Foreclosure Protections for All

apt23, i thought this thread was about new york in general. i do very much think that new york city is a bit different, but i still think there was a huge amount of bubble thought that compelled some people to stretch too far.

AR: yes we need to help the needy. Absolutely. We need a public health care system. But we dont' need to bail out the jumbo loaners who inflated housing prices to the point where nobody, nobody can afford a home.

btw, apt23, many of the people who overbought during this manhattan frenzy bought $400k studios. as silly a purchase as one could have conceived, but very much a sign of the times. don't be so harsh on the poor young people who had no perspective who decided to buy way too little for way too much. they had no perspective. part of the bubble.

"Someplace Cheaper doesn't exist in the world of $405/week unemployment checks." Matt you can find rooms to rent for $100 week within 20 minutes of Midtown.

Let us all agree, a false top (bubble) is just as despicable as a false 'bottom'. but, Did anyone have any feelings for all those who were 'priced' out of a 'home' during the bubble. Were there any programs available to us 'priced' out? Or did the bankers and govt just give more ppl lots of rope to hang themselves? Flmao. Plz see th entirety of the situation.

SSNYC how do you think the world would be today if the government wasn't involved in finance?

w67th, yes let's see the entirety. which solutions cost the most and least for the taxpayer?

"which solutions cost the most and least for the taxpayer?"

Yes, but not just for this election cycle - for our viability as a nation in the future.

AR: But they should have had the sense to not by $400k studios that went for $200K four years earlier. The only way they are going to get the message is to let the market adjust to REAL prices. Then they will all know that you can LOSE your money if you buy foolishly. Everyone needs to learn this lesson or the govt will be on the hook for an eternity. It will happen now or later. But it will happen. Let it happen now while we have some means to take care of people in the fallout.

The people in the Great Depression learned this the hard way and that is why we had stable prices for decades. If you don't let prices adjust, the bubble will inflate indefinitely. C'mon, they are still selling new condos in Manhattan for $1700 psf. That is crazy. And, when we depose these people who were silly enough to buy inflated prices, we will have to provide services for them but that will be less abusive to our system of govt then bailing them out forever. You have no excuse to buy in a bubble when it was reported constantly on USA Today and Access Hollywood. The only way to stop it is for real people who made bad decisions live by the consequences of that decision. It happened to my grandmother in the depression. And she survived. She never really got over it emotionally, but she survived.

" just deciding that all people who are having trouble paying their mortgage should be kicked out"
AR I'm not saying everyone should be kicked out - what I'm saying is that it's the bank's decision not the governments - you know I'm outraged that the banks got bailed out - but that has happened and it happened in such an egregious way that the banks are not required to make concessions to homeowners and so they shouldn't UNLESS IT'S FINANCIALLY PRUDENT FOR THEM TO DO SO. The banks are owned by people -we shouldn't take money out of the investor's pocket to give it to some guy who can't afford his mortgage.

The reality of it all is that housing prices must fall- they just can't stay at levels so much higher than incomes - every dollar the government spends trying to prop this up is going to be wasted. Prices will fall, they must. The current route will take 10 years - I prefer a quick bit of pain, displace thousands, nationalize the banks, then new capital (of which there is Trillions on the sidelines) will come in and buy up the pieces of the old banks and they will lend to the new homeowners who will own at affordable levels.

"Everyone needs to learn this lesson or the govt will be on the hook for an eternity. It will happen now or later." EXACTLY - we must pay the price now! Get it over with - don't let this drag on forever - have we learned ZERO from Japan? Have we learned zero from Austria?

Benhinn,
To answer your question...
I think the stock market would be much lower than it is today... I think most people would have lost 75% of their retirement accounts...
Global finance would have many more problems that it does currently... unemployment would be much higher...
It would be a much harder situation.....

Benhinn, I think you should read my earlier posts also...

Aboutready. The solution is to find a bottom as quickly as possible. To delay or obtusfucate the core issues of consumption versus income is to prolong the crisis.

Can't hang on to your 'home' given a prolonged unemployment, then move on. Literally. ThE average unem is 12 months now headed to 24. Can't carry then sell. Get yourz house in order. This recession ain't over by a long shot.

actually, apt23, there were huge measures taken during the great depression to assist people in keeping their homes.

that's what i don't get here.

jazzman, there is nobody on this board who agrees with you more that housing prices should fall. but unless you want pitchforks in the streets you ought to think about the ramifications of just letting it fall without any order. and you should try to spare a thought for the people who are affected by price declines elsewhere. the banks should have been nationalized from the onset. that would have changed our discussion tremendously. i agree with you there 100%.

"To delay or obtusfucate the core issues of consumption versus income is to prolong the crisis."

And by socializing risk, borrowing trillions from future generations and having the government rewrite private contracts, we weaken the fundamental strengths of our country and diminish our future prosperity.

w67th, the solution would have been to find a bottom as soon as possible. we are a couple of years beyond that. if we had allowed that, many of the people who are now being foreclosed upon wouldn't have been. because the banks wouldn't have had the implicit guarantees of the government for their losses, and they would have felt it prudent to do some decent mods. they wouldn't have fucked around and avoided real business decisions.

"but unless you want pitchforks in the streets you ought to think about the ramifications of just letting it fall without any order"

The people clearly don't have the $4k or so it would take to hire pitchforkers, so I don't think this is a realistic scenario.

W67: Can't carry then sell. Get yourz house in order. This recession ain't over by a long shot.

Yes. Do you believe that owners at the Caledonia or the Harrison or the Rushmore, etc aren't kissing this administration's ass for giving them a golden opportunity to sell to other schmucks? If they priced their apts now for 10% less than they overpaid for them, they would be free. But no. The greedy mf's are thinking it is all part of their entitlement and they should put it on the market for 20% more than they paid for it. Gotta be the definition of hubris. When Abu Dhabi can't bail out the NYC developers all those apts will be 50% down in a matter on months and everyone will be sleeping on Matt's couch. God bless him.

chasingwamus, i'm so sorry. but we've already so weakened the fundamental strengths of our country i don't even know how to respond.

look to india, to china, to brazil. they are now providing a large percentage of your services, and a very large percentage of your goods. and the multinational corporations care not one whit about your daughter, or your family. they care about their profits.

apt23, we're clearly talking about a different group of fools. you know what i think about new construction.

Everyone is so concerned about borrowing money that will hurt future generations....
Let me remind everyone that the new administration inherited trillions in a deficit... and, the first round of bailout were administered by the previous administration.... Which is why Lehman went under....
I never heard anything about "future generations" when George W was on his horse borrowing money from everywhere to pay for his daddies war.... I also have not heard much about "future generations" when the money was to bailout the banks.....
But if it is to help out an American citizen who was steered by the banking system...
Well, then everyone is screaming about their kids future....
Really?

Hahahaha. Hire pitchfork carrying serf!!!!!!!!!

Matt's got a sofa? Maybe he shld just cut his comm to 2% to help the homeless.

AR: actually, apt23, there were huge measures taken during the great depression to assist people in keeping their homes

As well there should be. But back then the govt was trying to keep people in $20K homes that were really worth $20K. We can't keep people in $2mm homes that are really worth $1mm. Something has got to give. Let housing fall to real value and then help the people who are dispossessed with grants and subsidies. No one is helped if unrealistic prices are artificially supported by the govt. The govt will have to stop that sooner or later and later will be more painful.

apt23, my real point is that we now own the fucking mortgages. we the american people. so how do you want to pay for the losses? both in terms of the foreclosures, and in terms of the social costs if people become homeless.

most mortgages, i'll admit, are now no longer redeemable as is. but we the taxpayers may very well pay significantly more if they foreclose than if they are modified.

it's just not so simple. and i'm tired of people thinking that it is.

""I also have not heard much about "future generations" when the money was to bailout the banks....." If you didn't hear then you weren't listening. Remember that the Republicans in Congress were saying no, no, no to the Bush bailout - eventually the Dems talked them into it. From day one, people have been screaming to let private business fail - we've been screaming that you can't socialize losses and privatize profits.
"Let me remind everyone that the new administration inherited trillions in a deficit" you should do some research about what out deficit use to be and what Obama's done to it before you make statements like this.
"Which is why Lehman went under.... " Lehman went under because of their actions not anyone else's.

well. lehman went under because the gov't didn't save them. which is why the gov't then saved the rest of them.

JM, the difference is large but it cannot be ignored...
and
Lehman went under because of no Govnment bailout...
If you think Lehman's actions were worse that any of the other playes the subprime field, you are only kidding yourself...
Lehman was not a Bush supporter...

AR: I believe in modifications. At this point they are in our best interest as a nation. But i think the govt has got to stop and just grandfather past loans to keep from escalating prices even further. Why wouldn't you buy now for top dollar if you knew the govt would bail you out. I can't believe the sales prices of Manhattan apts even in the past few weeks. I would like it if the govt made an announcement that as of tomorrow, no jumbo loans would be bailed out. Prices would be revert to the norm very quickly and it still wouldn't affect the lower end of the market because you have the buyer stimulus packages. There should not be any buyer stimulus packages for jumbo loans. That is the inflated end of the market and if we ever needed the trickle down mode of economics, it is now. Let those 4 mm apts come down and the rest will follow without hurting the poor and disadvantaged. But I am sickened by bailing out those $25 martini-swilling, lap-dancing, ferrari-owning real estate whores buying apts at $2000 psf. Let them do so at their own fucking peril.

apt23, we don't disagree. really. at all.

And you think that even with a government bailout that the experience for you and your family is a positive one that encourages this behavor?

CC "lehman went under because the gov't didn't save them." My stance is the same, Lehman went under because they made stupid investments and took on way too much risk. And remember Lehman still employs thousands of people - they will be out of bankruptcy in several months - then people are going to freak out - "What, Lehman is back? You mean if we had let companies fail then they could just restructure and come back as viable businesses? Wait you mean we didn't need to bail everyone out?"
It's all so disgusting and it's just going to disgust me more when B of A gets another bailout next year and Lehman won't need one. When Lehman is in a better financial position then Citi and B of A I'll be saying I told you so.

Lehman will not be back you moron. Ever hear about Barclays? Also, ever hear about trust in the financial system, Lehman's name is as dead as Continental Illinois.

Well, I wouldn't be too sure, Benhinn. Lehman's real estate arm is very active and doing exceptionally well. I would be interested to know JM why you think they will be out of bankruptcy soon. Do you mean independent of Barclay's? I find it fascinating that the real estate arm is acting independently. Please tell more JM

AR: Yes. I know. I will come to the next SE event and buy you a drink

Benhinn - careful when you use the term moron - Lehman never went way - they just declared bankruptcy (funny how there seems to a similarity between how people feel someone who forecloses on a house actually dies and how they feel that a company that declares bankruptcy goes away)
anyway - read this - http://www.canada.com/business/fp/Lehman+expects+reorganization+plan/2237369/story.html

You're pathetic. Lehman is gone. Explain how they could come back and people would want to do business with them?

Benhinn - come on - they will be completely restructured - they will have the best balance sheet on the street -

Ok buddyboy

SO - you think in 2011 people will do business with B of A but they won't do business with Lehman? B of A with all their bad real estate loans will be considered a better credit risk than a reorganized and recapitalized Lehman?
And by the way - Lehman is doing deals now so why not after the restructuring is over?

Gotta say JM that I am in a real estate deal that Lehman is involved with and the Lehman reps are some of the smartest guys on the planet. My husband and I both wondered why just A types were still hanging on with Lehman. Now it is beginning to make sense.

not just A types. I meant "such" A types.

This has been excellent discussion. I agree with apt23 on everything . The funny thing about this discussion about how to get out of this situation is that, potentially (quite likely? extremetly likely?) any financed deal in Manhattan at current still crazy prices without a huge % downpayment is more problems in the pipeline, especially in anything absurd like Caledonia, so the problem may be getting worse as you speak.

THIS IS A QUOTE FROM A CALEDONIA THREAD SEVEN MONTHS AGO FROM A BROKER CALLED SHONG: " I know we dont have any problems lending in this building (closed several and one not too long ago) nor any other Related building. ... sunny_hong@countrywide.com"

"what is evil is encouraging our government (in a fascist way) to come in and regulate private contracts. Keep them out of this."

Exactly.

No more bank regulation (and safety nets for banks). PERIOD.

Jazzman: " you rent a room for $100/week if you can afford it - you go to a shelter if you have none of the above."

Oh.

My.

Fucking.

Gawd.

You really are delusional. Have you ever been inside one of these places? Or a homeless shelter, for that matter? I have. I'm not exaggerating when I say it's worse than prison. In prison, at least, you (and even more importantly, the OTHERS) are locked down at night.

I now realize I'm dealing with a bunch of elitist limousine liberals who have no concept of what it's like to fall upon misfortune.

God help you if one of THESE options is YOUR only option.

"ut most of this thread was about Manhattan. And I stand firm. People who bought into a known bubble after 2004 and continue to buy at ridiculous prices should be subject to a moratorium. If you have 2 million to buy an overinflated apt. you should be on your own and quit whining about not being able to pay to move or that in spite of a multi million dollar education, you did not have enough savings to get you through even one year. How many of us over the years in Manhattan saw them buying $1000 strollers, $2000 handbags, And now they are broke and as jazzman says, they can't figure out how to sell belongings to pay for a mover. It makes me crazy. Move your belongings yourself or give them to people with more needs. I don't believe we should bail out anyone who has a jumbo loan."

Get a clue, sister.

Most of the foreclosures that are looming are not million dollar apartments. And they're not apartments for which the owners had to "stretch" to afford.

Yet AGAIN, you're not listening. Or you just refuse to listen -- that IS the hallmark of liberals these days.

We are talking about people who bought well within their means. My friend bought an apartment whose total value was only TWICE his annual income. At the time, that was considered almost foolishly conservative. He had savings. He had investments. He had a 401(k). He had good credit. He had no other debt outside of his home. He had an INCOME.

And then, thanks to forces beyond his control ... he didn't.

And unless you're financially INDEPENDENT (i.e., don't need a JOB to survive), hardly anyone in this country is equipped to handle no income for an entire year.

THAT is who we're talking about here.

"Have you ever been inside one of these places?" Elitist you call me? - I lived in a $100/week room for over a year - I need not receive any lectures from you.

"Responsible" home owners who have lost their jobs and exhausted their savings. . .

Matt, your friend with the 90K income bought his one-bedroom in the UES for 180K? When did he buy it, 1996? And what happened to the hundreds of thousands of dollars in equity?

"Matt, your friend with the 90K income bought his one-bedroom in the UES for 180K? When did he buy it, 1996? And what happened to the hundreds of thousands of dollars in equity?"

I'm not sure of the exact details, but he bought it in 2006 for $270K on an 80/10/10. The equity disappeared when the market went south -- and after he had to max out the HELOC he paid down while he was still working, in order to meet living expenses.

NYCMATT: We are talking about people who bought well within their means. My friend bought an apartment whose total value was only TWICE his annual income. At the time, that was considered almost foolishly conservative.

My darling boy. Your friend did not buy within his means. I am going to do what I swore I would never do - reveal my age in order to make a point. I am 55. A very young 55 but nevertheless, when I grew up it was pounded into my head that you Never Ever spent more than 25% of income-- including utilities and insurance-- on housing. When I bought my first apt in 1982 in Soho, my husband and I were making almost an unheard of amount of nearly $90,000--combined. We were both rock stars of our fields. The world was our oyster and we felt we could stretch. The apt we wanted to buy was $33,000. I had to get my father to co-sign the loan because it was way too much risk. My father screamed at me that we should not take on such extreme risk of over 30%. My father, a tax lawyer, was adamant. I brought out demographic charts and the charts on the availability of one bedroom apts. He conceded and we sold that apt 10 years later for $186K.

So I laugh when I hear TWICE his income. That is not historically conservative. You didn't say the date he bought but if it was after 2003, he was a fool. Because the bubble had begun. Your friend and even you should be pissed that you were sold a bill of goods -- an expression that reveals my age. It is very much like the adage that we should buy on black Friday as a patriotic duty. Don't you feel guilty that every child has to have a $19 robotic hamster to save the economy? It is total bullshit for the children that are manipulated into wanting that toy. And their uneducated parents will pay hard earned $45 for it on Ebay. And your generation has been manipulated the same way into paying for the excesses of my generation. We can't profit unless you are willing to buy the bullshit. And TWICE his income is bullshit. Really, how is that working for him now? How does it make you feel that you are going to pay for my generation to scam the crap out of you. Let you get all hubristic about your savvy real estate purchase and then get all mopey when you are on the hook for paying an unreasonable debt.

Get a clue sister? Shut up boyfriend. You are going to be paying for my healthcare for years because that asshole George Bush put the biggest fuckin sham over your generation that ever existed. Yeah. Get a clue. Read a newspaper once in awhile. You have been scammed up the whazoo and if you were smart, you would stop calling me a cunt and buy me a drink to find out the truth. Believe me. This crap ain't nearly over.

Apt23. That brought a tear to my eye. Well done and well said. Can you please have a conversation with my wife. ;)

I'm closer to 40 and as of rights I should have been able to afford my dream home after my first born 7 yrs ago, but a little thing called the bubble got in the way ......... We weren't quite rock stars, but an md and an MBA ibanker pulling in good coin..... But I for one didn't want to play the 'i can leverage more game'. Like tupac said, f u to all the lemmings with helocs, f u with 6 month savings, f u to multiple 'home' owning lemmings, f u to the borkers, Fu to the mortgage borkers, Fu to anyone who can't hang with a little recession. Good nite, esp. Apt23.

apt23, wonderfully said. . .

For about 65 years the POTUS has had a famous "red button" on his desk to push (metaphorically) that got pressed once, and after that everyone has always prayed it would never get pushed again. Of course I'm talking about the "drop the nuke" button. Unfortunately, our new President has a second red button - the "reset" button. Once pushed, everyone who had severely under water Real Estate would instantly have it foreclosed and taken away, insolvent companies would vanish, etc. It would generally reset everything by TREMENDOUSLY scaling back all our "entitlements" to McMansions, $200 sneakers, 2 Lexus SUV's in the driveway, $200 dinners on Monday night, etc.

But like the first button, no one want to go near the second button. So instead they just keep putting up more plates on skinny sticks and try to keep them spinning. The problem is, once the plates start falling, they usually ALL fall. Then everyone is going to wonder why that reset button never got pushed.

I see a lot of discussion on here about what school districts various neighborhoods are in. I have a better idea: hire private tutors to teach you kids Spanish and Chinese. Probably be a more useful skill set in the future than a lot of what they are learning now.

Thanks W67. I'm sorry that you didn't get your dream home but your children have one of life's great lessons from a clear-eyed father -- Respect for $$$ born of research and insight. And btw, stylistically you make this site rock, so you are a rock star to me. Sorry no pig-- W67 is a must read for some great observations and a good laugh. "Lemmings" should be in the national lexicon for this RE disaster. A perfect metaphor.

Btw, I was trying to be brief in my first apt. scenario so my omissions make the numbers look weird. My father was concerned about the risk because my income was free lance and therefore not dependable -- he was right-- and because we had no savings. He preached three years of savings and preferably five before buying a home. He called it the "gravy" for your retirement. He got out his calculator and made me run end-of-the-world scenarios that would make the Mayans blush. It was a great lesson.

the irony of course is that when everyone (certainly the majority) acted in this conservative manner, it placed a ceiling on the overall value of real estate that was good for everyone. btw, not advocating in any way for the good old days because there were many things then that were less than ideal.

Well since this discussion has , rightly, veered into our screwed up consumption society, I'd like to also mention another factor. The Baby Boomers in their 50s and 60s are in millions of cases woefully underprepared for retirement. Few have pensions anymore, and savings are inadequate to support the flat-screen, suv, cruises, golf trip, ralph lauren, etc. lifestyle they have been used to. These people have lived the illusion of great wealth because of the home equity bonanza (often milked for cash goodies through the heloc; now partly vanished as a wealth source) , and the equity market rises (now largely vanished). Not too mention paltry real interest rates which means an agonizing choice between riskier assets or very low income. This big problem is just starting to sink in to people. Manhattan has so many rich people, and single people, that this problem is less evident than out in the rest of the usa.

"My darling boy. Your friend did not buy within his means. I am going to do what I swore I would never do - reveal my age in order to make a point. I am 55. A very young 55 but nevertheless, when I grew up it was pounded into my head that you Never Ever spent more than 25% of income-- including utilities and insurance-- on housing. When I bought my first apt in 1982 in Soho, my husband and I were making almost an unheard of amount of nearly $90,000--combined. We were both rock stars of our fields. The world was our oyster and we felt we could stretch. The apt we wanted to buy was $33,000. I had to get my father to co-sign the loan because it was way too much risk. My father screamed at me that we should not take on such extreme risk of over 30%. My father, a tax lawyer, was adamant. I brought out demographic charts and the charts on the availability of one bedroom apts. He conceded and we sold that apt 10 years later for $186K.

So I laugh when I hear TWICE his income. That is not historically conservative. You didn't say the date he bought but if it was after 2003, he was a fool. "

Wow. Such misinformation -- where do I start?

Oh yes -- how about with the year: 1982. When the average mortgage rate was just over 18% -- a fact you conveniently left out. Compared to the interest rates we've been seeing over the past decade, that changes the buying picture completely.

I'll spell it out for those of us who weren't alive back then, Gramma. You see, when mortgage rates are over 18%, the monthly payment on a 30-year fixed mortgage of just $100,000 is $1547! Using the conservative "no more than 25% of your income on housing", the $90K household could only afford a home priced at roughly ONE TIMES their annual income.

This is precisely why housing prices were so relatively cheap back then. This is also why, at that time, the typical American home back then was a 3-bedroom, 1.5 bath, with a 1-car garage. Houses more than 2500 square feet were only for the rich, because only the rich could afford them!

Think back to the film "Risky Business". Joel came from an affluent family, in an affluent neighborhood. They were the "rich" people, according to our standards back then.

However, it's hard to imagine affluent people TODAY being satisfied with a house that by today's standards is a "starter" home! TWO car garage? And Mom is driving a CHEVY station wagon??

But back to reality -- and the story of our washed-out SoHo "rock star" of 1982. So -- her father "screamed" at her for wanting to buy an apartment worth roughly a THIRD of their household income. Probably because back then, it really WAS insane to buy real estate -- particularly in sketchy parts of Downtown! The crime rate was astronomical -- New York City was the nation's murder capital -- and while it may be hard to believe in today's SoHo of Apple, Dolce & Gabbana, and Manolo-teetering supermodels, but back then, being mugged (or worse) right in broad daylight was a regular occurrence in New York City -- particularly those neighborhoods that weren't the Upper East Side. Her father was probably "screaming" at her because he didn't see the point of sinking money into a rat-infested shit hole in one of the most dangerous parts of town -- particularly when rent CONTROLLED (not just stabilized, but controlled) apartments still abounded in the city.

Buying New York City real estate back then really was viewed as a dumb move -- and the banks even viewed it as such -- which explains why a "rock star" couple making $90K needed a co-signer to buy a $33,000 apartment.

Once we emerged from those Dark Ages, by the late 1980s, after interest rates settled down, the general rule of thumb for home affordability was roughly three times your annual income.

Now we get to my friend, who was said by apt23 that he didn't "buy within his means" -- a laughable assertion: 45 years old, making $200K per year (for the past 15 years, I might add), buying a $400,000 apartment with 20% down. He mortgaged $320,000 -- with a mortgage payment of $1700/month. Because he was in a walk-up, he had a crazy low maintenance of only $600/month. So his total monthly housing cost was $2300. With a monthly take-home pay of $9,000. That's just a cut above 25% -- of his NET pay, not gross.

So please explain to me, apt23, how keeping his monthly housing cost at 25% of his NET income was "irresponsible".

Matt, I thought you were talking about your 90K/year friend who bought the $280K one bedroom on the UES. What I still don't get - and I think you glossed over it - is what happened to the equity? He must have had at least 300K in equity last year, even if he had an IO loan and put nothing down. What happened to that?

He's saving 75% of 9k/month for 15 years or $1.2mm and he didn't think enough to out away $400k of it to be free and clear??????? WTF r u saying Matt? Your friend blew it on hookers, dope or prada shoes? Which is it dipshit? One other thing, you know just enough to know 18% interest rate environment happened and killed NYC re, ya think 5% is normal or even desirable, except to help you get 6%? And if you've got such a sense of moral rsponsibility then how about the millions starving in 3rd world countries not of the your skin color or religion?

Or does your sense of injustice only reach as far as isreal? And your friend on the couch and your chosen 'profession.'. Grow up Matt.

With a take home pay of 9K monthly for over 15yrs, not being able unemployed for 3 years is irresponsible, especially with a monthly housing cost of 2.3K! I can understand a 80K down payment if their other savings were invested in something else. If you tell me that's all the savings they had minus the 6 months emergency fund, then again "irresponsible!". As a last resort, they can also be able to tap into a 401K that should a decent amount in it considering the high income. There's a 10% penalty, but with no income for the year, 10% penalty is nothing! i.e. Take 10K out and keep 1K for taxes. If they didn't put much in the 401K in those 15 years, well... Irresponsible!

If your friend was not able to save much because he's spending 6K monthly on other obligations such as child support, medical bills, private schools, expensive vacations, etc... Well, guess what, the 320K mortgage was not affordable to him.

I'm not suggesting you should kick your friend off the sofa and into the street. That's a personal decision.

"He's saving 75% of 9k/month for 15 years or $1.2mm and he didn't think enough to out away $400k of it to be free and clear??????? "

Where the hell did you get THAT figure??

Who saves 75% of their take-home pay? Who can AFFORD to, in this city?

He was in a $5000/month apartment before his bought his place.

His salary enabled him to save up for a down payment.

I'll tell you what -- leave me your emails, and I'll have him get in touch with you. Then you can yell at him about how "irresponsible" he was -- as he sits on his friend's couch, on his friend's telephone. I'm sure it'll make you feel much better than just yelling at a third party like myself.

$200k. After tax of $9k means he's been socking away max 401k for 15yrs. So at a minimum he should have $300k in 401k. I think he'd rather mooch off you Matt than make the hard decisions. Time your lawyer friend grew and left his boyfriend's couch.

Herez my email. Suzeorman@cnbc.com

Well, he doesn't. I don't know how, but he doesn't.

$9000/month isn't really much when you're paying $5000 in rent. That's $4,000 left over for:

-- utilities
-- food
-- restaurants/entertainment
-- clothing (he's a lawyer, so he needs an upscale wardrobe)
-- health insurance
-- renters insurance
-- phone bill
-- cell phone
-- cable/internet
-- everything else.

It really doesn't go that far in this city.

But hey - again, leave me your number and he can explain it himself.

Matt, you're a great friend to him and I respect that! Really I do. You don't have to defend him or find excuses for him. I can also understand that you're pissed off and you want to direct some of the frustration of having guests on your sofa for an extended amount of time and you don't want to kick your friends when they're down. When he does get back on his feet, I'm sure you'll be telling him what others here are saying, because as good as a friend you are, you don't want him on your sofa again...

Matt, you are the one who used your friend(s) as examples of true hardship cases. Another strange fact: $5k/month on a 9K/month net income? That is a crazy amount to pay for housing in his circumstance.

So he blew his money on a luxury rental, then he bought an apartment and HELOC'ed out a few hundred thousand, and now he his on your couch, penniless. Not a great example of a hardship case.

Let me explain something to you in Spanglish my friend, Matt. He could spend $4k/month all his 'other' crap, the biggest nut that I see is $5k rent. If he'd live in woodside, lic, w heights, edgewater, Brooklyn for 15 yrs with just $1k saving/ month he'd be -> $180k ahead and that's not counting and interest earned ovr that period.

You friend has the dreaded 'i deserve to live in nyc' disease. The number one symptom is sleeping on a friend's couch after 15 yrs of making 4 times the national average income. The cure is to watch the size Orman show 5times a week. Drastic yes, but necessary.

"If he'd live in woodside, lic, w heights, edgewater, Brooklyn for 15 yrs with just $1k saving/ month he'd be -> $180k ahead and that's not counting and interest earned ovr that period. "

$5K a month rent for a single person is extravagent, even in Manhattan.

Matt,
I'm sorry your friend can't find work - unlike others here I'd say that a guy buying a $400K place who makes $200K per year can afford it.

I do, however, think that it's sad that he was spending $60K/yr on rent for himself when the median HOUSEHOLD income in NYC is about $53,000 - so clearly most get by spending significantly less on their housing.

My stance is still the same. If he can't make the payments then it's up to the bank to do what's best for the bank's owners. The government should stay away. Living in a $400K apartment is not a right that should be protected by tax dollars. Should the median household really fork over tax dollars to help a guy like this?

I'm not an SE regular but if I remember right you were such a die hard capitalist - you let AR have it about market rate rents or something similar. Now it seems that because people you know are hurting that you're abandoning sound economic principles. It reminds me of the 9/11 widows who for some reason felt like they were each entitled to more than $1M of government money because they lost someone. The government didn't have the balls to say no and so the average victims family got more than $1.3M of taxpayer money (that is on top of the amount donated by private individuals). Is it sad they lost someone - of course - is it the government's responsibility to give each of them even a dime - of course not - they should have had savings, life insurance, friends, family etc to pick them up. The governments role isn't to bail everyone out. We just can't afford it.

The market will find an equilibrium in housing prices - the government can't afford to spend enough money to keep them propped up.
They should stay out of the way.

"The government should stay away. Living in a $400K apartment is not a right that should be protected by tax dollars."

First of all, TAX DOLLARS are not being used to keep people in their homes. What I'm proposing is that the banks simply practice restraint and DEFER payment -- tacking interest and principal onto the back end of the mortgage. No one is losing any money, and no "tax dollars" are being used for this.

Second, as long as we live in a world where BANK PROFITS and BONUS PAYMENTS to executives are being protected by tax dollars, I see no reason why the other side of the equation should be protected as well (even though what I'm advocating doesn't even USE tax dollars).

FLMAO. maybe your couch buddy should sign over any rights to capital appreciation? and forgo the $500K tax exemption on home cap gain in the yrs to come... FLMAO...

Matt - "tacking interest and principal onto the back end of the mortgage. No one is losing any money" this doesn't work - you can't let people stay for free all the while their interest and principal get higher and higher -when they finally find some work they will bail on their payments. And banks can't afford to right down principal so any plan that requires banks to modify loans will cost the banks and then they will need another bailout -so bank mods cost the taxpayer (they also cost the taxpayer $1,000 to start and $1,000 per year for 3 years per modification I think).
" see no reason why the other side of the equation should be protected as well" two wrongs don't make a right - I'm not sure why the Dems (of all people) wanted to bail out rich bankers, but it's done ( a sunk cost) - going forward we just can't afford to bail out everyone who is underwater, unemployed, or undercapitalized.

" two wrongs don't make a right "

Neither does ONE wrong.

Matt: As I tried to explain in a subsequent post, my father was screaming because we didn't have any savings and he thought no one had any business buying real estate without 3 years of expense, preferably 5. The trade off for him helping us out was that we had to cut back our spending to the bone and put money into a stock/bond acct. that he would manage. And btw, we never paid 18% on the loan. I believe it was around 12% but of course it was so long ago I don't have records.

Soho was a wonderful neighborhood then. It was a quiet Italian neighborhood with no crime at all. It was filled with artists and it was gentrifying at quite a clip. It was an excellent deal. It was a great time to invest in RE. So you are wrong on all counts there.

It appears that with the financial particulars of your friend, he could afford that apt. But it is really shocking that a 45 yr old professional would have no savings. If he were my father's child, he would have had savings and a place to go after he screwed up. I am completely sympathetic to his situation now but with hindsight, I'm sure he would agree that he spent beyond his means all those years. If he had bought even 10 yrs earlier when prices were low instead of buying into a bubble, it would be a very different story.

"The Obama administration on Monday plans to announce a campaign to pressure mortgage companies to reduce payments for many more troubled homeowners, as evidence mounts that a $75 billion taxpayer-financed effort aimed at stemming foreclosures is foundering."

http://www.nytimes.com/2009/11/29/business/economy/29modify.html?_r=1&hp

Now I will do something I vowed never to do - reveal my age here. I am so old that I remember when $75 billion was a lot of money.

oh damn...another 2 year old posting here.

Matt, you should help out your friend by offering temporary shelter and help with the moving.

"Don't be naive. No one buys second-hand except at ridiculously steep discounts. It's unreasonable to expect someone to sell a bedroom set for which they paid $12,000 for $800. Or family heirlooms. "

come on! since when does the gov need to make sure that bedroom sets retain their inflated "value"? in any case, invite your friend for a walk around harlem. a neighborhood in which the avg household earns $23k per year and is also suffering unemployment. to see others in a much more dire situation helps a great deal towards "getting over it" and avoiding the feeling of victimization.

truth is, even without the recession your friend was too optimistic. a serious disease or an accident would have created the same trouble for him/her. taking for granted that the job will be there at all times, at current or higher income levels is a common but still optimistic bet (that most americans make though). it's pricing for perfection.

" Your friend blew it on hookers, dope or prada shoes? "

W67: Stop criticizing my lifestyle!!!!!!!!!

who am i to criticize what and how you spend your hard earned $$$$, my issue with the SoFa Guest is where is the budgeting? In my book, 1/100 on dope, 1/20 on hookers (if your wife okays this line item), and 1/200 on prada shoes (if you boyfriend okays this.).

no more than 1/3 on housing....

The new American Capitalism. "Flip" highly leveraged real estate and make a small fortune - great investment, no need to share profit with the lending institution. Try it again, but this time be "under water" and have negative equity - not only share with the lender, let them have the whole mess. How long can this continue?

If there is a choice between the government spending on foreclosure protections and spending on unemployment insurance, which is the wiser choice?