Friday, August 08, 2008

'You've Brought a Pistol To a Nuclear War'

From the Sacramento Bee:

The nation's new housing bill will offer a lifeline to an estimated 400,000 struggling borrowers starting Oct. 1, including many in Sacramento...The government will guarantee $300 billion in refinancing funds to get people out of risky adjustable loans and into safer 30-year fixed loans...The bill lets borrowers refinance their homes at what they're worth today – instead of the extreme high price paid during the boom.
...
[S]ome experts said lenders, already taking huge losses when homeowners default, might work with the FHA program. This is a way for the banks to take less of a loss, said Elk Grove foreclosure attorney Jonathan Stein. "I think lenders who already own a lot of real estate are going to be more inclined to follow through on this," he said. In other words, refinancing will be easier than maintaining vacant homes.
From the ForeclosureTruth blog:
[The] Housing and Economic Recovery Act of 2008...gives local governments a total of $4 Billion to purchase and rehabilitate or redevelop foreclosed properties..."$4 billion is kind of a meaningless sum," [ForeclosureRadar's Sean] O'Toole said. "It can't possibly make a difference. You've brought a pistol to a nuclear war."
...
By the time California gets their share, we are talking about enough money to perhaps buy 10 percent of the properties foreclosed upon in ONE MONTH.
...
There is an awful lot in this package, but nothing that strikes me as likely to fundamentally turn the tide. The reality is that housing prices will continue to correct until home prices are once again in line with incomes using traditional financing. The sooner the powers that be accept this and focus on smoothing out the transition while minimizing the affect on taxpayers the better off we will all be. And hopefully next time we'll collectively keep our eye on maintaining home affordability rather than artificially building home equity so that we never have to go through this again.
From the Sacramento Business Journal:
Sacramento has the 18th highest mortgage closing costs in the country, according to a new study by publicly traded Bankrate Inc...Sacramento’s average closing cost is $3,179.
From CBS News:
The promise of the suburban dream is what brought Nichole Cinaglia and her daughters to a neighborhood more than 30 miles outside of Sacramento, California.
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Nichole can't afford the $800 in gas she burned each month commuting to her job, so she's selling her house for less than half what she paid for it...Nichole Cinaglia plans to rent near her job. But she still thinks about the life she used to have. "I don't miss the commute, but I miss the idea," she says. "I miss that it was mine." A dream abandoned miles away now is beginning to fade.

9 comments:

Jacob said...

Well from what I understand of the housing bill it would work something like this:

Someone bought a home for $500k, it is now worth about $250k. Sac is ~45% off peak now, so just round up to 50%.

The second lein holder if any must agree to cancel the debt, so the first bank would have to pay them something to do this.

Then the bank must write down the balance to 90% of $250k or $225.

That is a pretty steep loss. Seems to me like it would be better to just take the home back, wipe out the second lein for free, and price the home below market for a quick sell.

And to the person spending $800 in gas, what can I say. You should have known better. Even with gas prices from a few years ago you were still paying $400 or more. And for what? Add up the time you spend at work, going to work, going home, sleeping, how much time do you have to actually enjoy your home?

Tyrone said...

Add up the time you spend at work, going to work, going home, sleeping, how much time do you have to actually enjoy your home?

Very true. I love my 3-mile commute. Ironically, though, it takes longer now due to the god da** light rail system.

norcaljeff said...

Sacramento’s average closing cost is $3,179.

All that to fill out some paperwork. What a scam. The whole industry has been a scam since it first started.

jasman said...

nicole, it was never "your" house.

Perfect Storm said...

$800 in gas???

Why sell the house sell the tank, but she has probably lost some much equity it is just better to walk.

mopar777 said...

We've estimated that between 1961 and 1989 my dad spent about 3.5 years of his life in a car commuting between Sacramento and the outskirts of Placerville. It was one of the reasons my mom left him. When the family split up and we moved to Sacto in '69, school, work and shopping were all within a mile or two of each other and we could afford some of the nicer things.
I've also noticed that those who move out in the boonies are usually antisocial men.

Patient Renter said...

The nation's new housing bill will offer a lifeline to an estimated 400,000

Wrong. This is the kind of press release parroting journalism that's just sad.

The legislation is going to qualify up to 400,000, but the CBO estimates about 1/3rd of those will end up in foreclosure anyways, ultimately being worse off for the "help". A more accurate article would have described how much better off lenders will be as a result of this legislation.

The reality is that housing prices will continue to correct until home prices are once again in line with incomes using traditional financing. The sooner the powers that be accept this and focus on smoothing out the transition while minimizing the affect on taxpayers the better off we will all be.

That, to me, is the irony. Anything that the government does has a negative effect on taxpayers. So the one thing that brings the greatest net benefit is to do nothing, but that's the one thing they won't do.

"I miss that it was mine."

The kool-aid is strong with this one. If making something "mine" was as easy as taking on debt, think of all the things I could "own" :)

Cow_tipping said...

You've brought a pistol to a nuclear war

No they have not. They are employing the win races sunday sell cars monday attitude. Every marginal homeowner now believes this bail out is for them. Just like every car buyer thinks he's the next Jeff Gordon if he buys this POS that Gordon drove and won yesterday. Since the requirement is that they be current in their mortgage, they will kill themselves waiting for bailout. When they get to the finish lone and find out all the fine print, they will have exhausted themselves in the death march to stay current and they will fail spectacularly, that is unless another "bail out " plan is legislated. Then they will wait till that one comes to their "rescue". Sorta like gettting stuck in quicksand in alligator alley. The quicksand is 2 X the density of your body, you will not drown in it. However it will hold you there till an alligator makes you for dinner.
Cool.
Cow_tipping.

Jacob said...

If you don't get help by November then all bets are off.

And the banks have to approve it and they have to mark down to 90% of current value. In most areas that would be such a huge hit anyway the bank might as well wait and see if they actually have to foreclose and then if they do just dump it for what they can get.