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  #1  
Old 02-23-2012, 11:22 AM
Franc Tireur Franc Tireur is offline
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Million-dollar foreclosures rise as rich walk away

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Five years after the housing bubble burst, America's wealthiest families are now losing their homes to foreclosure at a faster rate than the rest of the country -- and many of them are doing so voluntarily.

Over 36,000 homes valued at $1 million or more were foreclosed on -- or at least served with a notice of default -- in 2011, according to data compiled by RealtyTrac, which tracks foreclosures. While that's less than 2% of all foreclosures nationwide, it represents a much bigger share of foreclosure activity than in previous years.

"These properties are accounting for a bigger piece of the foreclosure pie," said Daren Blomquist, vice president of RealtyTrac.

Out of all foreclosure activity, the share of foreclosures on properties valued at $1 million or more has risen by 115% since 2007 while the share of multi-million dollar foreclosures -- or homes valued at more than $2 million -- jumped by 273%. Meanwhile, the share of foreclosures on mid-range properties valued between $500,000 and $1 million fell by 21%.
http://money.cnn.com/2012/02/23/real...tm?iid=Popular

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  #2  
Old 02-23-2012, 01:25 PM
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Its hard to know how to comment on a story where the writer is a total idiot like that. One sentence throws either their objectivity or knowledge of the topic into question to the point that it renders the story useless for discussion.

They are talking about millionairs "walking away" from financial obligations... But in support they offer the following pseudo-statistic:
Quote:
Over 36,000 homes valued at $1 million or more were foreclosed on -- or at least served with a notice of default -- in 2011
The parenthetic addition of " -- or at least served with a notice of default --" makes a HUGE difference. Thats like saying people are being buried at higher rates than ever because "over 36,000 people died of the flu -- or at least were hospitalized." It is a meaningless stat, because you only bury the dead, and not everyone hospitalized dies.

Many people get notices of default who are never foreclosed on. I'm not saying the problem isnt there... Imo the housing market is still in critically ill condition... But i cant comment on the strength of the story offered because the reporter that wrote it is clueless.

Last edited by robjones; 02-23-2012 at 01:29 PM.
 
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Old 02-23-2012, 11:56 PM
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At the risk of being not very well-informed on this topic (at least currently), I would venture ...

It seems that when the housing market collapsed as far as value, there were too many homes that simply were no longer worth what was owed on them. I knew of a number of wealthy people (through a friend who was in finance) who were not HURTING for money, but it just didn't make financial sense (to them) to continue to pay a mortgage balance on, say, a $1,000,000 house that was now only worth $650,000. It's not that they couldn't afford it, it really boils down to the fact that, like so many others, they anticipated the INCREASING of property values, when as it turns out, that is NOT a guaranteed factor. They simply made poor investments, along with everyone else.

It made more sense for them to default on their million dollar mortgage, and buy a house that was just as nice for $650,000 ... or perhaps even less, given the bottomed-out nature of the housing market and the value of being able to produce funds.

So, of the stories I knew of, it wasn't necessarily that they were in trouble, they just decided to dump their bad decisions and for their own financial gain, walk away and have a "do-over".

That's just a comment in general. Like I said, my information is now a couple of years old. I was just surprised to see the wealthy handling it that way.

Any my road has probably half of the houses still empty. I think they were pretty much all foreclosures. That's why I live here, in fact. I think the housing market IS still in trouble.

"They" say things are getting better, and there actually is some indication of that among the business owners I've talked to. But I have a very small corner of the world right here.
 
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Old 02-24-2012, 11:07 AM
Franc Tireur Franc Tireur is offline
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Quote:
Originally Posted by robjones View Post
They are talking about millionairs "walking away" from financial obligations... But in support they offer the following pseudo-statistic:

The parenthetic addition of " -- or at least served with a notice of default --" makes a HUGE difference. Thats like saying people are being buried at higher rates than ever because "over 36,000 people died of the flu -- or at least were hospitalized." It is a meaningless stat, because you only bury the dead, and not everyone hospitalized dies.

Many people get notices of default who are never foreclosed on. I'm not saying the problem isnt there... Imo the housing market is still in critically ill condition... But i cant comment on the strength of the story offered because the reporter that wrote it is clueless.
When comes statistics, you already know in most of the time they are biased in the way the author think.

You have to move back to see the big picture, that the real estate is going to be much more hammered by people walking away from any social class.

Greed will kill the confidence of people in the real estate market because they don't want to be stuck with a mortgage even if they have a low interest rate, and be locked financially to a uncertain future market and unstable employment market.

The solution could be painful for the mortgage companies that do not want to take the loss. A courageous mandatory action from the Government to define the policy to take all the mortages underwater to the market value.

By this I meant that the mortgage amount above the market value should be taken off. People could resale their house or keep it with a lower affordable mortgage.

If nothing is done, more people will walk away and they will plunge deeper the real estate market.

Last edited by Franc Tireur; 02-24-2012 at 11:11 AM.
 
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  #5  
Old 02-24-2012, 11:26 AM
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Quote:
Originally Posted by Inspired Ink View Post
At the risk of being not very well-informed on this topic (at least currently), I would venture ...

So, of the stories I knew of, it wasn't necessarily that they were in trouble, they just decided to dump their bad decisions and for their own financial gain, walk away and have a "do-over".

For a gal who claims not to be very well informed you more or less hit the nail square on head.

There is no longer much stigma attached to having filed for bankruptcy. Heck you can do it 4 or 5 times and still run for president.

Being able to blame it all on the cosmic events of the housing bubble is probably good for a lot of sympathy is the right circles.

Anyone with a strong dose of common sense knows how to make the tough choices. I can't criticize them because if I were that situation I might well make the same choice. Seven years from now that will no longer be an issue for credit ratings or reports.
 
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  #6  
Old 02-24-2012, 11:52 AM
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Quote:
The solution could be painful for the mortgage companies that do not want to take the loss. A courageous mandatory action from the Government to define the policy to take all the mortages underwater to the market value.

By this I meant that the mortgage amount above the market value should be taken off. People could resale their house or keep it with a lower affordable mortgage.

If nothing is done, more people will walk away and plunge deeper the real estate market.
The mortgage industry conspicuously pays a helluvalot more graft... errr... campaign contributions than any individual homeowners do. They could easily turn off the tap that keeps congressmen, senators and presidents in office and well fed. Threatening a lawmaker with the power of the vote is always worth trying, but they're a lot more afraid of the power of the purse. Long as they have money they can still BUY votes.

Even if it is politically possible for the government
... to mandate that lenders revalue houses houses and drop the outstanding loan down to the current value, that would be...
(a) extremely subject to abuse,
The same bull**** appraisal techniques that caused houses to get loans the underlying value didnt support a few years ago can be used to give someone a windfall by lowering his "real" value to an unrealistically low figure.

(b)in all probability over-ruled by the courts before implemented
there is nothing in the constitution that says I can loan you $xxx,000 and Congress (or the executive branch) could then tell me to accept a lower figure as payment in full. A mortgage is a contract. I don't *think* the government is empowered to alter private contracts to which they they are not a party. Then I suppose the government could agree to make them whole... but where does THAT money come from?

(c) likely to cause harsh / unintended consequences
There's no such thing as a free lunch. Just because the government tries to suggest there is... if a debt is washed away by statute, it will do wonders for the guy that no longer has to pay the debt to which he agreed... but that exact amount comes off the assets side of the balance sheet for someone else. That *could* be millionaire fatcats... or it could also be nurses, schoolteachers and firemen with pensions heavily invested in related securities.

RE: A
I used to grade multiple appraisals on the same property side by side to assess value for a Fortune 500 co. Later handled value issues for courts as a vendor or expert witness. I assure you the implementation of such a rule will lead to abuse. Some people will get rich, others will get screwed.

RE: B
If there are laws allowing that I'd like to know what underlying power they base it on. Maybe there's something in the Fannie / Freddie / FHA regs that make it possible. I dunno on that part. Guess the government could agree to make all or part of the loss whole, but where does THAT money come from?

RE: C
The simple truth of Accounting 101 says if a number changes on one side of a balance sheet there has to be a corresponding change on the other side. The government cant change that reality by legislation any more than they can repeal the law of gravity. Legislation supposedly aimed at "fatcats" often has a way of hitting Joe Public notwithstanding promises up front to the contrary.

Basically it goes back to the old farm axiom... Never move a fence until you know why it was put there. The unintended consequences of well meaning but poorly researched legislation can be more disastrous than the problem it was meant to "fix", and anytime the government offers you a free lunch, just remember they don't have a dime, so somebody else is gonna pay in the end.


added: I somehow erased half this post. Just tried to rebuild it. Oops. Hopefully I came close.

Last edited by robjones; 02-24-2012 at 12:13 PM.
 
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  #7  
Old 02-24-2012, 12:26 PM
Franc Tireur Franc Tireur is offline
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If we are thinking that apraisers could fraud massively, then why are they still appraising houses in the real estate market? I don't quiete understand what you are trying to say.

Mortgage is a contract, yes it is but when the market is abused by sucessfully diminish the value by half, it looks like fraud (rating agency rating triple AAA mortgage backed securities or repacked toxic stock across the world), manipulation of the real estate(shark 2nd mortgage, unthical incomes, buying home without down payment), and greed.

How can you respect a contract in these conditions?

Many politicians allowed free lunch with allowing people buying houses that they couldn't afford, then the free lunch like you can see around the real estate market will be taken from the people walking away.

You can check the historic real estate bankruptcies, all of these companies had a contract and many went bust and left billions unpaid to investors and banks.

Satus quo is not viable, laws need to be changed and you can only make a market ill healthier if you let people or mortgage companies liquiding the debt above the actual market or refinancing underwater mortgages to the actual market.

Like I said if not, people will not buy anymore or walk away, perhaps the statistics can prove that the real estate market is flat dead actually.

Last edited by Franc Tireur; 02-24-2012 at 12:31 PM.
 
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  #8  
Old 02-24-2012, 12:58 PM
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Quote:
Originally Posted by natural
If we are thinking that apraisers could fraud massively, then why are they still appraising houses in the real estate market? I don't quiete understand what you are trying to say.
I didn't TRY to say anything, I told you what I have seen in the 30 years since I graduated with a related degree and spent my entire adult life in real estate, either in Corporate Relo, as an agent, as a builder rep, as a broker, as a court appointed Receiver, etc. Appraisals DO get manipulated. "Brother-in-law values ARE given. There was supposedly a big shake up to correct that after the larcenous BS of the mid-1980s. People went to jail. People lost licenses. Did that stop it from happening in the same fashion going into the crash of 2008? No.

I used to have to testify in court with a lawyer trying to beat me over the head on the witness stand with silly bought-off value appraisals. Problem is I had way too much practice spotting the flaws in the methodology, and truthfully there are enough variables that are discretionary too sway an appraisal pretty big without even breaking the guidelines.

You believe whatever you want, just telling you what I've seen, and I handled appraisals in 32 different states and several territories. The tactics dont vary from one state to the other.

Quote:
Mortgage is a contract, yes it is but when the market is abused by sucessfully diminish the value by half, it looks like fraud (rating agency rating triple AAA mortgage backed securities or repacked toxic stock across the world), manipulation of the real estate(shark 2nd mortgage, unthical incomes, buying home without down payment), and greed.

How can you respect a contract in these conditions?
Buyers getting defrauded by mortgage companies is a specter politicians like to invoke, but more often it is the other way around. At the ground level where the loan was made... the buyers that overbought were as culpable if not moreso than anyone. Faked income verifications, lies about debts... heck I saw buyers get thru the system pretending to be single when they were married.

Quote:
Many politicians allowed free lunch with allowing people buying houses that they couldn't afford, then the free lunch like you can see around the real estate market will be taken from the people walking away.
Basically the programs didnt give the buyers a house... they just didnt require them to have much if anything into it. Under some programs the buyers walked away from closing not only not paying anything, but getting a check. There was some real weird stuff out there.

Those buyers have been MUCH more prone to walk away, because they had nothing into the deal to start with. If they paid a $1000 house payment while they were in the house, got to take a massive tax break on the interest while in it, and when things went south they walked away... did they actually have anything taken away?

If you do the math... many of those "victims" literally made money on the deal. They'd have been paying rent had they not been in the house, and they wouldnt have had the tax break.

The guys that REALLY got screwed were the guys that deserved the loans they got based on the income they truthfully reported, but bought in the neighborhood where the guys that got in for little to nothing walked away... driving the values down. The loss in values outstripped a lotta decent downpayments.

Quote:
You can check the historic real estate bankruptcies, all of these companies had a contract and many went bust and left billions unpaid to investors and banks.
I'm familiar with the history, I lived it for three decades. Not seeing what bearing that has on the points I raised.
-- I mentioned that it would be abused, and it would. History repeats itself quite a bit. If theres a way to cheat a system a system WILL be cheated.

-- I mentioned it'd probably be overturned by the courst unless the government reimbursed the lenders for the loss they legislated. Where do YOU think the government would get that money?

-- I mentioned it would hurt people it was intended to help. If you check to see where pension funds are invested, I suspect it'd hit them pretty hard, and the people that'd hit might include fatcats, but it might also hit the teacher, the fireman, or the retired railroad employee that has a company pension and a 401k wiped out by the same government bill that forgave someone else's debt.

Last edited by robjones; 02-24-2012 at 01:12 PM.
 
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Old 02-24-2012, 01:35 PM
Franc Tireur Franc Tireur is offline
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Quote:
Originally Posted by robjones View Post
Buyers getting defrauded by mortgage companies is a specter politicians like to invoke, but more often it is the other way around. At the ground level where the loan was made... the buyers that overbought were as culpable if not moreso than anyone. Faked income verifications, lies about debts... heck I saw buyers get thru the system pretending to be single when they were married.
Ok I see your points now.

Let's go back in what I have quoted.

Do you think that it is serious that mortgage professionals did not verified proofs of income, debts, and let people borrowing loans more than 30% income, etc?

I don't want to be rude or anything, but credit reports in most cases shows how many loans or revolving credit cards you have. How professional lenders can miss that?

How many government agencies make numerous settlements involving millions of dollars and pocked. Where this money is spent? Do they use this money for helping underwater homeowners? It doesn't look like many legislations fight against these big financial entities doing what they want in this market.

If I take the MERS system which was completly abusing the system and defrauded some homeowners, how can this system can be still active?

Everyday I am reading stories in newspapers about mortgage frauds, but no one go in jail. Settlements in many cases are just a drop in the water, that don't really dissuade white collar criminals to stop.

As your professional view, I will be interested to know what do you think they should do to correct all this mortgage mess?

Last edited by Franc Tireur; 02-24-2012 at 01:39 PM.
 
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Old 02-24-2012, 02:59 PM
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Never got around to going to bed last night. Had a project in progress. Ran outta juice now. Will be glad to answer, but for now, gotta close eyes.
 
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Old 02-24-2012, 03:26 PM
Franc Tireur Franc Tireur is offline
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Sure no problem Rob, take a nape

When you come back, you will see that even today this subject is pretty hot:

A banking strategy that pleases no one

Quote:
Ever since the $25 billion settlement over foreclosure abuses between five of the nation’s biggest banks and the state attorneys-general was announced, there’s been a steady drumbeat of naysayers who’ve asserted the deal does more for the banks than it does for homeowners. And barring some happy accident in which the settlement somehow inspires banks to behave, they’re probably right: In comparison with the estimated $700 billion difference between what people owe on their mortgages and what those homes are actually worth, $25 billion is peanuts.

But the problem isn’t that the settlement is part of some grand plan by the government to help out the banks. Rather, the problem is that the government doesn’t seem to have a grand plan for the banks.

For all the current and well-deserved bank bashing, few question that a well-functioning economy is predicated on a well-functioning banking system. And few question that confidence is a critical ingredient. So then the issue becomes: What kind of banking system do you want to have, and how do you inspire confidence in it?
http://blogs.reuters.com/bethany-mcl...leases-no-one/

I see that the future banking system to inspire confidence will be local so the banks know their market, the people and the businesses.
 
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Old 02-27-2012, 07:11 AM
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Quote:
Originally Posted by Inspired Ink View Post
It made more sense for them to default on their million dollar mortgage, and buy a house that was just as nice for $650,000 ... or perhaps even less, given the bottomed-out nature of the housing market and the value of being able to produce funds.
I'm at a loss to undersatand this.
Are you saying they defaulted and then bought a house at $650,000 for CASH?
Because, in my neck of the woods, one does not simply default on a mortgage, declare bankruptcy and then go house shopping.
You declare bankruptcy around here, you won't be house shopping for at least 10 years, unless you can pay cash in full for the house.
There's no way you can get a mortgage anywhere until at least 7 years after bankruptcy discharge, and it will likely be much longer than that.
 
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Old 02-27-2012, 09:39 AM
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Zap the people who have a tidy sum of money almost never assume personal responsibility for anything. Various assets are in inside of a corporation or LLC, the bankruptcy of which does not affect your personal credit rating at all.

Company X may be bankrupt but some fool banker will loan company Y some money to buy.
 
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Old 02-27-2012, 09:43 AM
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So, if I understand this right....

Create Company X. Transfer my mortgage and property to Company X. Have Company X declare bankruptcy.
Go house shopping with my personal credit, knowing all along that if I screw up again, I can create Company Y and repeat?

I think I undersatand now.
 
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Old 02-27-2012, 01:23 PM
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Quote:
Originally Posted by Zap View Post
So, if I understand this right....

Create Company X. Transfer my mortgage and property to Company X. Have Company X declare bankruptcy.
Go house shopping with my personal credit, knowing all along that if I screw up again, I can create Company Y and repeat?

I think I undersatand now.
Nope. It is to late for you. Had the corporation bought the home and allowed you the use of it for perk or pay, then you could walk away clear and free.

If forced to walk away do it again with another company though the times are not quite as loose as they were so you might have break down and do a personal loan.

Also keep in mind that sometimes a 'deed in lieu' is given. That is where you deed the home to the mortgage holder and avoid bankruptcy altogether.

What many of these people may be shocked to learn is that they owe the IRS money for the taxes on the 'imputed income', the amount they beat the banker for, the forgiven debt.
 
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Old 02-27-2012, 01:55 PM
Franc Tireur Franc Tireur is offline
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Quote:
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What many of these people may be shocked to learn is that they owe the IRS money for the taxes on the 'imputed income', the amount they beat the banker for, the forgiven debt.
That's the catch 22, bingo ScriptMan.

Either walking away or short sales, the IRS will never forget you. As bad as it is, IMO it is best to stay and negociate with the mortgage servicers or to take an attorney to negociate for you.
 
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Old 02-27-2012, 02:08 PM
Franc Tireur Franc Tireur is offline
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One important thing that most rich people do is creating a trust of property, so in this structure, it is also a good fuse in many ways.
 
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