'Just reduce the principal and let's move on'
Letter to the Editor
By Inman News, Tuesday, June 8, 2010.Re: 'Principal reductions may catch on' (June 4)
Dear Editor:
I see principal reduction as the only thing that makes sense. Lenders are spending the money to foreclose, and spending more for Realtors to resell at the present value. So now the banks have spent (perhaps thousands of dollars) more by foreclosing.
They could save that ... by reducing the principal to present value for the current homeowner. No foreclosure fees ... no Realtor fees. And along with that, the longer they take to do this the more it is costing the banks, with everyone sitting there not making any payments at all.
AND more money is spent on cleaning up foreclosures before they can resell. The longer this takes, the more present value comes down. The costs to the banks keep going up. None of this makes sense. Just reduce the principal and let's move on.
Catherine Deeths
Healdsburg Sotheby's International Realty
Healdsburg, Calif.
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Submitted by Ken Schmidt on June 8, 2010 - 5:27pm.
Unfortunately, most decisions made by banks and lenders make absolutely no sense and it doesn't seem to be getting any better!
Submitted by Vickie Hill on June 8, 2010 - 5:45pm.
Maybe, but if my neighbor gets a principal reduction I want one too. A wise stategy based upon one home turns into huge losses when you consider everyone in the cul-de-sac..........
Submitted by Gary Frimann, CRB, CRS, GRI, ABR, ABRM on June 9, 2010 - 4:22am.
So, one of my neighbors who has used his house as an ATM, and has pulled $550,000 out of his house in the last nine years should get a principal reduction? In other words (doing the math)the bank has paid him $1,000 A WEEK(!) to live there.
Who says you cannot make money in today's real estate market? His house is now worth what he paid for it. If he hadn't taken all that cash out. he might have been in good shape... Of course, he went Interest Only, and has lived a lifestyle few dream of. He's going to walk.
The bank has recourse, and I truly hope they go after him. As a taxpayer, they are using tax money to backstop the bank.
Gary Frimann
Broker / Owner
EAGLE RIDGE REALTY /
SIGNATURE HOMES & ESTATES
http://www.EagleRidgeRealty.net
http://www.SignatureHomesAndEstates.com
Submitted by Alex Valadez on June 9, 2010 - 6:13am.
Are you kidding me? The idea of rewarding homewowners for not paying their mortgage is absolutely not the solution. How about every bank reduce college student loans, auto loans, medical loans and reverse mortgages, also? How about we make people learn from their mistakes the ole' fashion way and have consequence. If you can't pay for it, do not buy it.
Let's say that at $7 per thousand borrowed, the mortgage would be reduced if a reduction was given to homeowner. $20k thousand dollars becomes $140 a month to the cash flow every month. This is really strectching it. A $140 a month reduction in mortgage payment is not gonna make it any easier.
I am not willing up to giving up more of my future earnings to cover for irresponsible financial behavior. We have done that enough already. There are other social programs for that.
Alex X. Valadez
Broker/Owner
Lakewood, REALTORS®
Dallas, TX
Submitted by Ken Lampton on June 9, 2010 - 6:55am.
We need to keep in mind that it is not "the lender" who takes a hit when a loan goes bad. It is the poor slob who bought the mortgage backed security which has that loan as one of many in the package. Those mortgage backed securities are not all owned by high-flying captains of commerce. Many of them are owned by pension funds and other institutions that have a big influence on the lives of "real people" like you and me.
I'm for reconsidering the idea of cramdowns. Let the bankruptcy judges decide, on a case-by-case basis, which borrower gets a break and which borrower must continue to pay.
-------------------------------
Ken Lampton
RE/MAX About Dallas
www.m-street-dallas.com
Submitted by George Maso, Broker Associate on June 9, 2010 - 12:30pm.
I believe Ken Lampton's comment is the most pertinent regarding the principal reduction issue.
It is the thousands, maybe millions of investors and investment instruments which contain the diced up bits of the "toxic mortgage assets" which have he final or perhaps legal say regarding the acceptance of a principal reduction.
Submitted by Lisa Ross on June 10, 2010 - 7:08am.
As I understand it, the banks have no motivation to work with borrowers. Word on the street is that banks are reimbursed by the Federal Government (gasp!) for the difference in what the foreclosed property sells for and what was owed to the bank by the original owner. All of this makes sense now....no motivation for approving short sales, loan mods, or principle reductions......
It appears that the Feds are in cahoots with Fannie and Freddie
Submitted by Tiffany Cloud on June 21, 2010 - 9:50pm.
I agree with most of the opinions already rendered. Principal reduction is not only 'not fair' but consequences are a natural and healthy part of living.
Have we learned nothing? First we are demanding and want the instant gratification that cashing out hundreds of thousands of dollars in equity brings instead of earning the money - a lottery jackpot for us all; then, we we get in over our heads we want that problem to go away as quickly as possible, and someone else to foot the bill for it.
The inability to delay gratification is what got us in this mess. Lets be patient and let the natural consequences teach us and our children to not make the same mistake again. What are we teaching our children if they see that when we over-commit ourselves, the banks and/or government are supposed to bail us out? What kind of legacy/example are we leaving them and our grandchildren to follow for the future?
No thanks, I am upside down on my home because I took out equity. I tried to sell my home for 9 months over what the market would support to break even and couldn't. I am stuck and am content to be so until the market recovers. Hopefully my children will learn from my mistake and not make the same mistake I did.
Tiffany Cloud - Realtor®
HomeSmart - Gilbert Arizona
CloudHomes.com