When borrowers and lenders petition the government for relief through debt forgiveness and bailouts for losses, you are the one paying for whatever the borrower did with that money; the government is merely a middleman facilitator of a tax heist. Repost from OC Housing News 2011-2016 In a bygone era, lenders lost money if they made bad loans to irresponsible borrowers. With the advent of securitization, much of this risk of loss transferred to investors, and with the economic catastrophe of 2008, lenders learned the government would bail them out for any losses they were unable to pass on to investors. The too-big-to-fail banks no longer attempt to conceal the moral hazard behind their actions; they know they will be…[READ MORE]

Many people erroneously believe housing recovered because lenders ran out of delinquent borrowers to foreclose on. They didn't. Instead, they stopped foreclosing in order to dry up the inventory to drive prices back up. Repost from OC Housing News 2011-2016 When lenders make loans, they far prefer borrowers to repay those loans; in fact, their entire business plan relies on it. As long as borrowers are current with their payments, lenders are happy and making money. When borrowers don’t make their payments, the end result is a distressed sale. If there are enough of these, market prices are reduced dramatically which causes significant lender losses. Lenders know this too, so when distressed loans became an overwhelming problem, they devised can-kicking methods including loan…[READ MORE]

I revisited my post on Rent Versus Own where I talked about the cost of ownership. Many of the questions people have about our Cost of Ownership analysis are related to the various cost inputs and how they impact values. Therefore, I want to take each of these costs and talk about them in more detail. In order to do this in a logical flow, I have broken this task into a series of four posts that will be debuting all this week. These posts are: Ownership cost: income, payments and house prices Ownership cost: interest rates and down payment requirements Ownership cost: property taxes, insurance, Mello Roos, and HOAs Ownership cost: taxes and opportunity costs Four Major Variables that…[READ MORE]

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