“Adding Another Log On The Fire” In California
The Voice of San Diego reports from California. “Stricter regulations among lenders of home loans geared for consumers with imperfect credit could prolong the region’s housing slump, as the pool of first-time homebuyers eligible for such a mortgage will almost certainly shrink.”
“Nearly 10 percent of the active mortgages in San Diego County in December 2006 were subprime, according to First American LoanPerformance. The share of the mortgage market consumed by subprime loans has dropped some since December 2004, when they accounted for 12.3 percent of the active loans in the region.”
“It has become more and more common for San Diego homeowners holding those subprime mortgages to fall into foreclosure. The percentage of people in that category who’ve missed at least two of their mortgage payments has risen from 1.7 percent of the subprime pool in December 2004 to 11.3 percent in December 2006, according to First American.”
“About 6,000 such loans were in some stage of foreclosure in December out of the nearly 60,000 active subprime mortgages in the county.”
“‘This is a result of how unaffordable housing got,’ said Peter Dennehy, VP of Sullivan Group. ‘When housing prices were going up, these were the only products people could get. The question was always, ‘How are people affording these home prices?’”
“Before the rule change, a borrower hoping to buy a median-priced, $472,000 home could qualify for an initial monthly payment of $3,628 on a subprime, two-year, adjustable-rate mortgage at 8.5 percent. Now, under the new Freddie Mac rules, that borrower has to qualify also at the fully-indexed, higher payment of $5,405 monthly, according to Mark Carrington.”
“The regulations may be too little, too late, Dennehy said. The subprime market is ’symptomatic of the go-go real estate world’ that doesn’t stop until it’s forced to, he said. ‘It’s like slamming the barn door after the horse has gone away,’ he said.”
“David Cabot, president of the San Diego Association of Realtors, said the local market, which has slowed since the years of double-digit appreciation at the start of the decade, could be hurt by strict loan regulations. ‘Anytime you substantially remove a big chunk like that from the market, it’s going to have an impact,’ he said.”
“‘There are some (Realtors) who handle nobody but first-timers,’ Realtor Jim Klinge said. ‘They’re going to be out of business.’”
“And mortgage brokers are worried about their jobs, too, said David Maiolo of Ocean Mortgage. ‘It’s a big buzz right now, with a lot of mortgage brokers getting out of the business,’ Maiolo said.”
“Klinge would not attribute to the subprime shakeout alone a pessimistic view of the next few months for the housing market in San Diego, slow sales numbers and dropping prices don’t show signs of letting up yet, he said.”
“‘I think it’s definitely a contributing factor,’ he said. ‘But there’s so much more going bad. This is just adding another log on the fire.’”
The Recordnet. “San Joaquin County brokers reported an increase in calls and applications recently for both purchase and refinance loans. ‘We’re getting a lot of calls from people wanting to get out of that adjustable-rate loan,’ said David DiDio, mortgage broker in Stockton.”
“Tom Cole, senior loan consultant at Washington Mutual in Stockton, said refinancing activity hasn’t picked up lately at his office, but recently, there have many homeowners trying to ‘bail themselves out of a bad situation’ by refinancing to fixed-rate loans.”
The Plumas County News. “‘Sales prices have clearly moderated since the high point of 2005,’ said John Sheehan, director of Plumas Corporation.”
“He told the board that although the Chester/Lake Almanor area remains the most expensive in the county, advertised prices have dropped 21 percent.”
“Rental prices have stayed generally stable in all areas, with the exception of decreases in Portola/Sierra Valley. In 2000, the average countywide rental price was $525. Now average rentals are at least $125 higher.”
“Homes in the Portola/Sierra Valley area are selling for close to asking prices, while Quincy and Greenville houses are approaching ‘affordability,’ which means somewhere in the neighborhood of $280,000.”
The Hollister Free Lance. “Home prices in San Benito County held steady in February, with the market continuing to lag behind its position a year ago. Sixteen homes closed escrow last month at a median price of $585,000, according to REInfoLink. In February 2006, 24 homes closed escrow, with a median price of $600,000.”
“Dee Brown, a broker associate, noted that sellers tend to be settling for less than their asking price, a big change from the boom years. Overall, the market continues to lag behind early 2006. Sales totaled $16 million in February 2006, and only added up to $10 million last month.”
“Both Realtors reported seeing more people at open houses. Renee Kunz acknowledged that many weren’t serious buyers.”
The Orange County Register. “The number of residential building permits issued in Orange County fell 70 percent in January from the year before, driven mainly by a sharp decline in new condo and apartment project filings, the California Building Industry Association reports.”
“Building permits for single-family homes dropped 40 percent to 167 units in January from 278 in January 2006.”
“Statewide, residential building permits fell 21.4 percent, with a total of 9,798 units permitted in January. The decrease appears to show hesitancy on builders’ part to construct homes in advance of actual sales, state BIA Chief Economist Alan Nevin said.”
The Merced Sun Star. “The rate of new home construction in Merced County continues to tumble from the dizzying heights of 2005’s building boom. Merced saw a 70.4 percent drop in the number of single-family home building permits issued in January 2007 compared to January 2006 — the second-biggest decline in the state.”
“Sean Snaith, co-author of the University of the Pacific’s Eberhardt School of Business California Forecast, said Merced’s building slump will likely last through 2008 and into 2009.”
“‘I think for Merced it’s going to take a little bit longer than other areas of the state to recover,’ Snaith said. ‘There’s inventory that needs to clear before builders will feel comfortable resuming the pace they were at.’”
“The Modesto area saw a smaller dip in building activity than Merced, posting a 43.4 percent decrease in permits.”
“That could be because Modesto builders can still tap into the demand created by Bay Area commuters in search of relatively cheap housing, economist Lon Hatamiya said. Merced, 45 miles farther from the Bay Area, isn’t as influenced by those buyers, Hatamiya said.”
The San Francisco Chronicle. “The January freeze that ruined the oranges in the fields here in the citrus belt also killed jobs and chilled the economy.”
“Ruben Galindo has a mortgage and thinks he can handle two months of unemployment, but no more than that. He bought his house in Lindsay in 1995 and has thought about moving to El Paso, Texas, where housing costs are lower.”
“‘But when prices of homes here go down, I won’t be able to sell,’ Galindo said. ‘And they’re already starting to come down.’”
Here is Rich Toscanos’ take on the subprime changes:
‘The potential significance of the ongoing meltdown in the mortgage industry can hardly be overstated. As I have described before, the virtuous cycle of higher home prices begetting laxer lending begetting even higher home prices, and so on, was absolutely crucial to allowing real estate prices to achieve their current absurd levels. Prices simply couldn’t have reached these heights without the lenders’ attempts to throw money at anyone who would have it.’
‘Now, those same lenders are scrambling to compensate for their prior excesses, and the virtuous cycle has turned vicious. ‘
‘Now, those same lenders are scrambling to compensate for their prior excesses, and the virtuous cycle has turned vicious. ‘
And it should snowball all the way back down to fundamental valuations: about 50% below the peak in Southern California.
50% off would get us there in NorCal as well. Prices have doubled in many cities since 2000, and people still cannot connect the dots that this is not reality.
I know Rich pretty well. We have discussed this at length over the past year or so.
The party is over…the cops are here and they have called your parents.
Got a new post up today!! Some good insight in there….
SoCalMtgGuy
http://www.housingbubblecasualty.com
About your post on driving looking out the rear view…
We engineer folks work on models and approximations. So, we can look at a circuit and say “nope unstable” or “overstressed”. I don’t see why these lenders can’t do the same thing. What I guess is they have no personal stake in the failure. Therefore they work twords maximizing personal gain. Its the only thing driving them.
Since their only buisness model was to make loans and gather origination fees and sell loans; they kept doing it till they choked.
My complaint is they hoodwinked investors and sold stock and have to restate earnings.
I wonder how many loans were rolled over and over to keep bad ones from showing on the books. This is just another fraud on top of all the Fraudera Ranch first payment default types.
Run and hide from this stuff.
James the difference, as usual, is money. When engineers tell something is unstable you better listen or the defecation will hit the rotating blades. IN the case of bankers, et al, all they could see was commission money, so why should they have ever CARED?!
“Since their only buisness model was to make loans and gather origination fees and sell loans; they kept doing it till they choked.”
Which is why we call this the classic Ponzi/Pyramid scheme. They had no choice but to keep pumpin’ the deals out. It’s the end of the road now, though. You tighten up lending standards, the pyramid dies. Like all good pyramid schemes, as long as you keep the entry level money flowing in, evey one gets paid. When it stops, it dies. High risk sub-prime and Alt-A provided the entry level money. Now that it’s stopped, the end is in sight.
I have a love hate with that number Irvine. I’d love to see it come to pass but then again that is going to really ruin quite a few people both greedy ones and the innocent. I spoke to a lady today and heard the all to familar “my husbands job didn’t pan out so we are headed back to So Cal, but we just bought here in 2005. We tried to sale last year but decided after no action to wait till spring and hope that it gets better.” I thought “hope that it gets better?” Man you better hope that it doesn’t wipe you out completly. Did people really think going into 05 and 06 that the 20+% appreciation was really going to continue? Come on!!!
50% off? When your plane flies too high and the wings fall off, you don’t land back at ground zero… you drill a big, smokin’ hole in the ground. We’re going down much more than just 50% in California.
Ditto. Prices will implode, then crawl very slowly from the nether. You’ll get a free home with the purchase of an SUV.
What? I can’t just get a discount on my SUV? Stinkin’ car bubble…
Old joke… Two passengers on the airplane… Captian announces that one engine has failed.
The one passenger all paniciy like he has a reason to live says “How far can we get on one engine”
The other passenger replies “all the way to the crash site”
“Probably beat the ambulance there by thrity minutes”
Da dum dah!
James;
Old joke… Two passengers on a two engine airplane… Captian announces that one engine has failed and the flight will reach its destination an hour late.
One passenger to another ” If we lose that last engine, we’ll be up here all day!!
“We’re going down much more than just 50% in California.”
I only hope. Also, I have a lot lots of cash and short term govt obligations - $$$$$$.
BOY do I agree!!! I sold my home in Irvine 20 months ago and have been renting every since in Woodbridge. I’m happy and will wait for about 24 to 36 Mos. before thinking about this insane market.
Lokk what this guy says:
“‘This is a result of how unaffordable housing got,’ said Peter Dennehy, VP of Sullivan Group. ‘When housing prices were going up, these were the only products people could get. The question was always, ‘How are people affording these home prices?’”
What???????????…..did he say:
The question WAS ALWAYS, ‘How are people affording these home prices?’”
Who the hell was asking that question, other than us bubblites? Certainly not the lending industry or any of its watch dogs, FDIC, whoever.
They may have been asking the question, but no one was paying attention to the answer.
It’s like the old time real esate investor friend of mine says, “When things are cookin’, no one’s lookin’”
According to Old Sully the question was being asked.
“Who the hell was asking that question, other than us bubblites?”
And asking that question will still get you ridiculed in more than just a few places even today!
It’s a sad state of affairs, John
“‘Now, those same lenders are scrambling to compensate for their prior excesses, and the virtuous cycle has turned vicious. ”
Whats really amazing is that very few are catching on. Spoke to a Rep today from New Century and he is giving me the all is well speech. He stated that their problems were solved this morning by the resignation of the big mucky muck (his name escapes me at the moment).
“He stated that their problems were solved this morning by the resignation of the big mucky muck (his name escapes me at the moment). ”
Einhorn. LMAO.
This guy has nothing to do with credit. People are clueless.
Did these people see the 8k? “Not accepting anymore loans”
There may still be some value in the loans they hold if the discount is steep enough. So, you aly off all the employees and just keep the loans.
Then do the guess work on what percentage of the loans go belly up.
Ok. 97.3%
2007 is going to suck.
-Rent
LOL!!!
I don’t put up with the “all’s well speech”. Armed with the facts, I just about had my Bear Stearns AE in tears last month. Poor bastard!
This enormous tidal wave of after the fact finger pointing and gnashing of teeth by industry overseers, both private and governmental is enough to make you blow lunch.
Anybody with any kind of previous experience in the RE game knew in ‘02 WTF was going on.
Commissioned L/O + crooked appraiser + no regulatory oversight = FRAUD
No rocket science here.
hd74;
EXACTLY!!!!
Like Myself and others have said here and on other blogs, if WE knew, how could they not have known?
I’ve been saying this since ‘04. I originally predicted the bubble’s burst for early ‘04. What I didn’t see coming was how insane underwriting would become. Loose money allowed the madness to continue another 18-24 months. Had it not been for that, we’d be well into a correction by now.
And because of that housing is going for a swift ride to hell in a hand basket. It’s even amazing me how fast the train is going.
Wgeb do we think the train will pull into L.A. station? Asking prices for new listings are still ridiculous. I syppose actual selling prices night be more informative, but they’re hard for the average guy (me) to find.
My neighbors are supposed to close on a house in the valley this month. I tried to explain what I think is coming, but nesting instinct/realtor happy talk won the day. When will the public (who don’t read stuff here, at CR etc..) get the message? Drives me nuts I tell ya!
uhh… Wgeb = When. syppose = suppose… D’oh!
They will get the message when the NOD’s are mailed out. People are very stubborn and that explains why some people rode Enron all the way to ZERO. Nobody likes being wrong
that explains why some people rode Enron all the way to ZERO.
Didn’t enron fall from over 100 to less than 1 dollar in a day or two?
Some people sold enron @ 2 and other bought @ 2 remembering 100.
IMHO this is just the first wave down (probably 4 -5 waves) and bottom pickers will be at each uptick in prices. Hopefully I will have the wisdom of James Grant and remember “….the market continues to fly in the face of every single received rule, evaluation and prudential investing that I know”.
Thanks for the inspirational message, Hoz. I find myself continuously tempted, but intellectually I see it is so obvious that prices have a long, long way to fall.
Hey, NotMssingIt, I think you missed it!
Didn’t enron fall from over 100 to less than 1 dollar in a day or two?
No way. Jerry from Richardson is right, people did ride it down, and for a long time, refusing to believe what was right before them. If you’d like to see the graph:
http://ca.encarta.msn.com/media_701610605/The_Fall_of_Enron_Stock.html
It took months, many months, though the last few were when the writing was really on the wall. Trouble is, people always refuse to sell at what they think is a recent loss. Parallels with the housing market, in fact.
Many Enron shareholders kept insisting it would come back, and even though a lot of the wailers you heard on the news actually only put in $50k of their own money, their 401k was “worth” half a million at one time, and they couldn’t make themselves sell for 250k, or 150k, or even the same 50k they put in. I’ve got a cousin who lost a LOT of money in there; unfortunately, she bought her shares the old fashioned way, not via 401k contribs. Ouch. But she, too, fell into the trap.
And how’s that like housing? Witness every long-term owner turned seller who says “I’m not gonna give my house away!”, even though chopping 20% off their wishing price would still leave them with a monster profit from when they first bought. Similar psychology. Hopefully for their sake not a similar end result, though the way houses are leveraged (unlike most stock holdings), it CAN give a similar result as Enron, or worse.
I think there’s going to be 2 markets here, the apartment-like market and the family home market. I’m in the former (ie looking for a condo), and am perfectly willing to stay in my sub-$1500 1B apartment for the duration. I predict 1B condos are going to revert to cash-flowing valuations relatively quickly.
People looking for the quality of life that a house provides, however, will provide more liquidity for the bulk of the market, so 3+ BR places will have much more stickiness than 1-2BR places.
Yep, unbelievable underwriting standards such as stated income. Yes, Joe just tell me how much you make and we will loan you the money. Don’t worry we aren’t going to check and even better we will give you a 1% rate for a year. How about borrowing 130% of the house price? As long as prices will keep going up, we will all be in good shape.
I keep protesting that Stated Income is not the problem. All of az_lender’s loans are Stated Income, but none are 0% down or even 20% down (always more down, these days). The big down tends to induce the borrower to State his/her Income more accurately, at least to himself or herself.
ex-nnv (BTW, hope you enjoy your time off!),
In So Cal, the loose money was already goosing the market since 2001. Prices had already doubled between 1998 and 2001 in my neighborhood. We lauged when we heard what people were paying to live in our very modest, starter neighborhood (about 35-40% of what it ended up being at the peak of the mkt).
IMHO, in So Cal (realizing other areas were affected largely by equity refugees & specuvestors from out area), things were out of whack in 2001 & should have corrected a bit (normal correction) from there.
I’d love to see Greenspan & co. fry for this mess.
Absolutely, I recall looking at some places in the second half of 2001, primarily in the eastern stretches of Hollywood. Even little bungalows were at that point cracking the $300k barrier in that neighborhood if they were in nice shape, having been well below $200k just a couple of years earlier. I decided at that point that I had missed the boat and would wait for the market to correct before buying. Still waiting, except those houses have doubled again or worse since then.
I remember the **real** flippers (not amateurs) back in late 1997/early 1998. Couldn’t believe how “stupid” they were to think that a little bit of cosmetic work would fetch the prices they were trying to get (often in just a few months).
Got slapped upside the head on that one! In no time at all, they were selling for **over** their asking prices. I just shook my head in amazement. By 2001, this had been going on for a while, and it just **had** to end (in my foolish and naive mind). Told all my friends who were looking to buy a house to hold off, as prices were just about to go down.
Needless to say, people certainly weren’t coming to me for financial advice after that — probably why the didn’t believe my “bubble talk” in 2004/2005, either. They had heard it all before.
I saw a problem at the end of 03 beginning of 04 and although I have been a real estate investor since I was 19 (I’m now 55), I never thought 05 and 06 would happen. A nice correction in 04 would save the inevitable 07, 08 and perhaps 09 pain.
As 05 got crazy I predicted we would lose all our 05 appreciation by the f1st Q of 07. Wrong again.
We’ve lost some apprecition and prices are beginning to come down, more so everyday.
Again, timing is elusive but I agree with a lot of writers on this and other blogs. RE prices have to decrease 50% or more form 4th Q 2006 levels.
The median income has to be able to buy the median house. The median house should be priced around 2.5 to 3.0 times median income.
“the virtuous cycle has turned vicious”
All depends on your point of view. As I’ve said before, to me it was a vicious cycle that has now turned virtuous as it will bring prices back in line with fundamentals and allow me to buy my first house at a reasonable price with a prudent DTI.
Interesting perspective, thanks. At what point would you say the cycle turned vicious?
I won’t buy anything, whether it’s real estate or a car or a stock, unless it’s a good value by my standards, even if I can easily afford it (I drive salespeople crazy). But my notion of intrinsic value may differ from yours. So how does one determine whether prices are in line with fundamentals?
SF;
There are several ways:
- The median income has to be able to buy the median house. The median house should be priced around 2.5 to 3.0 time’s median income.
- Market rents should allow an investor to purchase a rental house and make a 10% return.
- Go back 20 years, calculate and graph historic appreciation, than graph actual prices and compare the two. I do not correct for inflation as that is way to much work and you’re looking for comparisons and today’s actual price.
In central Fla, houses appreciate approx 3% per year, compounded, historically. In the next 12 to 36 mos, they will fall below the normal appreciation curve for a while but everything returns to the mean. Good time to buy.
One caveat: California has always been a little crazy and unpredictable. I was there in the Late 70’s and at least in Orange County, houses were priced at 2.5 to 3 time’s median income. I would guess that the Cal market, in general, has been “Normal” for most of the last 30 years.
Maybe SF is an exception. I don’t really know about Cal. I don’t live there.
Thanks, Mike. Affordability is an important metric. Actually, if >60% of households own their homes, that implies that a slightly lower than median income can buy a home of some kind. But does the equation median-income_can_buy_median-price-home imply that there should be enough below-median housing so that anyone with some income can buy? (No sarcasm here, if anything I’m a little left of center.)
Having lived from SF proper to 30 miles south, on the Peninsula, since the mid ’50s, I’ve seen demand overtake supply in a way that can rationally explain current prices. Whether that demand can be sustained for long I don’t know, but it is certain that supply of SFH is virtually fixed here. It’s a mountainous peninsula populated by rich environmentalists, so there has been very little buildable land here for quite a while. And more and more land is being taken off the market by land trusts.
On the demand side, there is continuing immigration and rising wealth. Income may have plateaued recently, but that doesn’t hurt those who got in early (many of my contemporaries have been able to retire or downshift early). So for those who bought at least 15 years ago, housing is affordable, and if we don’t move away as we retire, supply will not increase. This “retiring in place” seems to be happening more and more; the reasons being: (a) our mortgage payments are zero to, say, $2,500 (b) the aesthetics and services (e.g., culture, medical care, shopping, restaurants, recreation) are great, and (c) we now have time to enjoy (b).
Now here’s the flipside: Most of our kids will either have to move away or extend their stay with their parental units. Three-generation households are becoming more frequent in the upper-middle class. The philosophical parents will say, I was independent in my early 20’s, but maybe I couldn’t do it now. And that, I think, is the saddest observation: Our kids have less opportunity than we had.
You are SOOOOO right on this!
Why don’t people writing the headlines understand that whenever someone sells a house, then someone also BUYS a house at the very same time. Prices going down will HELP HALF OF THE MARKET!
More importantly, there’s been so much missallocation of resources (too many realtors, builders, appraisers, etc.) that the ECONOMY will be better off once this bubble bursts.
A quick popping of this bubble is the best thing that can happen.
Just to continue, maybe we need to invent a new word for this phenomenon of the media “siding” with the house seller, rather than the house buyer, and proclaiming falling prices a disaster.
Maybe “seller-centric?”
Amen!
Another good thing if/when house prices go down, then that should free up more money from new homeowners monthly budgets for discretionary purchases which will ultimately help other segments of the economy.
Good point!
I’ve been lurking for some time now and really really appreciate this site and especially all you have done for so many that have followed it.
From my readings of “Extraordinary Popular Delusions and the Madness of Crowds” by Charles McKay there is absoultely no doubt that what has gone on so far in the Global Real Estate Bubble is at least every bit as bad or perhaps worse than what happened in the “Tulip Bulb Mania” or the “South Sea/ Mississippi Land Bubbles” and thus i think that inasmuch as you are so far connecting all the dots exceedingly well, that perhaps you (one) ought to focus at least a bit more on the likely outcome of all of this over (a bit of) time and that imho is a great deflationery implosion that will likely be at least as bad or worse than that of the 1929 collapse. If that is the likely outcome then i think in terms of capital preservation that the whole (global) banking system is subject to collapse and ultimate banking “holidays” that could well end up punishing all including the prudent savers that frequent this board. I have been unloading all my stocks including gold shares and working on establishing some shorts in the markets but if this gets as out of hand on the downside as it did on the upside i truly fear that literally anything one does to protect oneself may be for no real account or benefit. Just as there has been multi trillion dollar gains in the aggregate price of real estate over the past several years, i will bet there will be multi trillion dollar losses on the way down which must implode the leveraged hedge fund communities and also the dumbos that run the banks.
Anyway, just some thoughts and an extremely huge thanks for such a great site for one to visit and exchange views with intelligent, ethical and honest people.
Van Gogh….so what do we do with our money? I’m planning to stock up on guns, ammo, and some other staples this summer!
Gold (GLD)
$1500-2000/oz in 18-24 months.
Prince inflation is the VICIOUS cycle. Prices coming down is the VIRTUOUS cycle. That is all
Ok, this is wierd:
The Countrywide website has an foreclosure property listed:
http://www.countrywide.com/purchase/f_reo.asp?lstState=CA
Search for this House: 609 KARENKEN PINES DR, LAKE ARROWHEAD, CA 92352
It shows the price as: $383,900.00
Now, when I use zillow.com to look up that house:
http://www.zillow.com/HomeDetails.htm?o=North&testAds=false&zprop=17414847
It shows it just sold (1/27/2007) for: $297,558
Now, is Countrywide trying to make a profit by selling it for 80k more than the last owner defaulted on after only one month? Or did they sell it, take an 80k haircut and haven’t removed the listing from their website?
Oh boy. Now we can keep an eye on these guys and their financial shenanigans.
No, these lists are updated weekly and sometimes more often. I’ve commented on this before where it appears that the banks are also getting into the flipping game. Seen lots of this going on over the past several months.
“Klinge would not attribute to the subprime shakeout alone a pessimistic view of the next few months for the housing market in San Diego, slow sales numbers and dropping prices don’t show signs of letting up yet, he said.”
“‘I think it’s definitely a contributing factor,’ he said. ‘But there’s so much more going bad. This is just adding another log on the fire.’”
Or to quote the Talking Heads:
“Watch out
You might get what you’re after
Cool babies
Strange but not a stranger
I’m an ordinary guy
Burning down the house.”
All those sub-prime borrowers got what they were after: a home. They just can’t keep it.
When I was in high school my girlfriend and I decided to go to a party that some acquaintances of ours were having. We had gone to a late dinner and showed up to the party later than expected. When we got there, some older friends of ours were on their way out the door to go pick up more beer as the keg was empty and it was still early.
So, while we waited for them to return we sat and talked to some of our friends. After what seemed like forever, they returned with the beer, and just as they were filling the coolers someone ran through the front door and yelled “it’s a bust!”
They must have brought out the whole county’s police force to end this thing. People started running out the back door, the front door, up the stairs and out onto the roof. My girlfriend looked at me with a countenance that screamed “what the hell are WE going to do.” I told her just to follow me as we calmly walked out the front door. I could tell that she thought I was crazy, but I proceeded to go over and talk to the first officer I could find.
Right off the officer says “why aren’t you running with the rest of them?” To which I reply “I haven’t had a drop to drink and figured it’d saved me time if I got whatever is about to happen over with.” He asked for our drivers’ licenses and after checking our records told us to leave right away or face the same fate the others face.
The party ended very abruptly , the police confiscated all of the beer and because I was late I was never able to partake in the primary reason for this party (drinking). A lot of people went to jail, and many others lost so many privileges that I can’t even list them all, but I felt good about the fact that I showed up late.
Maybe it’s just me, but I can’t help but feel like this story is being repeated in housing today, and I still feel good about the fact that I’ve shown up late!
Great tale! And fitting too. I think Teddy Roosevelt said something like “if you must grasp a nettle, grasp it firmly.” In other words, take it and move on. The FB, mortgage and RE hacks, and others are still crawling around on the roof hoping the cops won’t notice them….
Where I grew up they used to just throw the beer in the trunk of the squad cars for later, and tell everyone to split…
Where I grew up scoring whilst underage was such a breeze, sometimes we’d buy a 6′er, with roller skates on, in the 1970’s,
at our favorite liquor store…
Ah, the good ol’ days!
That is a great story and apt analogy. I am not sorry I didn’t drink any kool-aid.
Seeing the light and being willing to face the music. Most who hold the keys to your future( mortgage lender, judge, and in your case cop) almost always prefer honesty to bullshit. Smart man, and a great analogy.
NEW down even more after hours. Financing did not help stock price after this news came out. BK filing soon?
I’m being told that’s not on the horizon. But how could it not be. They went below 3.50?? or was it 3.95?? Don’t remeber now have to check on that.
$3.71 at last check.
Crispy: Reposting my comment from the prior, now-largely-abandoned thread:
Don’t jump the gun, Crispy . . . it’s not clear to me that this is purely new financing.
They’re bordering on insolvency, blew their covenants, and miraculously have collateral laying around for $265MM in new financing? Please. This is shuffling the deck chairs/cutting in line for the life boats.
This is an existing lender seeking to improve their collateral position before the sh!t really hits the fan. (JMHO)
Now this might be a hint/precursor of a prepackaged bankruptcy
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070308:MTFH26201_2007-03-08_22-27-40_N08324154&type=comktNews&rpc=44
“it stopped accepting loan applications after some lenders blocked it from tapping its credit lines.”
That can’t be good.
‘This is an existing lender seeking to improve their collateral position’
CORRECT!!
Classic Prisoner’s Dilemna, and one of the lenders decided to help improve their own position rather than trying to save NEW in the hopes that all lenders would be better off.
New just made the Implode-O-Meter
Per WSJ it’s Morgan Stanley.
Got a link or cut and paste?
WSJ.com says nothing of the sort, and Google news didn’t turn anything up either.
Blue Falcon, thanks for pointing to implode-o-meter today. It’s really impressive.
I didn’t get a grad degree in finance or anything, but I think they only have about $3.70 left to play with….based on this week, that should take about 20 minutes after the bell.
” there have many homeowners trying to ‘bail themselves out of a bad situation’ by refinancing to fixed-rate loans.”
Sorry the easy credit cycle has ended. You are going BUST!!
Yea, it’s too late for that. Party over.
Weren’t you the one about six months ago proclaiming that there would always be 100% financing for whoever needed it?
(…sound of crickets…)
I think Mrincomestream was saying that 100% financing would always be available…to those who qualified.
For instance, if someone had $2M in non-re investments, and wanted to buy a $500K house. Assuming he/she had no debt, they could easily qualify for a 100% LTV, neg-am mortgage — and it could very well make sense for them if they are earning more on thier investments than they are “losing” or paying on the mortgage.
“Suicide loans” have been around for a long time, but were used more for people like the one mentioned above. They are NOT “affordability” products, they should only be for borrowers who use them as a **legitimate** investment/cashflow strategy.
BTW, I used an extreme example (equity 4X cost of house), but you get the idea…
“I think Mrincomestream was saying that 100% financing would always be available…to those who qualified.”
I think the discussion was whether the market would go back to requiring “significant” down payments again, and he opined that would never happen. He also gave the names of many companies that would continue provide 100% financing, and I bet some of them are already out of the lending business altogether.
more crickets…
A tumbleweed blows by . . .
Crickets echo in the distance……
Awwww… No one’s right all the time…
It was an honest opinion.
….Clint Eastwood spaghetti western whistle
dwr…u r correct. It was MIS that stated that. Seems some “eating of crow” is in order. I prefer broiled crow when I make a mistake and someone calls me out…
tumbleweed rolls through
No, dwr 100% is not gone. Actually it’s still readily available and in some cases taking a new form.
Direct from my Inbox-
“Effective today, Wednesday, March 7, 2007, we will no longer allow **** second mortgages (combo loans) within any product family. We will continue to offer Seller and Institutional second liens as per our current guidelines. ”
The key word there is Seller the second key word is institutional.
Now I have recieved some emails stating some lenders who specialize will still do seconds. Maybe they stay around maybe they won’t.
But here’s the kicker how many sellers do you think will carry that 20% to maintain there “wishing price” especially if they know they can sell it on the street after 6 mo’s for 70-75 cents on the dollar maybe more. My guess quite a few. All that is happening now is burden shifting.
As I have said before the REO waves will fully correct this market. Nothing more nothing less
dwr-
In fairness I must say this 100% financing is harder to get and the rates are not as friendly but still available. The lender I posted above goes pretty far down the food chain as far as Fico scores but they too have somewhat tightened their standards. But again it’s still available. Also I don’t remember what lenders I quoted and I can’t find the post. But I’m pretty sure New Century was one of them. The verdicts still out so i’ll eat a little bit of crow. Keep the rest on ice we’ll see what happens.
MIS,
Do you think 100% financing will be available for someone who is very, very well qualified (like I mentioned above) — not referring to seller financing.
Do you think this credit tightening is more pronounced than you first thought it would be?
TIA!!!
CA-
Yea, i think it’s still going to be around but it’s going to be priced according to the new perceived risk (ie: very expensive) which is going to pull prices down but not as much as the slash and burn tactics of unloading the R.E.O.’s.
“Do you think this credit tightening is more pronounced than you first thought it would be?”
No actually it hasn’t gone far enough yet. Still people out there actively and aggressively trying to get the business that NEW and others are shunning right now. Still too much liquidity. I think a lot of folks are jumping the gun. The whip won’t fully come out untill mid-summer when all hopes are dashed.
Agreed! Thanks, MIS. Just wanted to get your take on things.
When I first got into this buisness back in the mid-90’s, it seemed 1 out every 3 applications turned into an approval. I was laughing with a friend in the biz the other day about how many denials he’d actually seen over the last three years, which was very few. Everything got approved. There was no such thing as an undoable deal. Well guess what?…..the end of this cycle is here. Welcome back to the days where your “no-go” files are twice as deep as your closed deals. I’d say 80% of the folks in the biz have no idea what this type of market environment is all about. They can have it!
Anything close to a 2 out of 3 application denial rate would be considered an act of financial terrorism here in La-La-land, where EVERYONE is entitled to whatever pick-a-payment loan they want for whatever arbitrary amount they “need” to borrow, including –no– especially illegals. Such a thing would have a Tsunami-style effect on the market, as these types of borrowers are basically the only ones currently buying houses.
As Neil likes to say, “got popcorn…?”
I expect 70% will become “no go” soon.
A Tsunami effect is appropriate.
Look at zip-realty’s inventory. It just broke a million? Fluke? Break away? Its 18 days early:
http://recomments.blogspot.com/2007/03/houston-we-have-problem-million-of-them.html
Got popcorn?
Neil
Ok, my reply hasn’t shown up. If it does, mea culpa.
I think 70% is going to be the “no go” rate for a bit. Tsunami… appropriate metaphor.
Oh, inventory on ziprealty just broke 1 million. Of course I blogged it.
http://recomments.blogspot.com/2007/03/houston-we-have-problem-million-of-them.html
Got popcorn?
Neil
Yup, az_lender is 75% no-go just because the amounts people are (still) asking for tin cans and land in AZ mobile parks are (still) ridiculous.
I read that whole article, brief as it was, and noted that the broker said people were “trying” to get out of their ARMs. He didn’t say they were successful in their attempt. If they had IO payments and bought in the past two years, there is a good chance they are underwater in San Joaquin County.
30 yr fixed 6.14 Helicopter ben is circling overhead
Ben can’t fix this. The only way to fix this is to start guaranteeing sub prime mortgages because that is the root of the problem. Last I checked Fannie and Freddie were supposed to do that, but they screwed up. So now what ? Is Ben going to create another entity ? He can’t do it without the help of government.
The only thing Ben can do is drop interest rates, but guess what ? Inflation is still prevalent and oil cracked $62 the other day and we aren’t anywhere near summer driving season or hurricane season.
The market has to sort this out itself.
Boeing (sort of - award has been challenged) was awarded a $15 billion new contract for helicopters “for the Air Force”. Hmmm, which quasi-governmental group has 15B$ and needs helicopters… (Wonder what they are doing with the old ones. BTW, How are black paint futures selling?
)
They’re for SAR work. Guess they’ll need lots of them for rescuing underwater FBs.
Here’s a new one. The freeze we had in California back about one month ago killed all the oranges and strawberries, and that’s why the housing market is taking a dump. Never mind that the loss due to the freeze represents less than 1% of the state GDP.
Let’s hope that the California porn industry stays warm. To many frostbitten nads and the economy will really take a dive.
With all of the Realtors leaving the business, there is now an oversupply of fluffers - So the porn business will be fine
If you have a house with a pool, renting the place out to the porn industry could actually be a great way to supplement your income to feed that mortgage!
With all the vacant McMansions, there are plenty to chose from.
Nah, zero lot lines aren’t very sexy.
Funny story about the porn industry in the SFV . My parents sold their built in the 60’s, but highly upgraded 4500 square foot house on 1/2 acre in a great south of the boulevard Woodland Hills location. They sold in 1990 right at the peak to a japanese business man for a million dollars.
After a few years when I drove by I always saw big movie trucks. Apparently they were using the house for porn movies. I think the japanese business man still owned it. In 2003 it was sold as a major fixer for 600,00 and has since been flipped twice last sale this past summer for 1.6 million.
I have a good friend from college who showed up after one spring break with a young woman named Ginger. After a little digging, I discovered she was in fact a fluffer. Wow. This was a nice little preppy private college. Even stranger was that this guy went on to make bar review at Harvard and then on to become a state’s attorney. If he ever runs for public office, I’m looking at some nice hush money.
“To many frostbitten nads and the economy will really take a dive.”
Not to worry. New method employed by Fluffers to warm nads…
Speed-bag to the nut sack! (© nnvmtgbrkr)
Is this related to having to feed the squirrels?
Here’s a story I posted yesterday…
Talented Medical Professionals~ Go to Prison!
http://www.valleyvoicenewspaper.com/vv/stories/prisondoctors.htm
Really~ From doctors on down, medical professionals can make as much as twice as much, working in a California prison, verses working for us here, back in the real world.
Maybe if we send ALL the FBs to debtors’ prison, the services there will get squeezed like the ones in the real world.
they’re lucky they aren’t in China. They take financial fraud VERY seriously…
“Friday August 19, 2005
The Guardian
A former Bank of China official is being prosecuted by the Chinese authorities for his role in a £270m fraud.
Yu Zhedong, former head of a Bank of China branch in Kaiping, is accused of approving false loans and money transfers, according to the Chinese government news agency.
“Yu candidly confessed everything,” the agency said.
China has embarked on a zero-tolerance drive against fraud. Earlier this month the former president of Bank of China’s Hong Kong branch, Liu Jinbao, was given a suspended death sentence for embezzlement. Non-violent offences such as tax evasion are also punishable by death in China.”
I wonder why he confessed… Guilt I guess
Or perhaps it was the little red ball in the mouth party that turned him around.
This is why the uproar this week about overcrowding. Every one knows that the new freshman prisoner class can’t handle 100 sq ft cells after wallowing in 2500 sq ft per capita McMansion dwellings.
Gotta move out those felons fast before the twunami hits.
“Ruben Galindo has a mortgage and thinks he can handle two months of unemployment, but no more than that. He bought his house in Lindsay in 1995 and has thought about moving to El Paso, Texas, where housing costs are lower.”
“‘But when prices of homes here go down, I won’t be able to sell,’ Galindo said. ‘And they’re already starting to come down.’”
How is he not able to sell his house if he bought in 1995?
He probably refinanced into an ARM that lowered his monthly house payment. For awhile, at least. And I’ll bet that he also took out a HELOC or two. Or three.
Yes… you were wondering about that nice truck? And that boat?
No shit. Multiple cash-out refi’s for ‘essentials’ perhaps? HELOCs? Both? If he really bought in 1995, there is zero reason he should be “unable” to sell now. Prices have at least tripled since then.
For that matter, how is it that a mere 2 months of unemployment could possibly exhaust all his resources? 12 years of mortgage payments and he still has ZERO equity? Zero savings? What has this guy been doing for 12 years –taking annual round-the-world cruises? Single-handedly putting all the girls at the local strip joint through college? And somehow I’m supposed to feel SORRY for this reckless, greedy spendthrift?
That was my thought, too. And then I thought about the refi or HELOC that Arizona Slim mentioned. It’s the only reason I can think of that would explain it, since his home should sell for at least three times what he paid for it in 1995 (plus he should have put down a down payment back then and paid some of the principal during the last 12 years).
(plus he should have put down a down payment back then and paid some of the principal during the last 12 years).
Some principal? Should be about 3 years from paying that sucker off.
2007 is going to suck. For some.
-Rent
“Ruben Galindo has a mortgage and thinks he can handle two months of unemployment, but no more than that. He bought his house in Lindsay in 1995 and has thought about moving to El Paso, Texas, where housing costs are lower.”
“‘But when prices of homes here go down, I won’t be able to sell,’ Galindo said. ‘And they’re already starting to come down.’”
How is he not able to sell his house if he bought in 1995?”
For those of you who may never have been to Lindsay, suffice it to say that it isn’t exactly a town brimming over with wealth or sophisticated financial understanding. Many people are on social assistance in some form, and a good job is hard to come by with 9% (and rising back to normal) unemployment.
RE speculation ran rampant thorough the Central Valley in the past few years. One friend found that the value of his house had quadrupled from $100K to just over $400K. But many there who felt they had suddenly won the lottery just HELOC’d or serial refinanced it away. They thought that perpetual prosperity had finally found them. I’m amazed at stories I’ve heard.
“Before the rule change, a borrower hoping to buy a median-priced, $472,000 home could qualify for an initial monthly payment of $3,628 on a subprime, two-year, adjustable-rate mortgage at 8.5 percent. Now, under the new Freddie Mac rules, that borrower has to qualify also at the fully-indexed, higher payment of $5,405 monthly, according to Mark Carrington.”
Just eyeballing those numbers, it looks like “that” borrower can now afford to pay about 33% less for a home than before.
Wow, $5400/mo is such a really big number. Who the hell qualifies for that kind of payment anyway? Wouldn’t one have to make about $250K/yr?
well i make north of 250k a year and i wouldn’t pay anything for a house right now. Very happy in my 2200. a month rental (a 750K house in a very nice area), my 33% savings rate, and 2 kids in private school.
I gross pretty close to that and if I had a 5400/month payment I wouldn’t be able to sleep at night.
Here is a theoretical question. My coworker owns a house in Palmdale worth 600k, and just bought a place in San Diego for 1 million which he claims appraises for 1.3 million in 2 months, haha. Let say he decides not to sell. Should he HELOC both properties to the max and sit on the cash? If he sees things turn south, can the mortgage lenders come after his cash?
How much hard equity does he have in the Palmdale house?
about 500k of equity in both houses, he claims. I bet it is more like 250k.
“can the mortgage lenders come after his cash?”
Depends on where he keeps/hides it.
Not an expert, but I think HELOC loans are hard money. i.e. not expunged with foreclosure. I could be wrong, but I think only purchase money loans are non-recourse.
Right. There are certain requirements for loans to be non-recourse in California, including that it be a purchase money loan on a 1-4 unit residential property (can’t specifically recall, but I think there is also a requirement that the home be owner occupied, too). Refis and HELOCs would be recourse (although the lender could elect to forgo the deficiency judgment if it elects to foreclose by way of a trustee’s sale rather than through a judicial foreclosure). Of course, there are the tax consequences from forgiveness of debt. And, it gets a little tricky when you have junior liens because the outcome depends on which lien is foreclosed on (senior vs. junior) and how the lien is foreclosed (judicial vs. non-judicial, which is up to the foreclosing lender). And, as Txchick mentioned, he would need to see how much he has paid (down payment plus principal reduction)/will pay vs. how much he could get out by a HELOC.
WaitinginOC is correct in terms of the recourse information.
But Markmax, your friend should know that pulling out all of the equity of home #1 with the intent that in all likelihood he will not pay back the loan, would constitute fraudulent conveyance, which is a crime. Further, he would probably only be able to get the money if he claims owner-occupied on the loan app, which would be loan fraud, also a crime.
There is also a chance that if he lands in BK court he might have a problem as well, because judges generally tend to frown upon fraud.
Finally, I haven’t been to Palmdale lately, but I don’t think there is much there that is selling for $600,000, especially since sub-prime is gone and Alt-A will be gone as well, or at least greatly curbed as a result of more stringent underwriting guidelines. Anyhow I’m not sure the Palmdale Mall is worth $600,000…
Nice. He is about 50 and his wife and children still live in the Palmdale house, but he moved to SD for a job. They are going to move into the San Diego house this summer after the school year. He makes about 90-100k and has a combined debt of about 1 million. I preach to him to sell at least one of the homes. He tells me he had cash back 92 and could have bought this nice house in Laguna Nigel for 250k in 1992. I tell him, that’s exactly what I am about to do. He was too scared to pull the trigger in 1992 and the place is probably worth over a million now. Some people never learn.
Eeeek! Income of 90-100k and debt of 1 million! The lending gods must be crazy…actually, I know they are.
For years I’ve been getting offers (mostly pre-approved) for loans and credit lines of insanely huge amounts. I used to show them to my wife and ROTFL. It’s not funny anymore…now I just throw them away.
Eeeek! Income of 90-100k and debt of 1 million! The lending gods must be crazy…actually, I know they are.
————————-
My thoughts, exactly. Markmax, please tell me he has savings/investments (actual equity) near $500K, at least!
I can beat that:
Hospital floor cleaner at $9 hour with $325k liar loan mortgage in Bakersfield.
I can tie that:
Los Feliz. Nanny and mother walking with infant, stop and look at newly-planted for sale sign. Asking price: $750,000. Nanny takes the flier.
There is a house in Palmdale worth $600k? What kind of mineral rights does it come with because that is about the only way I see a house in Palmdale being worth that much. Both gold and oil on the property.
I drove through there last year. It didn’t look terrible, but I saw few signs of productive economic activity. What do people do there, anyway?
Manufacture methamphetamines, of course!
Believe it or not there are a number of high paying engineering jobs up there. Edwards AFB (including NASA) has a bunch of jobs for civilian engineers doing testing and evaluation. Palmdale has Lockheed Martin (including their famous skunk works) and Northrop Grumman used for building and testing aircraft, etc.
LOVE the annual air show. Had a friend working there on the Global Hawk program, but I didn’t manage to get in for a tour before he moved on. Bummer!
Edwards and China Lake research facilities are all-but-deserted thanks to Mr. Bush et al’s little foreign adventures. There is NO house in Palmdale worth 600K. Or in Bakersplat, for that matter….
–
I am being told that people are desperately trying to move out of Palmdale and Lancaster due to crime-ridden schools. Most can’t. His $600K home wouldn’t be worth $300K in two years. He should bail out ASAP.
Jas
If he ends up in foreclosure, and the houses sell for less than the amount of the mortgage, then the lenders will demand that he pay the difference, if they believe he has the money to pay.
“David Cabot, president of the San Diego Association of Realtors, said the local market, which has slowed since the years of double-digit appreciation at the start of the decade, could be hurt by strict loan regulations. ‘Anytime you substantially remove a big chunk like that from the market, it’s going to have an impact,’ he said.”
Here we go again, those horrible “strict” lending regulations. You know, the ones that were on the books just 10 years ago after the downturn in the early ’90’s.
Yep. What David fails to realize is that a “big chunk” is going to be removed regardless of whether or not the lending regulations are tightened. Either the regulations are tightened (making fewer people eligible for the loans) or the MBS investors will demand much higher returns (i.e., higher interest rates) to compensate them for the risk that they finally recognize is there (which will mean that people can afford to borrow far less). The result is the same.
If subprime loans dry up, there are huge swaths of LA, namely the entire inner city, that are going to enjoy steep negative appreciation, seeing as that’s “80/20″ land.
“Nearly 10 percent of the active mortgages in San Diego County in December 2006 were subprime”
I am sure many of these sub prime loans will default, but I believe the REAL problem is the percentage of zero down option loans floating around. A 720+ credit score will not make a $5000.00 mortgage payment each month, and my understanding is that some 40% or more of loans made over the past three years in San Diego are made using loans for which low teaser rates were used to qualify the borrower but payments are due to reset upwards substantially. Problems in this area will take longer to show up, since persons with high credit scores will have more access to credit cards and such to live off of than those who generally are unable to access credit due to late payments etc.
Exactly! I have great credit, but I can’t come close to affording a local mortgage. Eventually the prime borrowers are going to get pulled down with the ship because so many bit off way more house than they could feasibly chew. The whole bubble was just so stupid it blows my mind, especially coming so soon after the dot bomb implosion.
Hi CA Guy. Below is my response to you from the previous topic:
Hey CA Guy: You’re welcome. Regarding the Tassajara builds, I knew an engineer (2004) at PeopleSoft (before the Oracle takeover) who bought a condo, pre-2004, for a price in the $300s, so I’m thinking 6 years is about right for the SFH @ $600k. Those same crapbox condos are in the $600s now. Sheesh! And there is a lot of building going on. For kicks and grins, take a look at the City of Dublin site. Select the purple tab (Economics), and then choose the New Developments link. There you will find a map and project list of everything going on in Dublin. It will blow your mind.
Back to the Tassajara builds…..I took a builder friend from Clearlake on a tour of the *new* 3 -level townhouses in ‘05. He shook his head at every step. So much jumped out at him as sub-standard, except of course for the GCT. LOL! Another observation was that, in his words, the square footage was mostly taken up in the stairways! What also irked me was that the rooms were so teeny tiny; the master bdrm was a joke. All you could get in there was a bed and 2 night tables. Forget space for a dresser, chest, maybe a TV stand ’cause there were no walls for them! The only wall was for the bed and night tables….another wall had the window and a little room on one side of it, but on that side was where (ta da!) the wall length closet was. And then, the fourth wall was the walkway/door way, and the entry to the master bath. I hope you can visualize the room….it was really stupid. Ugh! But I’ve seen so many new construction build exactly like this.
Suffice it to say, the folks who bought over there were not looking for quality, practicality, nor the best bang for their buck. Many were just looking for the next new thing. They got it alright, and a lot more than they bargained for.
I agree with you that Dublin is looking at a severe haircut, and to the misfortune of a lot of buyers who bought in the last 4 years.
BayQT~
Great description of the units! I’ve seen the new development list and kept a running figure (now forgotten) in my head of how many residential units it all added up to. Mind boggling to think that those THOUSANDS of units can be absorbed. Well, absorbed at current pricing. It would take more than a haircut; more like a scalping. Substandard doesn’t do justice to the new construction. It is pure garbage. Heck, half the hot/cold fixtures in my rental were backwards, and I was the first resident! With such little attention to detail on the obvious, imagine what lurks beneath!!! My rental has an enormous master bedroom, way bigger than we need or want. Of course it comes with a closet barely big enough for my wife’s clothing (she’s not an excessive fashion diva)! Real brilliant design there. Once the scalping occurs I will take my time buying. The floorplan needs to be at least somewhat functional, unlike this crap. I must admit that I like the granite though. Easy to clean off after cooking. My last place had tile and that always sucks for clean-up. Regardless, it’s like you say, those who thought they were getting the latest and greatest will certainly be surprised by the future. And I don’t mean in a good way. Thanks for the reply. We’ll chat again soon I’m sure!
“…and my understanding is that some 40% or more of loans made over the past three years in San Diego are made using loans for which low teaser rates were used to qualify the borrower but payments are due to reset upwards substantially.”
——————————–
I’ve seen nubers between 60-82% of borrowers in recent years using ARMs — many with neg-ams.
People still haven’t a clue how bad this is…
You are probably right on the numbers. Credit score or not, these loans all have a very high probability of default. This is a huge mess.
No LA bubble news lately, I guess?
There’s never any LA bubble news. Either no one here is telling the truth, or we’re on an enchanted island of wealth and prosperity. We need an honest voice like the Jim at bubbleinfo. Ah well, silly of me to think the bubble will pop here. As someone smarter than me once said… I’m off to the chocolate forest to play with the unicorns…
I’m seeing property sit for long periods of time for sale, but very stingy price reductions.
I did notice quite a few bank-owned properties popping up in last week’s LA Times RE section. Two or three in Venice, all priced around 8-900K. Also noticed a SFH in Mar Vista, also foreclosure, selling for under 600, which is notable for that area, even though I think it largely stinks.
The good stuff in Mar Vista (up on the hill) is still over a $million.
I don’t see anything moving.
Silent Spring.
The fact that “good stuff” and “Mar Vista” and “over a million” are all in the same sentence says it all. Nuts.
And what’s wrong wity Mar Vista? I can think of a lot worse areas in LA to live. Jeez, picky picky.
I’m with you lainvestorgirl. Mar Vista is where me and the wife are looking because it’s one of the few places on the West side that seem like it might approach vaguely affordable one of these days. It’s a perfectly respectable area, in parts.
I grew up near there, and I think it’s a great choice.
Re: Mar Vista. Any place that is that expensive should have public schools that don’t stink. There’s a reason there are so many private schools in and around Mar Vista. Problem #2, at least according to a buddy of mine who works juvenile crime in Culver City is the gang problem. Maybe he’s wrong, but he says it’s not safe.
I wrote on a previous blog that I’d visited a friend who’d recently plunked down over 800 on a home in Mar Vista, then required another 60 to fix it up. Still not so hot. And the street was completely charmless. Trees looked dead.
Again, not the worst place, but holy hell, not worth those kind of prices.
In my area of LA, weekends come with more listings each time. Some houses have sold, but not enough to catch up with the backlog. Other than that, I’m with you in that it’s too soon to call.
Cass, I’m noticing that the word is getting out about the bubble, but that people here still feel quite immune to it. I mentioned the Memphis stats, the 19,000 sales, 18,000 foreclosures, to a friend who bought in 2004 in the Marina, and her repsonse was, “well, that’s Memphis.” IOW, a city with lots of poor and blacks doens’t have anything to do with LA, especially West LA. I think this pervasive attitude is going to prolong this thing, but it’s also going to mean a steeper drop, and a very steep learning curve for everyone here when it really hits.
I wasn’t putting down sm_landlord’s statement with my comment. I’m putting down the stupidity of the current situation.
I just happen to think a million dollars is a lot of money. Especially for a nice pimple of a hill neighborhood sitting on an A$$ of a neighborhood.
If Compton homes are selling for 450k are worth 150k, then hill top Mar Vista’s probably worth 450k off from it 1.2 million.
And guess what…. 450k a lot of money too.
i think everyone forgets just how much money someone needs to make to afford a $400k place. Besides the fact of probably having to put down 10-20% in the coming years, the mortgage on this stuff is still really high to most people’s incomes. Maybe a 2 person income is high enough, but how many people make combined over $100k?
Either way I am looking in the $400k range for a 2 bedroom condo within a 15 mile radius of where I work in Pasadena and its still slim pickings. Probably about triple the properties since I started looking over a year ago, but still everything sucks and is in tagged up ghetto looking areas or right next to the huge power lines or some other crazy I can’t believe they built there thing.
I am a 28 year old civil engr and I have only known the boom time workwise, but all the project managers tell me this slowing down is what normal times are like. projects are drying up and I can’t imagine what kind of affect this will have on the economy in a year or so once all of these people in that industry have no jobs. that trickles back down to the banks, title companies, realtors, etc. once again. so its almost like they will get a double whammy out here. And yet there are clear signs of this happening in other parts of the country. I sound like such a doomsday person at work that I just stopped talking about it.
i live in La-la land where my next door neighbors have about 5 cars, the worst one being a land rover and best being a ferrari. i am very curious what will happen to all of the nonsense out here in socal.
OT-but:
TXChick, you recommended a book called Financial Armageddon yesterday but I was wondering what you or anyone else thought of this other book I was considering:
America’s Financial Apocalypse: How to Profit from the Next Great Depression (Paperback)
by Stathis (Author) $53 on Amazon
Thanks for any input you can offer.
Seems a little extreme and there isn’t much info on the author’s background. I liked the other book because the author was a market guy. Expensive too. I’d buy the other book.
what about peter schiff’s book?
A $53 PAPERBACK BOOK on how to profit from the next great depression? This guy seems to think he knows a good way…
2007 is going to blow.
-Rent
Most of what we need to read we can find right here at hbb, no?
Try America’s Bubble Economy. I’ve read quite a few of these types of books, but this one summarizes the issues and opportunities pretty well.
People, even hedge fund managers, JUST DON’T GET IT !
`If I didn’t already own Countrywide shares, I would be buying the stock,” Muhlenkamp said. “We’ve made a lot of money on it.”
http://www.bloomberg.com/apps/news?pid=20601109&sid=agBlUfdwU9l8&refer=home
What is this guy thinking ? Countrywide won’t take any losses ? The market is going to turn up like it was in 2003 ? I don’t get it. He is being paid millions of $$$ to be a hedge fund manager and he doesn’t see that housing is doomed for the next 5 years ?
People just aren’t understanding the situation. They just have no idea. They think last week was much ado about nothing and the whole home thing will stay “contained” and the boom will continue next year.
Nobody seems to understand we are about to lose about 1 Trillion dollars of wealth from our economy - and still be liable to pay for the debt behind it !
Pump . . . THEN dump. He’ll talk up Countrywide as long as he has a stake in the company.
You might have a point there. Its funny that these “reporters” never ask what the interviewees are holding.
It turns out that Japan has a debt problem too.
http://www.bloomberg.com/apps/news?pid=20601039&sid=ancVUXYp6oNM&refer=home
Exactly. One really needs to tie all of these strings together to understand that the global credit structure is already imploding at the edges and with about $ 350 trillion or so in derivatives out there and with the (exponentially) increasing volatility this whole thing looks like it is really about to implode in spades………. well beyond a 20 to 50 percent real estate price adjustment. Imho one really needs to think about financial survival in the face of bank and brokerage type closure event. These footprints are those of the biggest and ugliest Bear that has stalked the woods for centuries……..
Countrywide “should” be a survivor, that doesn’t mean you should be buying it now (as an investment, I have it as a trade)
Countrywide truly has nine lives. I wouldn’t be surprised if they did survive.
Well, they are a Treasury Broker Bank. One of only 20+?
From “White Hot” to “Deep Freeze”. As Rosanna Zanna Danna said….”If it aint one thing, it’s another.”
California is a manic society, from one extreme to another. If anything can be said, it is many who bought into the frenzied housing market in California more than likely they now have a nice garage to store all of their Beany Babies in until that market picks back up.
Since the funny money is now being removed from the market place, the market place disappearing. The mortgage broker I was using when I was trying to buy tried to talk me into the very loans the feds are now shutting down. They made me feel uncomfortable then and now I have been validated by the federal governments killing of these loan products.
Yeah, I think a more accurate measure of a person’s suitability for a loan than a credit score would be this question:During the Beanie Baby mania, did you buy any beanie babies for “investment”? If they did, don’t loan them any money.
How about instead, did you make money at it?
(In a market like this you don’t want to flush the 2 qualified customers.)
my sister put her large downpayment on her very huge house in washington in the late 90’s solely based off of selling all the beanie babies she thought were so cute that she was collecting. my mom always jokes about buying a house from beanie baby money, but she is retiring in her early 40’s with nothing more to accomplish work wise. so if you get out at a reasonable peak any profit makes a lot of sense. sold all my google at the top and bought at the IPO. now I wonder if I should short any of the mortgage companies stock that are about to go under.
The analogy of the week is:
“Close the barn door after all the horses have left.”
I have seen it in the MSM regarding the housing bubble at least a half dozen times.
Maybe it is time for a haiku weekend thread with a them of barn doors and barnyard animals.
Close the barn door after all the horses have left.’
Some one last year put it in a clearer light:
“Who left the gate open to Dumb Ass Ranch.”
“Who left the gate open to Dumb Ass Ranch”?
The FB whose hands were full with his bag of (borrowed) money and box of stupid.
‘But when prices of homes here go down, I won’t be able to sell,’ Galindo said. ‘And they’re already starting to come down.’
Ah yes, the great Central Valley housing bust. Humboldt county California (Eureka and environs) has seen inventory now drop to its lowest since November 2005, at 528 properties. Last summer, this number was just below 800. I need some encouragement here, people. I hear all these great stories all over the rest of California about inventory mushrooming and prices dropping (which, I know both to be true), but it just doesn’t seem to happen here. The house across the street from my rental in McKinleyville is still priced at $619K. Every couple of days, the builder puts out more brochures into the box…they are literally flying out like hot cakes, but no body has obviously bought…but the disturbing thing is that the interest is still very much there.
What are your observations from other northern Cal/Southern Oregon markets?
I don’t have any observations about those markets, but its my opinion that the housing markets, California included, are going to be become unglued very quickly. Foreclosures are rising, people are desperate to sell and the new lending environment probably took 20% of the potential buyers out of the market. We are kind of in the calm before the storm at the moment.
Don’t forget AltA will probably be tightening also, that’s another 40%.
So, could be for 60% of the buying pool, qualifying for a loan just got more difficult. Ouch.
I think the biggest impact will come when lenders start to veryify income. Obviously in many areas no one can currently afford to buy unless they lie on thier app, and they then become future foreclosures …
From the Red Hot Chili Peppers… California Rest in Peace. Simultaneous release…. (where is rainman to finish the song?)
And the 25% pure-play investors. That leaves some 30 to 40% able to buy a house - and half of them don’t want to.
‘Sell now, or be locked in forever’.
Hi Anthony,
I just did a little digging around. Looks like the upper Rogue Valley (Medford, Ashland, etc.) is down ~10% year over year as of January. Bend looks to be down about 10-15% from September to January. I think Bend had it biggest year in early 2006, but prices began to fall sharply towards year end. Perhaps Humboldt Co. is similar, and price declines will kick in later. Folks are still in the denial phase, hoping the locusts will come north in the spring. I am sure a few will, but it is not clear how many sellers will need to cut prices before that. I would guess that folks there will hold on to their “air castle” prices through the spring and early summer, before desperation kicks in in late summer.
Hey Fester,
Did you see the Greg Stiles article in today’s Mail Tribune:
“Housing Activity Begins to Stir”
Talk about cherry-picking numbers and wishful thinking!
Here’s the link:
http://www.mailtribune.com/archive/2007/0308/biz/stories/biz-realestate-3-8-07.htm
And here’s a link to the numbers he cherry-picked to produce his upbeat assessment:
http://www.jacstats.com
An Example quote from the article:
“Jacksonville residences sold during the quarter ending Feb. 28 turned over in 67 days versus 95 a year earlier.”
OK, but he fails to mention that all other towns in Jackson County saw an increase in days on market. The average county-wide went from 62 days to 100 days.
Ugh.
Thanks AshlandRenter,
Nice stats.
Styles seems to be a cheerleader, and quotes the usual folks with conflicts of interest, and learned his use of statistics from the Bush Administration.
I lived in Huntington Beach from 87 to 95 and during that time my place fell by about 30% over a 6 year period. All the way down some starving RE “professional” called bottom based on some lull in price depreciation and various “magic numbers”. Didn’t matter as it is now a historical fact that the RE lobby lied in the face of all logic and facts.
Never expect ANY capitulation from the soon to be starving masses which comprise the NAR (and cronies)…
Kendra Todd will soon be dancing for dollars……
I lived in Irvine and Bought a $255,000 home in Windwood just outside of Woodbridge and by 1995 my home had dropped to $195,000. That is almost 25% and we did not have the extreme price rise that we have had this time. OUCH!!!!!!!!!!!!
“What are your observations from other northern Cal/Southern Oregon markets”?
I have noticed the same increased interest in Chico in the last month, and properties are selling. A friend who works for a builder here sold 2 houses in one week (end of February), which were on the market since last summer: 750k and 1M. Original asking for the 750k house was 879k. The peak price for the house in 2005? Oh, about 750k, so apparently all you have to do is put an asinine price on it first, come back down to the peak, and then there is a bidding war over it. The inventory of 800k+ homes has shrunk from 30 on the MLS (Nov 2006) to 16 today, and they are selling. Inventory is fairly flat since December 2006 for all price ranges.
Homes sold this last week were about double what I’ve seen since last fall. I guess it looks like a bargain, but these prices would tank if buyers would just wait. Not likely I’m staying in this area, but that’s not the point. I’ve really just about had it with trying to get a read on these smaller markets like Humboldt and Chico. I can empathize with Anthony’s frustration. It appears to be different here.
Not different, just equity refugees moving there from the frothy places. Once the extreme bubble areas slow, the “ripple” areas will slow as well, IMHO.
Your humble opinion is right on the mark. This was the crux of what I began to write, and then backed off to the anecdotal observation topic.
That equity refugee fleeing to these areas (the boomers) creates an almost false price point here as well. False in the sense that, their newly chosen town is not the “Carmel” they were priced out of, and they will realize this in due time. Time will also correct this price imbalance, but I think it will be stubborn in these areas, as none will want to face the reality that “it isn’t different here”…..
Very true. A couple moved up here (Ashland, OR) from Carmel a couple years ago. By February of the first winter, the wife had had it with rain, fog, and gloom. She left her husband, took the kid, and headed back south. She was not that into trout fishing.
lefantome,
Thanks for the input. I can’t believe anyone would volunteer to buy a house at this moment, with even the MSM pretty bearish. But alas, the dumba$$es out there are doing just that! When will it end?
Portland has slowed down, and Medford/Bend have really slowed down, in terms of sales. Prices haven’t fallen much, yet. If I were a first time buyer - given there’s not much income stream in Humboldt (is pot still the biggest cash crop?)
Also, just to help you out, Federal tide-over timber payments are going to expire, which will put a serious hurt on Brookings and Medford. Those prices will HAVE to come down, because their property taxes will HAVE to go UP. Oregon’s legislators haven’t been able to keep the timber money coming - I believe it’s 20-30% of some counties’ budgets.
So - I missed this - WAIT at least another year, for Medford and Brookings to tank. They will… those CA retirees don’t like crime - but don’t like taxes either. As an example, one county (forget which) is closing ALL its libraries. Period. Reminds me of Prop. 13 in CA.
That would be us (Jackson County, OR). Josephine Co. next door to the west is considering shutting down the county government entirely and being annexed into a neighboring county! This is an old boondoggle having to do with the Oregon and California Railroad lands that were given away, then defaulted back to the government. We used to get timber revenue from these lands, but folks don’t like logging these days, so…AND, we (Jackson County voters) rejected a levy to cover the libraries last Fall, so…….
I say close..’em. I love our public libraries, but if the voters here won’t pay for them I would rather that they closed than that our Senators and Congressmen go panhandling in congress from other states who believe in paying for their own infrastructure. Oregononians have been cutting, cutting, and cutting taxes for years; it is time to pay the piper. Funny, I heard some of the folks who rejected the measure claim that we no longer need libraries now that we have google….!
Hey,
I just heard we (timber counties) got the federal bail out! Thanks everyone!!!
In my neighborhood of new cookie cutter townhomes, most bought around 220-260k over the last 18 months, NOTHING is selling. Throughout the winter I have seen the SAME half dozen places holding open houses off & on (more frequently recently with warmer weather). There are several more with For-Sale signs, but they haven’t had open houses, only craigslist postings.
PDXrenter,
What part of town are you in?
“Before the rule change, a borrower hoping to buy a median-priced, $472,000 home could qualify for an initial monthly payment of $3,628 on a subprime, two-year, adjustable-rate mortgage at 8.5 percent. Now, under the new Freddie Mac rules, that borrower has to qualify also at the fully-indexed, higher payment of $5,405 monthly, according to Mark Carrington.”
So doing the math, to afford to buy the median priced house every single dime of the median household income would have to go towards paying the mortgage. Good thing you don’t have to pay for taxes and insurance. Oh wait….
Actually, even the teaser amount is pretty much the entire take home pay after payroll taxes. Add in insurance, taxes, and utilities and I hope that the backyard is big enough for a garden and a small goat farm or these guys are not eating.
“‘This is a result of how unaffordable housing got,’ said Peter Dennehy, VP of Sullivan Group. ‘When housing prices were going up, these were the only products people could get. The question was always, ‘How are people affording these home prices?’”
More like how unaffordable home prices got was due to buyers’ ability to get these suicide loans.
Thank you, GS. Spot-on, as usual!!!
“I eat because I’m unhappy, and I’m unhappy because I eat. It’s a vicious cycle.”
-Fat Bastard
Question: I’ve heard of people taking out multiple home loans at the same time from different banks. They do this to, apperantly, hide the true risks from the banks and get as much money as possible. Is this fraud?
Also, when will lenders start going seriously after fraud. From rumors I’ve heard people have also gone into some kind of real estate firm and have being encourage to take all the equaity from their homes. I would suspect that this type of firms are a turn-key fraud factory. I don’t know the inner workings of lending but I would guess that since homeowners want to take all the equaity out of their house, they will get appraisers to give them unreal values. In short, it sounds to me that if lenders were more willing to go after fraudelent persons, they might get a lot of their money or at least properties back to sell themselves.
Yes, it’s fraud. It may not be prosecuted very often, but it is. As for the second part, lenders aren’t getting serious because they aren’t really lenders anymore. They fund & sell the mortgages, then go tits up when they’re forced to buyback.
But let’s pretend some banks are really lending and holding the loans. It’s usually not in their interest to prosecute fraud cases unless they are really solid. Going after people who buy 20 homes, for instance. Most banks don’t want to admit they’ve been defrauded. It indicates poor controls at the bank, or worse, that someone at the bank is in on the fraud. Bad PR.
“As for the second part, lenders aren’t getting serious because they aren’t really lenders anymore. They fund & sell the mortgages, then go tits up when they’re forced to buyback.”
This reprents a huge potential for catastrophe. This could one day be pointed to as the source of everybody’s pain.
Merced saw a 70.4 percent drop in the number of single-family home building permits issued in January 2007 compared to January 2006 — the second-biggest decline in the state.”
“The Modesto area saw a smaller dip in building activity than Merced, posting a 43.4 percent decrease in permits.”
Whew! I was worried that Modesto might post a higher decline! WTF!
70% drop? So, if 1000 houses were being built last year, it’s 300 this year? Oh dear.
subprime and the gov programs -what’s the difference ?
CA has lots of little tax payer funded 1st time homeowner programs
hel HUD has a failure rate in the teens
I SERIOUSLY RESENT that remark. I got a 3% down FHA loan to buy my first house, while supporting my wife and son. She was able to actually stay home and be a parent, and we could buy a small house.
Holy smokes - I think you’re missing the whole forest/trees idea. If the program did not exist, there would be less demand for housing in general - and YOUR house would’ve been cheaper (and your wife would still have been able to stay home and be a parent). Interest rate vs. price? I choose a lower price ANY DAY.
2007 is going to suck.
-Rent
Wouldn’t have been much less - and saving 20% after paying for college would have been near nigh impossible. I think the programs are excellent, but money does have to be spent for enforcement. Get real: Would you prefer renters or owners as neighbors? California doesn’t count… everyone rents there - that’’s why I left. Oh, wait - no, now they buy, with the free-market $0 -down teaser loans you all complain about. I get it now.
Ancedotal Story from Sacramento area. Brother in Law is RE agent with his own flip on the market for over 3 months now at a carrying cost of $4800 a month. Houses are getting a lot of traffic but no offers. Buyers (looky-loos) are now “cocky”. Agents keep getting promises of imminent offers but nothing ever happens, not even lowballs. The only offer on my Brother in Laws flip is contingent on the buyer selling his own home and despite it being the lowest priced house in his area he isn’t getting any offers either.
New Century is done.
http://www.bloomberg.com/apps/news?pid=20601087&sid=abtm3XofnWOs&refer=home
Some wiseguys on Brokers Outpost are saying “wait until end of business day today or tomorrow for a ’surprising’ announcement”, meaning that they have “sekrit informnashun” that NC will be bailed out. Heh heh heh…
“And mortgage brokers are worried about their jobs, too, said David Maiolo of Ocean Mortgage. ‘It’s a big buzz right now, with a lot of mortgage brokers getting out of the business,’ Maiolo said.”
I love the phrase “getting out of the business”. I suspect it is more akin to jumping out of an airplane and half way down your parachute dissolves leaving you naked.
The Hollister Free Lance. “Home prices in San Benito County held steady in February, with the market continuing to lag behind its position a year ago. Sixteen homes closed escrow last month at a median price of $585,000, according to REInfoLink. In February 2006, 24 homes closed escrow, with a median price of $600,000.”
I’m in Salinas around the corner and I don’t believe this pap! The only way people are qualifying here is though the liar loans and black magic.
Anyone with experience living in Hollister? I am looking for a place with some wilderness areas, but still occasionally commutable (1-2 per week) to Bay Area.
$585 sounds too rich for what I expect will still be a 1.5 hour one-way commute. Pleasanton a better option maybe?
Is Hollister priced higher because of proximity to Monterey/Salinas?
No, Hollister is commutable to Silicon Valley.
Hollister is nice, though hot and dry. You can escape to the beach. Pinnacles National Monument is south of there, and if you like dry wilderness, there is plenty.
Pleasanton is also hot and dry, and more crowded. In that area, there is a nice drive from Livermore to San Jose, via Mt. Hamilton. However, if I recall, BART is now there, so if you worked in SF or the East Bay, it could work much better.
The credit bubble, in terms of new lending is finally starting to shrink.
I would not be surprised to see housing-for-sale inventory reach biblical proportions come this spring/summer.
Stop the presses!!!
Go look at ziprealty. The national inventory just broke a million. Ok, what changed? I’m very suspicious of such a rapid inventory delta… but if its real… Maybe a blip? Significant?
Delta of ~60k in 22 hours. Gulp!
Got popcorn?
Neil
ps
of course I blogged it:
http://recomments.blogspot.com/2007/03/houston-we-have-problem-million-of-them.html
Ben,
This whole artice section pisssssed me off. It’s just more of the same. Before we had there is no bubble, housing is going up, etc and then when they couldn’t hide it anymore we find that they admit housing was in trouble in 2005. They denied the credit crunch and now they have to admit to it. The only way to explain it is that the RE complex and associates are using the MSM to help them unload their interests on the way down. But we here do know things are quite bad or why would BB and pals be trying to talk things up to placate the stock market; and as an aside I do love Greenspan talking up the big ‘R’ (recession) word. I think it’s part of the plan…get it out there early and have people get used to it, dismiss it, and then when it comes it won’t have as much impact.
Although the bubble peak was very likely summer 2005, I don’t think NAR “admitted” it (if that is what you can call it) until fall 2006.
It seems NAR is a lagging indicator by about 1+ year.
Ben, just a suggestion — maybe you can give us a separate “Daily Credit Carnage” thread so that all the posts about stocks, lenders imploding etc don’t get mixed up with the topics of your housing postings.
Aren’t they all part of the same package, though?
I second. It’s a daily sideshow, and riveting, but you have to hunt and peck for the threads.
Are you kidding. I look forward to the Washington and Wall Street posting. It is where the action has moved to, since the housing market moves slowly but the financial markets look ahead.
I look forward to the Washington and Wall Street posting.
———————
My favorite thread (and topic) as well. Glad Ben finally has enough material on this to create a specific post for it.
The lending/credit bubble **IS** the housing bubble.
There seems to be a lot of nervousness Posting on the Bankers Online and Loan Officer Forums about (TIL) Truth In Leading, (GFE) Good Faith Estimates, ARM Disclosures and RESPA Compliance and Violations today.
They’re EVEN getting PARANOID about the FED’s monitoring their online Forums. hee hee Testing..testing 1 2 3
http://forum.brokeroutpost.com/loans/forum/2/92338.htm
http://www.bankersonline.com/forum/ubbthreads.php/ubb/showflat/Number/379515/site_id/1#import
It’s getting more like Glengarry Glen Ross NATIONWIDE….
Blake: We’re adding a little something to this month’s sales contest. As you all know, first prize is a Cadillac Eldorado. Anybody want to see second prize?
[Holds up prize]
Blake: Second prize is a set of steak knives. Third prize is you’re fired. ….Ooops..You’re JAILED !
Here Comes the Fed’s …Here Come the Judge
If they’re so worried, maybe they should shut up and don’t post.
Won’t save them. Especially if they are doing something stupid and just now getting it.
It’s funny, there are the real bankers on there (a few) and then all the sleaziest, slimiest shitbuckets the world has to offer (see, e.g., david_32767).
I hope that guy, along with many others, ends up in the “Gray Bar Hotel”, as he so eloquently put it.
About New Century “The real estate investment trust, which offers mortgages to people with poor credit histories, ”
Am I wrong in thinking a business plan to lend money to people with poor credit histories was like a really bad idea? Or could bad weather back east, global warming and Nancy Pelosi been cause for all these subprimes going under?
Well, there are successful businesses lending to people with poor credit. The mortgage industry’s problem lies in their mistaken belief that the housing bubble could keep inflating to infinity. Rising house prices kep a lot of problem hidden.
Yup, I am still whistling past the graveyard, as none of my clients is more than 30 days late at this moment. But, we are talking about just a few dozen borrowers, all with Big skin in a Little game.
Rats…I had $10 riding that NEW would make it ALL the WAY until Friday night !
Sheesh …Chalks that UP as another ONE of my bad investments
Took a ride Visalia, Ca. way, this morning and feverishly they work…
The mighty housebuilders~
Saw 3 different developments, (all built on perfectly still useful citrus land) all in different stages of done, from just barely to 2/3rds done.
The men must know these will probably be their last steady construction jobs, for a long while…
This coming on the heels of a statewide January freeze, that wiped out $2 billion Dollars, in citrus alone.
July 2005: 430 houses for sale
July 2006: 1800 houses for sale
July 2007: 5000 houses for sale?
Another log on the fire?
BURN BABY BURN!
Check this out. The whole thread is interesting. SDCIA
Comment
asidon
Junior Member
Online!
Registered: 9/30/06
Posts: 24 Today at 10:50 AM
——————————————————————————–
The mortgage market continues to make headline news this morning as hedge funds that invested in many of the securities collateralized by subprime loans are now reporting significant losses. This is as a result of rising delinquencies and foreclosures. And here is something you should probably be aware of—interesting new businesses are cropping up. These firms are offering to help mortgage lenders recover monies lost as a result of misrepresentation in the loan file, or actual fraud. They are taking these cases on a contingency basis, meaning they get paid a percentage of what is recovered, and are going after real estate agents, loan officers, appraisers, and yes, even borrowers. In addition to this, a couple of large investors have offered to contract the services of their special investigations units for similar activities.
__________________
“Pride goes before destruction, a haughty spirit before a fall”. Prv. 16:18
luke4king
Senior Member
Registered: 8/09/05
Posts: 357 Today at 11:15 AM
Right on texchick57…They were warned more than once today by some of their members. ie.
“The constant “it’s not my fault” mentality is why FBI agents peruse this message board.
Considering the fact that, just a few years ago, it was perfectly legal for LOs to sell POA programs - despite having no idea how they worked - the “it’s the buyer’s fault” crap doesn’t fly. TILs and various other disclosures were cryptic to have the newbies that were selling these things, nevermind the borrowers themselves.
And saying “well, they get papers in front of their face at the closing table that disclose everything” is a load of bologne. Unfortunately, when you have a contract on a purchase with a non-refundable security deposit, it’s not exactly going to help you financially to say “I changed my mind” and forfeit your deposit, all because your LO was a moron.
In cases where, perhaps, somebody had some temporary emergency and needed to lower their mortgage payment and got b.s. from the broker on the terms of the loan, again, the closing table is not the place to change your mind. You can rescind, but then you are stuck with the same payment as before, have done no other research to check on other options to solve your financial problem, and are likely much closer to being in serious trouble financially due to whatever emergency came up.
You can’t simply whip open a copy of “Consumer Reports” to research your loan program like it’s a new car or refrigerator.
I’m betting that a lot of brokers who lied/omitted/didn’t know about POA deals are going to be the same ones who perjur themselves in court about whether or not they told a borrower that lenders “don’t care” if the borrower exaggerates income on a deal.
The next step is for the industry to be regulated like securities dealers are now regulated (we’ve already started down that path). It’s rather unfortunate that “exotic” (and that’s a ridiculous label) loan programs were made available to brokers with zero training and near-zero moral fiber.
In many cases, the worst that will happen is that said brokers won’t be able to sell bullsh*t loan programs and end up going out of business when they have to sell to informed clients. That’s pretty unfortunate, because the people they hosed are going to find things to be much worse.
Oh yeah, in regards to the FBI:
There are a lot of industry insiders working directly with them to stop this crap. I would suggest to some of you that what you post on this forum can quickly become a matter of public record in the archives of a criminal court…”
I know you all would want to know this: Casey is back on the air and doing sweet deals in Utah.
His site is back up? I figured CashCall got tired of him sticking his tongue out at them.
Here’s the official Casey Haterz(tm) site:
http://exurbannation.blogspot.com/
Warning: Not responsible for coffee sprayed on monitors or keyboards
That kid is like a little blond haired vampire…Nothing slows that Fool and his Magic Credit Card DOWN !
Big subprime lender Greenlight Financial bites the dust today in Orange County.
LINK????
I called the company and someone they asked what kind of loan I wanted. Sounds like they are still alive.
I hung up…
Their website still advertises no-doc loans
It won’t be long
“The January freeze that ruined the oranges in the fields here in the citrus belt also killed jobs and chilled the economy.”
Recent M&A most notable Oracle acquistion of Hyperion ( right after Seibal and Peoplesoft) will/has put out more than a tens of thousands in the unemployment line. There is a drought of IPO in the pipeline. Very few new companies going public. Current workforce in Silicon Valley stands at 850K or so … same number as it did in 1990-91. Sorry no boom in sight to payoff that million dollar condo in Palo Alto. Keep eating the ramen!
Another log for the fire……….
http://www.marketwatch.com/news/story/fieldstone-share-price-implies-concern/story.aspx?guid=%7BB5945B54%2D0BD8%2D46FF%2D8545%2DB45D582C71A9%7D&dist=TQP_Mod_mktwN
Whats funny about that story is that even though they are investment bankers and sophisticated, etc. THEY DIDN’T SEE THIS COMING ! Its like everyone is a zombie and they can’t see or think !
“Its like everyone is a zombie and they can’t see or think !”
I think this of my co-workers. They’ve probably heard of the sub-prime meltdown in passing, but in their minds it’s as if these problems are on a different planet, and therefore don’t affect them.
It’s more than that, though. It’s not even on their radar. My comments just fall on deaf ears. I find it completely fascinating to follow and determine how it will affect me and how to best navigate it, but my co-workers are completely apathetic.
What I believe to be the most important financial time frame in my lifetime, they don’t even acknowledge.
Considering some of these investment bankers claim not to know of it, I guess it makes sense that the general public is blind to it.
“What I believe to be the most important financial time frame in my lifetime, they don’t even acknowledge.”
I agree. Ignorance is bliss. I thought people were ignorant in the dot com meltdown, but this is worse. Everyone owns and house and most people have mortgages. This affects way more people in a much larger manner.
This last week has been really interesting as Wall Street came to the realization that there was an issue here. Wait until it bites them in the a$$ again in a few weeks !
I was watching the Spanish-speaking TV channels and I’m seeing TONS of commercials advertising ARM’s and No-Down-Payment-with-Cash-Back loans. The ads tout, “Don’t lose your home to foreclosure. We can refinance you! “.
So as you can see, the sub-prime lenders & fraudsters haven’t learned a SINGLE f*ing thing from all the current RE debacle. Chased from prime-time TV, they’ve morphed and now -after a few Spanish classes- are invading the Latino airwaves. In my experience, the Spanish-speaking channels seem to be much less monitored by the FCC (or whoever it is that prohibits outrageaously false advertising) and the potential for MORE rip-offs is eminent.
Additionally (and I say this as a latino myself) most latino buyers are not as savvy or sofisticated as the average American consumer. They’re usually not aware of where to turn for help or redress even when it is readily available. They don’t know the local laws very well and on top of all this is there’s the language barrier.
I don’t get it. The market (aka suckers) they’re targeting with their ads is very specific; the ‘desesperados’. So just HOW can these lenders still expect to make any profits off of someone who is upside down, behind payments, with almost no equity and yet looking for a refi?.
I’m a missing something here or am I just plain stupid?
Gracias.
They aren’t unsophisticated - they’re stupid.
Co-worker’s single Mexican immigrant 48-year-old mother sold LA house before the neg am liar loan reset in July - walked with $100k in her pocket. I told him - DO NOT LET HER BUY ANOTHER HOUSE, SAVE THE MONEY!
Instead, in August she quit her $10 an hour retirement center maid job, moved to Bakersfield, bought a $hithole ‘fixer upper’ for $325k with another interest only liar loan that resets in 3 years, spent ALL of the $100k ‘fixing it up’ and paying living expenses until she finally found a job LAST WEEK after being out of work for seven months. Her new job - hospital janitor - pays $9 an hour.
She isn’t a sucker - she’s a dumba$$.
WTF is this ?? The FBI WORKED OUT their Warning WITH the REIC Lobbyists…HOW Warm, Snuggly and Frigging Cosy of the the FEDS !!!
The FBI said in its Web site that the warning, worked out with the industry’s main lobbying group, will educate borrowers on the consequences of criminal activity and put potential perpetrators on notice.
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070308:MTFH26873_2007-03-08_23-03-16_N08379268&type=comktNews&rpc=44
JAIL them TOO!
This IS the Bush administration we’re dealing with. They are 100% responsible for this entire mess.
You can bet your ass that came down from a political appointee.
Not sure I would blame all this on the Bushies, but I know that they never miss a chance to protect corporate criminals, because they look out for their own.
Funny, I heard a couple days ago about the abrupt firing of a number of federal prosecutors, including the one who skewered that scumbag Cunningham. I was a bit surprised until I learned that the fired folks were linked to prosecuting corporate crooks.
I’m sure this was posted already, but just in case…prepare for the bailout!
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Bernanke and the other governors didn’t comment on interest rates, the economy or the direction of regulatory policy. They listened to comments from advocates and bankers, who indicated that foreclosures are likely to increase further.
“We feel like a canary in a coal mine,” said Stella Adams, executive director of the North Carolina Fair Housing Center in Durham. “It is sad for us to know that there are 1.2 million families at risk from foreclosure.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=ay7a6cGR11RM&refer=home
Even the SDCIA crowd understand the subprime is toast - though I’m not sure if they fully understand the implications:
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1749718
From Betamax’s link (so much juicy stuff, you’ve really got to check the link)…
Effective IMMEDIATELY, March 7th, 2007 - due to the current Capital Market conditions for High LTV / CLTV / Low FICO Loans, this lender will be discontinuing our E-Series program. No new submissions or locks will be accepted. Current E-Series loans in the pipeline must be funded by March 30, 2007. No extensions or re-locks will be allowed on current locked loans in the pipeline.
Sorry the monthly charts are late. To be honest I wanted to wait because it didn’t look like all the February data was in. Well I waited 8 days into March and there have been no updates. In terms of dollar volume, many zip codes in southwest Los Angeles County showed steep declines in February, some hitting 5 year lows. Wow! Here are the charts. Out of 45 zip codes I chart, I’d say 9 zip codes met or barely exceeded the sales volume from last year, just 2 zip codes exceeded sales volume substantially.
I suppose David Lereah will blame it on the weather. Maybe the sub-prime market implosion has something to do with it?
Enjoy.