The Collected Works of Author and Blogger Larry Roberts

Archive for October, 2013

When people bought homes during the housing bubble, they often used toxic financing terms like teaser rates, negative amortization, and other parlor tricks to get themselves into a home they couldn’t afford. Their plan (assuming they had one) was to refinance into a new loan in a few years when their payments skyrocketed. Ostensibly, they were going to get stable financing in the future, but realistically most would have opted for another toxic loan to keep their costs down while they made huge profits on appreciation. The process was known as serial refinancing, and many people fell for it. The false assumption they shared was that another toxic loan would always be available. The credit crunch rudely exposed the folly…[READ MORE]

The housing bust should have wiped out America's lenders. Instead, we deemed these institutions Too-Big-Too-Fail, and we pumped billions of dollars into keeping them afloat. Since the emergency cash was not enough, we suspended prudent accounting rules and allowed lenders to report the value of bad loans based on financial models rather than actual market prices. As long as lenders didn't foreclose, they didn't need to recognize the loss on their non-performing loans. But it's really worse than that. Lenders quickly realized they could turn this accounting loophole to their advantage in several ways. First, they embarked on an aggressive program of modifying loans to keep borrowers making payments. Rather than accept smaller profits, they modified the terms of these…[READ MORE]

I feel bad for loanowners (AKA underwater borrowers). When I started blogging in February of 2007, I felt a sense of urgency to convince as many people as I could they shouldn't buy a house. I knew the impending price collapse was going to have serious long-term consequences on people's lives. Many would succumb to the weight of their debts and lose their homes in foreclosure. Many more would endure years of owing more on their mortgage than their home was worth. Mortgage debt is always a heavy burden, but when it greatly exceeds the value of the house it's attached to, the crushing weight is almost too much to bear (remember Swiller's bizarre rants?) For many loanowners, the last…[READ MORE]

I recently reported the housing bubble fully is reflated in Irvine, California, and the OC housing market ricochets off affordability ceiling. Since the OC market is now priced very near its historical relationship between the cost of ownership and the cost of rent, I want to take a more detailed look at what's happening across the county and find those markets where deals still abound and those markets where none are found. With the dramatic increase in price and rising interest rates, affordability is declining rapidly. As a consequence, the OC housing market, which started the year rated a 10, is now dropping down to a 7. While this is still a good rating by historic standards, it's not the…[READ MORE]

I have been surprised that SB 30, the California legislation that would give tax relief on debt forgiveness on a principal residence hasn't been passed for 2013.  Since 2008 if you had debt forgiven by a lender, that forgiveness hasn't been subjected to both federal and state income tax.  For example, the bank gives you a $100,000 mortgage and you don't pay it back, the loan is then treated as income.  For 2013 it seems that it was just going to get another rubber stamp approval year.  However as of August 30th it still has been stalled in the California legislature.   CAr has a powerful lobbying branch in both Washington and Sacramento.  In fact, Larry Roberts just recently posted…[READ MORE]

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