Comments on: Mortgage Modifications That Focus on Principal More Successful

By: The First-Time Home Buyer Guide: 100 Must-Read Blog Posts | Construction Management Degree

Wed, 07 Apr 2010 11:30:34 +0000

[...] time and considering a short sale property as an option ought to review the possible downsides. 9. “Mortgage Modifications That Focus on Principal More Successful” at The Real Estate Blog… : First-time homebuyers and their more experienced contemporaries can look into the research behind [...]

By: Mike

Mike — Mon, 18 Jan 2010 19:55:03 +0000

Kirk Kinder makes good points.

Bankers and politicians believe (incorrectly) homeowners value their homes and public perception.

They don’t!

In Florida, we face serious market distress with shadow inventory not disclosed in numbers used to (sound) better than they are.

Job losses continue!

On one hand, principal reduction is only valid solution to long-term housing stability.

On the other hand, principal reduction should result in more defaults as homeowners want their “slice of the pie” as well.

Unfortunately, Kirk, Florida (at least) cannot allow the market to correct on its own. Even an $8k (and $6500) “gift” cannot force all buyers off the fence.

Many buyers say their jobs are secure (whatever that means today) and they say they plan to stick around for 3-5 years.

Yet, these people are concerned about buying into a market experiencing continued value drops.

Perhaps Kirk is in a market not besieged by distressed properties or underwater values as I am in Sarasota and Orlando (and everywhere in between).

Allowing the market to correct on its own is HORRIBLE.

Mike

By: Portland Condo Auctions

Portland Condo Auctions — Fri, 08 Jan 2010 18:01:50 +0000

Makes perfect sense to me. You are only helping them in the short term, if their home does not go up in value then they dont have much incentive to stay.

-Tyler

By: Kirk Kinder

Kirk Kinder — Thu, 07 Jan 2010 02:27:32 +0000

If the bank takes the hit on the principal writedown, I don’t have a problem with this. If there is a move for taxpayers to pay for the principal writedown, I am totally against it. I don’t care if the re-default rate is lower. This would create a massive moral hazard.

How many people who can make payments but have negative equity would look for a principal paydown at the expense of the taxpayer. The numbers would be huge.

And, don’t fool yourselves. A large percentage of the 30% of homeowners with negative equity are not poor schmucks who got suckered into homes they can’t afford. Many are people who did not buy at the top of the market, but they refinanced several times to buy new cars, pay for lavish vacations, etc.

Just let the markets correct. As the prices have dropped, more buyers have re-entered the market. This is the only way to create a healthy market.

By: missoula physical therapist

missoula physical therapist — Wed, 06 Jan 2010 23:01:43 +0000

Makes complete sense to me, I have a friend who is upside down and way behind or her mortgage. She talks about walking from it and renting and being way ahead with money, if she still had any equity, she wouldn’t even consider walking away from the house.

By: Oliver

Oliver — Wed, 06 Jan 2010 21:19:29 +0000

That’s an interesting thought.

But if they start lowering principal then wouldn’t everyone just start missing payments and request a loan modification? Then the banks would have to lower EVERYONE’s balance. Seems like an easy fix to a complicated problem, that in the long run would only get more complicated.

What do you think?

Oliver

Follow me on Twitter:
http://twitter.com/OliverGraf360

By: Simon Salloom

Simon Salloom — Wed, 06 Jan 2010 08:18:21 +0000

Good thing you have done here, Thanks! Simon Salloom LA Times: Southern California home prices and sales improve in November Southern California's real estate industry, decimated by the mortgage meltdown and housing bust, is stirring to life again -- even making hiring plans -- as home prices bounce back. Find more information about Santa Monica and Brentwood Real Estate here

By: Bob

Bob — Tue, 05 Jan 2010 19:24:10 +0000

I agree that lowering the principle is the ONLY way a loan mod will work. The homeowners do not feel good about a situation where there net worth has taken such a big hit. Hopefully these types of loan mods will become the norm.