According to The New Bottom Line (NBL), a new national campaign that recently released data indicating that the United States could pump billions into the economy by making mortgage write-downs mandatory, Hawaii stands to gain some serious economic momentum if the state will write down every underwater mortgage within its borders. In fact, NBL says that the Hawaiian economy alone could gain “nearly 3,300 jobs” and get an annual stimulus of $223 million” from the move[1]. Currently, about 10 percent of all Hawaiian homes are underwater.
The Hawaii report is just one of many that NBL has released promoting underwater mortgage write-downs. The report is part of a new campaign detailing a “win-win solution” in which mortgages are written down and that money is funneled back into the economy as homeowners begin spending more and building up the jobs market in the process[2].
It is starting to look like a lot of people think that mortgage write-downs are the way to go even if they are not an entirely fair solution. Do you think that the country could benefit from a plan like NBL’s?
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[1] http://www.bizjournals.com/pacific/blog/2011/08/writing-down-mortgages-could-create.html
[2] http://www.newbottomline.com/underwater_mortgages_and_1_million_jobs
Absolutely! Mortgage Write Downs are the way to go, the only way to go! And what’ so unfair about that? The banks BROKE THE LAW! What part of that don’t people ‘get’? The only way to deal with law breakers is to punish them! So what if the banks get punished, that’s how it’s supposed to be in this country and if you don’t think it’s fair to those who are NOT in trouble with their mortgages look at it this way, perhaps it will prevent them from GETTING into trouble with their mortgages by creating jobs and a vibrant economy! Sure sounds like a win/win to me!
The money for this does not just come out of the air. If you write down all these mortgages you are directly harming all those who invested in these banks including pension funds and small investors. There is an equal reaction to every action. All this money was loaned out and used by the borrowers. Now, with prices that slipped they want to be covered for any losses.
What does the government want next? To cover any losses in the stock market? And where does this money come from? Just like this suggested writedown, it ultimately comes from the rest of us.
It just isn’t that simple. There are major unintended consequences to this idea.
My opinion, of course.
Sure.Demand more interference. Then just wait a century or two to let lenders get over it and agree to loan more money on new mortgages……. Those “unintended consequences” should be obvious. What are they thinking? Personally, I’d love to be on the receiving end of that, but in all reality it is interference with the contracts and could certainly constrict future lending.
My thinking is let the free market go to work. If someone walks they pay via the impact of their own creation.
Funny when they bought the house it was all good. Now the market has tanked so it becomes an individual choice. (Does it work for me or not to stay)
Let the bank/investor have it back. That was the deal going in. Make the payments or we take it back. Let them live up to their end of the deal and take it back.
The thing that will fix the economy is not taxing all for some folks bad choice. Once the inventory is adjusted the market will go on it’s marry way.
I think a fairer solution is to just write all mortgages down to 3% fixed principal and interest for 15 years, no paperwork required anymore, no tax returns just DO IT, add on 5 more years to the balance to cover some of that. If people can afford to pay for that then great the economy will recover. If they can’t afford that then foreclose. All those foreclosed homes now should be given at 3% P & I for 15 year terms and then move up to 7% for the next 15 years, everyone should have to have 20% down payment and not be allowed to refinance to get money out untill they have had the loan for 15 years. Many will see the sense in paying it off in the first 15 years.
The banks made many loans to people that never should have been able to get a loan. Many more people used the equity in their homes like a credit card — as the market values were increasing, they kept refinancing to spend the equity. There was some fraud involved, but most of it was “irrational exuberance.”
Whatever caused the bubble, it finally burst and prices in many of the major markets fell – and some are still falling, some have started to recover. Many home loans are now ‘under water’ – some people continue to make their payments, many have defaulted and some of those able to continue paying are considering or doing ‘strategic defaults.’
The government bailed out the banks, but the banks have not used those funds to help the borrowers. All of the pending foreclosures, the shadow inventory, are preventing a recovery because too many prospective buyers are afraid of making a purchase, then seeing the value drop again when the banks finally foreclose on their neighbors. But the banks are slow to foreclose because they prefer to keep the loan on their books as a non-performing ASSET instead of moving it to the LIABILITY or DEBIT side of the ledger as REO. Forcing the banks to modify and renegotiate those non-performing assets would keep many borrowers in their homes and change a non-performing asset of say $300,000 into a performing asset of $225,000 (which is better than a debit of $300,000, which then sells for $175,000.)
Continuing the status quo is to continue the pain and delay recovery.
Absolutely NOT!! Since when did it become acceptable in this country that when 10% of the mortgages falter, you reward those who faltered, and not those who lived within their means? Only i
Great comments, As a short sale real estate agent, I see many people that can not afford their payments, and then sell their home at the new market value, and the new owner have a mortgage payment and terms that they could have easily managed.
This is a Aggravation to many who can’t understand why common sense can’t be used.
Perhaps lenders that did an adjustment to the loan amount could become vested with the owner, and when the home’s value rises and eventually sells, the lender recaptures their losses plus interest?
What about the “Fair Value Concept” of accounting. Whatever the market is willing to pay IS the value. There are no absolutes here! The banks loaned move than they should have but they set the value by making the loan. People paid more than the house was worth because the bank agreed to loan the money. No one put a gun to their heads but like children with treats, the majority of the time they will take more than they need! When the value of your stock went down over the past four years did you call your broker and say “I paid $10. per share and I am not willing to accept the current value of $4./per share so sell my stock for $10.!” The brokerage in most cases still made money while you lost! In some case they bet on you losing value and they won!
Why not write the loan down to an agreed upon price for the homeowner under water. That owner will pay more than the investor or than the amount received at foreclosure. The banks position of holding the underwater “value” kills the value of the entire neighborhood and prolongs the decline in value of ALL properties. The bank is making a decision on the best position for them, not the community that they do business in. That decision hurts not just the underwater family but the family that is not underwater but sees the value in a downward spiral and no ability to stop it.
If you sell your 2006 Chevy the FAIR VALUE is the best price you can get for it. No matter how clean it is, how well maintained and the low mileage! People will only pay X!! If the banks see the market drop and families are not buying at “their” price does it make sense to hold out knowing the price is going lower each day and you will never get that price. The banks have more anxiety over who will be the first bank to write down the mortgage balance than how it is negatively impacting the neighborhoods and national economy. The will holdout no matter. In fact that is what they are doing now! Slow the process down, wait the homeowners and government out or until we can get a deal that says we are not guilty of fraud or manipulation of the market! Remember they reminded the government there was no requirement of them to “loan any of the TARP money” so they didn’t!
Try to eliminate the thought of winners & losers! Ever citizen in this country has already lost something, a job, their home, their pension! Most have lost it all! Let the FAIR VALUE method determine the price and move immediately at getting the economy going!
First Trust Deed cram-downs in Bankruptcy are what is needed.
I believe this also gets away from the moral dilemma.
If you can truly qualify as bankrupt and can demonstrate that you still have a job that can pay the mortgage at the newly reduced valuation of the property, I don’t see anything wrong with this. If they foreclose on the property owner, they will only achieve a market value price on the property anyways. This is a fair solution to both parties and will not put the bank any worse off than they would otherwise have been if they foreclosed and sold the property. (Might even put the bank in better position.)
This also removes the moral dilemma as many will only choose BK as a last, desperate option given the credit ramifications and other difficulties presented by BK. Strategic defaulters may be enticed by this option if they really would like to save their home. Only those that are truly at their last straw will be willing to travel that harsh journey and emerge from it knowing they will leave some skin on the pavement. The number of folks unemployed or under-employed in this economy is staggering. When the guy with a big family who was making six figures a year is now making $50K a year, something will have too give and a house payment that was doable is now unsustainable.
In my area (Las Vegas) where 70-80% of homes are underwater, many of which were not the result of withdrawing equity or re-financing for toys, etc. you will not fix the problem for years – perhaps a decade or longer until you do something radical like allowing a 1st Trust deed cram down in BK court.
Of course the banks will not support this as it will hurt their books. But I don’t see any other choice other than watching the market languish price-wise and extending the pain for many, many years. So you have to decide whether you want to vote for households / consumers or the banks. I know where I stand.