Washington D.C., Dec. 5, 2008 — Treasury Secretary, Hank Paulson, announced a moratorium on defaults today. “We have been considering a moratorium on foreclosures,” said Paulson, “but a moratorium on defaults will be much more effective.”

While other lawmakers are still considering foreclosure moratoriums, Paulson is convinced a default moratorium is a better approach. He hopes others in State and Local legistlatures will follow his lead. “We want to keep people in their homes,” said Paulson, “and we need to keep our lending institutions healthy.”

When asked how a default moratorium would help, Paulson had this to say, “Foreclosures are the result of defaults, and defaults are also causing lenders to take write-downs on mortgage loans. By putting a moratorium on defaults, we solve both problems.” Paulson provides clear guidance on how the program would work, “Homeowners need to keep making their payments. That will put an end to the housing crisis.”

Experts agree that falling home values are not the root of the problem. Paulson goes on, “But let me emphasize that we do not need a system-wide solution for the vast majority of loans where a homeowner temporarily has negative equity. Negative equity does not affect borrowers’ ability to pay their loans. Homeowners who can afford their mortgage payment should honor their obligations.”

When pressed for more details on how such a moratorium would be implemented when so many homeowners cannot afford their payments, Paulson responded, “We are still working on the details. We may provide direct government assistance. The American people are kind and generous. They certainly won’t mind helping out their fellow citizens with tax dollars as necessary.”

When confronted with the possibility of creating a moral hazard, Paulson scoffed at the notion, “Homeowners need this help to stay in their homes. It would be immoral to throw them out on the street.”

You’re gonna realize that

Some of my lies are true

Some of My Lies Are True — Huey Lewis and the News

I have been getting some practice writing press releases lately.

When our various politicians propose foreclosure moratoriums, do you think they are serious? I believe most of them are simply pandering to their constituents that want to believe they are doing something about the housing price crash. If you give the idea of a foreclosure moratorium even a moment’s thought, you realize it could never accomplish anything. We just had a defacto foreclosure moratorium here in California when we instituted a new 30-day waiting period for lenders to contact borrowers to try to work something out. Of course, this only delayed the inevitable, but perhaps it gained some homeowners in foreclosure an extra month of free rent from the bank. I suppose the idea isn’t any crazier than subsidising mortgage interest rates at 4.5%. Why not zero percent? Why not pay people to live in homes? That would probably reduce the inventory. Any thoughts on what half-baked idea they will come up with next week?

Today’s featured property is another HELOC abuser who won’t get bailed out.

WTF?

Asking Price: $463,900

Income Requirement: $115,975



Downpayment Needed: $92,780

Monthly Equity Burn: $3,865

Purchase Price: $420,000

Purchase Date: 8/29/2003

Address: 24 Rockrose Way, Irvine, CA 92612

Beds: 3 Baths: 2 Sq. Ft.: 1,660 $/Sq. Ft.: $279 Lot Size: 4,928 Sq. Ft. Property Type: Single Family Residence Style: Cottage Year Built: 1966 Stories: 1 Area: University Park County: Orange MLS#: P667046 Source: SoCalMLS Status: Active On Redfin: 1 day New Listing (24 hours) New Listing (24 hours)

EXCELLENT OPPORTUNITY TO LIVE IN UNIVERSITY PARK IN A SINGLE LEVEL

ATTACHED HOME WITH ONLY 1 COMMON WALL! END OF CUL DE SAC LOCATION AND

BACKING TO GREEN BELT. VOLUME CEILINGS, FIREPLACE, CERAMIC TILE AND

WOOD FLOORING, ONE OF THE LARGEST LOTS IN THE ENTIRE TRACT! OVERSIZED

FRONT AND REAR YARDS! NO MELLO ROOS, LOW HOA THAT INCLUDES POOLS, SPAS,

AND TENNIS! BANK OWNED!

Can anyone tell me what the second picture is showing me?

Backing to green belt? Yeah, and siding on to the 405.

Well, this person didn’t double their mortgage. they didn’t own it long enough. So what did they do?

The property was purchased on 8/29/2003 for $397,000. The owner used a $336,000 first mortgage, an $84,000 second mortgage, and a $0 downpayment.

On 10/29/2004 he opened a HELOC for $120,000.

On 9/21/2005 he refinanced with an Option ARM with a 1% teaser rate for $528,000.

On 4/26/2007 he opened a HELOC for $24,847.

Total property debt was $552,847.

Total mortgage equity withdrawal was $152,847.

Is it any wonder kool aid intoxication is so strong? This guy put no money down, and he managed to extract $152,847 in spending money over a 3 year period. Who wouldn’t want some of that?

If this property sells for its asking price, and if a 6% commission is paid, the IndyMac (now the US taxpayer) will lose $116,781.

I hope you have enjoyed this week at the Irvine Housing Blog. Come back next week as we

continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.

🙂

{book}

Say you wanna be a friend of mine

See me all the time

You don’t care what I do

But it all sounds the same to me

Hey, can’t you see

It’s just like I told you

I know you think that I’ve

Been stringing you along

And that I’ve told you a few, but

(Chorus)

Sooner or later when you say I love you

You’re gonna realize that

Some of my lies are true

I never told you that I was the one

Said it just for fun

You know, you knew it too

So why so much on the telephone

I’m never home

It’s just like I told you

Because it’s real the way you used to make me feel

It makes it so hard to say

But nothing can change the way I feel today

Don’t you see that

Sooner or later when you say I love you

Your gonna

Realize that some of my lies are true

Some of My Lies Are True — Huey Lewis and the New