Mortgage interest rates at an all time low...and no one can refinance.

[shah269 0]

Mortgage interest rates at an all time low...and no one can refinance.
For those who are aware of modern economic theory this is a true and very sad catch 22.
Many people would love to refinance their homes, doing so would inject huge sums of cash into out bogged down service based economy.
However, and I hate to pick on the banks here, but as it stands less than 80% of recent home owners, those who bought with in the past 5 years, would qualify due to the value of their homes being significantly lower than what they owe.
What a kick in the pants right? The solution to all of our problems right in front of our noses and we can't even get it.

Case in point me. I bought my condo in NJ for $300k 4 years ago. Since then the value had dropped to about $200k. I've paid down the mortgage to $270k. I will never be able to refinance. And if I did and say I saved $500 a month I could use that money to either buy a new car or utilize services. But due to being under water I am will be unable to refinance for a decade or more. Thus, my buying power along with so many others will not move up thus the economy will not grow.

Sad, but what can you do right?

Life through good thoughts, good words, and good deeds is necessary to ensure happiness and to keep chaos at bay.

The only thing that falls from the sky is birdshit and fools!

[kelpdiver 2]

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Case in point me. I bought my condo in NJ for $300k 4 years ago. Since then the value had dropped to about $200k. I've paid down the mortgage to $270k. I will never be able to refinance. And if I did and say I saved $500 a month I could use that money to either buy a new car or utilize services. But due to being under water I am will be unable to refinance for a decade or more. Thus, my buying power along with so many others will not move up thus the economy will not grow.

So how much of a downpayment did you put in? 3%? That is a risk of low down - even a small decline puts you underwater. And yet everyone being able to buy a condo for $12k is what got the housing market so inflated, propped up on the premise that prices will only go up.

In 10 more years, your principle will be down to ~210, and your home's value will likely have rebounded some. Odds are it will happen sooner - however long it takes to rebalance from the bubble.

And if everyone could refinance right now, the interest rates wouldn't be so low.

[headoverheels 333]

I can't refi, but it is because I did in March and signed an agreement not to do so for 180 days. If nothing changes, I'll be doing a re-fi in late September, and drop my rate another .75% or so. I'm doing my part on the economy -- I pulled out $250k in my refi and it will all go for house remodel/repairs this year.

[DrewEckhardt 0]

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Case in point me. I bought my condo in NJ for $300k 4 years ago. Since then the value had dropped to about $200k. I've paid down the mortgage to $270k. I will never be able to refinance. And if I did and say I saved $500 a month I could use that money to either buy a new car or utilize services. But due to being under water I am will be unable to refinance for a decade or more. Thus, my buying power along with so many others will not move up thus the economy will not grow.

Sad, but what can you do right?

As a current or soon-to-be MBA you can get with the program like they do in business.

http://en.wikipedia.org/wiki/Efficient_breach

In 2009 when they went under water Morgan Stanley surrendered 17 million square feet of office space purchased in 2007 for $6.5B to Crescent Real Estate Equities. Later that year they turned their five five San Francisco sky scrapers over to Blackstone.

The Mortgage Bankers Association bought their DC headquarters in 2007 at the height of the boom for $79M with a $5M down payment and got rid of it in a short sale for $41M in 2010.

Making your move before the Mortgage Forgiveness Debt Relief Act of 2007 expires in 2012 might be a good idea so you don't need to pay taxes on your paper "gain."

Since you live in a recourse state, having a plan to deal with the bank if they come after you for the deficiency would be prudent too.

Be sure to weigh all the factors in deciding on whether you want to get a second place (to rent or buy) before your credit score drops with your first missed payment or to squat rent-free and build cash.

Or you can continue to "do the right thing" like a good little engineer/debt slave.

[rushmc 23]

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Mortgage interest rates at an all time low...and no one can refinance.
?

I just did

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[weekender 0]

Quote

Mortgage interest rates at an all time low...and no one can refinance.
For those who are aware of modern economic theory this is a true and very sad catch 22.
Many people would love to refinance their homes, doing so would inject huge sums of cash into out bogged down service based economy.
However, and I hate to pick on the banks here, but as it stands less than 80% of recent home owners, those who bought with in the past 5 years, would qualify due to the value of their homes being significantly lower than what they owe.
What a kick in the pants right? The solution to all of our problems right in front of our noses and we can't even get it.

Case in point me. I bought my condo in NJ for $300k 4 years ago. Since then the value had dropped to about $200k. I've paid down the mortgage to $270k. I will never be able to refinance. And if I did and say I saved $500 a month I could use that money to either buy a new car or utilize services. But due to being under water I am will be unable to refinance for a decade or more. Thus, my buying power along with so many others will not move up thus the economy will not grow.

Sad, but what can you do right?

You have a tendency to word things in a way that implies your situation is the standard for everyone. Not sure if that is your intent but your wording is quite definite. for example, "no can refinance for those who are aware of modern economic theory this is a true and very sad catch 22." There is no room in that statement for other people reality.

I do not agree with your assumption. My situation is similair but yet very different. I bought a home in your price range and time. Put about 30% down. refied it during the crisis with no problem. i'm currently trying to sell it and have plenty or room between what i want and what i most likely will get.

Spending 300k dollars is a very big decision. I feel many people took it too lightly in the last few years. I doubt they will make the same mistakes again.

"The point is, I'm weird, but I never felt weird."
John Frusciante

[normiss 860]

Are you implying there are valid fiscal reasons the lenders should have continued to actually verify income, credit, and require a serious down payment???

My ex wife somehow got a loan during the madness.
No employment proof or verification required.
No down payment.
Stupidly irresponsible payment and interest rate.
Wonder how that's going to work for her in 6 months when the $802 / month child support for one kid ends???


A LOT of people were very flippant about buying homes.
Some have been ruined financially.

[shah269 0]

OH no I'm screwed for sure. I'm working with a few people determining how i can "walk away" but odds are I'm stuck. Even if i get a higher paying job in say Dubai i couldn't take it due to having my dick held tight by the banks on the condo I don't want.

As for the comment "In the next 5-10 years..."
In 5-10 years we may all be dead as the saying goes.

The question is simple, do you want to eat today.....or do you want to eat in 5 to 10 years from now? For any one who understands basic economics money today is worth more than money in 5 years THUS
We have a problem. We have people not much different than I who make good money who are employed BUT who are unable to free capital for investment in our economy.

And sadly per all the books I have read....there is no way out untill the "value" of ones home is 20% better than what they owe on the home.

Furthermore, not every one who bought a home in the past 5 or so years bought too big or had no job.

I simply took out an 80-10 loan. I only put down 10% of the value for I lacked the $60k needed. But 10% down was something I could do not as an investment but as a home. As a means to help our economy.

Jumping up and screaming that all those dumb asses bought bigger than they could afford is a kin to me stating that all Republicans are bible thumping nut job. Many hard working people are a part of the Republican party and many hard working people bought homes that are now well under water.

and once we figure out how these people can refinance than our economy will get a much needed injection of capital and we will be able to dig our own way out of the mess we are in now.

however i don't see it.

Life through good thoughts, good words, and good deeds is necessary to ensure happiness and to keep chaos at bay.

The only thing that falls from the sky is birdshit and fools!

[normiss 860]

I'm thankful I have a much different perspective on economics than do you.

[shah269 0]

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I'm thankful I have a much different perspective on economics than do you.

I know that pesky logic and math are horrible tools utilize in forming an argument.

Life through good thoughts, good words, and good deeds is necessary to ensure happiness and to keep chaos at bay.

The only thing that falls from the sky is birdshit and fools!

[rushmc 23]

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OH no I'm screwed for sure. I'm working with a few people determining how i can "walk away" but odds are I'm stuck. Even if i get a higher paying job in say Dubai i couldn't take it due to having my dick held tight by the banks on the condo I don't want.

As for the comment "In the next 5-10 years..."
In 5-10 years we may all be dead as the saying goes.

The question is simple, do you want to eat today.....or do you want to eat in 5 to 10 years from now? For any one who understands basic economics money today is worth more than money in 5 years THUS
We have a problem. We have people not much different than I who make good money who are employed BUT who are unable to free capital for investment in our economy.

And sadly per all the books I have read....there is no way out untill the "value" of ones home is 20% better than what they owe on the home.

Furthermore, not every one who bought a home in the past 5 or so years bought too big or had no job.

I simply took out an 80-10 loan. I only put down 10% of the value for I lacked the $60k needed. But 10% down was something I could do not as an investment but as a home. As a means to help our economy.

Jumping up and screaming that all those dumb asses bought bigger than they could afford is a kin to me stating that all Republicans are bible thumping nut job. Many hard working people are a part of the Republican party and many hard working people bought homes that are now well under water.

and once we figure out how these people can refinance than our economy will get a much needed injection of capital and we will be able to dig our own way out of the mess we are in now.

however i don't see it.

Good points! All of them

However, to fix this the blame has to be properly set

And the largest percentage of the blame goes to the Fed gov

And now that the mess is made, only a correction can fix it

And that correction is going to hurt many many people. It will not hurt those who started it all and then exempted themselves

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[Butters 0]

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and once we figure out how these people can refinance than our economy will get a much needed injection of capital and we will be able to dig our own way out of the mess we are in now.

The banks lose money when you refinance to a lower interest rate thus they don't want you to refinance ... unless you can't pay then they'll help you refinance because they would rather gain a little than lose a lot (in most cases).

"That looks dangerous." Leopold Stotch

[weekender 0]

shah>I simply took out an 80-10 loan. I only put down 10% of the value for I lacked the $60k needed. But 10% down was something I could do not as an investment but as a home. As a means to help our economy.

The way i read this is you bought a home you could not afford properly. You made a mistake, which everyone does from time to time. Your now paying for it. I'm sorry to see your in a bad place. BUT your last sentence is a bit humorous to me. Are you implying you bought the property as a means to help our nation? Well gee thanks, we need more martyr's like you.

Good luck and i mean that sincerely. But, c'mon, man up and admit you made a mistake and do what is in your powers to fix it. dont try to convice others that your motives for buying the home was anything altruistic and/or patriotic.

"The point is, I'm weird, but I never felt weird."
John Frusciante

[TrophyHusband 0]

When making such a huge decision such as purchasing a home, you must take into account future unknown circumstances. You may get divorced, injured, layed off or fired, or get a better opportunity somewhere else and need to sell sooner than you expected. There is also no guarantee that your home will be worth as much if one of those things should happen. You must accept the fact that you may get screwed. It may suck and it may not be fair, but it's life.

I'm not saying you should not have bought as much house when you did, I'm just saying you should accept what risks are involved. Just like when you jump out of a plane you need to accept that you can get hurt or die, even if you do everything right.

It would be very silly for the banks to refinance a home that is worth less that the loan amount. You can't blame them for that.

As far as helping the economy, the best thing you can do is put yourself on firmer financial footing. If you had an extra $500 a month and wanted to use it to help the country, put it into a retirement fund so it ca grow and the rest of us won't have to pay for your ass when you get old.

For now, you can go to a strict austerity budget and put every extra cent you make towards the principal until the value of the home is more than the amount you owe. At that point your options will open up.

"Your scrotum is quite nice" - Skymama
www.kjandmegan.com

[normiss 860]

ACK!
Logic AND math?
Oh the horror....


I can make my house payment with unemployment!
Or for that matter a MUCH lower paying job than I am accustomed to.
I did that for sound reasons.

[shah269 0]

Oh I can afford the house and still get 6 skydives in per month. I'm doing much better than most.
Let's attempt to stay civil and not get into a pissing match.

I'm financially better than many I know. Yes my condo is under water by a solid $70k but i can still afford to eat and even have a bit of fun.

What I am stating is "on average" most people who bought a home during the boom or right after are in a very difficult position of being able to afford their mortgage but not much else. And with interest rates at an all time low it's a shame that there does not exist a mechanism by which these people could "renegotiate" their federally assured mortgages such that they would have more free capital to spend on goods and services so that our economy would grow.

You want to get into a pissing contest do it about some worthless subject as religion. This is banking and finance. All things being equal it's a math equation. And more so in our service based economy.

Want the economy to grow? Free up capital for those who are more likely to spend it on goods and services. You want it to slow down, take away that capital.

And right now there appears to be one hell of a good way to free up capital but we just don’t have the tools to utilize it. And that's a gosh darn shame! For it's not hedge fund brokers or major banks that will bring the economy out of the state it's in, rather it will be one guy who now has an extra few dollars to buy a new dishwasher or build a new deck or....even pay down his debt. That's our ticket out of this stagnant economy. A middle class Joe with a few dollars in his pocket. Yet sadly, there isn't a darn thing we can do.

Not with the current banking regulations.

*laugh*
Put money towards retirement...wait like those Roth IRA's that lost well over 50% of their value?
And pay down the $70k? HA! OK Yeah...like I said in 5-10 years sure why not! Brother has $120 to go out and relax once a month or pay off credit cards and you want me to pay it to an underwater property?
HA! No really...HA! Wait you are serious! HA!

Life through good thoughts, good words, and good deeds is necessary to ensure happiness and to keep chaos at bay.

The only thing that falls from the sky is birdshit and fools!

[normiss 860]

"most people who bought a home during the boom or right after are in a very difficult position of being able to afford their mortgage but not much else."

THOSE people made a painfully poor financial decision IMO.

It's an amazing time to buy.

[shah269 0]

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THOSE people made a painfully poor financial decision IMO.

It's an amazing time to buy.

Great than buy!
But you buying will not grow the economy nor create many jobs.

Again not a pissing contest. It's a larger debate. If you have a difficult time viewing the system as a whole I'm not sure what to say.
The discussion was regarding freeing up capital today so that the economy would grow TODAY not 5-10 years from now.

A self fueled stimulus package. And not like the banks don’t make any money off of a refinance. Between the various fees a bank can make a good bit of cash refinancing. The catch at the moment is that there is nothing to refinance. Negative equity in a home is not a good place to be for either party. Unless banks start renegotiating extended loans, say 60 years?
But that wouldn't make things any better.

How can I put it? Say I lived in Arizona or another state that basically told the banks to go pound salt with respect to mortgages but had the biggest boom and thus the hardest bust. On average say I make $5k a month. Of which $3k go towards a home that is under water. What is keeping me from walking away. In NJ our very pro big bank governor tied our collective balls to the anchor. But other states...why stay?
Send them back the keys.....with $5k income one can live a very comfortable liquid lifestyle. Who needs credit cards when you make that much? And if you rent for say $2k you are in effect up $1k?

To sum it up, other than states such as NJ, there needs to be a major shakeup in the system. Either the barrowers need to be provided some sort of method by which they can refinance or the banks will have to deal with a large number of barrowers doing some rather simple math and returning the keys to their homes. After all why do you need credit if you have plenty of cash on hand? And as it looks, our banking system may not be able to survive a vast bundle of "jingle" mail.

As such, both the average citizen and the large banks have to realize that they need to work together ASAP!

Life through good thoughts, good words, and good deeds is necessary to ensure happiness and to keep chaos at bay.

The only thing that falls from the sky is birdshit and fools!

[CanuckInUSA 0]

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The way i read this is you bought a home you could not afford properly. You made a mistake, which everyone does from time to time. Your now paying for it. I'm sorry to see your in a bad place. BUT your last sentence is a bit humorous to me. Are you implying you bought the property as a means to help our nation? Well gee thanks, we need more martyr's like you.

Good luck and i mean that sincerely. But, c'mon, man up and admit you made a mistake and do what is in your powers to fix it. dont try to convice others that your motives for buying the home was anything altruistic and/or patriotic.

Oh don't you love our societal martyrs. In the first post the Shah was telling us "if he could only refinance it would free up $500/month which would allow himself to buy a new vehicle". For someone who already is in what I would call huge debt, he does not want to use the possibility of lower interests rates to lower his debt. No he wants to use it to maintain his debt levels so that he can buy something new. The justification of his argument is that he would be helping society by buying a new vehicle. Well maybe my math is wrong, but I have always been in the mindset that I would be better off in society if I was not in debt or if my debt levels were low enough to weather bad economic storms when they came.

Not everyone can afford to buy a home or a vehicle with cash. I know I could not. But my primary goal once I added debt, was to look for ways to pay off my debt. I did not look for ways to add to or maintain my debt levels. Everyone needs to be looking for ways to reduce their debts, not maintain them for future "martyrdom" purchasing opportunities.

Try not to worry about the things you have no control over

[shah269 0]

Hum.....how can i put this with out using a million words?

Debt is not bad. No joke! Debt is not a bad thing to have. We need debt in our economy to keep things going.

I was utilizing the procurement of the car as an example, maybe not the best example, but a good example of a procurement that would create jobs.

Feel free to utilize your own example for what the average citizen would coud do with $500 a month to grow the economy.

Life through good thoughts, good words, and good deeds is necessary to ensure happiness and to keep chaos at bay.

The only thing that falls from the sky is birdshit and fools!

[CanuckInUSA 0]

The humorous thing in this whole thread is that you want to save society by forcing the banks to give you low interest loans so that you can add to or maintain your existing debt levels. I am no saint. I have used credit in the past when I should have saved more before my puchases. But once in debt, I tried to pay off my debts as soon as I could. I did not whine that banks were not lowering my interest charges so that I could add to or maintain my existing debts all in the name of helping society.

Want to help society? You can help society by not being dependent on it. Society is in the mess it is because far too many people (and governments) have run up far too much debt.

Try not to worry about the things you have no control over

[shah269 0]

And here comes the pissing match.....
My only debt is my condo. Other than that I'm free and clear. And I could buy another car right now without needing to refinance. I hope this puts to rest any further pissing matches and or personal accusations.

I was utilizing myself as an example of "the average".
If I was able to free up X amount of capital I could procure Y or Z and thus create ABC types of jobs.

You know what...never mind....I'm sorry I brought it up. It was meant to be a civilized discussion regarding economics and banking policy but well it went to shit.

Oh well. The best of intentions.

Life through good thoughts, good words, and good deeds is necessary to ensure happiness and to keep chaos at bay.

The only thing that falls from the sky is birdshit and fools!

[DougH 270]

So walk away from the Condo and the loan?

Is your mortgage cheaper than comparable rent?

Businesses and banks on a daily basis weight the costs of breaking a contract, versus the costs of performing on a contract where they are in a loss.

It is a financial equation.

"The restraining order says you're only allowed to touch me in freefall"
=P

[kelpdiver 2]

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I'm thankful I have a much different perspective on economics than do you.

I know that pesky logic and math are horrible tools utilize in forming an argument.

indeed. So help me out. The numbers don't add up.

If you bought a 300k house and put down 10%, why is your balance still at 270k 4 years later? That balance makes sense on a 3% downpayment (starting mortgage of 288k). Or on an interest only loan with 10% down.

[shah269 0]

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So walk away from the Condo and the loan?

Is your mortgage cheaper than comparable rent?

Businesses and banks on a daily basis weight the costs of breaking a contract, versus the costs of performing on a contract where they are in a loss.

It is a financial equation.

There are tools that business has at its disposal that the average person does not.
Being a citizen of NJ I for one am not able to simply "walk away". The banks could and would come after me for the outstanding debt.

Funny thing...now that I think about it...a vast majority of our mortgage debt is government backed. Thus if your average citizen were to walk away the government would have to cover the outstanding debt to the banks...unless I'm wrong on this?
*I'm not 100% sure on this one, can any one verify?*

Life through good thoughts, good words, and good deeds is necessary to ensure happiness and to keep chaos at bay.

The only thing that falls from the sky is birdshit and fools!