Posted on 02/02/2010 9:43:50 PM PST by Steelfish
No Help in Sight, More Homeowners Walk Away
DAVID STREITFELD February 2, 2010
In 2006, Benjamin Koellmann bought a condominium in Miami Beach. By his calculation, it will be about the year 2025 before he can sell his modest home for what he paid. Or maybe 2040. Benjamin Koellmann paid $215,000 for his apartment in Miami Beach in 2006, but now units are selling in foreclosure for $90,000. “There is no financial sense in staying,” he said.
New research suggests that when a home’s value falls below 75 percent of the amount owed on the mortgage, the owner starts to think hard about reneging on a home loan. “People like me are beginning to feel like suckers,” Mr. Koellmann said. “Why not let it go in default and rent a better place for less?”
After three years of plunging real estate values, after the bailouts of the bankers and the revival of their million-dollar bonuses, after the Obama administration’s loan modification plan raised the expectations of many but satisfied only a few, a large group of distressed homeowners is wondering the same thing.
(snip)
In a situation without precedent in the modern era, millions of Americans are in this bleak position. Whether, or how, to help them is one of the biggest questions the Obama administration confronts as it seeks a housing policy that would contribute to the economic recovery.
“We haven’t yet found a way of dealing with this that would, we think, be practical on a large scale,” the assistant Treasury secretary for financial stability, Herbert M. Allison Jr., said in a recent briefing.
The number of Americans who owed more than their homes were worth was virtually nil when the real estate collapse began in mid-2006, but by the third quarter of 2009, an estimated 4.5 million....
(Excerpt) Read more at nytimes.com ...
By June, about 5.1 million people will own a home whose value is below 75 percent of what is owed.
This is about 10% of all homeowner mortgages! Looks like Roubini may be right again!
When he “leaves”, the bank will foreclose. A friend just had her rental foreclosed, and she got a form 1099 from the bank ( copy to the IRS, of course) indicating that the amount of the loan foreclosed upon is deemed a debt “forgiven”, which is a taxable event. She now has about $400K added to her taxable income due this year. This makes her “rich”, as in liberal world “rich” is taxable income ( not wealth). I congratulated her on her new status. My friend, who voted for BHO, didn’t think I was funny.
Seen it before. The value always comes back but you cannot just give up. It’s not the American way.
If everyone gave up you create a collapse. If everyone hangs on and does whatever it takes to make it? We create an economic recovery. Whether it takes one or ten years people, do not say yes to failure.
Tell me true, did she get hit with the AMT as well? That was another Rat baby that they were all so proud of.
How’s that Keynesianism working for you?
Let the free market work! By artificially keeping the market where it's at, our nation traps itself into having to do so beyond the limits of the treasury. It will be our demise, financially. We must allow the free market to correct or we're doomed to prolong this mess for decades longer than it needed to be. That was my problem with G.W. Bush's (and now, Obama's) "stimulus packages."
If you take pain medication, it doesn't mean cancer has been cured. It only appeases the symptoms while the cancer grows more deadly. The same is true with the economy; masking the pain with "stimulus" only prolongs and worsens the economic cancer within until it's incurable.
Uh oh..the article mentions on on bailout for underwater homeowners.
???
I’m sure she will. There is no way she can pay this bill - the loans she was forced ( thru injury in a bad accident) to walk away from, when added to her regular salary, will have her “making” an “income” (for tax purposes) of over $500K.
After being off work thru no fault of her own, causing the loss of her real estate investments, she now faces a tax bill, AMT and all, she cannot pay.
America, whata country.
Ouch $6.3 Trillion of these left out of zero’s budget and a back door bailout he gave right before his expensive Christmas vacation we get to eat.
http://www.bloomberg.com/apps/news?pid=20601110&sid=aqifb.wX_npo
That’s what people get for treating a home like a gambling instrument instead of a place to live.
Note the IRS wants a chunk of $400K that never really existed, it was created out of nothing.
And more than any other entity , “people” in that statement accurately describes the behavior of bankers.
"Show me just what Mohammed brought that was new, and there you will find only things evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelogus
How can that not be considered double leopardy of some kind ?
I don’t know. All I know is that today she said she got $400K in 1099s - representing the amount of the defaulted ( forgiven) mortgages. Before today, I had no idea that those who lost their houses also faced a huge tax bill.
To make matters more unfair, the foreclosed properties have not been resold by the bank - and she still got the 1099s. Presumably, when they are sold the proceeds should go to paying down the forgiven loans, thus making the amount she “owes” that much less. Apparently not.
The article does not discuss the net effect from the financial impact coming from the above mentioned weighted with the acceleration of currently accelerating commercial real estate loan defaults.
Basically, we're in deep do-do, folks.
The recent artificially created credit bubble is only partially deflated at this time.
Still a lot of unwinding left to go (much > 50%) of all the monies involved in the $500-$700 trillion global (and continued unregulated) derivatives Ponzi scheme.
This is one reason Zeewoe & Co. are basically tripling the yearly deficit, as eventually, Ben Ben will have to raise rates or the USD will completely collapse.
After the bloodletting ceases (deflation), IMHO, we will see hyperinflation as a means to 'balance' the banks' books w/ regards to all the real estate defaults.
2010 will be a rough year.
Double jeopardy is a concept in criminal law - sadly not relevant here.
"Show me just what Mohammed brought that was new, and there you will find only things evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelogus
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.