Seattle To Get In On Bailout Action

Looks like the City of Seattle is getting in on some of the home “owner” bailout action.

The City of Seattle is offering a helping hand to homeowners facing foreclosure.

The pilot program would offer $5,000 loans to 40 families.

Wow, $5,000, huh? That will let some overstretched buyer keep making their adjusted-ARM payments for about… six months. After which, they’ll either need to find another sucker to front a loan, or they’ll end up in foreclosure anyway. Or maybe they’ll just take the $5,000 and get in touch with You Walk Away. Cha-ching.

“When a home forecloses on a block, within hours the value of the homes on that block are reduced by $5,000 each,” said Mayor Greg Nickels.

Oh, goodness. We wouldn’t want the value of other homes to go down. That would be terrible, just terrible. It might even lead to… actual, affordable housing! We can’t have that. Gotta have people relying on the government to get them into “affordable” housing.

Bah.

(Lori Matsukawa, King5, 01.30.2008)

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

50 comments:

  1. 1
    Batman says:

    If the people are on the brink of foreclosure, the smart bet would be take the money and run. That $5,000 would be a good start for an IRA or high yield savings account….something that is actually worth putting $5,000 into that won’t be lost in a few months of paying a loser mortgage.

  2. 2

    I really try to refrain from going political here, after all it’s a housing/bubble blog not a politics blog, but…
    What’s Greg Nickels really done to make housing more affordable?
    Well, he Cascade neighborhood, which used to only have inexpensice housing, basically got purchased by Paul Allen and renamed ” South Lake Union”, most of the older residences destroyed and replaced with much more expensive, much more glitzy trendy housing. Why, the taxpayers even paid for a streetcar to serve the Mayor’s corporate master.
    Now, I read that the city has been increasingly destroying he encampments of homeless folk. Golly, if people could see homeless encampments it might lower property values and strip away the veneer
    of Seattle as only the home of wealthy young up and coming software moguls.

  3. 3
    deejayoh says:

    but Tim – that’s (insert pinky finger in mouth) TWO HUNDRED THOUSAND DOLLARS!

  4. 4

    Most people are becoming wise to the “Just walk away…” option when they realize they are under water. I see this as just a $5k bonus as they walk out the door on their already HELOC’d home.

  5. 5
    redmondjp says:

    Tim said:

    Wow, $5,000, huh? That will let some overstretched buyer keep making their adjusted-ARM payments for about… six months. After which, they’ll either need to find another sucker to front a loan, or they’ll end up in foreclosure anyway. Or maybe they’ll just take the $5,000 and get in touch with You Walk Away. Cha-ching.

    My thoughts exactly, as I watched the story last night on the 11pm news. And it’s another LOAN, so if they can’t pay their mortgage, how in the world are they supposed to pay this back (which means that WE will end up paying)? Oh, it just makes me sick how politicians at all levels (from Shrub all the way down to Nickel-dime) are pandering to the underwater homedebters who should have never bought in the first place.

  6. 6
    Ubersalad says:

    A great idea just popped into my head. Cashout your house with as much money as possible, take $5k from the city and fly down to Vegas, put it all down in roulette.

    Nothing original, but quite applicable if you’re going to foreclose anyway.

  7. 7
    disbelief says:

    “A federal study by Freddie Mac in 2004 found that stabilization loans combined with counseling reduce foreclosures by 80 percent among all borrowers.”

    And for how long, if it’s not to nit-picky to ask. And does this contrived % figure include this recent housing bubble that has left many owing considerably more than what their home is worth ( it would take a hell of a “stabilization loan” for these folks)? Ugh, every time I see figures in newspaper articles I cringe!

    Also, I’d like to think that the City is smart enough to not make these loans “no strings attached”. But for the true-blue exotic financing cases, this can’t be sufficient. How do you steer someone into a workable loan when their payment has reset and they are now needing to make payments that are twice what they can afford?
    It all comes down to how many people got exotic loans in the Seattle area, and how much (and if) home values slide this year.
    Oh, wait, I forgot were in Seattle and there where likely only two or three such loans, tops! People here make more than enough on average to finance $500K homes, so we can expect another 5-10% increase in value in this year. They don’t call it the “emerald city” for nuthin’ y’know.

  8. 8
    50%off says:

    But i FEEEEL so much more compassionate and after all, we just have to DOOOO something! It might not work but, at least we tried!

  9. 9
    Buceri says:

    I just heard on the Dave Ross show that it’s supposed an interest free loan. They get the money back even if it comes from the foreclosure funds.

  10. 10
    Brian says:

    Isn’t the best case scenario for the gov’t, existing home owners, the credit markets, and I guess the economy in general that house prices stay flat for awhile and let inflation do the price lowering?

    Bubbles and huge declines end up being bad in aggregate, so I understand the desire to prevent a decline, but it’s too bad they don’t try to prevent a bubble too, but instead seemingly feed it.

  11. 11
    Affluent Bitter Renter says:

    Don’t criticize Mayor Nickels – this is a classic example of government pretending to do something while not actually doing anything. Ponying up 200K is hardly going to stem the foreclosure tide in Seattle.

  12. 12

    So I can’t say anything about how Mayor Nickels eats homeless people?

  13. 13
    patient says:

    Did Mayor Nickels wake up this morning and thought he was mayor of San Diego or something? I can’t see how this is relevent since we don’t have, nor will we have foreclosures in Seattle.

  14. 14
    disbelief says:

    Sh*t, I didn’t see that they were talking about $200K. Absolutely laughable!
    And after this “pilot” program, if they have some reason to think it showed some success, I’m sure the good people of Seattle won’t have any problem ponying-up the “real” money that will be needed once things get serious. I think it should be raised by a tax on the business licensing for realty firms.

  15. 15
    Buceri says:

    Off topic – but it looks like we’ll finish January’s inventory at +20% over December 31st.

  16. 16
    singliac says:

    Tim,

    What’s with the new google ads? I’ve always told people that the bloggers here have no financial incentives behind their reporting (besides wanting cheaper housing). That gave you a lot more credibility in my eyes.
    I don’t blame you for wanting some payment for all the hard work you put into this site, but it’s pretty jarring to see ads for Ballard Condos littered around the page. I just cringe at the thought of my friends saying “Of course they say there is a housing bubble. That’s how they make their money.”

  17. 17
    Orion says:

    Since I don’t live in Seattle or King County, I sure hope none of my taxes are being used for this ridiculous bailout, I don’t care how small it is. I guess every pothole in Seattle is filled so they have some mad money to waste.

  18. 18
    MisterBubble says:

    I’m taking out a loan to feed my pony.

  19. 19
    Affluent Bitter Renter says:

    Singliac said:

    “I don’t blame you for wanting some payment for all the hard work you put into this site, but it’s pretty jarring to see ads for Ballard Condos littered around the page. I just cringe at the thought of my friends saying “Of course they say there is a housing bubble. That’s how they make their money.””

    I think that it is reasonable for Tim to get some compensation for lots of hard work. Besides, having ads for “Ballard Condos” and other RE sales pitches is hilarious – talk about advertising to the wrong demographic!

  20. 20
    Scotsman says:

    Yup, $200K will stop this dead in its tracks. I’m going out right now to purchase a couple of good rentals.

    The bottom is in!!

    Maybe the Governor will come up with a matching funds program- wouldn’t want to let a great opportunity to buy some cheap street cred get away!

  21. 21
    AndySeattle says:

    “I’m taking out a loan to feed my pony.”

    Just feed the pony the money!

  22. 22
    Nolaguy says:

    When an area goes from a free-market economy to a socialist republic, is that good or bad for housing values?

  23. 23
    Happy Renter says:

    I’m not even privileged enough to think I can own a house. Where’s my $5k? Having 0 house is just as worse than having +1 house that soon will be -1 house, right? After all, I don’t have a yard! Poor me!
    /hehe

  24. 24
    singliac says:

    Good point about advertising to the wrong demographic. I just wish I could find a way to get paid for all the time I spend reading this blog.

  25. 25
    The Tim says:

    singliac, I will be addressing the new ads sometime in the next few days. Stay tuned.

  26. 26
    Angie says:

    I don’t begrudge you the ads, Tim.

    I think the, shall we say, poorly targeted Google ads are a common problem for consumer-oriented websites and blogs. I recall you’re a reader of Get Rich Slowly, right? JD’s been dealing with that for a long time—all kinds of goofy get-rich-quick ads get targeted to his site because of its name, whereas his blog’s real focus is about avoiding crap like that and being responsible for one’s personal finances.

    Tim will get more money if we click on the teeny little adlets, but just having them on the site racks up money per page view. They’re pretty ignorable, and we can have a lot of fun making fun of them, so I say, no worries.

  27. 27
    Affluent Bitter Renter says:

    The Tim said:

    “singliac, I will be addressing the new ads sometime in the next few days. Stay tuned.”

    Please also explain what brand of private jet you will be purchasing as part of your incredibly lucrative participation in the Google AdWords campaign! (grin)

  28. 28
    nitsuj says:

    “Oh, it just makes me sick how politicians at all levels (from Shrub all the way down to Nickel-dime) are pandering to the underwater homedebters who should have never bought in the first place.”

    I wonder if those people are more or less likely to vote? My gut reaction would be less, but what the hell do I know?

  29. 29
    deejayoh says:

    Buceri // Jan 31, 2008 at 12:37 pm

    Off topic – but it looks like we’ll finish January’s inventory at +20% over December 31st

    Anyone else notice that the inventory didn’t drop by 100 units this morning like it usually does?

    Oh, and if it stays at ~9500 that will be up 60% over last January’s figure of 5,932 listings.

  30. 30
    Orion says:

    “Tim will get more money if we click on the teeny little adlets, but just having them on the site racks up money per page view. They’re pretty ignorable, and we can have a lot of fun making fun of them, so I say, no worries.”

    Actually Angie, Adwords ads are only charged to the advertiser when clicked, no page view charges. There may be other ad networks that charge per-view, but not Google’s.

    The Housing Bubble Blog has had them for quite a while, usually horribly inappropriate as they are here. The advertisers could use negative keywords to block these bubble sites, or even choose individual sites they don’t want to appear on, but that’s somewhat advanced and time consuming.

  31. 31
    ComparativePoverty says:

    If a person does not pay back a loan (either because of short sale or foreclosure or any other reason), then is the amount of default considered ordinary income, subject to federal income tax?

  32. 32
    deejayoh says:

    If a person does not pay back a loan (either because of short sale or foreclosure or any other reason), then is the amount of default considered ordinary income, subject to federal income tax?

    This used to be the case for both short pays and foreclosures, but the “The Mortgage Forgiveness Debt Relief Act of 2007” (H.R. 3648) provides for a 3 year suspension of traditional tax treatment on forgiven debt from a foreclosure (1/1/07 through 12/31/09). This is also known as the “jingle mail” bill. Passed in December.

  33. 33
    bitterowner says:

    I didn’t even notice the ads, which shows how ineffective they are….or how poor my powers of observation are. Either way, this is America – nothing wrong with making a buck.

  34. 34
    WestSideBilly says:

    I assume Tim pays a fair amount of money out-of-pocket to keep this site running, not to mention time invested in writing articles (along with deejayoh and S-Crow). Skimming past some ads that may or may not be relevant to your interests shouldn’t bother anyone.

  35. 35
    michael says:

    Yo Tim. I like the Google Ads and I hope you make money from them. You should get a little payback. I noticed that ebay has a nice little API that allows for display of their products too.

  36. 36
    Scotsman says:

    Get as many ads as you can- you deserve much more reward than you’ll likely ever see for your efforts here!

  37. 37
    vboring says:

    i normally use firefox’s adblock, so i don’t see hardly any ads, but i’ll disable it for seattle bubble. i’ll even try to remember to click on the ads every once in a while.

    how else will i find out about how to make over $30k/ mo every month for the rest of my life?

  38. 38
    The Tim says:

    :^) I use Adblock too. I love it and highly recommend it.

  39. 39
    stephen says:

    Yeah, go for it :-)

    If the Seattle RE prices continue upward you can use your bubble proceeds to make up the difference…

  40. 40
    Buceri says:

    Interesting drop in inventory at 2AM.

    Date Time
    02:00 9541 10327 9631
    02.01.2008 03:00 9551 10327 9257
    02.01.2008 04:00 9551 10327 9259

  41. 41
    Angie says:

    Actually Angie, Adwords ads are only charged to the advertiser when clicked, no page view charges. There may be other ad networks that charge per-view, but not Google’s.

    Hm. I put Adsense ads on my once-and-future blog pages and IIRC there was some infinitesimal accumulation for per-page-view, and a lot bigger payback for a click. I thought that was through Google, but it’s all sort of hazy to me now, and it’s sure not like I made any money at it!

    I say we all make a habit of idly clicking around these ads to jack up Tim’s take, and then make him buy the beer at the meetup.

  42. 42

    …and we were wondering why The Tim was polling us to find out where we would choose to get a free house?
    Maybe he just wanted our opinions to see which neighborhood he should spend his newly found Google ad wealth.
    But how do I really feel?
    The Tim puts in an enormous amount of time and resources to bring us something that is very useful and not found elsewhere, so I hope great wealth comes his way from ads for Ballard condos, and if I need to click on those ads for The Tim to get paid, I’d be happy to..
    OTOH, if we see full page ads sponsored by the NAR or John L Scott, I might be a little more suspicious.

  43. 43
    notabull says:

    Interesting drop in inventory at 2AM.

    Date Time
    02:00 9541 10327 9631
    02.01.2008 03:00 9551 10327 9257
    02.01.2008 04:00 9551 10327 9259

    This happens every month at about this time. I think, but am not sure, that this relates to expired listings.

  44. 44
    Buceri says:

    “This happens every month at about this time. I think, but am not sure, that this relates to expired listings.”

    Yeah, that’s probably it. It should show a hefty increase in the next 60 days to start the hot spring season.

  45. 45
    notabull says:

    “Yeah, that’s probably it. It should show a hefty increase in the next 60 days to start the hot spring season.”

    I’m guessing that the inventory that’s due to come online throughout the year will be more weighted towards the the beginning of the year than it usually is.

    My guess is that a lot of people that would otherwise list in Spring are deciding to “beat the rush” and list a little earlier. Once we get YOY declines (coming soon to a newspaper near you!) I think this rush for the exits will get larger.

  46. 46
    deejayoh says:

    Personally, I am hoping certain RE agents sites show up in the ads, so I can click them repeatedly and drive up their ad costs. Not you Ray. someone else…

  47. 47

    BUT DIDN’T THE GOVERNOR TELL US ITS A GOOD TIME TO BUY, THE ECONOMY IS ROSY

    How come we’re printing slumping economy welfare checks; yet in denial and telling everyone unemployment is somehow so low and we need more workers in the city to make it even worse with more competition driving wages and real estate even lower?

    Sometimes I think a good portion of our Dem/Rep government leaders need to take common sense 101. And what’s wrong with lower home prices anyway?

  48. 48
    Joel says:

    Google is pretty good at catching click fraud so I wouldn’t recommend clicking on ads just to generate money for the Tim. You may just end up getting his account suspended. (Oh no, did I just give a spiteful RE agent a bad idea?)

  49. 49

    I did notice in the NWMLS stats today that there were an extraordinarily large # of expired listings. Lately it’s been in the neighborhood of 100, today it was 900 something.

  50. 50
    Orion says:

    Google is pretty good at catching click fraud so I wouldn’t recommend clicking on ads just to generate money for the Tim. You may just end up getting his account suspended. (Oh no, did I just give a spiteful RE agent a bad idea?)
    Perhaps we should stop discussing Adwords before we wake the powerful Google from its fitful slumber. We don’t want the Google to cast its lidless, fire-rimmed eye upon us and incur its horrible wrath, pinning us under its deadly gaze .

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