Short Sale Reform Is Key To Restoring Housing Market

Today’s Courier Herald Column:

With the GOP Presidential campaign having an extended stay in Florida, there were brief attempts to have the candidates weigh in on the continuing housing crisis.  Florida, like Georgia, has been extremely hard hit with foreclosures since 2008 with home values continuing to decline in many local markets.

Unfortunately, most discussions on policy were quickly debased by charges and counter charges of who consulted/lobbied for Freddie Mac, and who owned stock in Fannie Mae.  Gotcha campaign politics does nothing to assist those who played by the rules, are still paying their mortgage, but now have a home that is worth significantly less than what they paid for it and more importantly, what they owe on it.

The President called for refinances at market rates again during his State of the Union speech.  Those who are underwater on their mortgages are unable to refinance their 7% mortgages to today’s record lows under 4% because of appraisal issues or income issues.  If someone has paid their mortgage while their home has declined in value, then they are more likely to keep paying at a 4% rate than they are at almost double market rates.

The bond holders earning 7% have already received a bailout.  It is well past time to pass the relief on to the homeowner who has done nothing wrong but is bearing the brunt of the cost of the housing collapse.  Republicans should join the President and get this done, perhaps trumping him with a discounted refinance rate to the market.  The money released back to consumers would add legs to consumer spending which has shown signs of recovery despite continued high unemployment.

One additional area where policy and regulation changes could significantly help the housing market is in the area of short sales – sales where homeowners owe more than the home is worth and the bank must either approve writing off the deficit balance at the closing or take an unsecured note for the difference from the seller.  Roughly 60% of the homes in metro Atlanta are underwater, and the housing market for resales is dominated by short sales.

Banks, while having adopted policies to generally approve short sales, generally are still dragging their feet to approve them.  Realtors are generally advising buyers and sellers to allow for 6 to 9 months to complete a transaction where a mortgage holder must approve the terms.  Home buyers who contract to buy a short sale have actually only entered into an agreement to eventually begin negotiations with a bank.  Often the bank will not come close to approving the terms that the realtor, desperate to generate an offer for the seller to avoid foreclosure, has offered to generate a contract.

The result is that the market for re-sold homes has become remarkably inefficient, with many buyers refusing to consider homes that would represent a short sale, and many realtors refusing to list them or write sales offers for them.  These homes too often end up as foreclosures as a result, perpetuating the downward price spiral.

Anecdotally, I can share that I have been attempting to purchase a home for almost a year now, and have also sworn off of short sales.  The first home I had under contract involved a realtor listing the home for about 30% less than what she knew the bank would accept in order to generate an offer.  An endless loop of open ended updates followed, with her finally suggesting I increase my offer 50% if I wanted to close.  This, despite having been promised before writing the contract that the bank had pre-approved my offer amount.

More recently, I signed a contract after being told that the bank was local, and would most likely provide a “quick” decision.  After completing the paperwork, I was told not to expect an answer for at least 90 days.  Two weeks later, I was told my terms were approved, but I had to close in 9 days or the bank would be foreclosing two days after the proposed closing date.   My mortgage lender could not say with certainty that they could meet that time frame, and I was not willing to invest in yet another appraisal, inspection, and opportunity costs for a home that would be foreclosed on if I was unable to close in the timeframe allowed.  Thus, instead of a sale in 3 weeks, the bank will have a foreclosure next week.

To help the hardest hit states, banks must be forced to accept standard processes on short sales.  A standard list of documentation from the seller should be clear to avoid banks constantly asking for “one more document” to delay a decision.  Banks should have 60 days maximum to approve a seller’s request once their paperwork is complete.  This should include a clear net proceeds amount.  Offers that are less than this amount should be approved or declined within 30 days.  Once any offer is approved, a minimum of 30 days to allow for an orderly closing should be allowed.

Restoring certainty to the short sales market is essential to housing recovery in the hardest hit markets.  As the Presidential campaign leaves Florida and begins to look forward to Super Tuesday, Georgians must insist on this and other housing policy positions from the candidates.


  1. bgsmallz says:

    “If someone has paid their mortgage while their home has declined in value, then they are more likely to keep paying at a 4% rate than they are at almost double market rates.” – Amen, brother.

    That is frustrating beyond belief. I’m stuck paying interest rates close to double the current rates to Citibank, US Bank, (insert big bank name here) while the same banks are getting cash infusions and preferential borrowing terms so that they can just sit on the cash? Give some relief to folks that have been blessed enough to diligently pay their mortgage at an above market rate…the cash those folks save is guaranteed to go back into the economy through spending or investment (savings at banks or stocks/bonds).

  2. L. Max Lehmann says:

    Both commercial and residential real estate issues ought to be front and center for the 2012 general election cycle. Real estate is the bedrock asset class for most Americans and institutional investors. A vibrant real estate market helps keep entire economy moving along.

    US commercial asset value is not aligned with book value and that is a market depressant. Yet, taking these losses would shake our most revered institutions.

  3. bowersville says:

    “The President called for refinances at market rates AGAIN during his State of the Union.” The key word being AGAIN. The RNC immediately produced and ran this ad and in Jason’s words from a previous front page entry, “After his SOTU speech, the RNC put out this very good ad hitting Obama for his lack of new ideas.” And the clip Jason provided:

    Although the ad doesn’t address this particular issue, it does accuse the President for his lack of new ideas, just as Jason described it. And just as you wrote it, the President mentioned it AGAIN in his SOTU address and it was not a new idea. As for “Republicans should join the President and get this done…” I hope so, but can’t see it happening until after January and the elections are over. DC is too divided.

  4. John Konop says:

    I can only tell you what I am seeing. It looks like the banks are getting healthy again via low cost of funds and good margins on loans, the last few years, on performing loans and less write-offs on new loans. Now the banks are writing down commercial and residential loans at the value of the debt not the original loan amount. Because of this process which will take 3 to 5 years to get through the bad inventory it is slowly increasing business and consumer spending. That is why we will see the unemployment rate slowly drop and consistent growth in the 2 to 3 5 range.

    As long as we avoid a war with Iran ie gas prices and Europe does not totally implode I see real growth over the next 5 to 7 years. The real issue is how we deal with the growth cycle. The country needs infrastructure investment, manufacturing investment, trade reform, entitlement reform ie spending, education reform ie dropout rate, tax reform flatter tax system without special write offs that favor the few, energy investment that creates competition with oil companies and a military plan that keeps us safe yet stops the policemen of the world strategy we cannot afford.

  5. L. Max Lehmann says:

    I hope this is correct:

    “Now the banks are writing down commercial and residential loans at the value of the debt not the original loan amount. Because of this process which will take 3 to 5 years to get through the bad inventory it is slowly increasing business and consumer spending. ”

    As to the last point, dealing with growth… All good stuff. And yet with WDC so deeply divided, would you agree; equally implausible? How do we break through the gridlock?

    • John Konop says:

      In my opinion banks have to put the money back to work or they have no long term value. Also with cheap money from the FED for the next few years they need to fix the bad asset problem in the next three years before interest rates go back up. this is not about politics it is about money.As I said unless we fix the real issues the economy will just blow up again and we will keep repeating cycles in faster time periods. The next cycle drop will be driven by people retiring without enough money in 401k plans, entitlements under funded ie no cash no spend……unless we deal with the above issues in my first post.

    • John Konop says:


      This was in the paper today.

      AJC: Survey says metro Atlanta restaurant sales up in fourth quarter, full year of 2011

      …….Same store sales were up 4.7 percent in the fourth quarter of 2011 over the same period in 2010, according to NetFinancials, an Atlanta company that offers tax and accounting services for restaurant companies. For the full year, metro restaurants saw a 6.25 percent compared to 2010.

      The fourth quarter 2011 growth, however, was slower than the uptick during the first three quarters of last year, when sales increased 5.3 percent, 7.2 percent and 6.4 percent respectively compared to 2010.

      “Though consumers faced daunting economic worries in 2011, Atlanta’s restaurants managed to post impressive sales gains,” said Robert Wagner, NetFinancials president. “It is remarkable that almost 90 percent of Atlanta restaurants we surveyed revealed positive sales gains in 2011. Clearly the industry is as vibrant and relevant as ever and, we think, poised for solid growth in 2012.”……….

      • L. Max Lehmann says:

        Saw it, John.

        At dinner last night at Chuy’s discussing their full parking lot.

        What do people do when they feel like perking things up, and have a little bit of discretionary income?

        “Everyman” can afford dinner out. To me, increased restaurant sales substantiates a modest recovery. When we see furniture, appliances, capital outlays increase, we are full-on into recovery.

  6. Dave Bearse says:

    It’s good to every now and then see that you’re not categorically anti-regulation. More than anything it’s been a display of financial interests saying they’re taking action and can regulate the process themselves, and not doing much of anything I’d like to see a process wherein not just the bondholders, but the financial interests that took s6!t and packabes and sold it as blue chip securities, shared the haircut, but that’s probably asking too much.

    Short sale standardizaton should have been initiated years ago because it’s a three year process to get there, a year developing and enacting legislation, a year developing the regulations, and a year to implement. This is dragging on such that it appears it would be worthwhile even now.

    • Charlie says:

      The reality is that most things we do are regulated to some degree. Regulation in response to a crisis or negative event is often exactly the wrong thing to do. Much of the new regulations for banks focused on trying to tighten rules once the damage was done, and has made the problem worse. Georgia’s community bankers can cite many examples at the micro level.

      Overall, changes in regulation should be done with caution, as constant rule changes break down the level of buyers and sellers to calculate their best actions and decisons. It all goes back to certainty.

      In this case, however, you have mortgage servicing companies taking advantage of much of the “help” from the Fed and Federal Government which has put consumers, especially those who have played by the rules, at a significant disadvantage. There are many programs to help people who are behind on their mortgage. Those who struggle to meet the terms they signed up for and keep payments current can’t refinance while those who skip three payments are often offered principal write downs and below market rates. There is nothing right about this.

      The short sale process is greatly distorting the housing market. If a mortgage company can approve a new loan in two weeks, there is no reason they can’t approve a short sale in 30-60 days. Keeping paying customers in an endless loop for 6-9 months to delay taking an inevitable loss has conditioned buyers, agents, and even sellers to avoid homes in short sales. As such, many of these become foreclosures which are hurting home prices for the remaining who continue to try and pay their mortgages. Getting time certainty for short sales would return many more homes to the effective market, and help the overall housing and financial markets find stability.

  7. seenbetrdayz says:

    The banks seem to be living in a fantasy land where only the seller gets to determine price. Such as with Charlie’s story, they think they have something rare and investment-worthy but after 2008 people are very cautious to look at houses as investments but rather just a place to live (such as it used to be, many many moons ago).

    Normally, if you were an idiot banker who waited around forever to try to sell an over-priced home, you’d go out of business. Overhead costs would get you. But when you’re a bank like Citi and you can just call up your buddies at the Fed to get some funds to sustain yourself in the meantime . . . no worries, right? You can sit on those assets to ’til the cows come home, ’cause no one’s gonna let you fail. Bling-mutha-farkin’-bling.

    So that’s what we have. Banks sitting around with over-valued homes on the books and buyers (the consumers—the side that banks don’t seem to want to include in setting the price of goods) just aren’t buying as much, and certainly not at pre-2008 levels where you could buy a home, wait a few years, sell it, and be a made-man. Those days are gone and aren’t coming back.

    • Charlie says:

      Understand that short sales are unique in that the bank is holding a loan, not the actual piece of property. So their inclination to sit often depends on if the customer is currently making payments or not.

      In the first house I had under contract, I was told that the homeowner was still making payments and they were still living in the house. Thus, while the bank had an asset that wasn’t backed by proper collateral values, they were feeling no pain so long as the payments were being made. As such, even though the sellers qualified for a short sale, the bank was feeling no pain. Thus, months and months of circular conversations with the bank but no answer.

      In the most recent case, the seller had quit making payments and the home was vacant. Thus, the bank decided they would just go ahead and foreclose, despite a qualified buyer with earnest money on the table prepared to close.

      I’ll be interested to see if they net less on this house after they go through the foreclosure process. My guess would be yes, as the group inside most institutions that decides on short sales prices is often the group trying to manage current losses to the loan portfolio, whereas the REO (Real Estate Owned) departments often are more realistic in what needs to be done to get the highest amount of cash back into the bank quickly.

      • you says:

        I did not think a bank would consider a short sale unless a person is behind on payments. Why should they if the owner is current?

        What I don’t get is why not do principle reductions for people who have hardship situations? The banks will sell the home to a new person at a lost but will not take the same lost on the current owners.

        I believe we are in this mess for the long haul. The first to get hit were the people who borrowed 125%; they made money off their loan. Next were the people who borrowed 100%; they lost nothing. In both situations the banks made loans to people with nothing invested and nothing to lose. Now, home values have declined so much due to all the foreclosures that it is hurting those who put 20-30% down; people with real money invested can not sell their homes for what is even owed. They are the ones that are hurting. They are the ones that are actually taking a hit and they should get help if anyone should.
        I blame the banks and the politicians for this mess. And I sure don’t see how the people who caused it are going to fix it.

        • bowersville says:

          I blame the banks and the politicians for this mess. And I sure don’t see how the people who caused it are going to fix it.

          I believe you just paraphrased a segment of the most recent State of the Union address.

            • bowersville says:

              In this article from Politico it can be read that the approval rating for the Republican Congress is falling and it’s attributed to several factors including the drawn out battles over budget, pay roll tax and others. It will also point out that Obama is running against Congress. I agree with that. I watched the SOTU speech very closely. It is my nature to study people, to study where they are coming from and attempt to anticipate where they are going. Of course the President took no blame for himself, but he threw down the gauntlet to Congress. And he’s traveling around the country scoring his points. As we had a tendency to focus on the Jan Brewer tiff on the tarmac on Fox, he repeated his SOTU talking points to the public in Arizona. Another state like us suffering a terrible real estate market. For those predisposed to oppose Obama the tiff on the Tarmac was all the red meat that was needed to confirm their predisposed opposition and looked no further. But what about the poor stiff’s in Arizona, or Florida, or Nevada or even GEORGIA that aren’t predisposed to oppose Obama that are upside down on their mortgage and can’t refinance at historically low rates? Do you think they cared about the tiff on the tarmac? Or do you think they care more about their mortgage payments being lowered by $200-300?

              Congress needs to take this issue, the short sale issue and a few more off the table. Most don’t care who’s at blame, they want it fixed and now. Congress is acting quick to take the insider trading issue off the table but will they take this off the table? Or are WE so predisposed against Obama that WE won’t let them?


  8. saltycracker says:

    No one will move until they have to.

    Could it have something to do with the rates the Feds charge the banks for money and guidelines they set for leverage or non-performing assets ?

    Helping those that are upside down and want to stay in their home should have their interest over 4% set aside and after 7 years or so , forgiven. The banks can figure out how to cover or let Fannie do it.

    Set a time line and start raising rates to banks and or set stiff guidelines for non performing assets and leverages.

    Side comment: AP reports that TARP bailouts still owe $133 B.
    Synovus, Columbus $968 M
    Regions, Birmingham $3.5 B
    AIG, $50B
    GM, $25.4 B

    • Charlie says:

      Synovus and Regions are the two banks I bank with. One of the reasons is that they still are based locally (GA & AL). Remember Georgia and the SE have been among the hardest hit with the housing crisis. Their major southern competitors have either evaporated (Wachovia) or received so much fed help on the front end that they were able to essentially write off their problems and start over, while the smaller “big” banks were given enough to stay alive, but are still dealing with the cleanup.

      Both Synovus and Regions are making progress, and they should be repaying the program this year as I understand it. That still might not be enough to keep them independent, and the region will likely lose yet another bank to HQ’s much farther away.

      As for GM, I still contend their TARP loans were illegal. As bad as the mis-direction on use of TARP funds was from the reasons stated when it was passed to how the money was used, the law does specify that recipients must be financial institutions. GM (and Chrysler) were not, and should have never received their bailout funds from TARP.

  9. saltycracker says:

    Agree. All that was needed was to keep the financial system afloat. The bailout was wrong and it got worse when Obama used it to end run bankruptcy laws. GMAIL would probably be where they are today if not better if left alone.

  10. John Konop says:

    What do you think would of happen without a bailout? You do understand about 70 percent of the paper was guaranteed by tax payers? You do understand the tax payers are on the hook for the depositors as well?

    • seenbetrdayz says:

      Without a bailout, let’s see:

      The top dogs go down the drain and the second best move up the chain. This has been the way the market has worked for eons. Don’t really know where the fear came in . . . oh, well, except for the politicians crying about doomsday because they were paid to bail out their buddies on Wall Street.

      If this were a foot race, it’d be like bailing out an exhausted runner currently in first place because we’d be worried that no one else would take his spot, and the race would just end if he were to give up. Of course, it wouldn’t be much of a race if the person in first were guaranteed that they could not/would not be allowed to fail. That’s . . . exactly what we did. The bailouts guaranteed that those in first place would stay in first place. It was a slap in the face of capitalism and free-market competition.

      • seenbetrdayz says:

        And as for the taxpayers, we’re on the hook even more after the bailouts. As my father used to tell me when I was little, “if ya can’t do good, aim for not doing worse.”

  11. saltycracker says:

    We agreed Tarp for the FDIC involved financials was a move worth taking.
    Unlike a monarch or dictator no POTUS has the unauthorized right to set aside the law as Obama did with GM “for the greater good” or as he and others have done with immigration.

  12. L. Max Lehmann says:


    Because it would set precedent for changing the terms of transactions after the deal is done?

    • Harry says:

      If we explained why, we’ll have to kill you.

      Seriously, do you not agree that government mandated and subsidized loan modifications will encourage future risky behavior?

      • Charlie says:

        If you read what I actually wrote above instead of scouring World Net Daily to find the “real” reason behind it, you would note a few things.

        1) No one is suggesting that the process be mandated, nor a specific result be mandated.

        2) The process already occurs on a regular basis.

        3) The problem with the process is that it is held out by banks as an “alternative” for sellers facing hardship for a variety of reasons, but those same banks who can approve loans in less than two weeks take months or longer to approve short sales.

        4) What is suggested above is that the documentation for each bank be standardized that they wish to consider if to grant a short sale, and if so, on what terms. Then, maximum timeframes for them to make decisions, and a minimum timeframe to execute a sale once a decision is rendered. The minimum time to execute could also be tied to a requirement that the bank receive the earnest money should the purchaser not close in the time allowed.

        NONE of that forces the bank to make any decision they would not otherwise make. It just forces them to put the same resources, dilligence, and attention to dispose of assets that they do when they’re trying to originate new loans. The result would open the market for short sold homes to a much larger number of buyers, and help stabilize prices in markets like ours that are still in free fall.

        I await your consultation with Orly Taitz so y’all can tell me why the trillateral commission opposes this.

          • saltycracker says:

            Didn’t the moral hazard occur as the risk was transferred from individual investors to stockholders to taxpayers ?

            And topped off when the lenders and their minions came up with phony rated CDO’s producing more money than borrowers even with no qualifying, no down, name your schedule financing, resulting in phony appreciation, hell for home owners and a taxpayer bailout ?

              • saltycracker says:

                Don’t think this is going to get resolved without pain as it was the Feds that released the hounds of easy money and the Goldmans of the world that jumped on it. They are all too smart on end runs if we pile on legislation trying to work it out.

                Let’s start an announced, systematic process to move rates we loan to banks back toward historical levels (keeping an eye on failures). Why should responsible saving taxpayers subsidize the market as now ? The meddling we are doing is slowing the recovery. Knowing the future, the banks can be judges of what they need to do.

                And tell Fannie/Freddie to implement a program to set aside the interest over 4% on mortgages written between 2004 and 2009 and to forgive the variance and reset the balance to 4% after 7 years of timely payments. Freddie & Fannie must return to sound loaning standards of credit worthy folks taking 80% or so loans at historical interest levels.

                The meddling we are doing now is slowing the recovery.

          • Charlie says:

            Harry, I do not understand why I continue to be surprised at your inability to comprehend what is actually being discussed, but your complete willingness to object to what is being discussed with an objection you think you may have from a topic that sounds similar.

  13. bowersville says:

    The United States spends more on the military than the next 15 countries combined with a 114% increase over the last 13 years. In 2008 the Pentagon spent more in 5 seconds than the average American earned in a year.

    Donald Rumsfield admitted the Pentagon lost track of 2.3 trillion dollars. Why not the uproar over that? How much is being lost now? From the above article in 2007 alone 11 billion lost in Irag….poof…gone. The US military spending amounts to 44% of military spending of the entire globe. The military maintains bases in 130 different countries. The Sustainable Defense Task Force produced a report that the US could easily slash one trillion dollars. WE, me and you, defend the world.

    How much longer are we going to continue to police the world? We war and nation build in Iraq and Afghanistan at a cost of 745 billion and 373 billion and we can’t locate the money to assist homeowners here, right now, at home, or just down your street that haven’t done anything wrong?

    • Harry says:

      With a $1.3 trillion per year federal budget deficit (never mind state/local/personal debt), the US is not in the position to substitute one expense for another. Cut defense, sure, and cut everything else.

      • bowersville says:

        Harry, you used an article from and you used the head line to say Obama is bluffing. And without explanation. Now you agree defense cuts are in order and cut everything else. Why don’t you just admit it. You are anti anything Obama which gets us no where. I simply used what I believe Obama may use to justify his position on housing refi for those that haven’t done anything wrong…and he will.

        • Harry says:

          There are a couple of things Obama has done or proposed with which I actually agree, but spending taxpayer money to bail out underwater mortgages isn’t one of them.

                  • Charlie says:

                    The 800 or so words at the top of the page are a brief synopis of what is being discussed here. You may note, if you were able to read for comprehension, that no where in there does it advocate that taxpayer funds be used to bail out underwater mortgages.

                    • Harry says:

                      Well, you wrote this:

                      The President called for refinances (refinancing?) at market rates again during his State of the Union speech. Those who are underwater on their mortgages are unable to refinance their 7% mortgages to today’s record lows under 4% because of appraisal issues or income issues. If someone has paid their mortgage while their home has declined in value, then they are more likely to keep paying at a 4% rate than they are at almost double market rates.

                      How’s that ever going to happen without use of taxpayer funds to bail out underwater mortgages? Do you really think financial institutions will voluntarily refinance mortgages? This “refinances (sic) at market rates” from Obama’s mouth, is pure election season spinning. His handlers and protective media know very well that it will never happen.

                    • Charlie says:

                      First of all, that has nothing to do with short sale reform, which is what you asked above about moral hazards.

                      Secondly, the only thing keeping underwater mortgages from being refinanced is the underwriting guidelines established by Fannie Mae, Freddie Mac, FHA, or VA. Waiving the income documentation requirements and appraisal requirements ON REFINANCES ONLY costs the taxpayers NOTHING. Nada. Zip. Zero. Zilch.

                      These are the folks that ARE paying their mortgages. Those that are not have several programs to choose from that will offer principal reductions and below market interest rates. The moral hazard is for those who are paying, they need to quit in order to get mortgage relief. All the President has proposed is those who have a house which has declined in value (and possibly those who are no longer able to document income) be allowed to refinance without first having to miss several payments to qualify.

                    • Harry says:

                      Did you read the article I posted above by Bruce Krasting at I posted it to refute your and Obama’s contention that there would be no cost to the taxpayer…

                      These plans would force F/F (Freddie/Fannie) to reduce interest rates on outstanding mortgages. As some of those mortgages are in inventory at F/F, the ReFi will result in additional losses. More importantly, the ReFi’s will require a waiver of many existing representations, and warranties of existing borrowers. In the end, there would have been a cost to all of this. The plan was for F/F to absorb the costs over time, and therefore kick the can down the road. (Why the President said there would be no cost)

                    • Charlie says:

                      No, I didn’t. If you can’t make you’re points here I’m not going to wade through pages of World Net Daily or the other crap you usually link to so I can try to figure out what you’re talking about.

                      We’ve had this circular loop before, on this and many issues, and I’m done for the night. You start out asking about moral hazards of short sale reform. You then start talking about refinances (which are separate from short sales, as those attempting to short sale their house have no interest in refinancing) and when I point out that there are no taxpayer losses, you now want to say that interest income to the fed is most critical, when in reality you would be happy if the Fed went bankrupt.

                      What is proposed above represents the best path forward for taxpayers to minimize the losses which they continue to incur becuase they are currently a participant at every level of the housing market. You rail against TARP and bailouts which are the only reason those bonds now held by the Fed have any value, and then pretend that the overriding policy goal should be maximizing interest earned from the only people who played by the rules?

                      You clearly have no interest in moral hazards, no interest in actually seeing any policy changes because of your overwhelming fear that someone, somewhere, will do something that might get you. Worst off, Bowersville is right. You’re afraid if you’re not careful that you’ll end up on the same side as a Kenyan who is President.

  14. bowersville says:

    Good morning Harry,
    I’ll start again. You took an article, used the title just as the author did and took the President’s words from his State of the Union which had nothing to do with upside down bail outs and made Refi by those who have done nothing wrong into a bail out. Hogwash. Go back and read the President’s words quoted from the article you provided. The President said, “I’m sending this Congress a plan that gives every responsible home owner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low rates.” You deduced bailout in the author’s words not the Presidents.

    I used the same source and added another to it and refuted your conclusion that the President is bluffing. First he wasn’t talking about a bailout, he was talking about a Refi for those who are responsible and have done nothing wrong. Second, if he wanted to finance a home owner bailout he could rob Peter to pay Paul and even you admitted “Cut defense, sure…”

    A solution to the short sale and Refi problems will go a long way to resolve problems facing those of us that have done nothing wrong. And quite honestly I don’t care if the solution to these two particular problems comes from the President or Congress, the Democrats or Republicans. The solution is there. But if the voice of loud mouths like you, who oppose everything the President does because he’s Obama is heard over the voice of common sense and reason, you may be in for sticker shock come November. Work with the President when he’s right and oppose him when he’s wrong according to sound differences of political philosophy. Not some made up horse manure because he’s Obama.

  15. saltycracker says:

    F/F dont want to reduce the interest on negative equity loans being kept current as it reduces their losses on bad loans. For the non-public corps mandated refi is justice for the responsible and fair punishment for the irresponsible stockholders. For the publicly owned ones the taxpayers should ask themselves how the hell our legislators got us in this mess. Refi those upside down and want to stay.

    If we think the economy cant move forward without clearing non performing real estate, raise the interest on fed loans to banks in a scheduled manner. If not then stop whining and coming up with legislation to make somebody, particularly taxpayers, throw in money to make it happen. (we are screwed on the public owned ones so get rid of them).

  16. L. Max Lehmann says:

    @salty Usually I agree with your posts, this one, not so much….

    People are taking strategic defaults all over Georgia. The unsound practice of using foreclosures as ‘like-kind’ comps for RE transactions causes havoc to tax digests and artificially devalues your property.

    However, this point you made caused me to write: “For the publicly owned ones the taxpayers should ask themselves how the hell our legislators got us in this mess.”

    NEVER forget that we recently witnessed the fourth stage of a classic economic cycle, a blue-hot end to the greed stage. We may now be leaving the equilibrium stage, entering into recovery stage. After recovery comes growth, followed by greed again.

    Not one single law, lawmaker or regulation, will, nor should necessarily try stop these cycles. Never forget the interest only loan being used to buy a property with zero down, using the accumulated increase in asset value to buy even more luxury items. Never forget the interest only second home.

    We can and should be wary of monetizing sub-prime asset classes, and packaging them for re-sale as premium risk. If we make that illegal, there will be another scam, as pointed out above.

    Without some sort of resolve, the housing market may stay murky for years to come. The commercial market is suffering as well. That is what concerns me most. If we follow the Japanese model of not taking the hit to book value, we risk 20 years of malaise.

    • saltycracker says:

      Blame my iphone as I might have not detailed it clearly. We’re talking about how to deal with different situations in this thread. Not sure we have a difference. Having ridden cycles in Florida all my life, this one was easy to spot but very difficult to know when to get off the bus. I really bet it would end almost two years before it did and looked like a chump until….I begged friends and relatives not to leverage up so, but it was more intoxicating than a booze cruise with an open bar & topless chicks…..Lots of stories from Barnett screwing me on an REIT years ago to Wachovia telling me I was stupid (yep, exact word) for not fully leveraging a property in the early 2000’s….to selling a property by the square foot !
      I accept cycles but do not accept negligence, malfeasance and ponzi schemes.

      CDO’s weren’t bad, but packaging of CDO’s was based on fraud, deceit or stupidity beyond the pale as Goldman trained the ratings agencies how to rate a high rise built on sand as AAA.

      What was also insane were the financial institutions abandoning all long established principals when they had a limitless supply of money to play with. They in turn looted their corporations by paying out tremendous bonuses. These monies are seen by most as unearned fruits of a poisoned tree.

      Our legislators went along by virtually declaring home ownership an American entitlement (equal opportunity never has meant equal outcome). Fannie & Freddie lowered long held standards to shockingly low levels putting trillions of taxpayers dollars at risks never seen before.

      It will go on for years unless the banks have some reason to do something about non-performing assets. Who wouldn’t put that junk on the back shelf if it costs less to carry it ?
      There is no reason to come up with a bunch of laws which probably involve the taxpayer more than necessary. Set a schedule to raise the cost of money the institutions can borrow from the Feds at and let them sort it out. Watch failures and if it gets too ugly, slow down. The banks and buyers will get serious as both will want to beat the increase.

      States differ on recovering any deficiencies but the banks can sort that out too, including those that strategically default. Each case has its own twist.

      It won’ be fun at Fannie & Freddie either but they can be told to abate that a bit by keeping those that want to in their home at the low interest plan suggested. That plan only addresses those paying not the ones strategically defaulting. I’m cold to the taxpayer owned institutions doing anything to systematically eat principal.

      But if you put me on the jury I’d vote for a claw back from every officer & legislator that opened the door of easy money. Just dreaming there.

  17. Harry says:

    “In the wake of the Great Recession, we’ve shifted from a culture of celebrating and encouraging those who are productive and hardworking, to a culture where handouts, bailouts, freebies and entitlements dominate. You start to wonder, Why am I paying the freight for those who have been reckless and irresponsible, whether it’s on Wall Street or in Washington or anywhere else in the community? I think we’re becoming a very different nation.” – Charles J. Sykes

    • L. Max Lehmann says:


      The questions is whether or not we can make a different nation work better?

      We got ourselves into these paradigms over a 40 year time frame, it will take pragmatic consensus to resolve our big problems.

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