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Thread: weekend commentary - 782 days of 'free rent' thanks to US taxpayers

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    Default weekend commentary - 782 days of 'free rent' thanks to US taxpayers

    from a professional investors' BBS ...

    (snip)""The average number of days from when a borrower stops paying on his/her mortgage to when the bank sends out the first foreclosure notice is 417....And the final foreclosure can take up to a year more. The government's Home Affordable Modification Program, which today the Inspector General for the TARP wrote, "has made little progress in stemming the onslaught".... is simply delaying the inevitable and in some cases kicking the can and the cost down the road for borrowers who will inevitably redefault and for taxpayers who will foot the bill." (Diana Olick Realty Check, CNBC)

    Full-stop. So the banks are taking more than two years to roll-over a house...even when they KNOW the homeowner has no intention of paying? Think about that for a minute. The only reason the banks would hold-off that long is if they can't afford to writedown the losses. So, it's all a big accounting charade to keep the public from knowing that they're broke. That's the only logical explanation. Back to the article: "(snip)



    also from that article ...

    (snip)"Great. So, the same bank that borrows money from the Fed at zero-rates and dings you double-digits on your credit card if you're even a day late, wants to extend a helping hand in your hour of need? Right. There are no good Samaritan banksters, just tight-fisted scalawags who'd squeeze the blood from a turnip if they could figure out how. If B of A is giving folks a break, it's because their backs are against the wall and they have no other choice. It means they're underwater themselves.

    And one final note. The Treasury Dept recently reported that the number of "permanent" mortgage mods under the Obama whizzbang program, have more than doubled since its kickoff just a few months ago.

    According to economist Dean Baker, "This indicates that a very high percentage of the permanent modifications [ under the HAMP program - sic] are likely to end in default."

    But here's the shocker:

    "The money that the government spends on a failed modification goes to banks, not homeowners. Typically, the government will have substituted an FHA insured mortgage for the original mortgage issued by a bank. This means that when a redefault takes place, the bank will have received most of the principle back on the loan, with the government [ i.e. future US taxpayers - sic ] incurring the loss on the redefault." (Dean Baker, CEPR, "Money for Failed Modifications Goes to Banks, Not Homeowners")

    What does it mean? It means that the Obama mortgage flim-flam is another stealth bailout to shoehorn bankers into government-guaranteed loans so John Q. Public gets saddled with the bill again."(snip)

    ~
    Last edited by Melonie; 04-24-2010 at 08:44 AM.

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    Default Re: weekend commentary - 782 days of 'free rent' thanks to US taxpayers

    of course, if you examine the fine print, these days those two years worth of 'free rent' may not be free after all ...

    (snip)"(Bloomberg) -- When John King stopped making payments on his home in Coral Gables, Florida, two years ago, he assumed the foreclosure ended his mortgage contract, he said. Last month, a Miami-Dade County court gave collectors permission to pursue him for $44,000 stemming from the default.

    King is among a rising number of borrowers who are learning that they can be on the hook for years after losing their homes. Amid a crisis that stripped $6.4 trillion, or 28 percent, from the value of U.S. residential real estate since the 2006 peak, lenders are exercising their rights to pursue unpaid mortgage balances. To get their money, they can seize wages, tap bank accounts and put liens on other assets held by debtors.

    “The big dogs get a bailout, and the little man gets no mercy,” said King (snip)

    (snip)"‘Next Big Crisis’

    Deficiency judgments were rare in the 15 years since the last real estate slump, said Ben Hillard, a former investment banker who now is a real estate and corporate attorney at Hillard & Rogers in Largo, Florida.

    “The banks have been too underwater with foreclosures to spend much time on deficiency judgments, but that’s beginning to change,” Hillard said in an interview. “This is going to be the next big crisis.”

    Almost 4.5 percent of mortgaged U.S. homes were in foreclosure during the third quarter, the highest rate in the 37 years of tracking the data, the Mortgage Bankers Association said (snip)

    (snip)The federal government spent $230 billion in the year ended in September to support homeowners, according to the Congressional Budget Office in Washington. Those efforts didn’t help people who had already walked away from their houses.

    In states such as Florida, courts give mortgage holders as long as five years to seek a deficiency judgment and, if granted, up to 20 years to collect. Usually, they have the option of renewing the judgment if it’s not paid off within 20 years.

    About a third of U.S. states, including California and Arizona, prohibit collection efforts on primary residences after foreclosure. In some cases, homeowners waive that protection if they refinance. Most states allow collection on unpaid home equity loans.(snip)

    (snip)The likeliest candidates for deficiency judgments are so- called rational defaults, said Larry Tolchinsky, a real estate attorney in Hallandale Beach, Florida. In those cases, people who are current on their mortgages decide to walk away from a property because its value has sunk so far below their loan balance they have no hope of recouping the loss.

    About 21 percent of American homeowners owe more on their mortgages than their properties are worth, according to Zillow.com, a Seattle-based real estate data firm.

    “Walking away from a property comes with a cost, especially for people who otherwise have good credit,” Tolchinsky said in an interview. “The bank is going to pull your credit report, and if you’re current on your other bills they are going to come after you and potentially ruin you.”

    Fine Print

    It’s not just foreclosures that can trigger debt collections. Short sales also may lead to deficiency judgments years after former homeowners have moved on, according to Hillard, the attorney in Largo. In a short sale, lenders agree to let borrowers sell a home for less than the mortgage balance.

    “Banks are being very careful to preserve their rights, either outright in the short sale agreement or by using vague language that leaves that door open,” Hillard said. About 90 percent of people who do a short sale think they are “off the hook.”

    That was the case when two of his clients, Brigitte and John Howard, sold their home in New Port Richey, Florida, almost two years ago without using a lawyer to check the bank’s short- sale agreement.

    $20,000 Shock

    “We got a call out of the blue saying we owed $20,000,” said Brigitte Howard, 45. “It was a shock. There was no mention in the short-sale contract that the bank might come after us for the difference.” (snip)

    from


    keep in mind that when you combine the first article's observation that HAMP is substituting gov't insured rewritten mortgages for privately backed defaulted mortgages with this article's observation about deficiency judgements and recovery, in the future it may very well be the US gov't who starts collecting these deficiency judgements from former homeowners.

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