So much for all the “good” news coming out of D.C. Goldman Sachs, JP Morgan Chase, B of A are all happy campers with their billions in profits, while the rest of us lose our jobs and watch our state sink into bankruptcy. No one ever mentions that, besides the TARP money since repaid, Goldman Sachs got $12 Billion from AIG to cover hedge fund losses. And, of course, where did AIG get the dough to cover its insurance policies? Why, funny you should ask, that also came from tax payers…So, it’s kind of an endless circle of taxpayer funds creating “wealth” for these jokers while the rest of us starve. That’s capitalism, right?
But, back to real estate…What does all this have to do with real estate. Plenty, as it turns out. Chase and B of A are, of course, banks, now, in fact, the biggest banks in the country. That means they also control a majority of the mortgage loans and how the rising default rate is to be handled. In case you hadn’t heard, default rates are up and rising. Could that have anything to do with the also rising unemployment rate now over 10% in 30 states and 12.6% in California last time I checked. Here, even the “good” state jobs are now at risk and going down the tubes faster than your 5-year-old at Raging Waters.
With no job or prospect of a job, when underemployed or working only part-time or sporadically, home owners can’t cover their mortgage payments. Add to that, the factor of plunging prices. It’s estimated that by now, after more than a year of record foreclosures and drops in home values, 27% of all California home owners are under water, that is, they owe more than their homes are worth. Of course, the smart ones are short selling their homes. It’s hard to give up the old homestead and all the work and money put into it, but once the underwater mark hits 30% loss of equity, it really makes more sense to let it go. It will be years before that equity returns given the numbers involved.
What about the refi program discussed in a previous post? For some, that might be an option. It’s no help if you’ve lost your job. You won’t qualify. If you still have a job and can afford the payments, this is an option. Though, notice–you still owe the money your home is no longer worth. You do pobably have a better rate and more managable payments, but, the debt is still there.
Then, there’s B of A which says it’s done 45,000 loan mods since April. That’s for the ENTIRE COUNTRY. Think about this: California ALONE had 135,431 notices of default [NODs] send out from January through March of this year. B of A and its newest acquisition, failed California-based Countrywide, probably account for at least 30% of those loans or 40,000 loans. So, B of A is basically DOING NOTHING to help at this time of NATIONAL CRISIS. And, remember 27% of California homeowners are under water and so need to have their loans modified. How many actual borrowers would that be? I don’t know, but we have 35 million people, so that’s got to be in excess of 1 million loans….Nationwide, in the first quarter 1.8 million homeowners fell more than 60 days behind on their loans, 15% more than the prior quarter [Q4 08]. To repeat: this is a NATIONAL CRISIS.
What is going to happen next? Is B of A going to change its corporate culture and start helping homeowners? Not bloody likely. Digging deeper into the trough of public money is more apt to be that bank’s continuing attitude. Just try to do loan mods with Countrywide and B of A or short sales. They take forever–4 months is the minimum; there is no maximum time. The paperwork demanded is just stunning. B of A NEVER, to my knowledge, forgives even one penny of any under water loan balance as some banks actually are doing. Its idea of what it owes to the common good is EXACTLY ZILCH, NOTHING, NADA.