All Forum Posts by: Dave Kennedy

It was an interesting program. It's amazing to see how many people/company/governments invested in these MBS's and CDO's.

It was pretty much impossible to tell what the hell were in these. They would be rated AAA but be comprised of Subprime mortgages.

The entire situation is amazing and its no wonder we are in this mess.

Originally posted by Pierre Clark:

As a matter of fact, since one focus of the program is to get investors to purchase so-called "bad" assets (basically REOs) from the banks, there are many investor consortiums around the country (including ones led by former executives of the Resolution Trust Corporation) that are organizing now to buy these REOs in bulk. As for the affordable housing situation, for years prices were inflated by bad appraisals and those inflationary prices made it difficult to find affordable housing. The drop in prices is making homes more affordable and there are billions of dollars in the housing plan to support the purchase of affordable housing by low-mod income homebuyers at prices they can pay. From my view, the purpose of the program is to reinvigorate lending, stabilize housing prices, and create incentives for lenders to lend to people who want to buy homes, and for investors who see an opportunity to purchase properties as lease options, rentals, etc. It injects billions of dollars into the financial pipeline and that has to be good for everyone in this economy.

How does it reinvigorate lending? This only has to do with current loans in trouble. It has nothing to do with stimulating more loans. If anything writing down the principal or interest rate reduction will hurt the banks "expected" cash flow. I would think they base lending projections on expected cash available and if they are trimming principal or interest it ain't gonna help.

They also mention that houses with negative equity can take advantage of the program. How do you refincance a house that is overleveraged and still lower payments to stem off a foreclosure? Your telling me I could owe 150% on my houses value and now I can expect someone to bring my payments down to 31% of my salary?


What if someone bought a house for 400,00. Now it is only worth 300,000. It gets reworked by TAX payer money so they only owe the "market value" determined by a judge of 300,000. Now lets say that owner is able to stay in the home by the grace of the tax payer and lives there for 5 years. The home then appreciates in value to 350,000. Besides principal paydown since the mortgage was reworked he now has 50,000 in equity. Do the tax payers get that 50,000? NO! Not only do we have to pay money, get no direct benefit but the owner is also making money and rewarded for what was likely an irresponsible move in the first place.

Anyone else think the press conference was a joke the way it was handled? Its like Obama is a celebrity. He comes out to a wild screaming crowd that sounds like a rally. When in fact he is reporting a sobering statement about the economy and that we are in dire straights. He uses stories and rhetoric about how this is going to "change" it all.

The entire crowd has no idea what the hell he is even talking about. They just think that if they are in trouble they will be saved.

I just thought the entire atmosphere was strange and staged. He should have held a press conference in a proper manner dealing with this in a serious way. Not some party atmosphere.

Originally posted by Joshua Dorkin:

What is the answer?

Josh....the answer is free market.

As bad as it may get it'll bounce back. New generations and people will be allowed to prosper when the pieces are picked up.

Theres no way the government can stop all those problems by bailing them out. The bailouts tend to not solve the problem but distribute and prolong them imo.

BTW...nice chat. I got a call in the middle of it so I wasn't able to part take after that. The chat is a great way to talk with these breaking events. After all we are witnessing history.

A few more details

-Supposedly this will be implemented March 4th.

-Even negative equity owners can now refi under fannie and freddie loans.

Harrison,

It would be so hard to differentiate those with serious life problems and those that just flat out lied to get the house they got.

The only "fair" way is to not interfere with the market imo.

Yes these foreclosures will continue to depress house prices but that will also align them with a proper income/price ratio that has been way out of wack due to the bubble. The market will balance like it always has.

Some people actually bought well below their means, some people stayed in a crappy apartment to save up or moved back home to properly support an investment for their first house. Some people got an extra job. Those patient sensible people will benefit from all these foreclosures because they will be buying in a reasonable bottom.

I think those people deserve to benefit more. Its really two paths to chose from.

1) Allow foreclosures to go on, prices will fall, market will balance and people will allow to get a fresh start who were responsible.

2) Allow the government to step in, take tax money give it to people to stave off foreclosures and artificially prop up the market. All it will do is hold the basis of home prices higher not allowing to totally reset the cycle.

BTW....for those of you around a TV.

Obama is speaking on CNBC around 12:15-12:30.

Hopefully they dive into the details more.

Originally posted by Harrison Painter:

I am still confused on how this plan is fair to:

1. The folks who are current - Their tax money will go towards paying the modifications of incompetent people.
2. The folks who have already had their home foreclosed on. They get shafted, too little to late in their case.

I know life is not fair, but this seems like it could create a very hostile situation. I am all for helping people, but not sure what the answer is.

Am I missing something?

Bolded are my answers

The other issue is how do they determine what fair market value is in this case?

You totally through out the actually house, land and market value in this case since it would appartently be based on the owners income and not market balancing factors.

When you use houses for comps are you going to use the 400k sales price this year when in fact the owner got a modification to 250k?

Are we(or agents)going to have access on the write down value of homes to justify comps?

This does nothing to stem the drop in housing prices imo....its just optics.

Originally posted by Robert Mack:

What I wrote was probably a little sarcastic and extreme, but I agree with Dave, and I didn't see any suggested cap on the amount the government would reduce the loans by... Does anyone know if there is a cap on the amount they will/can reduce a persons loan to make it 38% of income......

Robert,

The only "cap" that I saw was that jumbos (417k +?) are not included. There has to be some cap....I would hope.

Lets say my scenario above plays out...Someone is taking a 200k loss, in this case the bank. Why on earth would the bank want to take a 50% loss on the original loan just for a couple grand in incentives from the government. I think they would rather risk the foreclosure to see if they can see it at .60 on the dollar. They would be winning in the case of foreclosure.