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High Mortgage Modification Defaults With Double Wammy To Tax Payers

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May 31, 2009 – Comments (3)

Mish always highlights the "meat" of a post, as he has done in More Prime Defaults.

The mortgage modifications reduced payments to 31% of income, but people have too much other debt to manage.  When I was writing Six Degrees of Leverage  I used 30%, but I will repeat, "make no mistake here; household budgets are tight when making the maximum payment."  

So, doing a mortgage modification when people are saddled with still carrying their student loans, car loans, credit card debt, and so on means that outrageous fee of $1000 the banks are collecting for these modifications is just more ass wipe money, as in it has done as much good as if it was used as ass wipe.

 

3 Comments – Post Your Own

#1) On May 31, 2009 at 9:51 AM, AnAmateur (< 20) wrote:

I'm sick of bailing out these idiots and their bad choices. I'm low-income and live debt free.


Screw these fools, let them loose at all. They deserve nothing.

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#2) On May 31, 2009 at 11:47 AM, NOTvuffett (< 20) wrote:

Tell us what you really think dwot, and don't censor your words this time, lol.

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#3) On May 31, 2009 at 2:49 PM, angusthermopylae (39.91) wrote:

"...means that outrageous fee of $1000 the banks are collecting for these modifications is just more ass wipe money, as in it has done as much good as if it was used as ass wipe."

Very funny, and (sadly) very concise:  A mortgagee (?) can't pay his/her mortgage because of other debt, so they have to scrape up a grand in cash for the opportunity to lower their payment.  Where does that money come from if they didn't have it in the first place?

My local bank is small, solid, and very well managed.  Every time I go in, I take a few minutes to talk to the bank manager (a friend of mine) and discuss the health of her bank, the overall economy, and the long term outlook.  Aside from systemic disasters like hyperinflation, I'm confident they'll make it through.  (I try to keep tabs through bankrate.com and other sources, since that's where my operating cash sits.)

All this pressure on the big banks is corroding the small, good ones, too.  Maybe we should start a "Band-Aid" movement--just rip off the bandaids (TARP, mortgage readjustments, housing price supports) and suffer the short-term pain.

In the end, I think it will be much better.

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