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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (102203)	9/19/2009 2:54:13 PM
From: Broken_Clock	Read Replies (3) \| Respond to of 116555

"Home prices finally began to rise in 1996 when the last of the foreclosed homes was sold. " On that note some people I know finally admitted to being seriously underwater on their ATM, I mean home. I'm guessing they owe 5 or 600k on a home worth maybe 300k. Their lender has approached them with an offer of 2% financing and some kind of crazy scheme in which they can keep making the payment and even pass the home down to their kids but if they sell their is some type of penalty. Supposedly gov't backed program. I'm trying to get the details. The best "deal" I've seen so far was a jumbo loan with BofA @7.7% modded down to 4% IO and fixed for 5 years. That was done over the phone in 45 minutes by the owner.

To: Elroy Jetson who wrote (102203)	9/19/2009 3:47:33 PM
From: mishedlo	1 Recommendation Read Replies (2) \| Respond to of 116555

Strategic Default Data Suggests Foreclosure Prevention Tactics Useless globaleconomicanalysis.blogspot.com An interesting report in the Los Angeles Times shows that a person with super-prime credit scores is more likely to walk away from an underwater mortgage than a person with a subprime credit rating. ... Mish

To: Elroy Jetson who wrote (102203)	9/19/2009 7:19:16 PM
From: Hawkmoon	1 Recommendation Read Replies (2) \| Respond to of 116555

What happened was the banks took an even larger loss. As many held off either on foreclosing or on selling foreclosed homes, the inventory of homes to be foreclosed and sold became unsustainable large. Lord knows what kind of loss they would have taken had they just dumped all their properties at one time in a firesale. Weren't you the one trying to explain "supply and demand" to me? You're advocating dumping ALL bad loans into the markets at one time, exceeding actual, or potential, demand?? What about all the currently good loans that would be turned toxic in such a firesale environment? Maybe the RTC lost some money, but they would have lost FAR MORE had they just dumped those assets into illiquid markets. How many more homes would have been added to the RTC foreclosure rosters had that occurred. People interested in buying real estate are not terribly stupid. They know prices are not likely to rise if banks have a huge inventory of properties they are waiting to sell - so they don't buy. And those people who currently own real estate, including those who own it free and clear, will suddenly become panicked sellers at the first sign of the banks dumping all of their supply into the marketplace. That will only add to the available supply of unsold RE and bring prices down even more. Sellers, current and potential, aren't stupid either. My mother recently paid off her home after the passing of my father. But were your plan to be enacted, I would be forced to advise her to sell immediately for the best price she could get. I understand your objection to free markets, And I understand your objection to reality.. You serve your economic master well, and yet you fail to realize that economic theory is ALWAYS subordinate to political realities. There is NO SUCH THING as a free market and never will be in a society where the government is accountable to its voter base. a centrally-planned socialist economy has a certain appeal to underwater debtors, but we're better off enduring this period of debt destruction and restoration to economic health in the traditionally capitalistic manner of free markets. Just as a free market appeals to those who use the system to exploit labor and the middle class in order to transfer wealth and power from the masses to the minority. In this, capitalism and socialism share an equal agenda. Hell, why do you think Socialism became so appealing in the first place? Capitalism exploited our society so terribly that workers (voters) had no choice but to organize.. I don't much like unions due to the political corruption that overcame them. But at the time they were originally formed they certainly served a valid purpose and improved worker quality of life tremendously. But the reality is that BOTH of our schemes will achieve the same result. But yours is tantamount to taking a chainsaw, amputating the arm to remove the self-inflicted bullet, while mine requires some anesthesia and stabilization of the patient. Your plan carries the potential of unleashing even more "animal spirits and inducing further economic panic, while mine is focused on gradually finding equilibrium between supply and demand. Hawk