bostonbubble.com

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A friend of mine did a short sell. The bank lost about 26% but didn't go after him.

I don't think loan modification will work since my friend tried that before. As far as I know, only very tiny percentage of people got through loan modifications. If you were the bank, why would you want to lower the interest agreement when the borrower has greater chance to default? Not to mention banks don't have much money to lend to anyone now.

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[UpsideDown]

I figured a little something out today when I was reading that rolling stone article. It goes like this.

The Fed and big banks are running financial cons on all American tax payers.

They get guys like me, dupes, to sign up for something like, say, a loan for home with an artificially inflated value - and the when guys like me wake up and realize we been had, and we call foul, they rely on self righteous dupes like Johnp to take a ridiculous moral high ground against us, his fellow, countrymen.

They do this, so that good country men, like johnp and I, fall into small bitter battles instead of pointing our legitimate outrage at the true source of our frustrations; The Fed and the Banks.

Guess what johnp, you're getting conned too. They are using you as a rube.

This is how your getting duped.

The banks conned guys like me out of tons of money, and when we complained, they knew we were right. But instead of standing up to the truth, THEY got the government to bail THEM out on our OWN dime. They post RECORD profits, and we struggle to keep afloat.

They are taking yours AND mine.

BUT now guys like you, who I suspect are also a little fucked with an upside down mortgages and also frustrated ,are getting angry at me cause you think you're bailing ME out.

Its a smoke and mirrors trick and you have fallen for it.

But like me, YOU and everyone else SHOULD be pissed at these swindlers, and hanging them up by there asses INSTEAD of fighting each other over which one of us is getting screwed more or less.

You do not know me. I am not a bad guy . I'm not a deadbeat, coward or any of the things you wrongfully stated about me. A am an honest, good person.

I am generous. Even in tough times I STILL give to charities of both my time and through donation.

I live for my family and God.

I am a highly skilled craftsman in a very competitive industry and I survive in a business that many people try to get into but most cannot survive in.

It a very hard business, and I work my ass off

It is a very creative business but it doesn't require great math skills, understanding of economic trends, or the clairvoyance it takes to know a GIANT HOUSING BUBBLE IS GOING TO BURST A FEW MONTHS AFTER YOU BUY YOUR FIRST HOME.

Your judgement of me was too quick and wholly inaccurate.

If you ever met me , face to face, in 10 minutes you would know I am telling the truth.

I am aware, I DID make a mistake in trusting the word of the people who sold me the loan. And now I know I was duped, I get it. The joke is on me.

But I am PISSED about it.

And my first instinct when confronted with the fact that I been made into a patsy is to screw that guy who got me right back as hard as I can.

And in my mind, when I started this blog, they best way to screw the banks was to walk on the money I owe'd them and rebuild. Now I realize that they will just pass that loss back to me and all of you through taxes and debt.

So it's a NO WIN. They got us wrapped.

So, if walking away from a loan is the WRONG thing, then you tell me -How DO I respond the the fact that me , my family and your family and every American on this blog has been openly raped of our financial futures?

TRILLIONS IN DEBT. TRILLIONS

How do I get back at the banks and feds that are sitting on private islands while they have all of our futures mortgaged?

And if you tell me that I should just "take it like a champ", then I affirm that YOU sir are a coward or a far bigger idiot than I have ever been. And you are certainly then no Patriot.

I am not your enemy.

wake the fuck up.

[GD]

Nobody forced you to buy your condo Upsidedown. You made your bet and it's not paying off right now. If you want to sell, sell. You'll need to convince the bank to give up the 50K or fork it up. If you don't want to do this, stay for a few years more.

My investment and savings halved, and still hasn't regained the amount I put in. I hate my investment now, prefer safer large caps - can someone make up the difference if I sell today?

When companies default their credit rating (technically) decreases as well, making it more costly to borrow money. Some receive govt bailouts.

Someone underwater who wants to default on any debt will also have credit rating decreased, making it more costly to borrow money.
An individual in this recession who say, lost their job, can already extend unemployment benefits beyond the norm. That's also a handout. Making work pay, lol. Oh well, any little freebie works.

I think John P sensed the undercurrents - that you were unhappy with an unsuccessful bet and wanted someone else to blame, and he was trying to share some advice. Did you read what he said? He is not happy with the way things are being run right now either.

I wouldn't say there's any "moral" argument to strategic short sale or foreclosure either. Where's the moral judgement? There is a straight contract - you default, the bank gets the house, your credit gets dinged, you may or may not have to make up the difference. If it helps Upsidedown more to do this and he decides to do it, good. More power to him. If this causes him more problems with credit ding/money repayment or if the house suddenly appreciates after he returns it to the bank, well it's a choice and another risk that failed. How is this amoral?

Upsidedown didn't ask our corrupt government to waste our money and cave to lobbyists and greed. That they do themselves.

John P I actually agree with most of what you say, except the morality part - find me someone who buys a house because it's the "moral" thing to do instead of as part of a financial strategy. It's a business transaction.

[Upsidedown]

It was very immature of me.

Previous to that rant I spent some time at a party talking to Frontline editor about these cons and it got me really fired up.

I'm just looking for someone to blame. We have been deliberately fleeced, and I think it can happen again to others if we don't stand up to it somehow. Like johnp said, people did sacrifice and are sacrificing for this country. I also have friends in Iraq and Afghanistan. Good men with families that are back here, basically under our watch. But what are we doing for them if we sit back and stay quiet while swindlers run a train on us all?

There is a guy in my complex who did a tour in Iraq. He is in the same boat and of the same opinion. I feel for him. He has done things no one should have to do, only to come to a realization that many of the people he was protecting were selling him out.

Anyway, I know this is all off the topic of the blog, I'll shut up now and make a decision with my wife on what to do now.

Thanks for the advice and the sounding board. Lesson learned.

I'm out.

[GenXer]

Very interesting discussion. I can't help but throw in my 2c. Of course, many mistakes become apparent after the fact, but it doesn't take a genius to prevent them. I tell all my clients to keep $100k in money markets and CDs for a good reason. Many if not most of my clients bought a house under $300k that they can afford given their above-average salaries. It takes a relatively simple calculation to discover how much of a house one can afford. All you need to know is how long you can last if you lose your job and/or unemployment benefits given your emergency cash reserves. You may want to throw in a 50% error margin just in case. Yes, it would require TOO MUCH cash for most people, but then you don't have an excuse. Yes, such scenario may happen once in a lifetime for many people, but that doesn't matter. This is the purpose of emergency cash - to save you in one emergency where NOT having it would cost you many times over. So, no hindsight is needed - just basic arithmetic and an open mind about potential risks. What I find amazing is that the same people who lost their houses are going to go back doing exactly the same thing once they get their jobs back - and the cycle will repeat.

[Renting in Mass]

I like your metrics GenXer

Can you imagine what would happen to the housing market if everybody followed your advice? There would be about 15 home sales per year (at current prices).

I wonder what percentage of first-time buyers have 100k in savings plus 60k for a down payment on a 300k mortgage. I would guess it's like 1%.

Are any of your clients that were able to follow your advice first-time buyers? What do they do for work?

[john p]

I agree Renting. His advise is sound for certain regions of the country though, but not here; which begs the question "Is this area really worth it?". People would choose Boston over say, Cincinnati because they'd hope that their salary would grow faster in Boston. This was true for decades but the jury is out moving forward. Boston is not the most affordable for sure. One major growing concern is that the entry level price point is not only high, but the quality of what you get is getting worse because the housing stock is certainly more tired than in other areas. In other areas you get a mix of new construction, some entry level and others high end. In Massachusetts, almost all the new stock is higher end.

Today, I think having a 5% down payment, spending no more than 3.25 times your household income on a house and an emergency fund to sustain you for 16 months with unemployment is a decent bet. What was the debt burden 35% or something? Beyond that, it is about lowballing to make sure that you protect yourself from further drops and balancing that with assumptions about what the cost of capital is going to do (mortgage rates going up or down). If mortgage rates go up, so do mortgages, but eventually house prices will drop further. Depending on your down payment ability, it might benefit you to wait for mortgage rates to go up so that prices go down and you're getting the lowest princpal.

I think a lot of people meet the criteria that I outlined but are still holding out because unemployment is still high and until we start to see fewer motivated sellers, the deals will just keep coming. There are too may unknowns. I mean if a guy can transfer to Florida and get a mansion for a song versus one floor of a triple decker that's worth looking into...

Stepping back and considering Gen-Xer's benchmarks it does make you wonder how you don't have to move out of Massachusetts to find a cheaper cost of living, sometimes it is just being open to a different town within Massachusetts. Further, people during the bubble try to deny that the historical affordability benchmarks don't apply any more. I mean in places like New York City, California people got so uprooted that it was impossible for 95 percent to find a decent place within their strike zone so they either had to overreach or rent.

What is funny is that I don't know how our government policy is dealing with the regions that have lost like 50% of their value. Think about all the people who are able to refinance because of our government interaction that don't live in the worst hit areas or those that bought before the bubble who are able to cash in now on the low rates.

I hope this guy that was upside down aced his interview. I gathered that he was just frustrated because he is englightened and saw the strings on us puppets. He doesn't understand yet that we live in a country that the puppets have the power to pull back. Knowledge is power and when this guy chooses to do the right thing, which I am sure he's going to do, he's going to learn a few things and be a force to be reckoned with.

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[john p]

Look, I rented until I was like 35, so it took me some time to get to these benchmarks, and my wife works and makes as much as I do.

I still think that you need an extra $50k on top of your down payment or at least access to it. Most people assume they'll withdraw from their 401K and take the penalty. The Emergency Fund is very important today because unemployment is very high. I hate to be a wet blanket but I wouldn't get into the game right now if I didn't have cash reserves built up. I would rent and save. (which is what I did for a long time)

[Renting in Mass]

Yeah, it's pretty amazing to consider how little house the average income can afford using johnp's metrics, which should be a baseline for any responsible purchase.

I'm looking at the far end of the 495 belt, and 227k would maybe get you a tiny condo. I've got friends who paid 350k for a modest 1800 square foot townhouse at peak. Those units are still going for around 300k. That's an improvement, but it's still out of whack.

The few sales I've seen so far this spring are depressing. A modest ranch with a Target parking lot for a back yard just sold for 340k. People are still buying at these crazy prices.

[john p]

http://www.realtor.com/realestateandhomes-detail/Halifax_MA_02338_1114908905

http://www.realtor.com/realestateandhomes-detail/Halifax_MA_02338_1096653651

[debussy]

Hi guys, I've been lurking for years. I just wanted to express my relief/gratitude that UpsideDown is gone. That verbal vomit was painful to read.

Having lived here for 27 years, I'm getting sick and and tired of the helpless "victim" mentality many have. Where have all the people with backbone and people who think for themselves? The people who built this great country? Having worked in IT for a number of years, I've noticed that all the hard working employees are immigrants. Whereas the complainers are mostly locals. We're all getting soft as a society.

Anyway, thanks for roasting this guy. It made my day.

[Boston ITer]

To both JohnP and debussy:

Look fellows, I understand your collective p.o.v's about personal responsibility, etc, however, for a vast majority of society, homeownership was sold to the public as the American dream. This was a key tenet of the American century; that century is now over. We're in a brave new world and probably one which resembles Mad Max more than the 20th century.

The idea of a this brilliant guy, like Tesla, living in a studio apartment and making all kinds of patents/inventions or running his own company out of a broom closet, is kinda a tech sector fantasy than what the mainstream person thinks of, on a daily basis.

A regular person believes that real estate only goes up in value and thus, being in the market, is better than being a renter. This was drummed into everyone's head until it backfired. Now, certain persons wanna run and stick it back to those who lied to them. Isn't that understandable given the general state of moral hazard in corporate America?

[admin]