Comments on: CoreLogic: 1 in 4 Borrowers Are Underwater

By: Why is Australia doing so well? « Penguin unearthed

Why is Australia doing so well? « Penguin unearthed — Sat, 28 Nov 2009 20:05:00 +0000

[...] 1% of households with mortgages have negative equity, compared with 23% in the US, according to this report. So is it just Australia being the lucky country, or is there more to it? I’ve got a few [...]

By: ashpelham2

ashpelham2 — Tue, 24 Nov 2009 23:49:54 +0000

What I am learning as I get along in my years is that a lot of the stuff I thought “adults” had under control and had figured out, they just made it up as they went along. Two examples are this year’s bank bailouts, which had no semblance of order of responsibility, and the distribution of H1N1 vaccine.

By: hue

hue — Tue, 24 Nov 2009 22:04:33 +0000

no one is ignoring houses without mortgages. it clearly says 1 out of 4 mortgaged borrowers. it’s the poverty effect.

if you didn’t have a mortgage on your house, and don’t plan to sell, did your house increase in value during the boom? or lose in value during the crash?

it’s all conjecture anyway, we don’t know how it will really shake out, until it does. look at what we thought about Y2K, or the decade that follows.

By: DeDude

DeDude — Tue, 24 Nov 2009 21:30:58 +0000

The 1 out of 4 is only for those that want to ignore all the people who do not have a mortgage. But for society as a whole (economy, mobility etc.) you have to consider all people (with and without a mortgage) – and then its only about 1 in 10 households. I am not saying that there will not be more people who bail and more people who will force their banks to accept a short sale. However, we may not quite get to the levels of losses for banks and investors that many people have been predicting.

By: hue

hue — Tue, 24 Nov 2009 18:55:44 +0000

dedude, it’s 1 out of 4 underwater in a mobile society. people don’t stay in their houses for 30 years. so they can’t sell and move, even if they can find another job, especially if they can find another job. so even if you’re only slightly underwater, you may just decide to bail. i personally know a few who bought a house 2 or 3 years ago, and thinking about walking — better off renting even with bad credit than paying a mortgage in negative equity for years. no money to upkeep upside down houses. bottomline, more bad loans, properties for banks, more housing inventory. but does that matter when banks mark assets to fantasy? or refuse to foreclose when people don’t pay?

By: DeDude

DeDude — Tue, 24 Nov 2009 18:33:52 +0000

If there is about 100 million household in US then about 10% is under water on a mortgage, and only about 5% are more than 20% under water (and will take a long time or some serious price increases to get back out). The under water mortgage problem is probably going to have much less effect on the overall economy than what most people here think.

By: benesposito

benesposito — Tue, 24 Nov 2009 16:45:23 +0000

@danm

What you describe is something i worry about happening; “The Great Walkaway”. That kind of thing would be like an end of the world as we know it type scenario.

If that happenned, while you might have a huge mass of people with similar credit scores, you’d have banks owning a phenomenal number of houses, and having to put them on the market. A bigger than ever housing price collapse would begin, and the solution is going to be lending back to these udnerwater walkaways? They won’t have any downpayment money, so what type of loan are they gonna get? Also, why would the bank lend to them regardless of FICO score in an environment where more and more walkaway people are diving the prices down? If they end up underwater again they’d just walk again. A great walkaway would cause a feedback loop of credit and asset price destruction that would make the fall of ’08 look like nothing.

Look at the story of the woman who’s credit card plight started going viral with her call for everyone not to pay their bills. Check out how the bank responded. A great walkaway would ensure a depression….

By: hue

hue — Tue, 24 Nov 2009 16:12:37 +0000

http://bit.ly/6QQJ7V sorry space removed.

By: hue

hue — Tue, 24 Nov 2009 15:45:23 +0000

OT, this is exactly how i remember the Flutie hail mary 20 years ago (yesterdie) when i happened to see it live http:// bit.ly/6QQJ7V

By: ashpelham2

ashpelham2 — Tue, 24 Nov 2009 14:22:21 +0000

It seems like it is just going to take good old fashioned TIME to work this thing out. I would rather not see governments try and prop up the prices of homes artificially, as propping up equity prices back in 2002 and 2003 is partly what lead us to this point. Fall if they must. And fall those prices will. I sound like Yoda.

In time, and with homeowners getting a chance (ie, keeping their jobs), this debt will pay down. It requires discipline, saying no to the things you want, and sometimes saying no to the things you need.