Revalue underwater homes.

[Pete]

It keeps getting brought up. How exactly do you do this? You go and say "Your mortgage is $450,000 because you over bought for your income, it appraises not for $245,00 so we are going to presto magico wipe $205K off and re-write you a new mortgage for $245,000 at 2% and you start tomorrow? Congratulations!

So how does this sit? I bought within my means, an older, modest home at 5% and my payment is higher than than the people who went out and paid too much, agreed to terrible terms, 80-20, interest only, variable rate and they live in a 3,000 square foot palace for cheap?

[philibusters]

Originally Posted by Pete

It keeps getting brought up. How exactly do you do this? You go and say "Your mortgage is $450,000 because you over bought for your income, it appraises not for $245,00 so we are going to presto magico wipe $205K off and re-write you a new mortgage for $245,000 at 2% and you start tomorrow? Congratulations!

So how does this sit? I bought within my means, an older, modest home at 5% and my payment is higher than than the people who went out and paid too much, agreed to terrible terms, 80-20, interest only, variable rate and they live in a 3,000 square foot palace for cheap?

It may get brought up, but as a realistic possibility it is non-existant. Two ways it could happen 1) The banks agree to it-- (which would be like Ford decide to lower the prices of the cars by 40% even if they would lose money at that price) 2) Congress could pass a statute requiring banks to do so. This option woud be blatantly unconstitutional unless Congress paid the bank the fair market value of what they were writing off (it would be an unconstitutional taking, just like a government entity must reimburse you if they take you land or else it is unconstitutional). As a realistic possibility it is non-existent. And while you are putting yourself in your example as the loser in the situation, you are in fact not at all losing anything. Its the banks that would would lose everything and for the few banks that survived, future borrowers would not be able to get interest rates at anything that would seem reasonable under modern day standards.

[Pete]

Originally Posted by philibusters

It may get brought up, but as a realistic possibility it is non-existant. Two ways it could happen 1) The banks agree to it-- (which would be like Ford decide to lower the prices of the cars by 40% even if they would lose money at that price) 2) Congress could pass a statute requiring banks to do so. This option woud be blatantly unconstitutional unless Congress paid the bank the fair market value of what they were writing off (it would be an unconstitutional taking, just like a government entity must reimburse you if they take you land or else it is unconstitutional). As a realistic possibility it is non-existent. And while you are putting yourself in your example as the loser in the situation, you are in fact not at all losing anything. Its the banks that would would lose everything and for the few banks that survived, future borrowers would not be able to get interest rates at anything that would seem reasonable under modern day standards.

It was not my intent to be "the loser" but to illustrate that those who did not manage their finances are REWARDED with a spectacular break.

Congress would in effect tell banks to revalue mortgages in accordance with some bureaucratic nightmare and then submit a bill to them for the set aside cost. basically a TARP Remix.

The result of this would in fact hurt me because now my older, less attractive home's value would plummet because of all the McMansions that now magically became affordable.

Tell me, if you were house hunting and you had a choice between a 1974, 2200 foot house with an older 70's style floor plan for $245K or a 2700 square foot open lay out, manicured lawn, modern conveniences built in 2009 for $245K what would you choose?

[Christy]

Originally Posted by Pete

It keeps getting brought up. How exactly do you do this? You go and say "Your mortgage is $450,000 because you over bought for your income, it appraises not for $245,00 so we are going to presto magico wipe $205K off and re-write you a new mortgage for $245,000 at 2% and you start tomorrow? Congratulations!

So how does this sit? I bought within my means, an older, modest home at 5% and my payment is higher than than the people who went out and paid too much, agreed to terrible terms, 80-20, interest only, variable rate and they live in a 3,000 square foot palace for cheap?

I think you are mixing up two separate issues.

Not everyone that bought a $450,000 home bought over their income. Even folks who bought within their means are suffering from being under water if they bought when the market was at it's peak. I think the vast majority of folks who bought within the past several years are under water with the value of their home. I don't think this is the fault of the homeowner.

Buying a home you can't afford is a completely different scenario and there are already a ton of programs out there now for that case, and from what I've read, no matter what program these folks get into, the vast majority are still defaulting on their homes.

With that said, I'm not too keen on the idea of revaluing homes. If we revalue homes/mortgages that are currently underwater why shouldn't the bank be able to revalue your home and adjust your mortgage higher when the market is on the upswing? Can't have it both ways. It sucks when you are stuck paying back a loan on something that isn't valued at what is owed on it, but hell, we do that with auto loans every day.

[ylexot]

I think underwater homes are very interesting because you can see all the fishes swimming around, but they are not very practical. Very much a niche market.

[Cheeky1]

Originally Posted by ylexot

I think underwater homes are very interesting because you can see all the fishes swimming around, but they are not very practical. Very much a niche market.

...so hard to keep the snakes and gators out though....

[SamSpade]

Originally Posted by Christy

I think you are mixing up two separate issues.

Yep.

My home is underwater. It generally means I can't refinance it, because the current value is so far below what it needs to be to refinance. Normally by now, I'd have paid enough equity into it, I could do that. Now that it has dropped so much in value, it essentially still has negative equity. It's like I never paid anything at all.

I bought this house in 2004, before the big jump in house values. It's now worth somewhat less than what I paid for it. It DID appraise for more than 100K more than it's worth now, and wouldn't you know it, the county uses THAT as the yardstick to tax me on it.

It also means - I can't really SELL it even if I moved into a smaller house, because I'd take a bath on the sale. So I have to stay here until the house value returns or in about 20 years when it is paid off.

[SquishyPossum]

Originally Posted by Pete

It keeps getting brought up. How exactly do you do this? You go and say "Your mortgage is $450,000 because you over bought for your income, it appraises not for $245,00 so we are going to presto magico wipe $205K off and re-write you a new mortgage for $245,000 at 2% and you start tomorrow? Congratulations!

So how does this sit? I bought within my means, an older, modest home at 5% and my payment is higher than than the people who went out and paid too much, agreed to terrible terms, 80-20, interest only, variable rate and they live in a 3,000 square foot palace for cheap?

You re-value your $450,000 dollar home down to $250,000 and later the market turns back upward. You sell at a price of $450,000 and make a hefty chunk of change at the banks expense because you created "artificial equity". Don't see how that is fair especially if you pay cash for your $450,000 home, it gets re-valued to 250,000 then the market turns upward and you sell at $450,000 and make nothing. Just seems like this idea would reward the people that over extended themselves. Buying a home has risk, just like when you buy stocks. Can I get my stocks revalued when they drop?

[Graymatter]

Originally Posted by ylexot

I think underwater homes are very interesting because you can see all the fishes swimming around, but they are not very practical. Very much a niche market.

Spongebob Squarepants has one and he seems to be doing very well!

[SquishyPossum]

Originally Posted by Tiki-Goddess

Maybe you should ask a better, dirtier question?

Word in the biz is that HAP, the Home Owners Assistance Program, administered by the Army Corp of Engineers (go figure) is being used to quietly bail out Navy officers and Government employees so they won't suffer career damage or lose security clearances due to their bad real estate decisions when they need to be transferred.

And yes, it is happening here for the fortunate of the less fortunate.

How does that sit with you?

HAP is not just for Navy Officers. I personally know of both Enlisted AND Officers using this program. Don't know about Government Civilian employees using the program. What source are you using for making the claim that it is being used to save careers or prevent loss of clearances?