by Kris & Kim on March 9, 2010
Congressman Barney Frank (Mass.) gets our kudos for taking the time to understand the misdeeds of the banks…2nd lien holders in this case.
Congressman Frank is sending out an ultimatum to Bank of America, Citigroup, Wells Fargo and JP Morgan Chase.
Mr. Frank is a very “powerful” congressman in charge of the governmental commission that oversees the banks…so, either the banks CEO’s listen or pay the price of not listening.
What it gets down to is:
- These banks servicing 2nd loans/liens for their investors are not pushing their investors hard enough to accept reality.
- What do we mean by this?
- 2nd lien holders in today’s market can make or break Loan Modification or Short Sale by choosing to participate …or take a stance and make unreasonable demands on the homeowner.
- Many 2nd lien holders hold notes that are worthless…as many of the homes are underwater or in a “negative equity” standing.
- This means that these 2nd notes are worth nothing, because there is no equity to support there value.
- What Mr. Frank is simply doing is sending a message to the CEO’s of these banks to remind their clients that own these liens, that they are in essence holding worthless paper and to take what ever is given them to resolve this debt and move on…remember…these notes are essentially worthless!
- Why does Mr. Frank care?
- Well it appears that he understands the economics of the banks and that the banks are simply manipulating the wall street into believing they earn more money than they actually do…That’s a whole other blog post…due to some changes a few years back…banks report their “negative assets” to show as actual stability and strength…kind of a “funny” economics!
Support Mr. Frank as he’s in the corner of the Homeowner…fighting the fight!
Kris
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by Kris & Kim on March 1, 2010
In some areas, you have a homeowner on either side of you that’s in a situation of “negative equity.” According to economists, it’s not going to get any better for a while….How long will it be before the housing market bottoms out is up for interpretation. Let’s say it’s right around the corner, although I don’t believe it’s that close.
Seeing our home values rise will not happen overnight, again, some economist are saying that it may take 10 years to realize equity again in our homes. Nothing indicates that we will see the equity increase to the prime times of the mid 2000’s.
Wall Street Journal posted an interesting article…….What would you do?
Millions of Americans are now deeply underwater on their mortgage. If you’re among them, you need to stop living in a dream world and give serious thought to walking away from the debt.
No, you shouldn’t feel bad about it, and you shouldn’t feel guilty. The lenders would do the same to you—in a heartbeat. You need to put yourself and your family’s finances first.
How widespread is this? More than 11 million families are in “negative equity”—that is, they owe more on their home than it is worth—according to a report out this week by FirstAmerican Core Logic, a real-estate data firm. That’s a quarter of all families with mortgages. And for more than five million of those borrowers, the crisis is extreme: They are more than 25% underwater—the equivalent of having a $100,000 loan on a property now worth just $75,000 or less. That’s true for a fifth of mortgage holders in California, nearly a third in Florida and an incredible 50% in Nevada.
Are you in this situation? Are you still battling to pay the bills each month, even when it may make little financial sense to do so?
It’s time for some tough talk.
Stop trying to chase your lost equity. That money is gone. Don’t think like the gambler who blows more and more cash trying to win back his losses. That’s how a lot of people turn a small loss into a big one.
And do the math. Even if you hope the real estate market is near the bottom—it’s possible, but by no means certain—it may still take years to see any meaningful recovery. If you are 25% underwater, your home will have to rise by 33% just to get you back to even.
Is that likely? And over what time period? Even if home prices rose by 5% a year from here, that would still take six years. And during that time you could instead be building fresh savings elsewhere.
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