Comments on: The Principle of Principal Reduction

By: Enderprise

Enderprise — Tue, 13 Mar 2012 03:37:01 +0000

I’ve been arguing for three years, now, that the only way to turn around the U.S. housing market is for ALL outstanding mortgages — both underwater and not — to be reset to Fair Market Value (FMV). There *is* an equitable way to do this so that ALL homeowners benefit — and the quants at the banks KNOW THIS! But the key to making this politically salable is to make the banks themselves pay for it — not the taxpayers. And the way to do that is to allow the banks to write off their resulting losses as depreciable assets — over a 3-to-5-year period rather than as short-term losses. By viewing the mortgage write-downs as contributions to their Net Operating Losses — which can be used to offset actual income — the banks actually could gain a significant tax deduction. In the end, doing wholesale principal reductions across the entire U.S. mortgage portfolio also could provide a viable incentive for the big banks and brokers to bring some of their income sheltered offshore back into the U.S. — because they would be able to leverage their increased NOLs against the additional income to save in corporate taxes.

By: clarence swinney

clarence swinney — Sat, 28 Jan 2012 23:02:56 +0000

JUST A NOTE: THANKS JARED FOR YOUR WRITINGS.
I KNOW THERE WILL BE TRUTH. NO B.S.
I APPRECIATE IT VERY MUCH.
clarence achmed swinney olduglymeanhonest
political historian Lifeaholics of America

By: Don

Don — Sat, 28 Jan 2012 16:56:54 +0000

We’re not underwater (thanks to my wife, the Good Citizen, putting down a substantial down), and our Nevada home has declined 35% from its 2003 price. Why shouldn’t all principals be adjusted? I think there’s a fairness issue at play here that isn’t being addressed.

By: The Raven

The Raven — Wed, 25 Jan 2012 00:11:39 +0000

I think in a forbearance situation, a large number of people are simply going to walk away. There’s no good reason to stick with a mortgage that’s been extended to 40 or 50 years of repayment, especially in this economy.

There’s also a wild card: the 100 million or so titles in question, thanks to MERS. There’s an awful lot of homeowners who can, if they choose, successfully just stop paying and squat in their homes and, in many states, chances are the courts will uphold their right to do so.

Without forgiveness, a lot of those loans are just garbage.

By: Jean

Jean — Wed, 25 Jan 2012 00:01:38 +0000

Good article. Thanks.