underwater mortgages

When Does 2 -1 = 0?

Housing Market Math, Circa 2010 When does 2 – 1 = 0? When a two-income family that’s “upside down” on their mortgage loses one of those jobs (“upside down” is Realtor-speak for owing more on your home than it’s worth). The first wave of foreclosures largely consisted of marginal borrowers — putting very little (or...
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Less Stigma, More Ditched Mortgages?

Social Stigma vs. Financial Self-Interest Across U.S., Food Stamp Use Soars and Stigma Fades –Headline, The New York Times (11/28/09) [A new academic paper] argues that far more of the estimated 15 million American homeowners who are underwater on their mortgages should stiff their lenders and take a hike. –Kenneth Harney, “The Moral Dimensions of...
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Under Water Mortgages & Strategic Defaults

Future Foreclosures? 1 in 4 Borrowers Under Water –Headline, The Wall Street Journal (11/24/09) In truth, this isn’t just a headline in today’s Journal; it’s THE headline. As the accompanying story spells out, even the startling, 1-in-4 statistic understates things: in Nevada, Arizona, and Florida, the corresponding percentages are 65%, 48%, and 45%, respectively. As...
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Rick Sharga, Cont.

Watching “Strategic Defaults” A couple other points from Rick Sharga’s excellent presentation yesterday, including a much-needed “silver lining”: The “X” factor in everyone’s foreclosure projections is what happens with “strategic defaults.” Typically, people don’t pay their mortgages because they can’t. A strategic default is when someone doesn’t pay their mortgage because they’ve decided not to....
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Et Tu, FHA?

Hemorrhaging at FHA FHA runs low on cash, fueling bailout concerns. –Headline, The Boston Globe (11/13/09) Here we go again. First come the rumors of funny accounting and huge, buried losses. Then come the vehement denials from company executives. Finally, the truth comes out: the critics are vindicated, the losses are toted up, the discredited...
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Housing Market Psychology

“Can’t Sell” vs. “Won’t Sell” Much attention has been paid to all the homeowners who want to sell now but literally can’t afford to, because they owe more on their mortgage than their home is worth (in Realtor’s parlance, they’re “underwater”). Unless they can get the bank(s) to reduce their principal or simply default, they...
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