Underwater? Stop Paying Your Mortgage, Stupid!

University of Arizona law professor. Brent White agrees with my recommendation to those who owe more money than their home is worth! (Underwater)Stop Paying Your Mortgage, Stupid!

I have been arguing for more than a year as I saw people's lives being destroyed by using their retirement funds, college funds, etc to pay on a mortgage on a house that is worth less than the loan. Invariably, when the funds ran out, they lost the house anyway, leaving them totally destitute. This makes no financial sense. Corporations and businesses don't play by these rules. Case in point: Maguire Properties Inc., one of the largest commercial landlords in California, walked away from seven prime office buildings in Los Angeles and Orange counties last year, defaulting on loans worth more than $1 billion. "The deal no longer made financial sense!"

Tishman Speyer walked away from a $3 Billion mortgage on 110 buildings in NY's Stuyvesant Town after property values fell to half of the purchase price.

Sunshine Properties, a major hotel owner let a string of Hyatt's, Hiltons and other marque properties go back to the lender when their values fell.

Morality? Please! What would Ben Bernanke, or Tim Geitner do if they were in such a dire situation?

We are under no obligation to adhere to any moral standards that are different from the banks who made the immoral loans that brought down the financial system. They knew what they were doing, but only saw the dollar signs generated by the lending frenzy.

Then, when the inevitable defaults happened, will they write down the balance of your underwater mortgage so that you can pay it off? You mean the banks taking a real loss, are you kidding? They even strong armed the government, (you and me) to pay off their paper losses! They have totally forfeited any moral claims on borrowers, in my estimation.

As a former bank loan officer myself, I will show you how to stay in your home for 12-36 months without ever making an additional mortgage payment, allowing you to recoup some of your lost money so you can accumulate a nest egg for your future.

So, if you are underwater in your home, get over it. Think of the money, like a business person. The house has been lost due to the financial schenanigans of the banks. Save your money, prepare to find a cheaper rental. It is even possible that you will be able to buy another, similar or better house in the future at a much better price.

Your credit may be bad for 7 years, so buy that car or whatever before you do this but think about it, do you really want to be the one with the highest credit score among your homeless mates living in a card board box under the viaduct?

If you would like to know how you can stop paying your mortgage and remain in your home for 12-36 months, contact me.

Bill Young, Personal Financial Consultant

Get Ready For Another 50% Drop in Home Prices!

Just received notice from Amhesrt Security Group that they estimate another 7 Milion homes are in the bank's unsold inventory of foreclosed homes!

We are also at the early stages of a catastrophic wave of new foreclosures as the Option Arms reset and Jumbo loans default at a record pace.

Option Arms were loans made to good credit buyers that employed a microscopic "Teaser" interest rate, is some cases as low as 1% for the first 3-5 years of the loan. These resets will take place between the end of this year and 2011Estimates are that as much as 70% of these loans will default, given the employment picture which is still worsening.

Jumbo loans were large loans given to "Executive" home buyers. So many of these loans have defaulted that Thornburg Mortgage, the larges player in this market just went under. Their avearage Jumbo Loan borrower had a FICO score of 740 and an income of over $200,000!

We predictt that because of the factors mentioned above, the number of "Underwater" mortgages, where the value of the house is less than the mortgage balance will exceed 50% by mid 2010, if not sooner.

This will initiate the real bottoming of the market, the capitulation of millions of sellers who were holding their properties off the market waiting for the market to improve.

As they dump their properties into the ballooning cascade of the bank owned REO's, prices will plummet another 50% from where they are now, bringing the median priced home below $100,000 in many areas.

As far as the governments efforts to shore up housing and prevent this scenario? Puleeze!

Bill Young 646-961-3818
PS If you cannot pay your mortgage, we can show you how to stay in your home for 1-3 years without making any more payments! Call for info

We al Estate Owned

What to Do if You Can't Pay Your Mortgage!

I am a Personal Financial Coach. I got burned in the last housing bubble in the 80's and learned my lesson. I did not participate in this bubble and in fact called the end of this lunatice housing bubble back in June 2005, right at its height, (The Coming Collapse of the Housing Bubble!)

Bush and Obama, and our entire Federal Government, are pawns of the Fed Reserve and the Banks which own it. They are the ones who created and are profiting from the creation and destruction of the housing bubble.

The government cannot or will not do what needs to be done to save millions of homw owners, which is to have the Government buy the criminal loans foisted on homeowners from the banks at today's loan values, not the original amount of the loans and reissue them on terms the homeowners can afford.

This is exactly what was done during the First Great Depression and it saved millions of homes. The Fed refuses to even entertain this idea because it would require the banks to take actual losses they could not hide with accounting tricks.

Their attitude is the Banks are too big to fail and main street is too small to bail! They are not going to offer any meaningful help to desperate home owners.

Therefore, I recommend to my clients and to you if you are in this situation, DON'T waste your retirement money, your children's education money or life savings trying to keep your home which you will then in most cases, lose anyway. I advise you to Stop making payments on your mortgage but do Not move out!

Particularly in mortgage states,as opposed to trust deed states, you will probably be able to stay in your home for 1 1/2 to 3 years before you are forced to move, if you follow our program. We have even had some cases where the bank Paid our clients to move out!

Use this time to replenish your savings and be ready to start anew. Will this hurt your credit rating? Absolutely, but would you really want to be the only family living in the homeless shelter with a 700 FICO?

Contact me for a free,private consultation to se if your situation qualifies for our program.

Bill Young, 646-961-3818

20% of Homes Underwater? Think Again!

Zillow.com the real estate industry's barometer of home prices, today reported that 21.8% of all homes in the US are "Underwater." That means that the house is worth less than the mortgage. That amounts to about 20 million homes.

The facts are worse than the news. If 20 Million is 21.8% of all homes, there are approximately 100 million homes in the US. However, 1/3 of them do not have a mortgage. Therefore, 20 million means that actually 1/3 of all homes with mortgages are underwater!

Think of that. What does that mean for the housing market, the banks, the economy?

A sizable number of those homes will be lost to foreclosure. What incentive does a homeowner have to keep up with his payments if an emergency comes up? Will they pay their mortgage or their doctor bill, or their exploding credit card bills, etc.

This means a continued increase in the amount of homes foreclosed on and a continued drop in prices as those foreclosed homes are dumped on the market at fire-sale prices.

Typically, regional bank reserves are about 50% in home mortgages. If 1/3 of them are underwater, what does that do to the value of the bank reserves? For every $1 loss in reserves, the bank will have to cut $10 in lending, adding to the drying up of credit.

How about the big, money center banks sitting there with Trillions in housing derivatives? "Normally" losses of 1-3% in the value of the mortgages underlying the security is projected. What happens to the value of the security when those losses approach 30%? Again, the value of the reserves is dramatically slashed, further choking off credit.

Unfortunately, we are in worse condition than the mainstream media and the government wants you to believe.

If you want to learn more about the reality of our situation and what you can do to protect yourself and your family from economic ruin, read the other posts in this blog.
Bill Young, 646-961-3818

Ugghh! It is Getting Harder and Harder to Report This Stuff!

I mentioned in an earlier Post that this year is the end of the Government Bailouts! You know why? Because it is coming down to either the Banks, GE and AIG go under or the Federal Government goes under! It is coming to that.

The Big Banks, those that are too big to fail hold about $200 Trillion in Toxic Derivatives, CMO's CDO's and CDS's. Last time I looked, they were estimated to be worth anywhere from 50% down to 5% of the value noted on the bank's balance sheets. There is simply not enough money in the world to keep these cash sucking vampire zombies and their blood thirsty management afloat, period.

Look at this. I fully expect the employment numbers to be released on Friday to be north of 700,000, maybe not when they are released, but perhaps when they are "revised" next month when even worse figures will make them look not so bad.

It is official, the stock market has now lost 50% of its value since 10 '07 meaning that 10-12 years worth of accumulated wealth, over 5 Trillions in asset values have been destroyed.

Where will the Dow end up? I predicted in Oct Nov when it was about 10,000 that it would hit 5000 in the next 6 months, and it looks right on target. After that? Below 3,000 is likely. Why?

Corporate profits, the driver of stock prices are down 61% that is the biggest drop in 141 years and they are going lower. Assisting will be a default rate of at least 10% in corporate bonds which will ripple through the bank's asset valuations.

They say that 1 in 5 mortgaged homes is underwater, the owners owe more than the property is worth with prices down about 30% since the peak and since there was only a 25% equity cushion to begin with... With prices slated to go down another 15% this year, that will mean between 25 and 30% of mortgaged homes will be underwater. What was that sound? Jingle Mail, the sound of keys being mailed to the banks! They won't have to bother to foreclose.

10% of mortgages are delinquent, about 4x normal.

Let's see, total consumer debt is is closing in on 350% of GDP, and that GDP is an inflated number! We'll see a record level of credit card defaults as the debt bloated consumers flatulate their way back to normal debt and spending levels.

Where does that leave you, and me? Relying on the Internet to generate cash flow. This is the only out for the Middle Class to become the Internet Class. High paying jobs, like Master's degrees will be nostalgic relics of a time long ago before this century is out.

The only train out of here? Not the feeble pokes the Obama team is making at the problems, with Rush and the Kno Nothings cowering them into feebility.

Precious metals will be the only antidote to the Ultimate Solution to the problem, probably though in Obama's first term, will be precious metals as they have always been in times of chaos and hyper inflation.

Stay tuned as I fleshout these options.

"Bank opposition to helping homeowners, Senator Durbin says, "was (is) very shortsighted in light of the mess they have created in our economy."

Banks Are Not Serious About Helping to Keep People in Their Homes!

You have heard that "banks want you to be able to pay your mortgage, they don't want your house." I have even said that in the past. While true on an individual level, today, bankers are taking a short term view to first to protect themselves, (and their jobs) then deal with the devil later on.

Look at These Excerpts from Yahoo News, Friday, Feb 13, 2009

The (housing) industry strategy all along has been to buy time and thwart regulation, financial-services lobbyists tell BusinessWeek . "We were like the Dutch boy with his finger in the dike," says one business advocate who, like several colleagues, insists on anonymity, fearing career damage. Some admit that, in retrospect, their clients, which include Bank of America (NYSE:BAC - News), Citigroup (NYSE:C - News), and JPMorgan Chase (NYSE:JPM - News), would have been better off had they agreed two years ago to address foreclosures systematically rather than pin their hopes on an unlikely housing rebound.

A major reason financial institutions and investors are so determined to avoid modifying loan terms more aggressively has to do with accounting nuances, say industry lobbyists. If, for example, a bank lowered the balance of a certain mortgage, there would be a strong argument that it would have to reduce the value on its balance sheet of all similar mortgages in the same geographic area to reflect the danger that the region had hit an economic slump. Under this stringent approach, financial industry mortgage-related losses could far surpass even the grim $1.1 trillion estimated by Goldman Sachs (NYSE:GS - News) in January. A desire to postpone this devastating situation helps explain lenders' intransigence, says Rick Sharga, vice-president of marketing at RealtyTrac, an Irvine (Calif.) firm that analyzes foreclosure patterns.


What About the Plans Already Announced to Help Homeowners?

Hope Now Alliance, a government-endorsed private sector organization announced by Paulson on Oct. 10, 2007. Lenders promised to cooperate with nonprofit credit counselors who would help borrowers prevent defaults. Faith Schwartz, a former subprime mortgage executive, was put in charge.

An analysis White did of a sample of 21,219 largely subprime mortgages modified in November under Hope Now in 2008 found that only 35% of the cases resulted in lower payments. In 18%, payments stayed the same; in the remaining 47%, they rose. The reason for this strange result: Lenders and loan servicers are tacking on missed payments, taxes, and big fees to borrowers' monthly bills.

Then there was Hope for Homeowners. It was already anticipated that its fine print would discourage all but a few borrowers. "We knew it was likely to have limited appeal," says Preston, the former secretary of HUD, which oversees the FHA. George Miller, executive director of the American Securitization Forum, a Wall Street trade group, calls the program and its 25 refinanced loans "useless" because of the onerous details.

The banks clearly are looking out for themselves first and foremost. As one banker put it, "Banks are too big to fail and homeowners are too small to bail!"

So, that is their attitude. They foisted fraudulent financial products onto homeowners and are now refusing to take responsibility and help their victims.

Here is a Typical Story of Homeowners Hoodwinked by the Banks!

Stefanie and James Smith of Santa Clarita, Calif., fear they may need the help of a bankruptcy court if they are to keep the subdivision home they bought for $579,000 in November 2005. Stefanie, 37, a university human resources coordinator, and James, 40, a federal law enforcement agent, borrowed the entire amount in two subprime loans that required a total monthly payment of $3,000. A representative of their lender, Countrywide, told them not to worry, says Stefanie: They would be able to refinance in a year.

By mid-2007 they were running late on payments, and refinancing options had dried up. With their monthly bill scheduled to jump to more than $4,000 this January due to a rising mortgage rate, Stefanie contacted Countrywide last summer. She asked for a loan modification so they could avoid default. In December the lender said it would be willing to increase their payment by $600. That was better than the scheduled rise of $1,100, so the Smiths agreed.

But now they are struggling to pay the higher amount. Countrywide's parent, BofA, declined to comment, citing the Smiths' privacy. After BusinessWeek's questions, though, Countrywide called them to discuss cutting their payments.

"We knew when we bought that the payments would be a stretch," says Stefanie. She regrets assuming they would be able to refinance at a lower rate. "We are not deadbeats," she adds. "All we want is a mortgage we can afford."

Our Advice to Homeowners Facing Foreclosure!

If you are now losing your home because you cannot pay your mortgage, don't rape your 401(k) or your children's college fund, you will Never be able to replace those funds in the economy we are entering.

Accept the possibility that you have already lost your house, you did sign the mortgage, probably without being represented by a lawyer, that is your responsibilty.

Now, you can either be put out of the house with No money left to your name, a bad thing, having raided your savings, retirement and children's funds, or you can stop paying now and be put out later with your savings intact to finance a new start, a better outcome.

With more and more people underwater, making payments on homes worth less than their mortgage, this will become a popular tactic and will eventually force the banks to help.

In fact, we are seeing an increasing number of people who stop making their payments and challenge the banks in court. If the bank cannot produce your original mortgage and note, they cannot proceed with the foreclosure! It is estimated that fully 40% of banks cannot produce this documentation, so it is well worth the risk.

Contact me directly if you would like more information on this subject or assitance in implementing it. I can be reached at 646-961-3818

Oh, what about the Moral Hazzard such a brazzen act of self help would produce? I think the danger of producing Moron Hazzards are much greater; people exhausting their money to make payments on homes that are underwater!

Is This the Solution to the Housing Problem?

"Here is how the government aims to solve the housing crisis: "The FDIC's program, which is underway at failed lender IndyMac, calls for making monthly payments more affordable by reducing interest rates, lengthening loan terms or deferring principal. Servicers aim to reduce payments to no more than 31% of a borrower's monthly income. So far, more than 10,000 delinquent loans have been modified, and offers have been made to another 20,000 borrowers."

So, the plan is to reduce the payments on the mortgage while keeping the amount of the mortgage the same?

That's nuts! Why would anyone commit to continue paying on a mortgage that is substantially greater than the value of their property ? Already, 20% (33% in May, 2009) of all mortgaged homes are underwater, worth less than the mortgage on it and that number will increase as home prices continue to plummet.

Talk about Moral Hazzard! Once homeowners realize that home prices are not coming back in their lifetimes, and that they have bailed out the banks but they are still stuch paying their losses, that strange music you hear will be Jingle Mail, the sound of keys being sent back to the banks in bunches!

There is only one realistic way to solve the homeonwer's dilemma, the same way it was done in the First Great Depression. Buy up the unaffordable mortgages at the value of 80% of the current market value of the home and refinance at that Loan to Value, in a fixed, 30 year loan at maybe 6% interest.

This will provide the debt relief and the payment relief that home owners need to be able to afford their homes and have money left for other bills.

I do not want to hear that the bank's will be taking a loss when the same homeowners have already poured Trillions of dollars into the banks as bailout funds and loan guarantees. What it will do is to stop the steady erosion of the bank assets that will continue as long as the mortgage problem is not solved, leading to further deterioration of the bank's assets which will prevent them from lending which will starve the economy of the funds it needs to operate.

Bailout This!

Bailout This!
I advise my personal finance sclients who have mortgages that they cannot pay, especially if they owe more than the house is worth, to stop paying their mortgages!

Sounds kind of radical, you say.

But when you understand what the financial system has done to these homeowners you may understand.

It is simply a matter of self defense, financial self defense.

The Wall St syndicates; banks, investment houses, bond insurers, bond rating agencies etc. conspired in true racketeering style, to produce fraudulent financial instruments and then foisted them onto unsophisticated borrowers.

Uncomfortable with the word, fraud? Fraud is a "deception made for personal gain," according to the dictionary.

Rating bonds backed by sub prime mortgages as investment grade, AAA, in order to collect fees, are a prime example.

Issuing insurance; credit default swaps, with no assets to back them up, in order to collect fees, is another example.

Knowingly falsifying data on mortgage applications, in order to collect fees is yet another example.

Without these key fraudulent practices by the mortgage and financial industry, the entire sub prime debacle could never have happened.

Now that the mortgage mess has "inextricably" blown up in the faces of the banks, essentially putting them out of business; they are demanding that home owners whom they have defrauded, continue to honor their commitment to pay their toxic mortgages and to now to bail them out with trillions of taxpayer dollars.

As one Wall St Bigwig said, "The banks are too big to fail and the homeowner is too small to bail."

So the battle lines are drawn. The banks on one side, want to drain your very life blood in order to keep you paying their mortgages, all the while robbing your children and grand children by blackmailing us and getting Trillions of our dollars to repay their losses so they can stay afloat.

These massive loans and cash infusions will produce huge deficits that will be passed onto future generations.

Unfortunately, there is no bailout for the home owner, only half-hearted measures like loan modifications that do not solve the borrower's problems.

Look at the widely touted Hope for Homeowners rescue plan. It was projected to save 400,000 homeowners from foreclosure. Only 312 loans were modified. And we now know that over half of all borrowers who have had their mortgages modified have become delinquent again in less than 6 months.

Modifications are not the answer. Slashing the balance of the outstanding loans to 80% of the current market value of the property, like they did in the First Great Depression is a far more effective remedy as it sets up a payment level that the borrower can afford.

Therefore, in the absence of any willingness on the part of banks or government to bail them out, borrowers are left to defend themselves against the unscrupulous banks. It is really a case of financial self defense. You know where the banks are coming from, it is up to you to fight them.

It is enough that most of these troubled borrowers, especially the 15 million or so who are "Underwater," who owe more than their house is worth, will lose their homes one way or the other.

That is their punishment for taking out a loan without having the advice of a financial professional or being represented at closing by their own lawyer; not the mortgage broker's or real estate broker's lawyer, at the closing.

But it should not mean that they have to ravish their life savings, retirement accounts or their children's inheritance to placate the bloodthirsty banks.

As an experienced real estate investor, former bank loan officer and Personal Financial Coach providing assisting troubled home owners, I have many people in this situation.

My advice to them is to stop paying their mortgage, do not give the banks one more cent of their hard earned money.

We then show them how to remain in their homes for up to two years or so without paying a penny to the banks so that they can accumulate some money to get a fresh start. In some cases, the banks pay my clients thousands of dollars to leave the premises.

What about the eventual foreclosure? Won't it hurt their credit?

Yes it will, but they would be in the same situation credit wise when they eventually lost their homes.

Their choice is to be evicted from their home penniless, after going through their life savings or with the savings intact and a few dollars to move on with.

Also, when the dust settles, they will be able to buy a house for less than half of what they paid for the one they lost, according to knowledgeable experts.

If the banks and their proxies in government will not bail out the home owner, he must bail himself out, period.

Copyright 2008 Bill Young. Bill is a Personal Financial Coach. You can sign up for a free, year long course with Bill in How to Solve Your Money Problems here: http://HowtoSolveYourMoneyProblems.Com