From your experience, the guys that walk away from the mortgage, would probably have their credit destroyed. No way it will be at the 700-800 level anymore.

However, does the system reward those that stick around? Show their moral obligation and repay the debt?

Well of course the guys who walk will have their credit destroyed.

For a while.

By law, it can't be more than 7 years, and likely will be far less.

No, but with an immediate return to good credit practices the FICO will be at pre-foreclosure levels before the individual can earn the amount of loss they would have had by staying, in most cases.

'Those are Character, Capacity (to pay) and Collateral.
Sound lending requires you evaluate all three.'

It will be interesting to see if lenders actually start doing this again.
Of course home prices must come down 50 percent in many places for
most of us to buy them. Bob Toll does not want to hear this ceaseless logic!

>> Bob Toll does not want to hear this ceaseless logic!

He may not but till the median household income can afford the median home of its market RE continues to decline and economic activity related does likewise.

This is a viscious cycle induced by asset inflation created by over zealous credit expansion. The only question is in the end game for this cycle what professions fall out of median income, in other words what will be the floor for the new middle class, doctors and lawyers?

Music, here in the UK there is a definite "getting to know you" thing going on. High LTV (>95%) loans have all but disapeared. The ones that remain you can only get from the bank (not from brokers any more). The good old days of grovelling to the bank manager and taking him some of the wife's apple pie seem to be returning.

Where in the US has the median income ever bought the median home? If stable home ownership rates are around 60% That means 40% never owns a home. That means the median price should not be affordable by the median income earner.

In San Diego the median income has never bought the median house.

On another note it seems like traditional lending standards are making a huge comeback. Every week I hear of some new lower LTV or stricter requirement. While so far this has helped whack prices in lower end neighborhoods much faster, I have a feeling its going to hit the high end even harder in the long run.

I love the idea of Fannie as a short-to-zero candidate, but I worry about the effect of the implicit guarantee. Everyone thinks the Treasury is going to bail them out if things get too hairy. I'm afraid the short-bus crowd would have to actually see Fannie's corpse, and poke it with a stick personally, before they realized the game was up. Am I wrong here?

Mr. D,

Unfortunately, you failed to recognize in your analysis that military service members are eligible for the BAH -- Basic Allowance for Housing. BAH eligibility is determined by family size, duty station (location) and a few other factors. This is non-taxable compensation.

Let me give you an example. The person in the referenced article was likely stationed at Travis Air Force Base. If he had no dependents and lived off-base, he would have received an additional $1,489 per month tax free for his housing costs. This calculation takes into account a number of factors (dwelling type, utility costs, etc.). If he had dependents, his BAH rate would be $1,802 per month.

Under these conditions, your argument is not as well constructed. You also didn't consider that this was probably the only affordable, available housing he could find at Travis, forcing him to commute 2 to 3 hours a day just to go to work.

There are currently almost 800,000 military service members and their families who receive the BAH. It is very unfortunate that the military requires them to move about every 2 years. For those service members who purchased homes in 2005 or 2006, they are finding that they are being asked to sacrifice at home AND abroad. The stress that military families face under these circumstances are far greater than you will ever experience in Niceville, FL.

I'm am deeply disturbed to see you dismiss members of the armed services and their families in this way. They do not have a choice of "living in their homes and riding-out the loss" because the military forces them to PCS (permanent change of station) every 2 years.

Your ticker sparked a mild fit of outrage in the military family blogs tonight. While I'm sure this was not your intention, the damage has been done.

Copied from the chat room on the San Diego family housing .mil site:

"Mr. Denninger, Military service personnel are fighting and dying for your right to sit at home and make lots of money. Please have the dignity not to criticize them for trying to provide for their families."

Who is KD criticizing? Sounded a lot to me like he was saying that the military dude was essentially ****ed over by the bank.

I used to get rations and quarters allowance in the US Army. Replacing the old German barracks of Heidelburg the reason. I had to live in a duplex in a burb 5 miles away called Ziegelhausen. Commuted in my 65 VW beetle. Quartermaster gasoline was 19 cents a gallon. Did I deserve it?, you ****in' A I did. Uncle Sam drafted me. Used the GI bill to get my food chemistry degree from Ames. Did I deserve it?, you ****in' A I did. Never belittle people who serve their country, even if you think they don't deserve it.

I'm not here to judge -- but I will tell you that Mr. Denninger hit quite a nerve with his post tonight. Stress in military families is at Defcon 5 levels right now.

Even if it is the banks fault, suggesting that a service member shouldn't have been eligible is not helping. The military decided to privatize housing during a quadrennial review a number of years back. Now that decision looks BAD. 2/3rds of all military service members live off-base and receive the BAH. Many of them bought homes at some point. Many are upside down. Many are VERY VERY angry.

I gotta quit drinking cheap Russian vodka on my carpeted floor. Send it to The Bilge, Genesis. I'm way outta line and drunk.

Read the article from WSJ. The tick has the link. It's very interesting

Are the technicals in the WSJ? They used to be linked to the Tickers. Where are the technicals at? I miss the videos, Genesis. Shat's up? Are you hiding them is some secret place>

Econo, the only people who would be upset by Karl's ticker are those people who failed to understand it.

Quote:

suggesting that a service member shouldn't have been eligible is not helping

Saying the truth isn't helping? The truth is that these families never could afford to buy and should not have done so. Are we supposed to ignore that little fact because it is uncomfortable?

As for privatizing housing, that has actually worked out well so far. Lincoln is doing a pretty good job.

As for stressing people out on a military housing blog, just who was it that stirred the pot there? Hmmmm.....maybe it was YOU.

Quote:

The stress that military families face under these circumstances are far greater than you will ever experience in Niceville, FL.

I'm am deeply disturbed to see you dismiss members of the armed services and their families in this way. They do not have a choice of "living in their homes and riding-out the loss" because the military forces them to PCS (permanent change of station) every 2 years.

Your ticker sparked a mild fit of outrage in the military family blogs tonight. While I'm sure this was not your intention, the damage has been done.

Econo, if people are unable to read, that is their problem.

I did not criticize the serviceman who was referenced in that article.

And for the record, in my little "Ivory Tower" here in Niceville FL, I live within a few miles of two major military installations, Eglin and Hurlburt. I am very well acquainted with what the military families have had done to them by lenders and Realtors as some of the people who have been victimized by this are my friends.

I have nothing but the highest respect for those who serve our nation in the military. If you read for content you might find that nowhere did I allege that this family "deserved it."

I in fact defended his decision to stick the bank as not only supportable but entirely reasonable.

So before you run off in some fit of pique, you might try reading for content.

I was defending that serviceman and his family, not attacking him.

I'm well aware as well that a military family cannot just turn in the keys and walk without potentially severe consequences for their military career.

This does not change the fact that the family should never have been given that loan. This is not their fault - it is the bank's (or lender's) fault.

If you are the one who is responsible for raising people's ire, you owe both them and me an apology.

By the way, Defcon 5 is "Peacetime." Defcon 1 is "Oh ****."

They're not at Defcon 5.

Pd,

I don't believe that Mr. Denninger meant any harm. In fact, I very much concur with his view of our circumstances. Common sense was sacrificed at the altar of greed. Each party (lender and borrower) were culpable in this situation.

BAH is not designed in any way, shape or form to support home ownership -- only rental housing. The policy language is clear.

Lincoln has done great things. So as Actus Lend Lease, etc. Base housing was squalid in so many areas prior to MHPI. They got safe deals to build attractive communities. It's not a perfect system though. There are troubles on the horizon.

I'm not here to start a flame war. Nor am I at all interested in "pot stirring." You can thank the Wall Street Journal for that and the miracles of hyperlinks for this subject. I only learned of it after I logged-in to my administrative account tonight and later read the ticker. Oddly as it may seem to you, there are wives of service members who read this forum.

I posted this to reflect the sentiment of a group of people I respect and admire. Had Mr. Denninger known that he may have been $1,800 short on his mortgage calculation, he may not have written his opinion as he did tonight.

That's my last word on this. Good evening everyone -- best regards to you all.

Econo, I am the wife of a service member!

If someone is upset, then it is because they could not understand the ticker.

Karl's assumption of 80K sounded very, very generous. Bringing up BAH doesn't further your point at all.

Last word to Mr. Denninger,

Sorry about the Defcon reference, my error, that's outside of my lexicon in milspeak. I'm on the personnel side, not the combat/security side.

There are two sides to this situation, and I feel that I'm trying to better illustrate the side that may not be represented well (if at all) in your opinion piece tonight.

You are very passionate in your views and opinions. There are others who are equally as well set in theirs.

It was probably a mistake for me to step right in between the two of you, but I know a great deal about military housing issues, and you didn't have all of the information available to you that would have helped you to write a more objective piece today.

I appreciate the opportunity to have this dialog on your turf and wish you all of the best in your endeavors.

Quote:

It was probably a mistake for me to step right in between the two of you, but I know a great deal about military housing issues, and you didn't have all of the information available to you that would have helped you to write a more objective piece today.

On the contrary, I am closely associated with a number of military families and understand the BAH and how it works, as well as a number of civil service and civilians who work at both Eglin and Hurlburt.

The fact remains that there is absolutely no way an E7, with or without combat supplmentals, can afford a $455,000 house, and the bank or lender who wrote that paper ****ed them intentionally.

Period.

The point of the Ticker was to encourage people who are similarly ****ed to NOT feel an obligation to "behave with honor", because the lenders and realtors sure as hell did not. They exploited these people and screwed them intentionally, with full knowledge that they could not possibly make the payments.

To add insult qualifying someone under combat pay schedules is even more outrageous as mortgages last longer than wars.

Econo,

There is only one side - Can an E7 afford a $500,000 house on his pay?
Answer --- NO.

No sides, just facts.

Oh, and if there are people who are "pissed off", they should come over here and read this. Or, if someone was honest enough to point to where those who are "upset" with me are, I'd be happy to pop over there and point out to them that they need to go back and re-read the posting again.