5 ms·

So basically for everyday people it's: Heads (banks keep mortgages): You Lose, because the market value of your home is artificially high, and when the bottom

So basically for everyday people it's: Heads (banks keep mortgages): You Lose, because the market value of your home is artificially high, and when the bottom goes out on the market again (unless you happen to be drinking the kool aid and equate a life time of mortgage payments as owning a home), you'll either find yourself on foreclosure or trying to refinance again. Tails (City and PE get mortgages): You Still Lose, but now you have to pay a PE firm those monthly mortgage payments while the above still applies. Am I missing something?

mbreese 13y ago
I think that the benefit of the Tails option is that your monthly mortgage payments are more in line with what your home is actually worth, as opposed to the inflated market value of the original mortgage.
- cinquemb 13y ago
  Oh, so the homes get refinanced in the process? Does that happen every time the market cycle goes into a down turn, or just an one and done in the kick the can down the road kind of way?
  - fnordfnordfnord 13y ago
    >Oh, so the homes get refinanced in the process? That's what they're selling. Whether it really happens...? It wouldn't be the first time a gov't entity promised a plan that would 'help' homeowners and that plan failed to actually do so.
    - cinquemb 13y ago
      Ok, so basically the fundamentals aren't really being addressed to why this is even a problem in the first place, and the game can go on for another day. Fun to watch… As an aside, I wonder if it would just be better sign yourself onto a mansion, get your neighbor to burn "your" house down (using pgp to communicate this with temporal keys), collect insurance, cover neighbors bail and skip to the some emerging market (with no extradition treaty with the US or its allies) together with your "ill" gotten earnings in ones under luggage. </joke>
      - fnordfnordfnord 13y ago
        May there be a throng of distraught weeping bankers and insurers at your funeral, sir.
  - mbreese 13y ago
    Yes. (from the article) The city buys the original mortgage and then sells you a new mortgage for a more appropriate valuation. This would hopefully be a one and done deal, but it does kind open a pandora's box in the process.
- smtddr 13y ago
  I don't claim to understand a lot of this, but I know if the principle of my home was altered to current market value & mortgage payment was made to match(looking at zillow.com's numbers) I'd be paying 1k/month less. That would be life-changing for my family. I wish someone would come seize my mortgage. That being said, I don't fully understand who's getting negatively impacted by me not paying so I await replies to my comment to enlighten me.
  - chiph 13y ago
    The investors who bought the bundled mortgages would be harmed. After all, if your mortgage was $300k and under this forced refinancing scheme it's now mortgaged at $200k, that $100k just didn't vanish - someone lost that money. It might have been divided up amongst 1500 small investors, or it might have been a handful of larger investors, the net result is the same -- someone is out that money. On the larger stage, the City of Richmond is cutting their own throat by doing this. It's doubtful that I'd ever buy any of their municipal bonds after this. If I were somehow persuaded to (fat chance), it'd cost them a much higher rate - something like what Detroit is paying.
    - cinquemb 13y ago
      >It's doubtful that I'd ever buy any of their municipal bonds after this Funny thing is, people probably own their munibonds and don't even know it.
    - smtddr 13y ago
      Ah, okay. Then it depends on how I feel about the investors taking the hit. I imagine(incorrectly?) the investors as a group of wealthy people that won't suffer a huge decrease in quality-of-life by taking the hit but all the "regular" people in underwater mortgages would have significant gain in quality-of-life by the freed financial resources. This is me thinking that for a lot of people about 40% to 50% of their income goes to mortgage payments. The other problem though, is that wealthy people always seem to have a way of passing the damage down to the working class.
      - 13y ago
- smsm42 13y ago
  What is the home "actually worth" changes monthly, and even that is a very rough estimate since you have no idea how much it is worth until you actually sell it. So it would be more in line with whatever bureaucrat decides the home is worth in some particular point of time, probably basing on political considerations having little to do with market reality. It probably would result in some money being robbed from the banks - after all, that's where the money is - and some payments being lowered - after all, that's where the votes are - but it would have very little to do with actual market values.
Dylan16807 13y ago
I'm not sure. I see potential benefits for everyone. Banks - 75% of the house's market value is probably more than they would get from repossession and auction Home buyers - they now owe what the house is worth, instead of more City - has enough money to run, keeps citizens happy Company - $5k (though this can be argued to be unfair and the middleman should be removed)
- sseveran 13y ago
  The "Banks" probably don't stand to lose much money. Pension funds and private investors stand to lose money. Also as tax payers we would all pay assuming that at least some percentage of loans are held by Fannie and Freddie. It is a wealth transfer to homeowners and a select group of players from everyone else. And if Richmond can make it work then other municipalities will undoubtedly follow suit. And if it works for mortgages why not other assets?
  - Dylan16807 13y ago
    I would be pretty happy if pension funds would stop buying mortgages in an expectation of being paid back from underwater. Don't contribute to the problem and you won't get bitten.
    - sseveran 13y ago
      Maybe we should just tell the CalPERS pensioners, sorry, we gave it to the home owners.

mbreese 13y ago

I think that the benefit of the Tails option is that your monthly mortgage payments are more in line with what your home is actually worth, as opposed to the inflated market value of the original mortgage.

cinquemb 13y ago
Oh, so the homes get refinanced in the process? Does that happen every time the market cycle goes into a down turn, or just an one and done in the kick the can down the road kind of way?
- fnordfnordfnord 13y ago
  >Oh, so the homes get refinanced in the process? That's what they're selling. Whether it really happens...? It wouldn't be the first time a gov't entity promised a plan that would 'help' homeowners and that plan failed to actually do so.
  - cinquemb 13y ago
    Ok, so basically the fundamentals aren't really being addressed to why this is even a problem in the first place, and the game can go on for another day. Fun to watch… As an aside, I wonder if it would just be better sign yourself onto a mansion, get your neighbor to burn "your" house down (using pgp to communicate this with temporal keys), collect insurance, cover neighbors bail and skip to the some emerging market (with no extradition treaty with the US or its allies) together with your "ill" gotten earnings in ones under luggage. </joke>
    - fnordfnordfnord 13y ago
      May there be a throng of distraught weeping bankers and insurers at your funeral, sir.
- mbreese 13y ago
  Yes. (from the article) The city buys the original mortgage and then sells you a new mortgage for a more appropriate valuation. This would hopefully be a one and done deal, but it does kind open a pandora's box in the process.
smtddr 13y ago
I don't claim to understand a lot of this, but I know if the principle of my home was altered to current market value & mortgage payment was made to match(looking at zillow.com's numbers) I'd be paying 1k/month less. That would be life-changing for my family. I wish someone would come seize my mortgage. That being said, I don't fully understand who's getting negatively impacted by me not paying so I await replies to my comment to enlighten me.
- chiph 13y ago
  The investors who bought the bundled mortgages would be harmed. After all, if your mortgage was $300k and under this forced refinancing scheme it's now mortgaged at $200k, that $100k just didn't vanish - someone lost that money. It might have been divided up amongst 1500 small investors, or it might have been a handful of larger investors, the net result is the same -- someone is out that money. On the larger stage, the City of Richmond is cutting their own throat by doing this. It's doubtful that I'd ever buy any of their municipal bonds after this. If I were somehow persuaded to (fat chance), it'd cost them a much higher rate - something like what Detroit is paying.
  - cinquemb 13y ago
    >It's doubtful that I'd ever buy any of their municipal bonds after this Funny thing is, people probably own their munibonds and don't even know it.
  - smtddr 13y ago
    Ah, okay. Then it depends on how I feel about the investors taking the hit. I imagine(incorrectly?) the investors as a group of wealthy people that won't suffer a huge decrease in quality-of-life by taking the hit but all the "regular" people in underwater mortgages would have significant gain in quality-of-life by the freed financial resources. This is me thinking that for a lot of people about 40% to 50% of their income goes to mortgage payments. The other problem though, is that wealthy people always seem to have a way of passing the damage down to the working class.
    - 13y ago
smsm42 13y ago
What is the home "actually worth" changes monthly, and even that is a very rough estimate since you have no idea how much it is worth until you actually sell it. So it would be more in line with whatever bureaucrat decides the home is worth in some particular point of time, probably basing on political considerations having little to do with market reality. It probably would result in some money being robbed from the banks - after all, that's where the money is - and some payments being lowered - after all, that's where the votes are - but it would have very little to do with actual market values.

Dylan16807 13y ago

I'm not sure. I see potential benefits for everyone. Banks - 75% of the house's market value is probably more than they would get from repossession and auction Home buyers - they now owe what the house is worth, instead of more City - has enough money to run, keeps citizens happy Company - $5k (though this can be argued to be unfair and the middleman should be removed)

sseveran 13y ago
The "Banks" probably don't stand to lose much money. Pension funds and private investors stand to lose money. Also as tax payers we would all pay assuming that at least some percentage of loans are held by Fannie and Freddie. It is a wealth transfer to homeowners and a select group of players from everyone else. And if Richmond can make it work then other municipalities will undoubtedly follow suit. And if it works for mortgages why not other assets?
- Dylan16807 13y ago
  I would be pretty happy if pension funds would stop buying mortgages in an expectation of being paid back from underwater. Don't contribute to the problem and you won't get bitten.
  - sseveran 13y ago
    Maybe we should just tell the CalPERS pensioners, sorry, we gave it to the home owners.