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Lehman Bros. Folds, Brothers come together

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  • #16
    Re: Lehman Bros. Folds, Brothers come together

    Originally posted by JCsPlumbing View Post
    The original terms of the contract did not change unless he changed them. His payment would have risen to $2300.00 if his mortgage would have never been sold.

    He was probably under a 1-3-5 etc. year ARM (Adjustable Rate Mortgage). He could afford the first terms but when the mortgage went into the adjustable rate, he couldn't. An ARM is, or should I say WAS a tool, that if you knew what you were doing and had finances if the worst came, which could be useful. But very few know what they're doing or pay attention to all of the paperwork.

    So with "creative financing" people could go stated income or have an ARM to live beyond their means.

    People say I'm cheap. It's probably warranted to a certain degree. But there's another side to that. Maybe I look cheap because alot of other people are truly living above their means.

    J.C.
    This is EXACTLY the way I look at you, all jokes aside.

    Comment


    • #17
      Re: Lehman Bros. Folds, Brothers come together

      Originally posted by JCsPlumbing View Post
      So with "creative financing" people could go stated income or have an ARM to live beyond their means.

      People say I'm cheap. It's probably warranted to a certain degree. But there's another side to that. Maybe I look cheap because alot of other people are truly living above their means.
      This deserves quoting, just because it is so true. The one thing that everyone has told me about the 30-year fixed is that even if you are stretching in yeras 1-5, it gets easier and easier as you go along. The payment which seems huge in the beginning, will be just like a car payment at the end.

      Originally posted by JCsPlumbing View Post
      Now it's biting some in the a$$ and when it's not easy they want to be irresponsible and just walk away.

      I saw a program recently where the couple living in a small house in CA. decided to stop mortgage payments because their house was declining in value. They thought it would continue to go up at the false value it had been in the past. When it began to rebalance and start showing more true value, these college educated people just thought it was ok not to care about their agreement in the mortgage contract. When things were going in their favor, they were happy to pay. When values changed, they literally didn't care and were planning to just abandon the house.
      They are just following the example of corporate America. In NY that is a dumb strategy, because the bank will go after your other assets. In CA it is a reasonable strategy, because the bank has no other recourse if it was a purchase money mortgage. Either way, if they write the debt off; you are going to owe the IRS big time and you can't hide from them.

      Comment


      • #18
        Re: Lehman Bros. Folds, Brothers come together

        Explain a little better about owing the IRS please. I haven't thought about this. Nobody is showing a gain, right?

        Thanks.

        J.C.

        Comment


        • #19
          Re: Lehman Bros. Folds, Brothers come together

          Originally posted by JCsPlumbing View Post
          Explain a little better about owing the IRS please. I haven't thought about this. Nobody is showing a gain, right?

          Thanks.

          J.C.
          Let's say I'm a deadbeat customer and I owe you $1000. You manage to get $250 out of me, but write off the other $750 as a bad debt. The $750 of debt that you wrote off ends up turning into debt forgivenes, which is reported to the IRS on a 1099C and I must be declared as income. I now have $750 of income, lets assume a tax rate of 1/3 on that (because it is easy); now I owe the government $250. And of course, Uncle Sam doesn't think bankruptcy or anything else is an excuse not to pay.

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          • #20
            Re: Lehman Bros. Folds, Brothers come together

            Thanks for the lamens terms. Gonna' research more though. Hope I and others never get themselves in this position.

            J.C.

            Comment


            • #21
              Re: Lehman Bros. Folds, Brothers come together

              Originally posted by cpw View Post
              Let's say I'm a deadbeat customer and I owe you $1000. You manage to get $250 out of me, but write off the other $750 as a bad debt. The $750 of debt that you wrote off ends up turning into debt forgivenes, which is reported to the IRS on a 1099C and I must be declared as income. I now have $750 of income, lets assume a tax rate of 1/3 on that (because it is easy); now I owe the government $250. And of course, Uncle Sam doesn't think bankruptcy or anything else is an excuse not to pay.
              Trying dealing with 27 000 in bad debt your first year, numbers got a little more complicated...


              We haven't been hit as hard here in Canada as you, if the real estate values have declined, its more because of paranoia over your sub prime crisis. About 5 years ago our banks started allowing 0% down mortgages, and 40 year mortgages. ARMs were never allowed. A month ago the government announced the 40 years and 0 downs would not be allowed after oct 1. Again with the paranoia.

              Can someone tell me this, in terms of vacation property/long term investment, is now a good time? or are the housing rates set to decline even more?
              West Trail Mechanical Ltd
              Service. Commitment. Expertise.

              www.westtrailmechanical.ca

              Comment


              • #22
                Re: Lehman Bros. Folds, Brothers come together

                Just how much money does the US federal reserve bank have and how many failing firms can they bail out or are they just printing money??

                Tony

                Comment


                • #23
                  Re: Lehman Bros. Folds, Brothers come together

                  Big Pipes,
                  Word here in the states is the housing crunch has a long, long, long, way to go before it hits bottom. Estimate is another year to a year and a half. My guess is if you wait some more for vacation property, you will probably get a heck of a deal in the coming half year or so.

                  AFM, our federal reserve does not have that much money. Matter of fact, word here is that it would need a major injection of funds if a run on banks starts because they don't have enough to cover the $100,000 deposit promise they are known for. They are reaching out to China, Japan and India for loans and money to make these purchases. Two weeks ago when Fannie and Freddie were bailed out, the word here was if they don't bail them out, our recession will go to Depression status. Same today with AIG, feds figured if they didn't bail it out, the entire economic system here would teeter on the verge of collapse. They're also printing a lot more money here to cover debts which is yet another reason why the U.S. dollar is so weak right now. You can't continue to print money and have a stable economy. If you are a studen of history and have read anything of what happened in Germany prior to about 1937, you will know what comes next without me having to say it out loud. And to make things even more interesting right now, U.S. sold 1,000 bunker buster bombs to Israel yesterday at a cost of $77 million. U.S. has held off selling these to Israel for a number of years, but now has turned itself around. Israel will probably use them in October against Iran and its nuclear facilities. And this one won't be a blitzkrieg 6-day war either.
                  Jim Don

                  Comment


                  • #24
                    Re: Lehman Bros. Folds, Brothers come together

                    Originally posted by bigPipe09 View Post
                    We haven't been hit as hard here in Canada as you, if the real estate values have declined, its more because of paranoia over your sub prime crisis. About 5 years ago our banks started allowing 0% down mortgages, and 40 year mortgages. ARMs were never allowed. A month ago the government announced the 40 years and 0 downs would not be allowed after oct 1. Again with the paranoia.
                    It is interesting that ARMs were never allowed. I've been told in some countries (UK & India) you can't get a fixed rate; a mortgage is always variable.

                    I personally have no problem with zero down loans (I only put down 10%), but do think that the bank should price them according to the risk (meaning that the return would justify the larger risk). I don't think the problem was liar loans or zero down, the problem was cheap liar loans and cheap zero down loans.

                    Comment


                    • #25
                      Re: Lehman Bros. Folds, Brothers come together

                      Exactly, this is where the banks went wrong, making the liar loans and zero down loans too cheap. I would have no problem with them either if the bank would price them more reasonably, according to risk like you said.
                      Schumacher Homes

                      Comment


                      • #26
                        Re: Lehman Bros. Folds, Brothers come together

                        OUCH
                        Northern Kentucky Plumbers Twitter Feed | Plumbing Videos

                        Comment


                        • #27
                          Re: Lehman Bros. Folds, Brothers come together

                          Is 'liar loans' an actual term? I have never heard or seen it except on here.

                          I am not sure about vacation properties in upstate NY today. I considered buying some a few years ago and was told terms were limited to ten years max with 20% down. Friends I know who have purchased vacation property recently have remortgaged their and houses and used the money to buy the vacation property.

                          Naturally everyone would like to buy whatever when the prices are at absolute bottom but vacation property might be subject to a different cost benefit analysis. The intrinsic but very real psychological value of having a vacation home/camp/get-away should be factored in. Plus, even if the return is flat, you have had the use of the property and that is worth something. Waterfront property in our area is at a premium. A cottage down the road from ours is listed at $225,000. It is configured a little differently from ours and the square footage is about the same but we have twice as much property. I don't have a clue what ours is worth but we bought it in 1968 for $5,000. Even if the financial value of the camp stayed flat the personal value of the property is incalculabyl. How can you put a price on teaching a kid to swim, to row a boat, seeing the excitement when they catch their first fish, s'mores by campfires, and so much more?

                          If you can afford it Big Pipes - Go for it and don't worry about trying to buy at the absolute market bottom, because there are others there waiting for the same thing and their idea of the market bottom might be higher than yours. They will buy it and you won't have it.

                          -Tom

                          Comment


                          • #28
                            Re: Lehman Bros. Folds, Brothers come together

                            Originally posted by JimDon View Post
                            Big Pipes,
                            Word here in the states is the housing crunch has a long, long, long, way to go before it hits bottom. Estimate is another year to a year and a half. My guess is if you wait some more for vacation property, you will probably get a heck of a deal in the coming half year or so.

                            AFM, our federal reserve does not have that much money. Matter of fact, word here is that it would need a major injection of funds if a run on banks starts because they don't have enough to cover the $100,000 deposit promise they are known for. They are reaching out to China, Japan and India for loans and money to make these purchases. Two weeks ago when Fannie and Freddie were bailed out, the word here was if they don't bail them out, our recession will go to Depression status. Same today with AIG, feds figured if they didn't bail it out, the entire economic system here would teeter on the verge of collapse. They're also printing a lot more money here to cover debts which is yet another reason why the U.S. dollar is so weak right now. You can't continue to print money and have a stable economy. If you are a studen of history and have read anything of what happened in Germany prior to about 1937, you will know what comes next without me having to say it out loud. And to make things even more interesting right now, U.S. sold 1,000 bunker buster bombs to Israel yesterday at a cost of $77 million. U.S. has held off selling these to Israel for a number of years, but now has turned itself around. Israel will probably use them in October against Iran and its nuclear facilities. And this one won't be a blitzkrieg 6-day war either.
                            Jim Don
                            You are vary well informed and I was vary interested with your veiw on Israel but Iran is a vary different animal than Iraq and could lead us into something I don`t think the world wishes to go right now.


                            Tony

                            Comment


                            • #29
                              Re: Lehman Bros. Folds, Brothers come together

                              AFM,
                              You've got one more year of experience than I have, BUT, you know, with that many years under your bel as well as I do, how QUICKLY things can cascade out of control.\

                              SO -- We have a line up of dominoes right now that are all in place. We have two major wars going, we have a problem with the former Soviet Union and Georgia, we have a growing economic problem that threatens to envelop the entire world, gasoline and fuel prices out of sight, food prices going thru the roof, people losing jobs left and right, homes being lost and people becoming homeless, throw Israel in the mix with some new weapons to play with and don't forget their motto: Never Again. We could have a very very volatile mix just waiting to be stirred.

                              You bet your arse we could be headed somewhere where the world does not want to go.

                              I find it interesting that the major news media have not picked up on the sale of those bunker busters. They'd rather discuss lipstick on a pig! For that matter, our whole election cycle is focused more on ridiculous name calling and non-issues than the real issues out there. I are one of them BUT : STUPID AMERICANS!

                              Cheers,
                              Jim Don

                              PS -- Got room Down Under for one more Tony?

                              Comment


                              • #30
                                Re: Lehman Bros. Folds, Brothers come together

                                Originally posted by JimDon View Post
                                I find it interesting that the major news media have not picked up on the sale of those bunker busters. They'd rather discuss lipstick on a pig! For that matter, our whole election cycle is focused more on ridiculous name calling and non-issues than the real issues out there. I are one of them BUT : STUPID AMERICANS!

                                Cheers,
                                Jim Don

                                PS -- Got room Down Under for one more Tony?
                                I personally think you just touched the root of the entire problem.

                                We've become so focused on entertainment, immediate gratification and convenience that we allowed this problem to go unchecked to the point we're seeing words like "depression" and "economic collapse".

                                Cut a few corners to get what you want with no consideration for the end result, run to the more appealing answer without considering the longterm price.
                                Seems like it's become the American way...to pursue the most convenient short-term answer.

                                A society propelled and guided by sales pitches.

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