Hudson: How to Write Down the Debts and Restructure the Financial System

[WDCRob]

Thought this was a nice summary of Hudson's thinking.

It's also interesting because it showed up in Google Reader this morning from "Best of the Moment" - a fairly mainstream feed dedicated to passing on high-quality articles and commentary.

[astonas]

Re: Hudson: How to Write Down the Debts and Restructure the Financial System

Great link! Thanks for posting.

[LorenS]

Re: Hudson: How to Write Down the Debts and Restructure the Financial System

If anyone thinks that the "low" interest rates do borrowers much good take heed. We just inquired about refinancing our mortgage. We had ~30% down when we purchased and have been paying a LOT of extra principal over the three years we've had the mortgage. We are still being asked to pay $500 for an appraisal, extra $$ to forgo escrow, hundreds of dollars in "document fees" as well as over 1% in "origination" fees. Since it's a refinance we are not eligible for the lowest rates either.

What totally takes the cake is that I have a "401k" account of sufficient value to pay this mortgage which is getting NO return. My money market account is paying absolutely nothing. -- The financial industry is using the IRS to hold my money hostage so they can loan it back to me at 4% "interest". And Republicans have the gall to call this "free market".

Just for comparison sake, the cost to refinance my mortgage would be enough to pay for solar panels that would supply 1/3 of my electrical needs for the next 20 years. The "value" of the refi will evaporate if I move. The solar panels would continue to provide value for the next buyer.

[Milton Kuo]

Re: Hudson: How to Write Down the Debts and Restructure the Financial System

We just inquired about refinancing our mortgage. We had ~30% down when we purchased and have been paying a LOT of extra principal over the three years we've had the mortgage. We are still being asked to pay $500 for an appraisal, extra $$ to forgo escrow, hundreds of dollars in "document fees" as well as over 1% in "origination" fees. Since it's a refinance we are not eligible for the lowest rates either.

What totally takes the cake is that I have a "401k" account of sufficient value to pay this mortgage which is getting NO return. My money market account is paying absolutely nothing. -- The financial industry is using the IRS to hold my money hostage so they can loan it back to me at 4% "interest". And Republicans have the gall to call this "free market".

You might want to consider calling up some of the credit unions where you live and ask about their terms for refinancing. They typically won't have all the crooked fees typical of loans from commercial lenders. As for rates, assuming you have excellent credit, you should be able to get a very good rate. Not necessarily the absolute lowest of any lender in the country but one that's in the ballpark.

As for your 401K, if the plan administrator allows it, I believe you can borrow up to $50,000 from it although I don't know what the maximum allowable duration of such a loan is. It can't hurt to ask. Best case scenario is that you'll borrow $50,000 from yourself, lessening by $50,000 the amount you borrow from a bank, and pay the interest to yourself instead of a bank.

[thriftyandboringinohio]

Re: Hudson: How to Write Down the Debts and Restructure the Financial System

If anyone thinks that the "low" interest rates do borrowers much good take heed. We just inquired about refinancing our mortgage. We had ~30% down when we purchased and have been paying a LOT of extra principal over the three years we've had the mortgage. We are still being asked to pay $500 for an appraisal, extra $$ to forgo escrow, hundreds of dollars in "document fees" as well as over 1% in "origination" fees. Since it's a refinance we are not eligible for the lowest rates either.

What totally takes the cake is that I have a "401k" account of sufficient value to pay this mortgage which is getting NO return. My money market account is paying absolutely nothing. -- The financial industry is using the IRS to hold my money hostage so they can loan it back to me at 4% "interest". And Republicans have the gall to call this "free market".

Just for comparison sake, the cost to refinance my mortgage would be enough to pay for solar panels that would supply 1/3 of my electrical needs for the next 20 years. The "value" of the refi will evaporate if I move. The solar panels would continue to provide value for the next buyer.

I see your point, LorenS, and agree, that locking the money into a zero-return 401k by force of law makes no sense.
Milton Kuo's advice seems good if you are allowed to do it.

The wife and I held tightly to the belief that our debt was a great investment, and we worked hard to eliminate it all when we were in our 30's and 40s.
We got the job done and love being essentially debt-free.

[aaron]

Re: Hudson: How to Write Down the Debts and Restructure the Financial System

Credit Unions may be a tougher way to go. They like to keep their loans. The crooked ones are likely to be easier on you since they will just sell it to a bigger bank who will in turn sell it to the government.

Taking money out of a 401K is not usually a wise idea. While your money is in there, it is protected against lawyers and banksters. You can even murder people and they can't get your retirement money (OJ Simpson).

Remember, refinancing also exposes you to the risk of a bankster taking your savings after a foreclosure.

I bet if you had not paid 30% down and extra principle every month that you would have a nice savings account to show the friendly loan shark. They like liquid assets. They do not like "equity" in a house quite as much. Why try to pay a loan down faster when inflation is running north of 5% (and will go higher in the future)?

Bernanke has promised to keep interest rates low for another year and a half. Likely, they will stay low for longer than that even. You are not in a rush. Cash is king (when applying for bank loans). Your 'equity' is unavailable for them squeeze out of you.

[Chris Coles]

Re: Hudson: How to Write Down the Debts and Restructure the Financial System

Thought this was a nice summary of Hudson's thinking.

It's also interesting because it showed up in Google Reader this morning from "Best of the Moment" - a fairly mainstream feed dedicated to passing on high-quality articles and commentary.

This is as important a document as it gets. Everyone should read it.

[shiny!]

Re: Hudson: How to Write Down the Debts and Restructure the Financial System

This is as important a document as it gets. Everyone should read it.

Maybe it's just me, but I've tried to read it several times and find the font unbearable. It's so difficult to read that I can't concentrate on the content. I've bookmarked it to try again when I have more time and patience.

[c1ue]

Re: Hudson: How to Write Down the Debts and Restructure the Financial System

Maybe it's just me, but I've tried to read it several times and find the font unbearable. It's so difficult to read that I can't concentrate on the content. I've bookmarked it to try again when I have more time and patience.

Copy, then paste into a word processor. Highlight all, then change font to whatever you prefer.

[shiny!]

Re: Hudson: How to Write Down the Debts and Restructure the Financial System

Copy, then paste into a word processor. Highlight all, then change font to whatever you prefer.

Thanks, c1ue, it worked! I didn't know you could copy from a .pdf.

[DSpencer]

Re: Hudson: How to Write Down the Debts and Restructure the Financial System

I have never heard the principle of fraudulent conveyance described in this way.

My understanding of fraudulent conveyance laws is that they are in place to protect creditors, not debtors. For instance they prevent you from paying yourself a huge bonus from your company right before filing bankruptcy and stiffing your creditors.

Maybe there are two meanings of this principle, but in trying to internet search for the one he describes, all I can find are links to other Hudson articles and speeches where he tells the same story.

Can anyone else find evidence of this principle existing as he describes it? Or does he just not understand the law?

[Polish_Silver]

Re: Hudson: How to Write Down the Debts and Restructure the Financial System

MY experience lately is that they (banks or Credit unions) don't care what assets you have. Only current income matters. I had large liquid assets and they wouldn't re-fi because my current income is small.

They don't think independently. The fed/fdic pass down rules, ridiculously liberal or cautious and banks follow them.
They are rewarded for following the rules, not for being rational economic decision makers.

[doom&gloom]

Re: Hudson: How to Write Down the Debts and Restructure the Financial System

If anyone thinks that the "low" interest rates do borrowers much good take heed. We just inquired about refinancing our mortgage. We had ~30% down when we purchased and have been paying a LOT of extra principal over the three years we've had the mortgage. We are still being asked to pay $500 for an appraisal, extra $$ to forgo escrow, hundreds of dollars in "document fees" as well as over 1% in "origination" fees. Since it's a refinance we are not eligible for the lowest rates either.

What totally takes the cake is that I have a "401k" account of sufficient value to pay this mortgage which is getting NO return. My money market account is paying absolutely nothing. -- The financial industry is using the IRS to hold my money hostage so they can loan it back to me at 4% "interest". And Republicans have the gall to call this "free market".

Just for comparison sake, the cost to refinance my mortgage would be enough to pay for solar panels that would supply 1/3 of my electrical needs for the next 20 years. The "value" of the refi will evaporate if I move. The solar panels would continue to provide value for the next buyer.

This is not an eeeevillll Republican plot. If you still subscribe to this partisan nonsense you still have some education to get thru...

[DSpencer]

Re: Hudson: How to Write Down the Debts and Restructure the Financial System

This is not an eeeevillll Republican plot. If you still subscribe to this partisan nonsense you still have some education to get thru...

Agreed. Also, these days usually the people saying we have a free market are those who are saying that in order to blame the free market for something that is caused by government laws, regs etc. Most free market advocates are aware that what we have is not a free market and is becoming less so all the time.

[btattoo]

Re: Hudson: How to Write Down the Debts and Restructure the Financial System

MY experience lately is that they (banks or Credit unions) don't care what assets you have. Only current income matters. I had large liquid assets and they wouldn't re-fi because my current income is small.

Similar experience here. I ultimately was able to re-fi, but the bank didn't care how much liquid savings I had; they were only concerned with my income.