paycheck away from the street, eating Ramen noodles and Hamburger Helper for dinner.

There are some other shocking numbers in the report. All the perment mods got an interest rate reduction, 40% of them got the loan extended, and 27% got a principal forebearance. (not a principal reduction!). You can see that a lot of these loan mods are time bombs unless by some miracle prices bubble up again. The average savings is a little over $500/mo.

Welcome to the Bail Out Generation! (We are the BOGs)

2 comments:

The Yen Guy said...

You relate "Damn Batman after you pay taxes what's left to buy food and pay utilities. It really does make you wonder what in the hell banks were thinking making these loans. 76 freaking pecent DTI...amazing. And the scary part is the back end DTI after mod is averaging nearly 60%."

Well, that is why the vast majority of MODS are failing and will continue to fail.

The HAMP program was designed by bankers for bankers ... not for the benefit of the home investors. HAMP is just more extend and pretend for the banks and the investors.

And you write "Before mods the average back end DTI was 76.4%".

The lenders were thinking commisions on the loans; and then too they were thinking about securitizing and leveraging the mortgages in CDOs at ten to forty times book value.

Since March 23, a dollar carry trade has been on; the US Dollar fell today to 79.70, and will continue to fall lower.

Soon the stock and bond markets will sell off because the Fed has just about used up about all of its Quantatative Easing funds, and then all economic chaos is going to break loose.

For more details on the current dollar carry one can visit here http://tinyurl.com/ydsprsh

Then we will be called The Wipe Out Generation

golfer_X said...

Make no mistake. I completely understand the mod program is for the benefit of the banks. But it's still beyond me why lenders made those loans back in the bubble years. Sure brokers didn't care, they made money hand over fist. But the freaking banks and Wall St. should have and probably did know those loans would go bad. So why the hell did they make them/buy them? Were they counting on a bail out, did they think they could sell them to China before they went tits up.