“We Face A Challenging Market”: CEO
Some housing bubble news from Wall Street and Washington. Bloomberg, “Freddie Mac, the second-largest source of money for U.S. home loans, reported a $550 million net loss for the third quarter and likely had similar results in the fourth quarter as lower interest rates reduced returns on its investments.”
“Freddie Mac, which owns or guarantees about 20 percent of the $10.5 trillion U.S. residential mortgage market, hasn’t released timely financial reports since revealing in 2003 that it understated net income to minimize earnings volatility.”
“The company won’t provide financial results for the first quarter of 2007 until the second half of the year, Freddie Mac President and COO Eugene McQuade said today. ‘Sometime in the second half of this year, we expect we would be able to get back to quarterly reporting,’ McQuade said.”
“The third-quarter performance was attributable to $1.5 billion in pretax losses on derivatives and credit guarantee assets and obligations, Freddie Mac said. The results ‘reflect the volatility we see quarter-to- quarter in response to movements in interest rates,’ Freddie Mac CEO Richard Syron said in the statement. ‘We face a challenging market environment.’”
From the Street.com. “The following are rumors I’ve picked up from trading desks and other industry sources this morning. More signs of an imbalance in the residential real estate market are appearing.”
“For example, there’s been a surge in vacant homes because of foreclosures, owners who bought another home and await sale of their first home, and homes that are for rent because they can’t be sold. In certain regions of the country, such as California, vacant homes represent nearly 50% of annualized sales (triple the levels of four years ago).”
“A medium-sized private homebuilder and two more prominent subprime mortgage originators/servicers will shortly announce bankruptcy. HSBC is considering the sale of its Household Finance subsidiary because of the hemorrhaging of profits in its mortgage business.”
The Associated Press. “James Pedrick, executive VP of Mortgage Lenders Network USA Inc., said the company is negotiating with several firms about possible partnerships ‘that would allow us to reconsider our business model with the appropriate capital to support that.’”
“Pedrick blamed the company’s problems on rising defaults and the faltering housing market. ‘I don’t think the market is going to turn around real fast,’ Pedrick said. ‘I think we’re looking at 2007 being a tough year and beyond that it should improve.’”
“The company laid off workers Tuesday, although Pedrick called the actions two-week furloughs. He wouldn’t say how many of the company’s 1,300 workers were affected.”
“Subprime borrowers had a delinquency rate of 12.5 percent in the third quarter of 2006, the highest in more than three years, the Mortgage Bankers Association reported last month. ‘Basically, this industry has been doing terrible things for a long time,’ said David Olson, president of a Columbia, Md.-based firm that tracks the mortgage industry. ‘It threw all the lending standards in the garbage.’”
“He criticized the industry for lowering its standards by reducing the level of creditworthiness acceptable to borrow money and pursuing a sales-driven strategy.”
“Michael Warshaw said he arranges about 80 loans a month, including four or five through Mortgage Lenders. Several loans that have closed have not been financed by MLN, he said. ‘MLN is legally bound to produce the money and they can’t,’ Warshaw said. ‘This has never happened before.’”
An editorial from the LA Times. “Buying a house with no money down was always sort of crazy, but the market is just now realizing it. The answer may be staring us right in the face. If you can’t get a house with no money down, the sky is obviously falling.”
“The problem for all these firms is that their market, people who want to own homes but have bad credit, little income, few savings or all of the above, is understandably at a much higher risk of default than the mortgage market as a whole.”
“The sub-prime market’s 45-fold growth, from $13 billion in 1995 to $594 billion in 2005, stands as a monument to the nation’s home-buying mania. You’d need the proverbial heart of stone not to laugh at the suffering of the gamblers who bet that the real estate market could increase indefinitely.”
“There’s a puritanical impulse to say, ‘If you can’t afford a down payment, you shouldn’t be buying a house.’ But it may be more appropriate to marvel at a nation in which you can buy a house the way you’d buy a used car, and to thank the market’s powers of natural selection that this behavior is now being curtailed.”
‘The third-quarter performance was attributable to $1.5 billion in pretax losses on derivatives and credit guarantee assets and obligations, Freddie Mac said.’
And the ratings agencies want us to believe the taxpayer will bail these guys out?
‘You’d need the proverbial heart of stone not to laugh at the suffering of the gamblers who bet that the real estate market could increase indefinitely.’
I think the editors at the Times are reading here.
Ben,
You are converting the experts one at a time.
Thank you for this blog.
To hell with the “experts”. They know, they always knew. They’re the ones that control the puppet strings. The ones that need convincing are the stupified masses.
The experts are bought, plain and simple. There is even a rumor circulating that the NAR may be interested in buying this blog.
Where did you get that?
If I were Ben for $500,000 I would sell to NAR and migrate the blog to a different web address.
“Where did you get that?”
I may have made it up (as I said, it’s a rumor).
Con the NAR? Hell yes! It would be sweet, but not for no 500K. C’mon. What did the creators of Youtube sell to Google for? Bleed ‘em hard Ben, and then hand the baton off to someone else.
Or make sure you don’t sign a non-compete.
In order to help get Ben maximum value everybody should vote HBB as the best housing blog in the contest being hosted at http://www.housingwire.com which was posted by Arizona Slim in yesterday’s Bits Buckets:
Per Slim:
Okay, gang, let’s get this blog a REBA:
http://www.housingwire.com/2007-rebas/
Don’t laugh. I’m pretty sure that’s what happened with the “Overvaluedblogspot”. Realtors must have been steamed by their ridiculous listings and quietly asked the guy how much would it take for him to just go away. I’m not worried though, Ben’s one of those “stand up” guys and as books like “Sell Now” by John Talbott gain more mainstream acceptance this blog will only become more pivotal. Thanks to Ben and all of YOU!
Everyone has his price, including Ben. I wouldn’t blame him at all if he got an eye-popping offer and took it, even if it meant signing a non-compete.
Many folks on this blog could then start a follow-up, until the NAR realized it couldn’t afford to keep buying them out.
Hold out for at least seven figures, Ben!
Slight correction, D. The title is “Sell Now!” you missed that exclamation mark there
I make it a point to leave that book prominently visible in the most trafficked areas of bookstores, on a shelf at approx. 4-5 feet height.
I’ve already voted for Ben’s as Numero Uno. I like some of the other blogs, but this is the one I come to daily.
Thanks P’cola P! Done!
~Misstrial
posted “Hold out for at least seven figures, Ben! ”
Yea! you could hook them up with a 80/20 neg am loan…. walk and be cool…. just count the cash!
nnvmtgbkr,
It’s like I may have mentioned yesterday. The way these sub prime lenders have been cut adrift it’s as if they were by design, expendable. Simply there to write as many loans as they could for as LONG as they could and then shut down without so much as a fight to stay in business?
Again, as you look at the absolute explosion in sub-prime paper do any of us really believe that is was ONLY “first time” or marginal buyers that created all this demand for sub prime?
Well, if Freddie took that kind of hit from credit guarantees, who else took a hit? Freddie isn’t the only one in town playing that game.
My goodness, if that kind of pain happened in Q3 06, what will happen in Q2 of 07?
There is blood in the streets.
I remember getting chewed out for saying that some time back… maybe that person was washed down the street…
yes, please use;
“hemoglobin on the highway”
The blood flowing is merely a trickle today. Just a hint at the tsunamis to come in 2007-2011.
Q2 of 07? 15%
Q2 of 08 20%-30%
just guessing, and trying to be nice
fre is still hiring and giving raises
gov ageny- as things fail the get more $
Nope - it’s a private for profit corporation, as are quite a few entities which people mistakenly believe are “government agencies.”
Who We Are
Freddie Mac is a stockholder-owned corporation chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing. By doing so, we help lower housing costs and provide better access to home financing.
Yes, technically the GSEs are “private” and there is no explicit guarantee of a government bailout. However, the bond markets & hedge funds have priced GSE paper risk equivalent to T-Bills –in other words, basically at zero-risk. And with the implicit assumption of a massive taxpayer bailout if things get really ugly. Given the fact that Fannie & Freddie underwrite about 50% of all U.S. MBS/CDO risk, they’re probably right.
It’s a gov’t institution when (as I anticipate) it fails (i.e. taxpayers bail it out) and a private institution when things are good (i.e. insiders pocket all the profits). Typical 21st-century American business model. Kruschev laughs at us from his grave.
“You’d need the proverbial heart of stone not to laugh at the suffering of the gamblers who bet that the RE market could increase indefinitely” — I don’t get it. I HAVE the proverbial heart of stone, and I have NO trouble laughing at the gamblers.
You smell that? Ah yes, the winds of change are blowin’. Interesting days lie ahead - navigate carefully.
A day of BIG fat lies by the Labour Department and the Wall Street bastards. So in one month you have created 167,000 jobs. The lies must continue. Wonder where. In the army or at the Pentagon ? What a total pack of crock!
What month? Probably the December Christmas help.
You are probably right.
They hired a lot of part time Santa-Clauses and US marines for Iraq.
Marc Authier, What did you expect? The system was highjacked by the supply side liars 30 years ago. Right about the same time the mutherf#ckers threw us all overboard.
I expect nothing. At least there is still a lot of decent Americans out there, like you and Ben. I expect the lying to continue. It’s just really nice just to know that maybe eventually things will change.
Yes, Marc, there are still a lot of decent Americans out there. Many of whom agree with you.
You don’t hire marines - they volunteer.
Some of the most stand up guys I’ve worked with have been ex marines.
Note : I’m a foreigner who typically likes to poke fun at US machismo - but the ex-marines I’ve worked with have been some of the most stand up reliable honest people I’ve had the pleasure to work with. Certainly more of an asset then some of the business school smarmy politicians I’ve come across.
No such thing as an “ex” Marine.
“The system was highjacked by the supply side liars 30 years ago”
Details please.
I was around 30 years ago…21% prime as I recall around the time the “supply siders” came into fashion.
jag -
please do NOT bother us with the facts…
LOL
ok my posts today are approaching Stucco proportions, signing off yo’
Here’s a little advice jag. Stop jumping on my every post like an ethiopian on a rice cake. You’ve got a long history of doing so and its getting old for me and Ben.
The tell for this lie was the ADP report of 40,000 jobs lost. This number will be corrected big time, and no one will notice.
Revisions, revisions, and more revisions.
“There tree sorts of lies. Lies, darn lies and statistics.”
MARK TWAIN.
http://en.wikipedia.org/wiki/Lies,_damned_lies,_and_statistics
Thanks GetStucco.
play with the numbers and hold the FED rate steady. Wait for the FB’s to shake loose. The Plan seems evident.
Steady as she goes for the Poop Ship Destroyer…
Poop Ship Destroyer ?
It’s nice reading this blog. It’s an addiction.
Poop Ship Destroyer. What a nice metaphor!
Title of 15 min opus by obscure Comedic Alternative Rock band “Ween”
I feel it’s the perfect describer for the Housing/Credit Bubble.
The line from the LA Times article, “You’d need the proverbial heart of stone not to laugh at the suffering of the gamblers who bet that the real estate market could increase indefinitely.”
That was lifted from Ben’s blog and specifically Sammy Schadenfreude.
Oops, Ben beat me to it.
I think Ben is playing coy, since he can see the IP addresses and registrations of the hits to his blog. He knows the LA Times lurks here.
There is no need to compromise confidentiality when the MSM is lifting direct quotes from this blog.
I was floored when I saw the article this morning. Finally, they’ve decided to address the proverbial 600-pound gorilla. However, I found it interesting that their first real shot is in an editorial, as if there were not enough hard news to put in the cover of the RE section, or even the main paper. I think they are preparing for that.
Hey, some of us on this board recently sent in letters to the editor at the LA Times regarding their real estate coverage, maybe it’s having some influence?
investorgirl, I guess it’s safe to assume that they got more than one indignant letter.
Well,
At last they are smelling the coffee. Good on ‘em.
Perhaps we will soon read that quip about “set a man on fire and…”
Or not…
That was cold,but very funny!
Nicely done SunsetBeachGuy
I doubt they care about the facts or us bloggers’ opinions. This is the “dump” stage in the grand “Pump ‘n Dump” scheme. MSM has its own puppeteers.
Yeah the NAR wants sellers to lower thier prices or was that last week?
Liquidity moves from housing bubble to metaphors as six-hundred pound gorillas with hearts of stone wake up and smell the coffee.
…and suddenly realize there is an elephant in the room…
SunsetBeachGuy, Ben -
While I’d love to take credit for that quote - about having a heart of stone not to laugh at the suffering of FBs - the actual source was the playwright Oscar Wilde, who wrote: “You’d have to have a heart of stone to read about the death of Little Nell [whoever that was] and not laugh.”
http://www.age-of-the-sage.org/quotations/poetry/oscar_wilde.html
One must have a heart of stone to read the death of little Nell without laughing.
Here’s the actual quote.
Yeah, and the editors of the LA Times are HUGE Oscar Wilde fans.
I read pretty widely and the only instance of this phrasing has been used recently by Sammy Schadenfreude.
True. In terms of actual usage there’s no doubt in my mind they saw the phrase here & lifted it. I just wanted to credit where credit is due.
I don’t doubt that we’re going to see a lot of other familar material from this blog turning up in the MSM, as more and more reporters get wise to the fact that the posters here have been consistently right, where the RE “experts” couldn’t have got it more wrong.
And this ball just got rolling.
There is a way to bail out the investors that should not have been buying. Check out this loan program for investors that purchase rental homes. It is called the 2% loan. http://www.2percentloans.com
To good to be true?? One of the investors on the SDCIA forum did a nice job explaining its downfalls, but sure enough many will jump on.
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1595453
What’s next? The government making our morgage payments??
In the F.A.Q., it says it’s an adjustable rate mortgage with no caps. Might be a little risky?
What one guy on the SDCIA board says is that the loans are in Yen and must be paid back in Yen so exchange rates are a big factor in the loan. I personally don’t like complicated financial deals so if I wanted to speculate in exchange rates I think I would do that separately and not try to get it to work with Real Estate investing
Yes, but you’re not feeding the alligators every month.
I suggested yen loans several months back as a possible desperation move for specuvestors.
“In the F.A.Q., it says it’s an adjustable rate mortgage with no caps. Might be a little risky?”
Tony Soprano offers that one too. You don’t pay, you loose your kneecaps…
Serfdom–no payments necessary.
just a flim flam site on godaddy (website tonite, meaning it took about 10 minutes to publish). a rehash of the ads i still see offering neg am loans to investors.
Soon to come a neg-am coupled with a neg-int ?:)
You really need to believe in a strengthening dollar to take this loan. If the yen goes up against the dollar, they will call the loan, and you are screwed.
Of course they’re in the OC - Huntington Beach.
From the Street.com article:
8. The falloff in subprime lending and the tightening of standards at traditional originators has caught the eye of the now Democrat-controlled House. There will be an attempt by the Democrats to introduce legislation that will subsidize first-time homebuyers, who because of affordability issues and less availability of subprime loans are having trouble getting mortgage financing.
Wow good idea! And make pay the stupid chineese and japaneese and Saudis. Real good idea ! That’s what will be happening. What standards? It’s not because you introduce a standard, that it must really be followed. Go ask that to Kenneth Lay from ENRON. Oh shocks I forgot, Kenny Boy is dead but it doesn’t make a darn difference.
“There will be an attempt by the Democrats to introduce legislation that will subsidize first-time homebuyers, who because of affordability issues and less availability of subprime loans are having trouble getting mortgage financing.”
That sounds like a standard Democrat solution — encourage more low income households to become bagholders by purchasing homes at a point near their all-time bubble highs…
As a tree-fondling greenie, I could take offence to that, but I won’t.
I am a bit flummoxed by affordable housing. Seems like the attempts to override market forces for homes are like sticking your finger in a dike. Besides, even the poor usually find some way to screw the next guy. Cheap condos in Ashland that went for 120k in 2001 are now (not) going for $300+
“Seems like the attempts to override market forces for homes are like sticking your finger in a dike.”
More like sticking your finger in a dike while simultaneously seeding the clouds to produce a flood-inducing deluge. Because the short-term side effect of more subsidies will be higher home prices and more speculation, the mid-term side effect will be more McMansion tract home developments built in the desert and the long-term effect will be a bigger bust with still more supersized overpriced housing that does not meet fundamental needs than what is extant.
Well it’s good for Robert Rubin’s bunch.
“legislation that will subsidize first-time homebuyers,”
This is always a sure indication of End Game. Without a doubt legislation from either side is always a day late and a dollar short.
Goodbye housing Bubble, the FAt Lady is singing…
“That sounds like a standard Democrat solution — encourage more low income households to become bagholders by purchasing homes at a point near their all-time bubble highs…”
Except that anything they do won’t take effect until 2008 at the earliest by which time home prices won’t be anywhere near close to their all-time highs.
What a lot of people don’t seem to realize is that the Dems can’t do squat without Bush’s signature. They don’t have the numbers to override a veto. The question should be will Congress and Bush bail out low-income homeowners. If the answer is “no” then expect no action until Jan 2009 at the earliest.
assuming that the repubs in congress are not interested in getting reelected to play along and override the veto.
Ah, price supports. Great idea, and so obviously necessary as well.
Craven Witless Republicans vs. Craven Witless Democrats. What a choice.
Witless? Think NAR campaign contributions…
There is another lense through which this proposal looks smart:
It has the appearance of a practical policy to demonstrate the Democrats’ commitment to protect low income households from the hobgoblin of unaffordable home prices. Too bad that it is not practical and it will end up victimizing those it is ostensibly targeted to protect (kind of like tempting low income households to buy homes they cannot afford through waving downpayment requirements and abolishing prudent underwriting standards…).
“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.”
– H. L. Mencken –
Price supports. … boy you got that right emcee.
Trully brilliant to boohoo about “Affordable Housing” just as home prices are on the verge of a collosal dump.
If they cared AT ALL about affordable housing, they would have paid a bit of attention to the shoddy lending practises and fraud that kept this baby going for so long.
Shut down FNM. That’ll help make housing affordable again.
The only thing that subsidizing first-time homebuyers is going to do is to keep house prices high and transfer more money to the Real Estate industry. But since the Real Estate industry has so many connections with both the Republicans and the Democrats at the local level I expect this idea to get wide support even though it will hurt more people including poorer people then it helps.
Price supports - what a stunningly stupid “solution”.
I can see low-income areas experiencing little “booms” of their own, while home prices in surrounding, more affluent burbs, adjust downward in accordance with prevailing market conditions. The govt would be doing 1st time homebuyers a bigger favor by just leaving the market alone.
If Pelosi is serious about this we will all have to get out our nice stationery and write to our local Congressguys.
“The govt would be doing 1st time homebuyers a bigger favor by just leaving the market alone.”
The Dems would be doing themselves a big favor by distancing themselves from the housing market conditions they have inherited, rather than adopting policies to keep the party rolling while inadvertently victimizing their low-income constituents by providing further incentives to buy houses that nobody can afford.
Yep. Focus on getting Bush and his cronies out of office and into jail. Stay away from economics until everyone agrees that the economy is going as badly as the Iraq adventure.
“The Dems would be doing themselves a big favor by distancing themselves from the housing market conditions they have inherited”
The problem for them is that the Democrats are just as tied to the Real Estate industry as the Republican, much in local politics is controlled by the Real Estate industry and even at the national level all politics is local.
And they call it free markets. Mucho mucho funny!
The government wants desperately to provide home financing to ILLEGAL ALIENS. They want to make sure they have a home here in America.
I have many “new citizens” in Tampa Area that have bought houses, new cars, lots of goodies. Don’t speak English. Just showed up and moved in.
I expect the guvmint to support this continual takeover.
Ah come on! The government does care a damn about citizens or even illegal immigrants. It’s about the banks and Golman Sachs! You are real slow to understand.
Ah, diogenes, a poster after my own heart. Like you, I just don’t get this illegal alien grab/giveaway, assisted by the guvmint. But I’ve given up, because insanity cannot be fathomed. The best thing to do is to realize what it is, and that these people and those who assist them are criminals and enemies of American citizens and so can be depended upon to take those actions that will injure American citizens.
“The best thing to do is to realize what it is, and that these people and those who assist them are criminals and enemies of American citizens and so can be depended upon to take those actions that will injure American citizens.”
Well said.
Thank you, spike. I say this because it is important to be able to assess the reality of a situation, not how it was, or how it should be or how public relations groups say it is. When one understands the reality of a situation, then one can deal with it and prepare properly.
Yep, diogenes, I agree. I have personally witnessed this.
Keep on postin’.
~Misstrial
uh,
i believe that was the original intention of the fha/va programs, which fell out of vogue because they actually required a nominal down payment and documentation of income.
“down payment and documentation of income.”
How passé
NO, NO, A THOUSAND TIMES NO! I’m a first-time homebuyer, but I’ve also noticed that whenever programs are set up to “help,” the maximum income thresholds are typically set at exactly $5,000 less than I make. It’s almost as if they use the Thomas Benchmark — “Anybody who dresses that well MUST be rich” — for deciding where to place the cutoff.
An attempt to subsidize first-time homebuyers NOW, with markets elevated into the stratosphere, is really nothing more than a subsidy of present homeowners. Just allow the market to do its creative destruction, and affordability will return on its own as prices fall. Propping up the price with a subsidy will preserve the irrationality in the system, and likely cause prices to escalate even further — leading to demands for a further subsidy, and so on in perpetuity.
“Propping up the price with a subsidy will preserve the irrationality in the system, and likely cause prices to escalate even further —”
This also will encourage more speculation, which amounts to gamblers snapping up homes in order to capture the home equity gains as prices increase to reflect new “affordability” subsidies. Maybe this is why so many vacant homes were still getting snapped up in SD (51%) and PHX (47%) as recently as last month?
As an anti-corporatist, anti-republican, I find this stupid democrat idea a very dangerous scheme to distort markets typical of the corporatist led republicans.
Start writing letter peeps.
And you really still believe there is a difference between both? One moment. Ok one advisor is called Paulson and the other one Rubin. Both work for Goldman Sachs.
OK, Marc, I just want to acknowledge your point about Goldman Sachs being in control. They are a bunch of major creeps, OK? I mentioned this about a year ago when I got wind that Paulson would be coming on board as Treasury Secretary. His job being to preside over the falling dollar, basically.
“I just want to acknowledge your point about Goldman Sachs being in control.”
How can there be any denial of it? The corporatists have molded an idea blend of uneducated wage earners willing to vote against their own economic interests and “social conservatives” who are willing to castigate the majority in the name of Christianity, even though the bible clearly warns against demonizing the non-Christians. Whatta ya get?
GOP
“corporatist”
To paraphrase Inigo Montoya, I do not believe that word means what you think it means.
corporatist… cartel…. your choice.
Just a pet peeve of mine. “Corporatism” was actually a specific political movement — one of the movements Mussolini drew upon in creating fascism. The word “corporate” in that movement didn’t refer to business corporations in the modern sense, but rather to generally-defined interest groups. The idea was that one-man-one-vote democracy didn’t work (given the Italian and French experience, not an entirely illogical conclusion) and therefore you had to raise the bar of representation to “groups” — kind of like the modern Left fixates on group rights and considers the word “individual” a red-flag term that results in domination by the dominant group. But I digress.
Anyhow, I don’t buy that because the GOP doesn’t go out of its way to screw business, it is therefore “corporatist” in the sense you use it. If business corporations were all-powerful, we wouldn’t have gotten the Sarbanes-Oxley abomination (which costs business several dollars in compliance costs for every dollar’s worth of fraud prevented). We wouldn’t have turned the U.S. from the IPO capital of the world into a second-tier player over the past few years, under a Republican administration and Congress. We wouldn’t have corporate tax rates which, believe it or not, are significantly higher than their counterparts in most of our competitors.
That’s not to say that business doesn’t have influence with the GOP — but so what? Just because we’re not nationalizing industry, or instituting a socialist paradise, doesn’t mean business runs things. Business is one interest group among many. Here in California, I wouldn’t even say that business is one of the top 3 most powerful interests.
I found the same thing to be true when I was looking to buy. The income thresholds were so low that I was amazed that they were even targeted at prospective owners.
I want a subsidy to buy google as I can no longer afford it at its current price. Also stone crabs are extremly high this season so I am going to need a subsidy for those as well.
Hear, hear. And as long as we’re on the subject, I’d like a pony.
Preferably one that wouldn’t try to buck me off, like the one on my great-uncle’s ranch in Wyoming twenty years ago.
There is less here than meets the eye. The Democrats may “introduce” some legislation they know will never become law to score some political points. If they manage to get it through congress, which is doubtful, the president will veto it. then the Democrats can bluster how the Republicans don’t care about the little guy. Good posturing for 2008 when you think about it.
The little guy? He is a darn good electoral ping-pong ball.
Ka ching ! Ka ching ! Ka ching ! It’s real punchy to talk about the little guy. Meanwhile Nardelli, that incompetent piece of sh-t from GE gets 210 million dollars for six years of “hard work” and his poor salary. The shareholders get hyper crappy results as the employees, oh pardon me, the associates. God! The US is not the place I used to know! It’s more and more like a banana republic.
From GE and then Home Depot. They like to exchange their pieces of junk in corporate mafia land.
“Democrats can bluster how the Republicans don’t care about the little guy”
Clearly, their electorate is the big guys, ie. corporations. The republicans are bought and paid for by the corporatists circa 1980.
zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz
Captain Credit,
That is complete idiocy.
Sorry Arwen but to deny the enormous influence of the corporatists on your beloved GOP is akin to suggesting that housing is priced correctly.
You lost some credibility my friend.
Captain Credit,
I have a B.A. in History, and my favorite topic at present is Lincoln. (My favorite professor is currently at Gettysburg college and is a common man, yet something of a Republican idealogue). Lincoln’s idea was that slavery was a problem for the common man because the common man simply could not compete and rise in life against such an institution. The Democrat Douglas did not concur.
Yes, I do know a lot of Republicans. I live in Northern Virginia. Some are very close family members who have worked on the Hill for decades. The staffers I know are from poor backgrounds, be it farming or manufacturing. Not one of them cares a fiddle for “corporatists”. That is *not* why they chose to work for Republicans.
Ms. Nancy Pelosi is a multi-millionaire. Mr. John Kerry married a multi-millionaire. Mr. Ted Kennedy’s family made its money from bootlegging.
Mr. Santorum (R) is an example of a common man Republican. He probably has the least net worth in the entire Senate. His children can now attend college, because he’ll be getting a better job.
Better a bootlegger than a guy running a bank underwriting the financial underpinnings of Nazism.
” George Bush’s grandfather, the late US senator Prescott Bush, was a director and shareholder of companies that profited from their involvement with the financial backers of Nazi Germany…
His business dealings, which continued until his company’s assets were seized in 1942 under the Trading with the Enemy Act…were the basis for the Bush family fortune.”
http://www.guardian.co.uk/usa/story/0,12271,1312540,00.html
captain credit has a monopoly on idiocy around here. Best to leave the trolls under the bridge when they stray from housing to politics.
Another hit and run apologist crawls out from his rock to attack the truth….. the truth he knows no attack on the truth teller can pierce.
Back under your rock little man.
No, they should let the market do it’s job. If homes are not affordable, or banks are unwilling to lend to buyers who are poor credit risks, prices will come down, making homes more affordable and the buyers with poor credit more reasonable risks at lower loan amounts.
The problem with letting the invisible hand do the work is that it becomes hard for politicians to claim that they did it. Although I do recall one very successful populist politician who made hay with the promise to “get the gubmint off the people’s back.”
http://news.bbc.co.uk/1/hi/world/americas/3788229.stm
“A medium-sized private homebuilder and two more prominent subprime mortgage originators/servicers will shortly announce bankruptcy”
The suspense is killing me. I want names.
You know where to go. The brokers can’t keep their mouths shut.
Yes this is true. I bet their bantering back and forth will only escalate. I’m sure they want to keep their mouth shut, but for people who’s greatest talent is talking out of their ass, they can’t.
Can you share the URL for this broker messsage board with us? Subprimes folding has a direct impact on me professionaly and I really need to know about them as early as possible.
I have been using the links from past blog comments.
http://bakersfieldbubble.blogspot.com
I have links to the two I view. About 3 stories down the main page…
Got two of them, thanks:
http://forum.brokeroutpost.com/loans/forum/1/2.htm
http://www.brokeruniverse.com/grapevine/
The scuttle butt today is on - D1.
Nice
Love the story about the bankruptcy lawyer boot camp.
“My goal is to train an army of attorneys to take the fight right to the creditors and their Wall Street aiders and abettors,” says Gardner. “They wanted reform, and we’re going to give it to them.”
“For example, there’s been a surge in vacant homes because of foreclosures, owners who bought another home and await sale of their first home, and homes that are for rent because they can’t be sold. In certain regions of the country, such as California, vacant homes represent nearly 50% of annualized sales (triple the levels of four years ago).”
What is the source of demand for vacant homes? Is it hard to foresee (as Russ Winter has pointed out) the personal financial disasters that await those holding vacant homes in a declining market?
“The company won’t provide financial results for the first quarter of 2007 until the second half of the year,” Freddie Mac President and COO Eugene McQuade said. He went on to say… “We are extremely confident with the the economy right now… in fact our auditors recently found thousands of dead people and pets with stated income well over 100k!”
And they were all registered Democrats.
True. That’s one of the reasons I’m a Republican: I want to get some rest when I’m dead, not have to run around voting.
“The company won’t provide financial results for the first quarter of 2007 until the second half of the year,” Freddie Mac President and COO Eugene McQuade said. He went on to say… “We are extremely confident with the the economy right now… in fact our auditors recently found thousands of dead people and pets with stated income well over 100k!”
I am wondering who is the “Mid Size” builder in Cal. thats ready to go BK….Most likely in the So.Cal. market or maybe Sac…..
Are there any “builders chat rooms”? LOL
Yeah, but I think they are in Spanish.
BAHHAHAHAHA
Tu a razon. Habla espanol signor ? Viva Mexico! Viva Cuba libre! Might get use to it. Learn spanish.
It’s a beautiful language. Maybe they will save you from the real estate implosion. I doubt it. Most of them are poor like you yankee overspenders, deep deep deep in mega debts. But they work hard at least and they cost peanuts to employ. Go ask the nice folks at Wal Mart?
you mixin’ up you espanol and you italiano, baby
Italiano is the bella of languages.
They work hard …. at crime and corruption. Really are you trying to make that culture out to be superior or something? Look at the squalor and corruption and pollution and POPULATION in Mexico City.
“There’s a puritanical impulse to say, ‘If you can’t afford a down payment, you shouldn’t be buying a house.’ But it may be more appropriate to marvel at a nation in which you can buy a house the way you’d buy a used car, and to thank the market’s powers of natural selection that this behavior is now being curtailed.”
Thank God for inventing natural selection.
And Darwin for explaining to us simple souls…
LOL!
And Darwin theory applied to politics gave us ? ADOLF HITLER.
We were talking about real estate or about the theory of evolution ?
Darwinism also rid us of ADOLF HITLER.
Didn’t Hitler die by his own hand?
“Didn’t Hitler die by his own hand?”
Technically yes, but that is a bit of a technicality given that his country was at a point of defeat and the alternative would have been to get strung up by his feet like his buddy to the south…
http://en.wikipedia.org/wiki/Image:Mussolini_e_Petacci_a_Piazzale_Loreto%2C_1945.jpg
I have some insight to the Ameriquest (OC) situtation. The wife’s cousin works there in IT and would be fairly safe if jobs were cut and possiby if they folded (someone has to maintain the data). Well all anyone is talking about is getting someone to buy them out and soon.
People are getting out fast, one manager the cousin knows emptied his personal things slowly over a week and came in on Tuesday to tell HR he was done, no talking to his workers or his boss. This guy managed a fair amount of people (45) and know really cares and they aren’t concerned about replacing him. People aren’t doing work there anymore either, some are working on resumes, some are dumbfounded, some are taking up smoking as the smoking area is packed and people are using the area to talk about rumors.
A company that has everyone throwing in the towel cant survive long.
WOW! Keep us updated.
Sounds like the last days of Enron, I was there.
Brian Cruver’s book on Enron. Forgot the title, but it described a company in which very little work got done once the truth got out in late ‘01.
“People aren’t doing work there anymore either, some are working on resumes, some are dumbfounded, some are taking up smoking as the smoking area is packed and people are using the area to talk about rumors.”
Whats the problem? This just sounds like a the description of the typical Corporate American Office.
“The problem for all these firms is that their market, people who want to own homes but have bad credit, little income, few savings or all of the above, is understandably at a much higher risk of default than the mortgage market as a whole.”
To the lenders in the virtual room:
1) How long can the credit quality inversion, where lax credit underwriting standards adversely select the worst credit risks into taking out loans, last in an environment with zero or negative price appreciation?
2) Is there a historical precedent for a credit quality inversion?
Even our political leaders are getting into the “game”.
http://www.kansascity.com/mld/kansascity/16387313.htm
Even our political leaders are getting into the game.
http://www.kansascity.com/mld/kansascity/16387313.htm
“Political leader”. Might that become something of an oxymoron?
posted ” “Political leader”. Might that become something of an oxymoron? ”
yes currently.
“But sub-prime lending isn’t going away. A larger share of the action will go to bigger players that can afford to engage in risky loans. Meanwhile, folks who need to shop in the bad-credit emporium will still get service; it just won’t be as fast and loose as it used to be”
OK, perhaps sub-prime won’t disappear, but you can bet it’s going to be a tiny fringe market with appropriate risk premiums applied. The CA market will need to fall 60% (OR MORE) before sub-prime borrowers will be able to afford to buy anything there once sanity returns to lending.
reverting back to the big three, citi, wamu, wells and priced accordingly, say 11-12% yield to justify the risk. that is the way it used to be.
Then 90% of these shops will close - no one will qualify at those rates…
Sure, a certain number qualify, over time as prices adjust to buyers’ ability to pay.
Pricing direction is certain - Only timeframe and pricing levels are to be determined. REOs and government involvement are unknowns.
And, they’ll be saying “NO” to a lot of applicants, something that hasn’t happened in a long time.
The pool of prospective buyers is going to shrink A LOT just as the for-sale inventory skyrockets and the FBs will be screwed - In a corner 1000 ways and closing.
I’ve been saying “no” for many months now, based mainly on the absurd prices people wanted to pay for tin boxes on desert plotlets. Maybe THAT market will actually hold up (5 digit prices), but I am not willing to risk my personal funds on it at these levels.
“But sub-prime lending isn’t going away. A larger share of the action will go to bigger players that can afford to engage in risky loans.”
But the bigger players were basically forced into “engaging risky loans” by competition from the fly-by-night lending shops. If they wanted to keep originating, they had to match the risk levels of new companies that didn’t have the institutional self-preservation instinct and valuable goodwill of established firms. The start-ups didn’t particularly care if they crashed and burned in a few years; their principals would get rich during the flush times and bail.
Now that the start-ups are being immolated, the established institutions will be able to return to their previous prudent standards.
The last two years of Real Estate gains were made possible by the loose and downright fraudulent lending. A lot of mortgage brokers made a LOT of money. People don’t understand that massive debt does not equate to FREEDOM.
Want to bet though that the MBs who made “a lot of money” pissed most of it away and will retain nothing? Look at how many of them are going belly up already, before any real pain has been incurred.
As a bit of poetic justice, many of those mortgage maggots will soon be serving Venti mochas and be thankful for the recent minimum wage hikes.
LOL
http://www.itulip.com/forums/showthread.php?t=778
I know the owners of a very popular coffeehouse here in Tucson. I can assure you that the personality of the average mortgage slickster is NOT what they want in their coffeehouse.
Perhaps these slicksters will pursue “opportunities” in fast food? Or, gack, in Mexican real estate, which is where the local REIC is now seeking the next bubble.
Exactly, Arizona. Because many of the illegal immigrants who made money here during the housing boom are going back home to purchase their own homes, which will cause something of a housing boom there. I hope they choke on it.
Hey, now. I’m far from pro-illegal, but at least the Mexicans were doing real work to create something of value. Unlike the parasitic realtwhores and crooked mtg. brokers here, who “made” money by doing nothing but pushing paper, lying and churning debt.
Amen, Harm. Not fond of the fact that we have illegals in their millions flooding into this country, but to the degree they stay out of trouble and perform honest labor, I have far more regard for them as human beings than I do for the sharks in the RE and financial “services” sector. Also hate to see them screwed over by unscrupulous lenders, realtors, and employers.
Yes, well, it wasn’t a real estate agent or mortgage broker I had a physically threatening close encounter with over the holidays. I know how to insulate myself from real estate fraud, but not so easy with physical thuggery.
As to doing real work to create something of value, I don’t consider shoddy and dangerous construction, massive mortgage fraud, etc. to be things of value created through real work.
Many brokers in Salinas CA are Mexican.
Bwhahahahaha
So many Mexicans here are going to get whalloped in RE and they left Mexico to get rich in USA where they are getitng poor and the rolling bubble is moving to Mexico where the ones who stayed will be getting rich !!!! LOL
They make a lot of money, then expand to new “hot” markets where they have their “best month ever”. And look forward to the Fed lowering rates “this summer” so they can re-fi all the FB’s. All is well! up up up we go. God these people annoy me….
My view from all that I am reading. It seems to me that the builders are the only ones agressivly selling (they know what is coming). The other FB “average joes” are waiting for spring. I bet most of the homes sold over the past two months are new homes. Existing homes seem to be sitting still unless they are priced very well. Any bets on the future dates of the sob stories on Oprah and other shows? Get ready for the 2007 season of America’s Funniest FB an GF. Everyone I know is waiting to sell in the spring. That is not a general statement. I mean everyone.
I think you are right. The folks who understand business are moving inventory, the reality-challenged flippers are waiting for the music to start again….the same sorts of chumps who keep pulling the slot machine handle after running through all their and saying “I’m due!!”
Have you ever held a stock position too long? You know that sinking feeling when you are waiting for the market to come back and it doesn’t? People hold stocks for emotional reasons, so imagine how many will hold their houses. Most of the ones who go underwater are on refi time bombs praying the market will bail them out.
With all the 3 and 5 year adjustables in the market, I see no way the market will recover until all of these people have been forced to sell. There will just be too much product dumped on the market for future FB’s to absorb it all. Plus, once prices start dropping, some FB’s will actually wise up and delay purchasing which will cause further price drops. IMO, the mortgage products have built-in a 5 year overhang in the market.
No! I have never held a stock too long! The TWKGQ valued at $.00009 is coming back this year! What’s that? La La La I can’t hear you!
Someone noted a while back that a large number of the option ARMs from 2003 and 2004 had already been refinanced. There were also indications that the majority of the refinancings had been from one option ARM to another — so the FBs just re-started the teaser-rate schedule and delayed the reckoning for another couple of years. Very likely, as Daffy Duck pointed out to Bugs, you can only do this trick once. My impression is that most of the option-ARM classes of 2004-2006 will not be able to refinance (property hasn’t appreciated enough — not at all, if you look at 2005-2006) and will be more than enough to create an unprecedented number of forced sales. That first wave of forced sales will prevent any meaningful recovery (that’s conservative — more likely, they will not only prevent a recovery, but drive the market down hard). The lack of any meaningful recovery will mean that those (temporarily) fortunate few who did start the clock over with one last refinance before the funny money dried up (as is now occurring) will not be able to do so again. So there’ll be another wave of forced sales in 2008-2009.
All in all, I see no reason whatsoever to expect a bottoming out of the market in 2007. In the long run, malinvestments get liquidated, and there’s still tons of malinvested cash hanging out there, irrationally propping up asset prices.
Mr Fester,
The music will start again, a nice soothing melody like Moussorgsky’s “Night on Bare Mountain”.
As many have mentioned before, I don’t think many will wait for “spring” to relist.
A neighbor with his home on the market for the past year, took it off for December, now its back and I’ve noticed even more signs in my Boston local.
Prices here are down AT LEAST 15% from peak (which was, admittedly, incredibly high). There’s at least another 15-20% to go in the Boston area.
Kinda going off topic….. and I posted in the wrong place the first time…..My husband has me hooked to this site. I love popping in and seeing the hilarous comments. I also enjoy seeing that there are people that think like me. I was so tired of defending my choice of selling our home a couple of years ago and renting, everyone thought we were crazy not buying a house right away. I predicted a bubble and everyone looked at me like I was on CRACK. I was off by 2 years so we have been renting now for a while. I am still glad I sold when I did, we made a nice profit. I use to be a RE agent. I quit a few years ago. Most agents and lenders are scumbags in nice suits. The majority of them would sell their mother to make a buck. I quit the business because I could not deal with these people day after day. I felt guilt and anger at the many underhanded deals. I am happy to be out of the business.
My problem is things are not moving fast enough for me -$. We live in the Folsom area in CA. The F***Heads that live in this community are stubborn, they can be pretty snobby tooo. I have not seen much in the way of home prices dropping. I have seen just a few homes upside down, forclosure and such. I was wondering if anyone knows this area and what they think? Do you think Folsom will take longer to pop???? Happy New Year to all!
maybe they can start moving prisoners from folsom into some of these foreclosed mcmansions that is an untapped market
I don’t know your area at all, but I do think drops in prices will come about largely through foreclosures, especially because there is so little equity in so many of these homes. That might be the difference with this bubble. Dramatic price drops may take longer to come about due to the foreclosure process. It’s not a matter of the homeowner just dropping his price. If he’s underwater and has to bring cash to closing to make a sale, and doesn’t have the cash, then the foreclosure process has to take place, which takes a while. Then the bank will dick around trying to get as much as they can out of it, so that’s more time. Finally will come the moment when the banks realize that in order to unload, they have to drop trow big time. So I’m thinking this could be at least a couple of years down the road that we see the major price drops.
I thought the top was in 2004 myself. I didn’t count on I/O and neg am loans propping it up for two more years.
Fortune favors the bold and the patient. I think you will need to be both. I think Excremento housing will soon be a smoldering crater soon. Many of the BayAreanos that hosed the market may have a bit more cash than others,so it may take a few months longer, but I am certain that sometime in mid 2007 things will start really happening and thing will only get real good by early 2008. Then and only then, should you move in. I am in Ashland, OR another bubbletown, fueled by BayAreanos. That is my timeline. Best of luck and Happy New Year to you too.
I agree with this… I think that is the problem here in Folsom…. many are still flush. They sold their expensive crappers in the bay and moved to Folsom McMansions with half their profits put into the bank…. so many are still sitting pretty. I think we need unemployment to rise to really see anything dip in Folsom. Most of these people can sit through a housing bubble but they can’t if unemployment goes up. Unemployment will force people to sell, to relocate to new jobs. I think if unemployment stays the same…. I will not being buying for a while in Folsom…… Gooosh I was soooo looking forward to see how asbesto’s burns….hahahaha!
i shot a man in reno, just to see him die
and then i became a REaltor
Ha! Here’s a recipe for those of us on “Crack”:
AMIIRA’S FAMOUS CRACK BROWNIES
50 light caramels
1/3 c skim evaporated milk
1 pkg German chocolate cake mix
3/4 c melted butter (no margerine)
1/3 c skim evaporated milk (2nd one)
2 c milk chocolate chips (or semi-sweet if you like)
Preheat oven to 350 degrees. In a heavy saucepan, combine caramels and 1/3 c evap. milk. Cook over low heat, stirring constantly until caramels are melted. Grease & flour a 9″ X 13″ baking pan. In a large mixing bowl, combine the dry cake mix, the melted butter and the other 1/3 c evap. milk. Stir by hand until the mixture holds together. Divide this dough in 1/2 and press first half of dough into greased baking dish. Bake at 350 degrees for about 8 -9 mins. Remove from oven and sprinkle the choc. chips over the baked crust. Pour caramel mixture over the choc chips. Crumble the other half of the dough over the caramel layer. Return to oven and bake for 20 mins. Remove from the oven and let cool for 15 mins before cutting into squares. then, put in the refridgerator and refridgerate for at least 30 mins before serving.
From the book: It’s Called a Break-up Because It’s Broken. by Greg & Amiira Berendt.
~Misstrial
these sound so good…but didn’t you miss the “crack” part?
Handy Kitchen Tip: for those on a budget, crumble a quarter lid of hash and add with chocolate chips.
careful.
if you don’t love the grateful dead they’ll think you’re on crack too.
“The third-quarter performance was attributable to $1.5 billion in pretax losses on derivatives and credit guarantee assets and obligations, Freddie Mac said.”
Well, that is very interesting. Because if you look at the stock market volatility indicator, the VIX, its very low. Interest rates haven’t moved much yet either. They have been pretty stable. So why is FM suffering derivative losses ? I thought derivatives magically prevented losses !
“A medium-sized private homebuilder and two more prominent subprime mortgage originators/servicers will shortly announce bankruptcy. HSBC is considering the sale of its Household Finance subsidiary because of the hemorrhaging of profits in its mortgage business.”
The whole industry is blowing up, isn’t it ? And we haven’t even seen any big happenings yet !
The ironic thing is that everytime an industry player goes down, it hurts the industry more. When a homebuilder fails, trades get laid off, their inventory gets liquidated, bonds fail, etc. When a mortgage company fails, consumers have one less source for a mortgage.
I have to say that I saw the mortgage company failures coming, but I didn’t see the effect that it would have. I didn’t see a homebuilder failing so soon. We haven’t even really gotten started yet !
credit guarantee … obligations
Perhaps Madame Merriweather’s Malaysian Mudhut is actually Fearless Freddie’s Frenzied Funding.
It barely broke yet we are seeing some very wide cracks.
This is huge, the bread lines will be long, the social chaos a nightmare.
If he thinks the environment is challenging now, wait until the fed hikes rates unexpectedly in Q1 2007. That jobs report almost forces them to hike rates. They watch jobs numbers and wage growth like crazy and the current inflation numbers already made them uncomfortable.
If figure we get 50 basis points and ZERO cuts in 2007. That ought to make the ARM resets even harder to pay. And FM’s job is going to be harder because new uncertainty has been added to the market, especially on the bond side of things.
I would be quite surprised at a rate hike. IMO, the FED will leave rates alone for a little longer to see the full impact of zero house price appreciation has on the market. HELOC spending kept the economy alive for a couple of years, and elimination of this stimulus will help keep inflation low. If they raise rates too much more, they risk a quick and catastrophic collapse of the housing market with collateral damage including a government bailout. If they keep rates low and let the balloon deflate slowly, other parts of the economy will probably pick up the slack. They may even lower rates later in the year if the non-housing economy doesn’t pick up significantly. Either way, housing is dead; it’s just a matter of whether the death is quick and catastrophic or slow and lingering.
Inflation must be kept under control and if it takes a rate hike to do that, so be it. Housing is dead either way. A rate hike deals with the inflation problem. There is no other choice.
The other thing a rate hike helps is the value of the dollar.
I had a link that showed several large banks expecting 25 to 50 bps in 2007, but I can’t find it.
You know they are cooking the books on high burn.
The feds can’t cut and they can’t raise.
They can’t cut because inflation will roar, gold will roar and the dollar will cliff dive to its death. Foreign investments will halt.
They can’t raise because they will kill what’s left of business and it will accellarate the housing crash and its consequent depression will arrive sooner.
The fed is in the box they constructed.
Here is a post with a list of failed mortgage companies in 2006.
http://forum.brokeroutpost.com/loans/forum/2/83317.htm
Add to the FM losing $1.5B in derivatives plays and you get some sort of idea what is going on behind the scenes.
I’d say the days of sub prime lending are numbered.
Maybe you could compare the smaller subprime lenders to the smaller “specialty” stock brokerage firms of which there were a lot prior to 2001 (firms like H&Q, Gruntal, etc.) Lots of them went bankrupt, closed or were bought out during the bear market but the big, well capitalized ones came out fine. Same thing with the “big three” of mortgage banking as mentioned above?
There seems to be a lot of companies having problems with homeowners paying their mortgages. Look at this post.
“Our mortgage-banking-firm is looking for an investor/lender which is willing to accept business from our clients, which have just received a forbearance (avoiding forclosure) from their current lenders. They are desiring to refi. Our clients all have low fico scores and mortgage lates, from 2-10 months. A forbearance was just granded in most cases with current lender.”
In essence, we are looking for a company to take these bad customers off our hands ! Wow. You know that this wouldn’t be a problem if house prices were rising or there was equity in the home. But you just know there isn’t.
http://forum.brokeroutpost.com/loans/forum/2/83356.htm
Isn’t it interesting the way this bubble unfolds. First there was absolutely no chance a bubble could exist. Then a small chance. Then a minor slowdown. Then a major slowdown. Now there are problems in lending land ! And rumor has it we could see our first private builder go BK.
It gets better every month !
It gets better everyday.
“Before the Deluge”
Yes, the little raindrops are slowly beginning to turn into little ice cubes, off into the distance…thunder, lightning, and a looming cloudburst.
“It gets better everyday.”
Every snowflake in the avalanche pleads not guilty.
A new report that is excellent reading published Dec 2006 on the subprime mortgage foreclosures, can be found at http://www.responsiblelending.org/
That site is pretty good! We all here will get some mileage out of it.