They are going to keep throwing everything at the wall, until something sticks. From HW:
In the wake of reform enacted to promote homeownership, analysts at the Center for Economic and Policy Research are saying that ownership may not be the smartest option.
In a report released today, The Gains from Right to Rent in 2010, the CEPR suggests that giving homeowners the right to rent their house at a fair market price could be a game changer in the nation’s foreclosure crisis.
The report dissects the benefits of a drafted bill, H.R. 5028, also known as The Right to Rent. Under the legislation, homeowners entering the foreclosure process would be able to occupy their homes for up to five years, while paying rent to a lender. Rent would be based on fair market price as determined by an independent appraiser and adjusted annually.
“This would give homeowners an important degree of security, since they could not simply be thrown out on the streets,” wrote Dean Baker and Hye Jin Rho, co-director of and research assistant at CEPR. “This policy should also benefit neighborhoods in the most hard-hit areas, since they would not have large numbers of vacant homes following foreclosures.”
The CEPR report, which compares the costs of owning a home and renting in 16 major metropolitan statistical areas around the U.S., found that homeowners would see substantial reductions in costs by becoming renters if they rented in a bubble-inflated market. Savings are much less, however, if the market was not affected by the housing bubble.
For example, in the Los Angeles MSA, homeowners would save $1,586 per month by becoming a tenant. The median home price in 2006 and 2007 was $608,600. Based on that number, CEPR found the monthly cost of ownership as $3,128 versus $1,420 to rent.
New York/New Jersey, Sacramento, San Diego and San Francisco savings are all over $1,000.
I kinda see what they were going for here, but wow. I’m a respectable, responsible person and this is tempting even me to go into willful foreclosure! I could reduce my monthly spending by at least a grand and not have to move out for up to five years! I wonder if rent control is going to be part of that deal, or are the banks going to be able to adjust the rent however they want?
For someone who’s already considering willful foreclosure, this would almost certainly tip the scales.
(Don’t get wrung up, people – I’m not really going to do it.)
It appears the current administration favors renting over buying. Consider the following opinion piece.
http://www.notorious-rob.com/2010/09/13/future-of-rentals-petra-tra-and-end-of-housing-as-we-know-it/
Can’t say I agree with everything in the piece, but expect an attack on the mortgage interest deduction as fundamentally unfair to renters. At least it will be run up the flagpole to see who salutes (and who shoots).
*sigh*. Just more BS.
When are we going to have a return to a free market economy?
Free market economy?
The ship sailed with the emergence of the Pump-And-Dump your way to gazillions culture.
What we have now is a command and control economy where the USGOV is borrowing MASSIVE amounts of $$$ to plug a 15-20% hole in the GDP…
When the party is over ANYONE who is still attempting to leverage they way into wealth will be the bigger sucker!
“This would give homeowners an important degree of security, since they could not simply be thrown out on the streets”
When were any of the homeowners “thrown” out on the streets? They’ve been given anywhere from 3 months to as much as in some cases 2+ years to get ready to be “thrown” out on the streets. Ample notice AND in many cases, cash for keys. As if all the money they saved on not paying their mortgage that whole time wasn’t enough to be “thrown” out on the streets. Puleeez.
“CEPR found the monthly cost of ownership as $3,128 versus $1,420 to rent.”
Can a $600K home be rented for less then $1500 a month in North County?
No.
Rents are $1.25 per sf in Carlsbad, roughly.
In the last 2 months there have been 52 Carlsbad sales between $550,000 and $650,000, and they average 2,171sf.
2,171 x $1.25 = $2,713 per month in rent.
The P&I payment on a $600,000 house with 20% down is $2,432 per month.
PITI = $3,132 per month with about $1,800-$2,000 being deductible currently.
So if lenders can’t manage the portfolio of homes that they own now, how are they going to manage being landlords also. Even if this idea makes sense (which it doesn’t) how would this ever be implemented in reality?
I agree with GameAgent, the numbers in the article are BS. No way could you rent a house that costs $3100/month for $1400.
First of all, deadbeats should have no rights. This is actually more a right to “free money” in the form of erasing their debts without going through foreclosure, and that happens before we even can start talking about “renting”.
Secondly, it’ll just make it all the easier to game the system. The government doesn’t know how to set rent, ever. In fact, government officials are happy to occupy multiple rent controlled apartments themselves.
How about actually promoting homeownership? Why do we always forget that for every deadbeat who scammed himself a house by lying about his income, there’s a hardworking American who wants to buy it instead?
People already interpret housing laws in California to mean free ticket to gamble on the housing market. If the house goes up in value you keep it, if it doesn’t you walk away and never have to pay excess losses back. Imagine how many people would line up if Vegas worked that way.
Let’s give deadbeats fewer incentives, not more.
I go back to my original thoughts when the word bail out just started that I posted in comments to this ame blog I think in 2008.
In exchange for a home debtor getting out of his mortgage, the US govt pays $5k in cash (paid on move out). In addition, US guarantees rent payments for this person up to one year (with a cap e.g. $2k a month rent). If the person does not need the guarantee (e.g. they pay the rent), they are rewarded by having the govt direct credit bureaus to erase the foreclosure on their record 2 years early.
This keeps people in housing that they can afford (or put another way, in housing commensurate with their income / economic contribution to society), allows debt to be cleared, and allows people who were responsible to buy the foreclosed properties.
This plan also has enough downside that those who can afford a mortgage but might think about purposely defaulting wont.
It would also speed up the ability for the irresponsible to clean up their personal balance sheets and again become viable consumers.
Finally! People are starting to freely use the term DEADBEAT. It’s disgusting how scammers have controlled the national narrative. Savers and financially sound/conservative people need to be positively recognized.
Amid mountain of paperwork, shortcuts and forgeries mar foreclosure process — The nation’s overburdened foreclosure system is riddled with faked documents, forged signatures and lenders who take shortcuts reviewing borrower’s files, according to court documents and interviews with attorneys, housing advocates and company officials.
Again with the moral superiority claims by those who haven’t suffered financial arrears in this economy. The poor should just work harder, otherwise they are deadbeats, eh, sdbri?
Take this advice for a current beltway insider (me): Everyone take a deep breath and realize that this bill has about as much chance of passing as a balanced California budget.
Yep,
Let’s save the bankers, .gov employees, and those that can’t make properly responsible financial decisions…cause “Savers and financially sound/conservative people need” are EVIL!
Keep pumping that T-Bill Bubble you super-smart “beltway insider”, the sky is the limit 😉
shadash, I think it’s mostly just me. I’ve been using that word pretty consistently for the last couple of years. The dictionary definition sums up my thoughts: “A person who intentionally avoids paying their debts.”
Hard to disagree that a lot of people apply.
How long can bailouts for the crooks & deadbeats continue?
The Chart That Tells It All – Treasury Bubble
Everyone should have to take a haircut. But, in this world, everyone hasn’t. Especially those who caused this fiasco.
So, where do we go from here? The people who caused this fiasco are basically all for the various kinds of “help” plans because that gives them more ways to figure out how to make money.
Let’s face it, there are NO GOOD WAYS out of this mess we’re in. NONE.
The Obama Administration is basically trying to spread the pain out over a wide area and over time. Bleed slowly.
If the Republicans get back in control it’s going to be basically the same policy except there will be a lot of quick, intense pain. And you know who’s going to get the short end of that stick.
“Let’s face it, there are NO GOOD WAYS out of this mess we’re in. NONE.”
In the dark and distant past there was a thing called FORECLOSURE. Believe it or not but it worked! People that couldn’t afford a house were kicked out and those that could moved in. I realize it’s a wacky idea but it’s so simple it might just work.
“Hard to disagree that a lot of people apply.”
No it isn’t. There are people who are UNABLE to pay their debts, not unwilling. This does not make them “deadbeats”.
Gotta love these beltway insiders pandering to the lowest common denominator…no surprise eh?
At one time in this country, someone that borrowed money they couldn’t -OR- wouldn’t repay were labeled as frauds and criminals.
Calling them deadbeats was actually a step-up for degenerates that leave other more responsible parties holding the bag…
CEPR publishes BS like this all the time. For example, they still believe Social Security is sitting pretty.
tj is onto something here. Dean Baker is borderline commie. Wants the government to pay for and run everything.
He’s been running the cramdown cheerleading section for years.
6.“CEPR found the monthly cost of ownership as $3,128 versus $1,420 to rent.”
Can a $600K home be rented for less then $1500 a month in North County?
GameAgent | September 23rd, 2010 at 10:23 am
No, but the $600k figure would be the loan balance, which could be much larger than the current value of the home.
21.CEPR publishes BS like this all the time. For example, they still believe Social Security is sitting pretty.
tj & the bear | September 23rd, 2010 at 2:49 pm
Social Security is fine. Every year, the government says SS will run out of money in thirty years or so. They said that thirty years ago, for instance.
Worst case scenerio is they just start using the general fund to pay for any shortfall. There’s no danger in grandma not getting her check.
I’m a tax preparer, and some of my clients have definitely been gaming the system. Two of the better examples:
1) a couple bought a home in San Diego, in 2006, near the top of the market, their loan adjusted upwards after a couple of years, to about $5,000 per month. They tried to get a loan modification, but were not successful. So they decided to stop making payments, although they could afford the payments (but it was very tight). When I saw them in February, this had been going on for well over a year, they’ve been saving the money, they said they had saved over $50,000. Also, they had not received an NOD yet. They said they are going to drag this out as long as they can. I imagine they are still in the home, and if they have been saving diligently, they should be close to $100,000 by now. The best part: they had the nerve to be very angry and upset because they had to pay more taxes this year (because they didn’t have the big mortgage deduction anymore since they stopped paying).
2) a client bought a $600,000 condo in 2005. Then shortly thereafter (2006, I believe), he bought two more “investment” condo properties and rented them out. By the way, this person’s annual income is about $35,000, and he was able to borrow almost $1 million dollars to buy these 3 properties. The monthly rent he collected barely covered half of his carrying costs of mortgage, prop taxes, hoa, etc – but that didn’t matter to him, as his plan was to sell them for a big profit in a couple of years. Within a couple of years, loan payments adjusted higher, and he couldn’t make the payments. The 2005 condo eventually went into foreclosure, but it took about 2 1/2 years before he had to move out. As of last March, he was living in one of the rentals, that he had not made payments on for about 2 years. The other rental is rented, he is collecting rent payments, but is not paying the mortgage. Neither of the rentals had been foreclosed on yet, although they had received NOD’s. The best part: right before he stopped making payments, he withdrew close to $100,000 on a home equity line of credit, saying that he was going to get as much as he could before everything hit the fan.
Troubled Loner, are you trying to make shadash’s head explode?
Too late… I’m shaking I’m so pissed.
Troubled Loner,
Thanks for posting your anecdotal, I personally know of 3 people in OC that are/were doing similar things…
Wonder how long this “Money for nuthin’, chicks for free” cultural phenom will continue…
Vantage Pointe is expected to become a rental as Sam Zell’s Equity Residential is poised to buy the downtown tower.
“Again with the moral superiority claims by those who haven’t suffered financial arrears in this economy. The poor should just work harder, otherwise they are deadbeats, eh, sdbri?”
I’m speaking for myself, not sdbri, but if you can’t pay your bills – good economy or not – TS. If this economy is hurting everybody, then why preferential treatment for anyone? My first financial goal out of college was to have savings. I sleep at night knowing I’m okay when that rainy day comes. When I buy my house, I won’t stretch.
And if you don’t pay your bills, you’re a deadbeat. The economy affects me too.
Worst case scenerio is they just start using the general fund to pay for any shortfall.
Oh yeah, the general fund has lots of money too.
JTR – Please post news on Zell’s transaction as it surfaces….historically you can set your watch to Zell’s real estate market timing moves.
He didn’t get the nickname “the grave-robber” for nothing.
Conservatives who wish for a “free market” need to understand that the mortgage interest deduction would not exist in a free market. It is merely another form of social engineering using taxpayer dollars and it actually encourages homeowners to increase mortgage debt rather than paying it off.
So. The chief malefactor here is either:
1. The “homeowner,” for fraudulently misstating his income;
2. The third-party mortgage agent, for knowingly allowing the guy to fraudulently misstate his income;
3. The bank, for being so ${EXPLETIVE} retarded as to loan $1 million to a guy they didn’t check up on.
Funny, though; each one of them was a “rational actor” in their own mind:
1. “Homeowner” can use the always-rising equity in the property to cash out two years down the line and make some money for himself;
2. Third-party mortgage agent gets paid a commission based on the size of the loan, and has no real skin in the game;
3. Bank can sell the dodgy paper to “investors,” earning a margin right away instead of 30 years of dreary loan servicing.
Looks like everyone in the chain was hoping to play Pass The Parcel on to the next schlub. Who should we hate the most?
Again with the moral superiority claims by those who haven’t suffered financial arrears in this economy. The poor should just work harder, otherwise they are deadbeats, eh, sdbri?
Former RB Resident | September 23rd, 2010 at 12:06 pm
——————-
Let’s imagine a scenario where you, Former, are the landlord renting to a nice, young family. One month, the check doesn’t come. Your tenant has lost his job and can’t make the rent (they might even be evading your calls!). You feel sorry for them, so tell them that they can make it up the next month after he gets a new job.
The next month comes, and no check in the mail. You call your tenant who seems a bit resentful because you are demanding your rent — what part of “don’t have a job” don’t you understand? He explains that they still don’t have a new job, and that they need to use whatever money they have to make car payments and feed the kids.
This goes on for seven more months, and with each passing month, your tenant seems to get more angry with you for “harassing” them about the rent. In the meantime, you still have to make your mortgage, insurance, and tax payments on your “investment.”
At that point, would you be so cold-hearted that you would actually evict your tenants? Would you ever be tempted to call them “deadbeats,” especially when you know there are multiple *qualified* families who are looking for a rental just like yours?
See, here’s the problem. Too many buyers had fantasies about what homeownership is really about. Bottom line: it’s shelter — and expensive shelter at that with all the maintenance costs, etc. **Responsible** buyers understand the liabilities associated with buying a house and factor in the possibility of job loss, divorce, death, medical problems, etc. when calculating how much they are willing to pay for a house.
Now, bad things most certainly happen to good people, and I’m especially compassionate where serious medical situations are concerned. I wouldn’t mind making allowances for people who are dealing with serious and disabling medical conditions, but that’s NOT what most of these *DEADBEATS* are dealing with.
The loss of a job does not entitle a person to a free “owned” house any more than it entitles a renter to free rent. People who outbid more conservative and prudent buyers should not be “saved” at the expense of the prudent buyers when the SHTF (as it inevitably will).
Yes, the “owners” who’ve been riding the free rent are DEADBEATS, and need to be foreclosed on so that more prudent buyers can buy a home of their own. Why should we reward the irresponsible at the expense of more prudent, responsible people?
Good post, CA renter. That really puts it in a good perspective.
As an owner of many North County Rental Properties(most in Escondido), I certainly understand. And yes, I have evicted people in the past for non- payment. But, I don’t attach any real moral superiority to the position, its just business.
So, I don’t have any real problem if banks want to foreclose for non-payment and then go through the ordinary CA eviction process. (Which is a PITA, BTW.) Nor do I have a problem with the idea that maybe home ownership isn’t for everyone. Maybe it isn’t. I actually think the low or no down payment loans can work, but the mortgage system as it is now with brokers and banks that off-load risk provides a lot of room for abuse, often with people who aren’t, by definition, necessarily used to complex finance. But, I realize on matters of policy like this, reasonable people can disagree.
When I think “Deadbeat” in this context, I think a person who leveraged a house 100 percent with no intention of ever paying. I don’t think there are very many of those people. I think there are people who bet wrong, thinking they could always refi an expensive loan, or sell the house if the couldn’t, but I don’t think there are many who took out loans with zero intention of ever paying.
And, while a true deadbeat would be a problem, the banks and their inability to watch their own coffers is clearly a big part of the problem. They are comlpetely complicit in this problem for having no loan standards. Increasingly, there are stories of people who are negotiating modification when the house gets foreclosed on anyway, or paper mill foreclosures, etc., so I don’t have any real sympathy for the banks here. If they had done their due diligence in the first place then maybe they wouldn’t have so many people unable to pay.
So, this is my main beef: people who either had financial distress because of the recession or who had gotten in too deep either through irrational exuberance, mortgage fraud, stupidity or some combination of all them, are not “deadbeats”; they are victims of the bubble. I’m not saying they deserve free rent, or to keep their houses or a pony. But, they are entitled to their legal process. And, they shouldn’t be subject to moral pejoratives perjoritives like “deadbeat” when they exercise this process.
Thank you RB, you are right it is just business.
1. When people use morale hazard as if you need to honor a contract because it’s the right thing to do. I always say why it’s just business.
A contract is a legally binding agreement between two or more parties which, if it contains the elements of a valid legal agreement, is enforceable by law[1] or by binding arbitration. A legally enforceable contract is an exchange of promises with specific legal remedies for breach
2. We where also provide with the etymology of deadbeat to validate the point on those who fail to pay. That anyone who does not pay a bill for what ever reason is a “DEADBEAT”. I hope my using this reference is also acceptable
A bigot is a person obstinately or intolerantly devoted to his or her own opinions and prejudices, especially one exhibiting intolerance, irrationality, and animosity toward those of differing beliefs or genetics.
RB what crack smoking world have you been living in? There are people walking away from homes who are certainly able to pay. It just doesn’t make sense to. And yes, that’s a deadbeat. I never called anyone else one, *you* did.
Grow up with your ridiculous attacks and superiority complex. You’re a bigot as someone else accurately stated.
I’ve been working my ass off this whole time, don’t see how that’s even relevant to begin with.
CA Renter,
Agreed. In my case, I have an even narrower definition here. Simply the people who promised to pay and certainly can, but have decided not to because the market tells them their house is worth less than they bought it for. I don’t see why people are either vehemently defending them or literally denying they exist. Maybe it’s their reading comprehension.
The problem is that what they’re doing is perfectly legal. You can’t go to jail for not paying your mortgage. The worst that can happen is that you lose the house, a procedure that I assume is listed in detail in the mortgage contract.
Now if it were actually a crime to refuse to pay your mortgage even though you could afford it, the deadbeat ratio would be much lower. But to many Americans, that would mean more government interference in their daily lives, something they simply can’t tolerate at all.
Of course in CA the consequences of walking away are less than other states (in theory at least) in most states the lender could come after one for the balance due forcing a bankruptcy. Ca being non recourse for purchase money and improvements makes the penalty less.
Of course for some strange reason the banks in the recourse states are doing nothing. I don’t understand why they don’t sell the deficiencies to collection agencies for 10-20 cents on the dollar.The collection agencies know how to get their money. For example they even go after survivors of the dead claiming there is a moral obligation to pay off the debt. Yes if there is an estate, otherwise the lender just has it tough.
As far as walkaways go, it is sometimes a rational business decision. Ideally, banks would work with loan mods to avoid the disruptive effects that foreclosures and jingle mail have on neighborhoods, but if the banks aren’t willing to modify the deal (Any business deal can be modified if its everyone’s interest.) If the banks so no, and its a non-recourse loan then walking away may be reasonable. I don’t consider that “deadbeat”, either. I’m a lawyer, and I see all the time where companies have a deal and decide later that its better for the business to not honor the contact. In these cases, lawsuits and settlements happen. For houses, the remedy is the house.