So there is chatter in the news the government worked out a deal with major banks to freeze the adjustable rates on mortgages of many subprime borrowers. The rules are, the loan has to be originated from the beginning of 2005 to July 30th of 2007 and the rate is set to reset in 2008 to 2010. The subprime borrower also have to have a good payment history and live in the home to qualify. So I thought I would do an non-expert analysis on who benefits the most in this situation.

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The biggest winner is the banks that made these loans. Some of the teaser rates for these subprime loans are as high as 8%, so I don’t think the banks are hurting much by collecting a rate thats 16 times the average of national banks interest payout on savings accounts. Additionally, by keeping the borrowers in their homes, the banks do not have to deal with an asset that has depreciated in value. Basically, the banks are saving and earning billions by keeping subprime borrowers up to date with their debt.

The next big winner in this situation is the government. Why? One word: taxes. By keeping these stretched homeowners in their homes the government can continue to collect property taxes. Additionally, since the mortgage rates are not rising the homeowners will have less mortgage interest to deduct on their taxes and that means more tax revenue for the government than they would have had otherwise.

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I don’t consider the homeowners who keep their homes in this plan to be winners. Sure, they get to keep their home, but many of them are so financially stretched that almost their entire income is going to the banks and that is a very stressful situation. In fact, if they weren’t financially stretched, they wouldn’t qualify for the program. This is Secretary Paulson’s outline of the plan:

Paulson offered a general outline of the plan on Monday. He identified four groups of subprime borrowers facing rate increases on their adjustable-rate loans: Those who cannot afford their payments even at the current rate; those who could afford payments at the higher rate; those can refinance into a “sustainable mortgage while keeping investors whole;” and those who can afford their mortgages today but could not at the higher rate.

Only the fourth group would get help.

These homeowners are just indentured servants to a gargantuan money hungry force. Their rates will be frozen for five years, but they will have to keep on paying the price on an asset that has depreciated greatly with all that they have.

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I would count myself amongst “The Angry” because I think the plan is unfair to most consumers and Americans in general. I don’t own a home, but I know many people who took out reasonable fixed rate loans at higher rates than these subprime borrowers, only to see irresponsible behavior rewarded. Additionally, as Paulson said, “those who could afford payments at the higher rate” will not get help. How is that fair? I suppose life just isn’t fair. I think this plan, and other mortgage related bailouts are just further discouraging people from saving money, and living a sustainable lifestyle. I also think the subprime borrowers who had absolutely no equity in their homes would do better just to walk away, save some money and buy a home for a much cheaper price. I know it’s not that easy, but we can’t continue to support this manipulated bubble economy.

Quote Source: San Francisco Chronicle 12/6/2007 This article is a great read that echos some of my thoughts.

We’re heading into the winter doldrums of real estate and these two weeks I examined 218 properties that were up for sale in San Mateo County. Of these, 28 qualify as home sellers in trouble. Here are some highlights.

Well, it’s been two weeks since the last update and in the last fourteen days about 305 homes in San Mateo County were listed on Redfin. This time prescription drugs cialis us qualified as home sellers in trouble. This is nearly prescription drugs cialis us of all the new listings in San Mateo! Quite a few of these homes are marked as lender owned. Here are some highlights.

Even though I have never been to Cleveland I feel like I have some kind of strange connection to it through a few friends. One of my super geeky friends likes to say three things to indicate that something is cool. Those three words are “orange, ninja, and Cleveland”. I guess he got it from the opening song of Drew Carey where they yell “CLEVELAND ROCKS! CLEVELAND ROCKS!”. So sometimes he says “I’m in Cleveland” to mean that he’s awesome. Anyway, two of my other friends from high school are also connected to Cleveland. One of them is actually attending Case Western’s medical school, and the other one grew up in Cleveland. The three of us had a sort of “big head club”, because we all have quite large heads. So imagine my surprise when I read that most of the foreclosures in the . The BBC has also provided a lovely graphic to pinpoint all the German-owned properties:

I am at a loss for words. Though one thing that is clear is that the foreclosure situation in America affects financial institutions all around the world. It makes you wonder, how many other cities are getting owned by foreign banks?

P.S. Cleveland still rocks, because . Californian public schools are in desperate need of such courses too.

Well, it’s been since my last update on the homes selling for less than their last sales price in San Mateo County. So today is the time for another update.

I found another 50 properties that have listing prices lower than their last selling prices. There were a little more than 400 properties in San Mateo County that were listed on Redfin in the last 14 days, so that means 50 properties is once again about 10% of new properties coming up for sale. Here are some highlights of these listings.

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Most of the homes in trouble were in Daly City and East Palo Alto, but some were also found in Menlo Park and Redwood City. In fact, the most expensive home on the list is , and the least expensive is, and both of these are in Menlo Park.

I am glad to see that it seems like the homes getting discounted are of larger sizes than previous reports. Also, I did a scan of the homes in my and it seems like none of them have sold. A couple listings were withdrawn but for the most part all of the listings are still active on Redfin. A couples of the listings also went through more price reductions in the last two weeks. The most drastic of these reductions was on . On 10/21/07 the list price was 649,000, but now it lists as 499,000. I haven’t seen any properties that really caught my eye yet, but some of these properties could be a good deal for people who are good at fixing up homes. So once again, the raw data is available on the . Enjoy, and keep in mind that I don’t have every single distressed San Mateo property listed here. I only grab what I see from Redfin, and that is by no means an exhaustive source. I am sure if you dug deeper you can find cheaper homes in San Mateo.