Homestead mailing list

[Gene GeRue <genegerue AT ruralize.com>]

On Sep 13, 2008, at 8:34 PM, Clansgian AT wmconnect.com wrote:

> > > As the inventory of REOs builds, banks will become amenable to  
> > > holding
> > payments at their original rate.
>
> Yes, except for two things, one addressed below and the other one is  
> that in
> many cases the original paymens not only did not pay any on the  
> principal but
> didn't cover the interest on the loan.  For the banks to continue  
> with that
> loan at the original rate, they'd have to be bleeding money which  
> they can't do.

The decision depends on the loss from continuing the loan versus the  
hit they take if they have to sell a home after foreclosure, which  
often means a home that has been abandoned, vandalized, the  
landscaping dead. When that happens the mortgage holder may well have  
to sell for tens of thousands less than the note. In many cases they  
are better off working out a plan where the mortgagor can stay in the  
home and continue the same or even lower payments. The motivation for  
the mortgagor is they get to stay in the house they chose, the kids  
stay in the same school, and they don't have to go looking for a  
rental, which is almost always a less desirable dwelling.
> > > A dangerous condition exists if mortgagors react negatively to the
> > > news that they are making payments on a loan that is greater than
> > > their home is worth.
>
> Dangerous for whom?  If a person finds themselves paying for an  
> asset that is
> worth far less than they are paying, it only makes sense to nullify  
> that
> agreement as quickly as possible and quit doing that.

Misunderstanding. The danger is to everyone, but mostly the US economy.

>  The only cudgle to hold
> over their heads is that their "credit" might be ruined.  For many  
> of these
> people before the bubble they would not have qualified for the loan  
> and here after
> the bubble they don't qualify for any such loan so it is an idle  
> threat to
> give them a bad credit score.

That is incorrect. Bad credit will affect a rental application. It  
will affect a car loan application. It will affect a utilities hookup  
request. Bad credit has many tentacles, many more than just the next  
home mortgage.
> > This is an example of the power of the
> > > sensationalist and negative media.
>
> Just the opposite I'd say.  The fact that so many people bought into  
> the
> housing frenzy was the result of sensationalism and media hype.   
> What follows is
> just the natural consequence of falling for that hype.

But don't you see, they fell for the buzz going in and now they may  
well fall for the buzz going out. Instead of making prudent decisions,  
too many are knee jerking to what the media is selling as fact and  
forecast.

And, frankly, a whole lot of the motivation going in was simple greed.

I am still waiting for your definition of socialism in the context you  
used it.