RE: Jeff @ 39 – Any thoughts as to why the banks/credit card issuers supported The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005?.

It’s because they wrote the legislation! Of course they supported it.

The prior act was written by a special panel, and then modified by Congress. The next time around the panel made it’s suggestions, and Congress threw them out and substituted the bank written legislation.

It gave them a lot, most notably the reaffirmation requirement on auto loans. I think they thought it would give them a lot more than it did.

Well what do you own that you don’t have to maintain, or pay taxes on.

That sounds racist. Better be careful.

In 5 years the “waiting list” will be for a dry spot under the bridge since I’m sure Seattle will be tired of tent cities by then. The old NIMBY thing, ya know?

Its my belief you never own your home anyway. after the Mtg is paid off you are still strapped with taxes, utilities, upkeep, and insurance. If you own a Condo your home is further strapped with dues on top of all the other fees.

Paying off your Mtg, which I always found to be insanity with our tax structure, just eliminates 1 bill of many associated with home ownership.

I have found many homeowners as of late extremely excited to get the “Lead Weight” of homeownership released from them. They now look for GEMS but are perfectly content with continuing to rent for years to come.

Renters are definitely not losers. In fact it gives many a very long time to save up!

I’m waiting for Obama to give me a house. Won’t be long now, he already owns a lot of them thanks to treasury and the fed buying all those failed CDOs, etc. and I get the sense there will be more to come. We’re going to need a new homesteading act…

http://www.flickr.com/photos/wastatednr/4004801971/in/set-72157622570021278/

Remember when the WSDOT was trying to sell homes for $15 and couldn’t get a bidder on some of them?

“Unlike stocks, house will not down to zero because it has value”

Not true. Lots of houses go below zero in value- they have this thing called “liability” attached to them. All through the Midwest homes sit vacant because of past due taxes, various fines, hazmat declarations, dangerous neighborhoods, etc. In five minutes on the internet I can find all kinds of homes that won’t even sell for a dollar because of the associated liabilities.

Watch what happens as the disposable income of the US is cut by 30% or more thanks to dollar devaluations, unemployment, under employment, increased taxes, etc. Pretty soon it may be free houses for anyone who is willing to take on the rehabilitation in an effort to clean up vast tracts of wasteland.

My list of possibilities is no more outrageous than your constant assertion that ownership is best.

I’m going to change my screen name to: OWNRsRBROKER. Gonna have to find a good picture of the messiah to go with it…

I know of at least 30 Katies…By the end of this year it will be over 50. By the end of next year easily over 100 Katies.

BTW the people who walk know how to play the game. They get at LEAST 18 months in their home and huge opportunities to save. They sprinkle a payment in here or there, bounce a check near foreclosure date, contact Lender they received an inheritance, accept a Loan Mod then never pay more then one time, it just goes on and on.

This will be coming out soon on a DateLine or PrimeTime type show. Its been widely common knowledge in Nevada and Az this last 12 months.

They are all coming back!

“Oh, and by the way, a fun factoid on Katie’s Realtor: She bought her brand new home in 2005 for $240,000. According to the comps she runs daily, she says it’s now worth between $90-110,000. So in January she decided to stop paying her mortgage. No financial hardship, she just figured she was throwing money away. The bank hasn’t gotten to her yet, so she’s just been living there for free. At some point, she knows, her bank will foreclose, but she’s fine with that. She says she’ll do far better financially renting for a while.

This is what the housing market has come to.”

In my opinion the “big banks,” for lack of a better way to put it, kicked many people who essentially had no other option, especially for those “above-median earners.” At the time the banks were doing very well–no one would have predicted the demise of WaMu, for example.

The bottom line, I am sure you will agree, is that you cannot squeeze blood out of a turnip, but you can change the bankruptcy code so the big banks can record smaller losses. The same thing is happening today with foreclosures–if a bank/lender approves a short sale it must admit to and record the loss immediately, but if they bury their heads in the sand, then the losses are recorded much later, even if larger on a net present value basis. Then when the debt is sold, the value of the debt is going to be greater when debtor cannot go chapter 7 bankrupt. Essentially the change made it harder for those who were already down.

Maybe we can agree to this:

If you take something that’s easy and make it “complicated and messy” for some people, then it will drive the number of people doing it lower. Certainly we could not expect the number of filings to increase, given the increased requirements and difficulty for some filers. Hopefully we can agree to this too: Unless the underlying reason for the bankruptcy is fixed, the probability of a second bankruptcy is quite high. An example where the underlying problem is fixed: medical situations where there is a good recovery. In general living beyond one’s means is not fixed by a bankruptcy; bankruptcy just resets the counter.

“Those who lost their home will need a place to stay. ”

Why? From what we’ve seen just about everywhere else in the country they can just stay in their current home, often rent free, for a year or more. The banks don’t want the home, the “buyers” don’t seem to want the home, not even the government wants the home. Hey, we already have almost 20,000,000 vacant homes here in the US and we haven’t even started to “double up” by world standards.

I don’t care what your math says- in my world no rent for a year or more beats even a screaming deal on a mortgage… yes, even when you figure in the tax consequences. Amazing, huh?

Recovery? Bottom? Phffft! Just because you’re still treading water in the middle of the ocean doesn’t mean you’re gonna make it.

Likewise I would have no problem with changing the rules to allow it for all mortgages after today, that way people who get sold this schlock would be aware that the rules have changed and it’s a much riskier investment.

Not that the highly moral investment bankers would ever let that stand in their way of repackaging, phony rating, and still selling off the blocks to unsuspecting investors while raking in another record setting quarter/year of bonuses.

A main goal was to push higher-income debtors into chapter 13 (and to make chapter 13s longer – 5 years). This part of bankruptcy is horribly complicated and messy for above-median earners. I’m sure it has been successful in pushing some people into chapter 13s. I just don’t think its effect is as great as was presumed before the laws changed.

Given that RE is an asset, cramming down the amount owed on it would put it in a special investment class. I mean, if I borrow $100,000, invest it in equities, and the value of it declines and I enter bankruptcy, can I get a cramdown on the $100k and still keep the stock?

No… it gets liquidated to pay off the creditors. Just like your home should be. Or if by act of law you are allowed to retain your home in bankruptcy, then you should pay it all back.

If you can get a 20% discount for a the property you want or 30% discount for a so so rock bottom property. Which one do you pick?

The flaw in your question is that you frame today’s prices as a “discount” from 2007’s prices.

If I take coffee mug worth $5 and mark it up to some suckers for $20, that does not mean $16 is a discount. It’s just less overpriced.

At the time there were all these claims that people were just running up debt to file bankruptcy, and yet much of the credit has an interest rate of 20+% (correct me if I am wrong by your observations). I do note, however, that most people don’t file bankruptcy because they have thousands of dollars.

Mortgage cramdowns aren’t to let people who can’t pay their mortgages off the hook. They for chapter 13 bankruptcy. That is for when people can prove to a judge that they have no way of paying off their debts, so a judge develops a plan for that person to pay as much back to the creditors as they can reasonably get. That means their credit card companies, auto loan companies, payday loan companies, ect. have to accept lower payments as an alternative to getting nothing in default.

The only creditor that doesn’t have to take a lower payment is the mortgage banker. Why? Because they have a better lobby. They can make more bad loans to deadbeats, therefore fast money, if they don’t have to worry about modifications in bankruptcy like every other lender. They can also keep pretending their loans are worth more than they actually are because they don’t have to mark down the value to whatever the bankruptcy judge says it’s actually worth. Good for mortgage bankers, bad for other creditors and bad for those who have to bail out the bank after the inevitable default (taxpayers).

This site would be the last place I would expect to find people actually supporting this system of exempting mortgages from cramdowns if you actually understood what it was about.

Anyway, being a bankruptcy attorney, I can confirm that Kary is correct. Huge decrease in filings in 2006 so every year is going to see a big percentage jump compared to the previous year. I think we’re now back to “normal” quarterly bankruptcy filings (compared to the early 2000s to 2004).

As far as the bankruptcy law changes go, for the majority of people not much has changed. Its more complicated and expensive but the end result (a discharge of most debts) is usually the same.

Don’t you think foreclosure will affect rental market? Those who lost their home will need a place to stay. As foreclosure is up, the rental vancant rate will be lower. Compare to last year, I don’t see a lot good rental deal this year.

Yeah you totally right. Rental deal are totally drie up. No good rental deal this year at all. All rent go up right now from high foreclosure.

Year-Over-Year CPI Negative 7th Consecutive Month; Rents Decline First Time In 17 Years

Rents Falling Everywhere

Given that the official measure of CPI is based on rents not housing prices, please consider the following collection of links courtesy of Lanser on Real Estate: Really? Rents fall almost everywhere.

• Manhattan:Apartment Rents Drop as Employers Cut Jobs
• Houston: Renters are snagging deals in a slowing local market
• Tuscon: On your mark, get set, go! Apartment firm makes game of it.
• Nashville: Apartment rates squeezed by lower demand
• Nationwide: Renters look for thirfty comfort, not style
• Tokyo: Apartment rents under pressure
• Middle East: 17% fall in rents seen in Qatar this year
• Orange County: O.C. renters get twice the freebies

In the first quarter of 2006 there were about 100,000 filings. These were the people that the law didn’t affect. So I start with a base of approximately 100,000, maybe a little higher for the scare factor on some that would otherwise be qualified under the new law. The filings stayed below the historic average until after the financial meltdown really took hold. Let’s remember all the areas that were already having extensive housing problems, such as most of the state of Florida, and Vegas was on the way down starting ~2006.

Now we have higher debt load with higher unemployment, even with the income restrictions the filings are increasing. I suspect that bankruptcy filings are going to continue to increase, much like foreclosures.

I suppose that this could be summarized:

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was a symptom of the underlying problem, and banks supported the act as an effort to put a halt to existing problems. Even pre-2005 the banks had the correct assessment that there existed extensive credit problems, it was the wrong solution.

Don’t get me started on how corrupt and convoluted our taxes are. Do you know how many pages are in our tax code?? In New Zealand’s tax code?? Shocking horrible mess brought on by special interests and corrupt politicians, aided by lawyers making things even more complicated.

End result is you will always be paying and likely more in the future than now.

From Article VII:

SECTION 2 LIMITATION ON LEVIES. Except as hereinafter provided and notwithstanding any other provision of this Constitution, the aggregate of all tax levies upon real and personal property by the state and all taxing districts now existing or hereafter created, shall not in any year exceed one percent of the true and fair value of such property in money. Nothing herein shall prevent levies at the rates now provided by law by or for any port or public utility district. The term “taxing district” for the purposes of this section shall mean any political subdivision, municipal corporation, district, or other governmental agency authorized by law to levy, or have levied for it, ad valorem taxes on property, other than a port or public utility district. Such aggregate limitation or any specific limitation imposed by law in conformity therewith may be exceeded only as follows: . . .

And with state budgets looking a little lean I expect the property taxes will not stay where they are.

http://4.bp.blogspot.com/_pMscxxELHEg/SsYshGLLHhI/AAAAAAAAGgE/522Nkr263kw/s1600-h/BankruptcySept.jpg

Now part of that might have been due to bad reporting. I can’t tell you how many people have told me they think that the new law prevented the discharge of credit card debt. If those people never saw an attorney, they wouldn’t know otherwise.

If we hold the percentage of personal income spend on housing constant, then what happens to housing and rental prices when families consolidate so fewer housing units are needed?

http://www.calculatedriskblog.com/2009/10/abi-personal-bankruptcy-filings-up-41.html

Housing expense has already been high percentage of people income and will remain so. As I said before, home ownership is not for everyone. Many people choose lifetime renter and easily happy with. House ownership is long time commitment and you will be happy when you own you own space debt free when you retired. Moore’s law didn’t apply to housing price. Housing price follow it’s own rule: keep with the inflation. The question is: Does your income keep up with the inflation or do you still have a job. You can’t afford to rent if you don’t have a job. Do you still want to buy a new computer twice faster and 1/2 the price. I won’t cause my computer is fast enough to serve my needs. Don’t want to waste money on it. Pay down your mortgage and let it compunding.

RE: Kary L. Krismer @ 15 – Let’s ignore the major cause of bankruptcy, being medical related debt, which usually reduces income producing ability.

Beyond that, it was my understanding that those income limits cut the bankruptcy filings way down, until recently as incomes have gone down with the increase in unemployment.

I think the main reason filings were down is everyone even considering a bankruptcy filed before the law went into effect.

An aside, I’ve been reading reports indicating that nanotechnology is around the state the IT was during the early eighties.

Do you think that housing will be a higher percentage of personal income?

“I didn’t see very clearly that any new technolgy come out to boost the economy. Last 100 years, we see the boom of steel, rail, automobile, aerospce, IT. What’s next? Green tech? If there is few tech invention and jobs still going to oversea, I don’t see our life standard will be better than last generation.”

Yet Moore’s Law lives on and on and on, even after Moore declared it dead.

Hi Scott, I Read Your Blog and Thought You’d get a Chuckle Over This Blog from Dr. Roubini’s Crowd

States in Part:

“…”Gold”en Opportunities

If you had 1,000 US dollars, would you invest it in Goldman Sachs, an ounce of gold or the S&P 500?

If you had 1 ounce of gold would you use it to acquire Goldman Sachs shares, S&P 500 or keep the ounce of gold.

Despite Goldman’s 400% rise from the lows that is 4x in 7 months, I still find it hard to believe the best place for $1,000 is NOT in an ounce of gold…

having said that, i fully understand the leader of the financial dictatorship of the US is Goldman.

heck, if you can:
a)get accounting rules changed
b)transfer bad loans off your pals and perhaps your own books to the government
c)acquire several 100 billion in government bailouts
d)control the market on a daily basis
e)continue to ‘earn’ and pay out billions to yourself throughout

all this while 17% are unemployed, inflation is starving millions on Earth and families are living in tents YOU could be king too.

all hail, King Goldman financial dictators of the world (for now)

BTW – IMHO sell GS buy gold

Proverbs 7:22 He goeth after her straightway, as an ox goeth to the slaughter, or as a fool to the correction of the stocks;

it is absolutely amazing to me that they are about to “”cash out”" again in bonuses after all that has happened

Hide replies Reply to this comment By Capone on 2009-10-14 11:05:03…”

The rest of the URL:

http://www.rgemonitor.com/roubini-monitor/257827/latin_america_economic_outlook#readcomments

I’ll keep building my downpayment savings and as house prices come even lower because of higher interest rates my savings will be an even larger percentage of the overall price of the house :)

Of course if it never reaches the point at which I’m willing to buy a house I might just buy a boat instead and sail away :)

Couldn’t agree more.

Is anyone else furious that Goldman Sachs, and Wall Street are back to huge bonuses? What a joke!

Goldman says: “we need to pay it to keep the top talent”. You mean the same ‘top talent’ that would have closed your doors had it not been for the taxpayer intervention.

I have contacts in hedge funds, and Wall Street. Most are not worth this amount of money, and could easily be replaced by unemployed grads.

When are people going to start getting angry?

You also need to look at the interest rate. A 4% jumpto 5% is like a 20% HOUSING Price increase for the 1st couple of years. If you want to know the future for the interest rate. Look at the money supply. Someday down the road when economy out of ditch, the Fed will increase the rate for sure. Interest rate at 0% is insane. Don’t comare US to Japan. Japanese are always savers in good and bad time. The American are always spenders in bad and good time. It’s nothing wrong to wait and see. But like you, everyone are waiting. It doesn’t take long for oil to shoot from 20USD a barrel to 150USD. The DOW from 6000 to 10000 just took 6 months. Too fast to sudden. It’ doesn’t mean housing will repeat like DOW. The demand for house is still there. From peak to 22% down is a good thing, means are are one step closer to the bottom. But no one canl ever tell you where is the bottom is. The worst I worried is everyone include people on this board are jumping in when they realized that the worest is over and there is so much greenback floating around chase for limited goods. You know housing are built by wood, concrete, and metal. Compare US housing price to other developed world. It’’s cheap. Of course, if you couldn’t afford in the 1st place, you can’t afford even the market is crashed

I will keep renting for the foreseeable future until I can justify buying using economic fundamentals. Very high unemployment, continued job losses, increasing foreclosure rates, high shadow inventory,……..etc does not indicate a bottom to me.

I don’t know about you but a 10% drop in price on a $350,000 house covers a lot of rent for me. without even including the taxes, repairs, and loan interest.

You Got It Tim

The total year 2009 GDP is estimated by the IMF at a Horrifying 3+% decrease for America and Seattle.

But the recent Whitehouse economic data looks rosy for Q3, at a +2.2 [albeit Q1 was decreasing at 6+%]?

The problem with massive shifts down in the GDP and minor shifts up in the GDP is perception. Assuming the massive downward shifts earlier this year were as most economists called, “inventory” burning with no new sales; then the minor “inventory” recovery doesn’t mean a return to the real estate bubble with no foreclosures and using our homes as ATMs to over-consume, as before. The American Consumer driving the Seattle housing market is dead and inventory blips upward are almost completely meaningless compared with the approx 70% driver of our economy unrestored, the American/Seattle Consumer.

See my proof in the article in part:

“….As Kevin hall at McClatchy newspapers argues, the consumer economy is dead, all starting in September 2008 when the US government seized Fannie Mae and Freddie Mac and Lehman Brothers filed for bankruptcy.

Hall writes: “One year later, the easy-money system that financed the boom era from the 1980s until a year ago is smashed. Once-ravenous U.S. consumers are saving money and paying down debt. Banks are building reserves and hoarding cash. And governments are fashioning a new global financial order.”

That means recovery will be anemic, economic growth will be around 2% and it would be five years until the economy generates enough jobs to make up for those that have been destroyed.

It will be some time before the US economy becomes competitive again….”

The rest of the URL:

http://www.soxfirst.com/50226711/the_us_consumer_economy_is_dead.php

This is what uncontrolled housing debt in America did to us. Foreclosures are the chronic symptom and yes, it will get much worse IMO without consumers in America, irrespective of moot point Q3 GDP growth to simply replace inventory that should have been sold in Q4 2008.

Beyond that, it was my understanding that those income limits cut the bankruptcy filings way down, until recently as incomes have gone down with the increase in unemployment.

Let’s switch to a different topic that banks have control of: Raising rates on credit cards.

Congress in their infinite wisdom fired warning shots to the banks:

**** RAISE THE RATES ON CREDIT CARDS TODAY ****

**** RAISE THE RATES ON CREDIT CARDS TODAY ****

I forget the exact day, what is in in February 2010, maybe it was July 2010, such activity is prohibited.

The word I am hearing is that rates are being raised en masse, both in terms of people and APR.

Hand waving and cheerleading are slowing the correction and while that may seem like a good idea to you I would rather move out of the country to someplace that has a clue than suffer through a couple of lost decades ala Japan while our government props up zombie institutions and prices slowly trickle down. It’s good for some people but I think it’s a bad idea for the majority of the people and the future of the country.

I’m betting the bankers getting record pay this year while the economy grinds slower would disagree with me. :-