The mortgage crisis will continue as long as the decision making is in the hands of the banks. Many of the banks have followed the guidelines set by the federal government, but are skewing the results of the (NPV) Net Present Value calculator. Much of the test is based on speculation and the banks are using this to move forward with foreclosing on properties in order to just get bad loans off of their books. The banks, in many cases, are using the avg value of the homes over a 5 yr period, and not the current value of the homes. By doing so, they are creating a part of the equation that shows homeowners to have equity in their homes, rather than the inequity that really exists. Another factor that has a big impact on the test is the homeowners willingness to pay. It isn’t as if the homeowners just all of the sudden decided not to pay on their homes, but rather, due to the economy can no longer afford the home at the current mortgage. Yet the banks are allowed to use this factor as the homeowners aren’t willing to pay, thus providing the negative score that even if the loan were to be modified the current homeowner still wouldn’t pay. By doing so the NPV test is showing that it is more profitable for the banks to foreclose on the property rather than modify the loans. These are some of the big reasons so many have fallen out of or left the programs set forth by the government. In many cases the homeowners are left not knowing why they didn’t qualify, and the banks aren’t even required to explain. The NPV test as set forth by the government, in many cases, due to the nature of allowing the banks to manipulate the test, isn’t working, and in many cases the banks are making the decision that it is more profitable to either foreclose on the property or force the homeowner into the decision to short sell their home. When you add to that, that these banks are being subsidized by the government when a home goes into foreclosure or it short sells the banks are hedging that their loses will be less compared to if they keep a homeowner who has already shown they are having trouble paying the mortgage. Many mortgage companies are sitting on foreclosure properties and not moving forward on the foreclosures at this time. The government bailout that was given to some of these banks is allowing them to sit on these properties with the banks hope that the market will regain some of its ground, cutting some of their loses. In a sense they are trying to manipulate the market. Rather than processing all of these foreclosures and having them hit the market, they are keeping them off the market in hopes that other homes will start to rise in value. A bet that might bite them in the ass in some areas. There are areas around the country that the housing market is still declining and doesn’t appear to have reached its bottom. None of this is to say that I support any efforts that the government has made, nor to say that I believe the government should be interfering with the free market, but the system was put in place and in many cases isn’t being used in the best interest of the homeowners, but rather as a tool for the banks to validate why they should foreclose on these loans. Eg of what a bank might do to skew an NPV test: Mortgage balance: $267,000.00 Homeowner delinquency : $36,000.00 ($23,000 interest/$13,000.00 principle) 5 yr Avg home value : $328,000.00 NPV test result : Bank proceeds with foreclosure due to $74,000.00 profitability. Test result negative What the test would look like if they used true current value of home: Mortgage balance : $267,000.00 Homeowner delinquency : $36,000.00 ($23,000 interest/$13,000.00 principle) Current value of home : $186,000.00 NPV test result : Bank would modify mortgage due to loss of $68,000.00 This is the test simplified, but pretty close to how it works. There are several other factors involved, but the home value is the biggest element the banks can manipulate, and do. The one thing that anyone in this situation needs to know is that you can have this decision turned around. Many people have. Most unfortunately believe that this is the final decision and because they are never really told why they don’t qualify never seek legal help. There are many good attorneys that have had the results changed just by bringing to light this information when they get the homeowner and the mortgage company in front of a 3rd party mediator. Again, not saying that I advocate the government interfering with the free enterprise of our banking system, but the program was put there to help people and they should be able to use it the best they can to protect their homes. Not houses, but homes. People that are losing investment homes shouldn’t be able to use the system at all, IMHO. This is FYI for anyone who might be facing the unfortunate situation of foreclosure, I hope this helps you.
what i dont get is why the banks arent more willing to make deals. foreclosures cost and avg of $70k ive heard and they will lose tons in this market if they auction. wouldnt they do well to give the occupants a temporary reprieve (cut a deal where the occupants pay what they can pay) at least until the market improves? atleast then theyll keep getting some decent monthly payments and the house will be maintained as opposed to people not paying at all or flat out abandoning the place. but i think the market wont come back, at least on average no more than 3%/yr.
Well for starters, the wealthier parishes trend better in academics. Levels of education is almost always in correlation to the poverty level and not party affiliation. The political trends are that regardless of Democrat or Republican affiliation, Louisiana pols are almost always conservative politically. Political affiliation is determined more by parental party affiliation than with political platform in this state. Also historically, wealthier people become Republicans while smarter people become Democrats. That you think that is exactly why you're not a "economics/finance whiz".
Hey Skipper, I read all your posts. Believe me, I'm ecstatic that you don't agree with me. I may not be a whiz at anything, but you think you are a whiz at everything and constantly proven wrong. Have a great day.
Thanks MLU...I needed a good laugh to start the day. I may drive downtown to Orleans Parish so I can go hang out with all the geniuses! :lol: I will agree some very intelligent Democrats have figured out a way to remain in power buy keeping the uneducated crowd in their back pocket. Throw them a little governement cheese and they'll stay happy! Keep trying to sell the "wealthiest 1%" and the "rich are greedy" lines. They work well on the un/undereducated, un/underinformed audience. Just hope and pray these people never learn the truth. Otherwise you can say goodbye to a lot of career politicians.
Exactly how politicians like Harry Reid stay in power. It's amazing how when you talk to people in NV they are sick of him and want him out, but somehow the number one candidate to run against him loses the primary, with some no name winning to go up against him. How does something like this happen? I'm not sure, but it looks like he more than likely will end up with another term.
It's because most of the time the loudest group of people are the ones who don't have a candidate in office they feel represents them, you rarely hear from the people who support said elected official.
Because, all they are required to do is try to make the payment fit into the 31% of their income guideline, by either lowering the interest rate and/or extending the term. They aren't required, and it is rare that they will do it, to lower the principal balance. Many of the banks are taking the approach that it is best to just foreclose on the property and get the bad loan off of their books. This is also based on the fact that some 41% of the mortgages that have been modified have gone back into default. To the banks its just a losing proposition. Why keep the current homeowner in the home, when they have already shown that they can't pay the mortgage. Giving them a 2nd chance, based on what is going on, will only end up back where they are now. I personally agree with you, that the banks should do something that allows the current owner to make a reduced payment for a 3-5 yr term, giving the bank the opportunity to capture some of it's loses, time for the market to recover some, and the opportunity for the current homeowner to get back on their feet. Should the current homeowner default down the road, then the home may have regained some of it's value and the banks lose might be less. Unfortunately the evidence just isn't there for the banks to take this risk. They feel they are just better off forcing the current homeowner out and getting the bad loan off their books. Taking whatever loss they get and recover some of that through the gov't bailout monies, then right off whatever the difference is.
I went ahead and took you off ignore just long enough to hit you with some knowledge. Why Liberals and Atheists Are More Intelligent. - Hit & Run : Reason Magazine So I have a sociological case study supported by data from the National Longitudinal Study of Adolescent Health to support my claims while you have maniacal ranting on a message board to support your claim, although it really only reinforces my claim every time you open your mouth. Thanks for making me look good. :thumb:
