This page contains a single entry from the blog posted on October 12, 2010 10:49 AM. The previous post in this blog was Chèvre: Portland's Velveeta. The next post in this blog is The next set of Portland scams gets a number. Many more can be found on the main index page or by looking through the archives.

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Tuesday, October 12, 2010

Can't pay your mortgage? No problem.

At first glance, it appears that these guys are seeking to uphold the law against unscrupulous robber barons who fake documents rather than cut square corners when dealing with customers who have fallen on hard times. But the cynic in me sees a desperate attempt to keep stringing the real estate and banking sectors along in the hope that a miracle will prevent another big collapse. Sooner or later, it's gonna happen -- but for these dudes, it's better if it were after the election.

They just released another study showing that in Portland, it's cheaper to rent than to own your home. I don't know about that -- it looks as though owning means you can just squat and not pay a penny, at least for a good long while.

Comments (8)

I could see how that is, though... asking home prices are overvalued, a reflection of the overly optimistic purchase prices of a few years ago, whereas rent prices reflect today's real value in a jobless local economy.

"But the cynic in me sees a desperate attempt to keep stringing the real estate and banking sectors along"

I'd have to agree, I think putting it off just is going to make it worse when the reckoning comes. I understand about banks messing up paperwork, but the underlying issues (ie Borrower unable or unwilling to pay the mortgage) haven't changed.

Side point, if anyone is a RE lawyer, I heard a rumor there may be another title issue, viz, that if a loan gets sold/transferred it needs to be recorded on title. Almost every title now has only the loan originator and this might be another gotcha.

Let's talk apples and oranges. The rent v. own report says the average list price shows $448,764. That is the average for the entire Portland area, including mansions, 5 bedroom homes etc. (plus I believe that number is high to begin with.)

A little checking finds there to be 244 homes on the market in NE Portland today. The AVERAGE for a TWO bedroom home or condo is $198,325.

Now if you take an FHA loan with 3.5 % down, your monthly payment is approximately $813 per month at four per cent. Couple that with an average 1/12th property tax at $250 and insurance at $50/month and you are at $1,113 per month.

And the interest is deductable.

The first link had photos of the three stooges. Wyden, Merkley and Franken. With those idiots in charge the mortgage problems will never go away.

Of course the numbers look really awful for Portland. They used the mean which is really sensitive to extreme values and didn't include any of the other measures of center or spread for their data.

When there are a bunch of of 2 bedroom condos in the $750k to $1.25 million range on the market it's going to have a huge impact on the mean.

This doesn't mean that a savvy home buyer couldn't purchase a home with mortgage payments that are at or below the going rate for rent on a comparable property. This "study" simply uses some pretty misleading statistics.

Sellers got overpaid, in violation of 18 USC 1014 (overvaluing collateral). If the FDIC, through low-balled premiums or through direct transfers of tax dollars, has to cover the banker's losses of depositor's deposits then the FDIC should demand return of the proceeds from the recipients of these illegal transactions. The astrotufing about creditworthiness of borrowers should not be used as an excuse to not demand return of the money from the genuine recipients.

Will the real consumer advocates please stand up? Let's not all forget the capital-gains-tax-cut-game which was fueled in significant part by the artificial boosting of prices of homes through super-lax lending coupled with over-valuation of collateral. It was political gamesmanship run amok. Borrowing to pay twice the value of a home is not home ownership.

The Land Sale Contract should serve as a reference point for resolution. If a buyer fails to pay then the seller can get the house back, and then the buyer and seller can squabble about the payments already made, if any. We have no grand public finance scheme to guarantee that Land Sale Contract sellers get their hoped-for but unrealized sale price from public resources, nor should the bankers or their depositors.

Restore the parties to where they were before the fraud. But do so without leaving out one very important class of beneficiary, the seller that got the cash.

More posturing and pandering by our senior senator and the others. And he is looking very senior. Privately they're likely accepting money and favors from the banks and other financial institutions. And foreclosure is just the last resort. There are other ways to push people out.

Other Steve, "the interest is deductible" is a crock of shinola.

If you rent, you get to claim the standard deduction. In your example, the person who tries to deduct their interest would need a whole lot of other deductions to reach the threshold where you would be taking more off your Schedule A than the standard deduction is worth. ONCE you are above the standard deduction, for every dollar in interest you pay, you would get your marginal tax rate back in pennies + the Oregon tax back -- call it 15% for the feds and 9% for Oregon for the median household.

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