Serious Delinquencies May Trend Upward
Some housing bubble news from Wall Street and Washington. “Fannie Mae, which finances one of every five home loans in the United States, reported it…expects to report lower earnings for 2006. The government-sponsored company is remaking itself as it recovers from a multibillion-dollar accounting scandal.”
“Fannie Mae said that it expects 2006 profit to show a decline, mainly due to reductions in interest income and ballooning costs from the restatement process. The company said that going forward, it expects its credit losses ‘will increase and serious (mortgage) delinquencies may trend upward’ as a result of the slumping housing market.”
The Associated Press. “Some on the brink of losing their homes will benefit from the foreclosure delays advocated by Massachusetts Gov. Deval Patrick, but many are so financially troubled that a delay won’t make a difference, the state’s top lenders association said Tuesday.”
“By the time many cases reach the foreclosure stage, it’s often too late, ‘whether we wait 60 days or not,’ said said Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association.”
“John Battaglia of The Cambridge Mortgage Group, said he applauded Patrick’s efforts, but said it will be a daunting task for the state to determine which complaints have merit and which are just trying to take advantage of the extra time. The state has no power to force lenders to negotiate new terms.”
The Orange County Register. “It has been two weeks since H&R Block announced the planned sale of its subprime unit Option One Mortgage Corp. Well, the tax preparer already has hit a little snag, though nothing that will derail the deal at this point. The company said in a filing today that its mortgage unit lost a $1.5 billion credit line from Merrill Lynch & Co.”
“Other investment banks reduced or rearranged their financial backing. For example, UBS cut its credit line from 1.5 billion to $750 million.”
The Columbian. “Mortgage loan broker Millennium Funding Group stopped operations this week after laying off most of its Vancouver staff due to continued erosion in the subprime lending market.”
“‘The market in general doesn’t support operations at this time,’ said Joe Bell, VP of human resources for Ace Holding Co. LLC, Millennium’s owner. He said subprime lending represented about 60 percent of Millennium’s business.”
The Star Telegram. “Moody’s Investors Service, a credit-rating agency, reported recently that more than half the large home builders had negative cash flow at the end of calendar 2006. ‘A growing number of builders are at risk of failing to comply with their lender covenants, underscoring ‘a potentially serious problem,’ Moody’s said.”
“Since last summer, Moody’s has taken 15 ratings actions against home builders, all of them negative. More problems are expected.”
“‘Now, as the spring selling season shows signs of being a bust and a stunning surge in mortgage credit problems is roiling the nation’s mortgage market, 2007 looks to be a complete wash out,’ wrote Joseph Snider of Moody’s, ‘while 2008 is probably the earliest that some stabilization will begin to occur.’”
“This cycle is different, because 18 months into the downturn, many companies still have negative cash flow, Moody’s said. And that cuts into their capacity to handle debt payments.”
“Last month, at a conference at the American Bankruptcy Institute in Washington, lawyers warned that some large builders may be headed toward trouble, because they issued so much debt in the boom times.”
“The problem is that it’s taking much longer to sell finished, vacant homes. At DR Horton, that’s largely because cancellation rates are still running double their historical average. CEO Don Tomnitz doesn’t see that changing soon, even though Horton is building fewer homes and cutting sales prices.”
“‘We’re still faced with a liquidity crisis in the mortgage industry, and I think that’s going to get worse over the next two to three quarters,’ Tomnitz said, referring to tighter loan standards.”
From BYM News. “‘Florida markets continue to work through the down side of the real estate cycle and residential inventories remain high in our markets,’ said St. Joe Company CEO Peter S. Rummell.”
“‘We are selling a limited number of resort and primary residential units. High inventories remain an issue and sales activity is slow and sporadic. We knew heading into 2007 that this would be a difficult year in Florida’s residential real estate markets – and it is proving to be just that. We don’t expect to see our markets returning to health until 2008,’ Rummell said.”
“Yesterday, JOE announced that it has agreed to sell its mid-Atlantic homebuilding operations, primarily operating under the name Saussy Burbank. The transaction is expected to generate no gain or loss beyond an impairment loss of $2.2 million recorded in the first quarter 2007.”
From CNN Money. “John Devaney’s not a developer, and he’s certainly not a flipper. The CEO of United Capital Markets is a bond trader. And one of his specialties is buying and selling bonds that are backed by the mortgage payments of ordinary homeowners.”
“Option ARMs? Devaney loves ‘em. ‘The consumer has to be an idiot to take on those loans,’ he says. ‘But it has been one of our best-performing investments.’”
“Wall Street’s rocket scientists keep finding more sophisticated ways to repackage and resell mortgages. Now a lot of that lending looks foolish. Mortgage delinquencies among so-called subprime borrowers have risen to 13 percent, the highest in at least 10 years.”
“What comes next? The pullback. Investors will be more selective about where they put their money, and banks will be more cautious in their lending. But the risk is that this will happen so fast that we’ll see a vicious circle develop.”
“With option ARMs, borrowers tend to focus on the introductory rate and minimum payment, and to ignore the higher rate down the road. For the broker, that higher rate could mean the difference between a $3,000 commission and one several times as large.”
“‘Option ARMs are not a license to steal, but once a customer asks for it, I know I’m going to make four times as much,’ says Jim Moore, a Grand Rapids broker. ‘It’s what puts me down here at Best Buy buying a 40-inch flat screen.’”
“The state has no power to force lenders to negotiate new terms.”
Do activists understand this minor detail?
The state has the power to do virtually anything it chooses. Whether such actions will stand Constitutional muster is a different question.
As if that even matters anymore…
The only group that seems to get it are the gun owners. They understand what a slippery slope is. Other freedoms be damned.
“The only group that seems to get it are the gun owners.”
Great. Thank god we have that “well regulated militia” of the 2nd Amendment or where would we be?
lock and load!
NYCB,
Pretty much where we are heading. If the people and the attorneys defended the 2nd amendment as vigorously as they defend the first, this county IMO would be much better off. Thing being the way they are though, you can’t have an armed populace that has it’s rights taken away piece by piece. Go to any past dictator ship and you will see that one of the first things they do is disarm the cattle, makes it easier to herd them in the pens for slaughter.
For all you people who think that you don’t need “evil” guns, go do a little research on who is responsible for protecting you. It sure isn’t the police or the government. The supreme court has consistantly ruled since the late 1800’s that the government is not responsible for protecting citizen from harm. Noodle that over then next time you hear a cop talk about laying thier life on the line for the citizen.
When I was a kid growing up in the Houston ghettos, the cops were nowhere to be found. They had better things to do than get shot at. The only time they showed up was to escort the coroners while they were picking up the dead bodies. The crimes were committed with guns, knives, rocks, fists and anything else that could maim or kill people. Anyway, one day our neighbors had to gun down a couple of thugs who broke into their home. It’s easy to call for banning guns when you live in a gated community or nice upper middle-class areas. How about the people. How about the people who have to live with the crime?
The Second Amendment guarantees all the others. Without it, the Constitution is worthless.
“…I admitted that we are not all born heroes, and that a world in which everyone would be like him, that is, honest and unarmed, would be tolerable, but this is an unreal world. In the real world the armed exist, they build Auschwitz, and the honest and unarmed clear the road for them; therefore every German must answer for Auschwitz, indeed every man, and after Auschwitz it is no longer permissible to be unarmed.”
Primo Levi (The Periodic Table)
IBID ..”toast”
NYCboy etal..
Then you missed what happened this week in ALabama. 5 milita men were arrested,bythe BATF no less. Yeh they found rifles, shotguns,pistols, and the ammothat goes in the guns. One source close to 1 of the 5 said the 4th of July fire works stash was described as capable of making the gernadesas they terrorist in IRAQ are doing.
Hyle Hilter King George. {just practicing}
“Feds Rain Alabama Militia Group, Uncover Small Weapons Arsenal”. Well, as it turns out, one of our readers is close enough to the situation to have been visited by the BATF folks and offers this account:
“George; I am acquainted with a couple of the men involved in the Alabama Militia bust. I would like to make a comment or two on your “editorial”, if I may.
for BTAF BUST story:
http://www.foxnews.com/story/0,2933,268726,00.html
for Ala.man’s comments:
see heading ” Milita Alabama followup”
http://www.urbansurvival.com/week.htm
States have still money, to distribute to victims (until their next bond issue flops). Activist understand that major detail.
hehehe…Deval Patrick the former flak hack for AmeriQuest
is gonna make everything right for the FB’er crowd.
Hollywood couldn’t have scripted it any better.
As I posted earlier
The Deval is in the details…
Good catch hd74
“‘Option ARMs are not a license to steal, but once a customer asks for it, I know I’m going to make four times as much,’ says Jim Moore, a Grand Rapids broker. ‘It’s what puts me down here at Best Buy buying a 40-inch flat screen.’”
Bit of a conflict of interest, no?
I predict that this quote will bust the comment-o-meter.
Could it be that flat-panel TVs are responsible for the economic apocolypse?
Plus what a small time operator. Only a 40 inch flat panel? They’re cheap now. I was expecting the 70 inch job!
I agree with Sad but True,
A true player wouldn’t settle for a 40″ HDTV. Come on! That’s what I’m considering… far to practical for a big time mortgage broker.
And folks, this is contained… move along…
(For this guy’s friends already have 60 inchers… He’s late to the game.)
Got popcorn?
Neil
A lot of the FBs will be getting something measured by the inch but it won’t be a TV set.
Remember - this is a Grand Rapids, Michigan “player” …. would you really want to see the Lions stumble through another 4-12 campaing on a BIGGER screen than that?
“Only a 40 inch flat panel? They’re cheap now. I was expecting the 70 inch job! ”
The 40″ is for the bathroom. . . duhhh!
The 40″ is for the bathroom. . . duhhh!
Slaps forehead.
Now the world is aligned.
No. The granite countertop would have that honor.
don’t forget to mention the NEW BACKSPLASH
I don’t know…it’s a tough call. Toss-up between Hummers, plasmas, and umm…fake bresses?
oh yeah, granite - can’t forget the granite.
I want a hummer with a granite topped 70″ plasma on the roof.
I want a hummer with a granite topped 70″ plasma on the roof driven by my double D implant sporting trophy wife!
You guys are killin’ me. We’ve got a lot of great comedians here.
BayQT~
finnman -I can’t stoplaughing ;>)
YES my son. ” what would your second wish be?”
= 2% instead of the usual 1/2% ?
why do idiots use a loan officeWHORE
what is it 5or6 clicks online
5 or 6 clicks online won’t make the dings go away. The vast majority of people using mortgage brokers are using them for a reason.
Naked greed, refreshing to see it expressed without reservations.
Is this evil, or just dog eat dog? He doesn’t seem to mind the trail of ruined lives he will leave in his wake. Perhaps because many of his customers were greedy flippers so he recognized he was eating his own kind.
He did state that “once a customer asks for it.” Ask 100 people on the street what an option ARM is and 99 of them will look at you funny. Anyone “asking” for an option ARM knows what they’re getting into.
Maybe this guy is simply giving people what they want (or think they want).
“She was asking for it”.
Yeah, I got a funny fealing ‘no’ means ‘yes’ in brokerese
Exactly right! Any honest mortgage broker who educates his customer would scare the shit out of a dumb ass wanting an option ARM.
You would think so wouldn’t you… but it doesn’t happen that way they simply get up or hang up the phone and find some who’ll get’er done.
We asked 100 people on the street what an option ARM is. Top answers are up on the board. Survey SAAAAAAIIIIIIIIIIDD!!!
Got 10% down?
“..but once a customer asks for it..”
CYA! How many customers ask for a suicide loan?
Flippers who think they can unload a house in 30 days or less…
$15k prepayment penalties eat up quite a bit of profit.
The so-called savy ones will pay the extra costs to avoid that…
Ok,
so that’s 2 suicide loans and fries?
Please pay at the first window.
I’m sure the borrower’s request for an Option ARM sounded something like “Do you have ANY way for me to qualify for a larger loan?”
What does the borrower care…they just walk if the loan(s) are for more than the value of the home. Pre-payment penalties..so what… Option ARM no big deal. NegAm so??. Right?! Isn’t that how it is in AZ? Seriously a guy I know in AZ is right now, in the process of walking away. They’re not paying the mortgage any longer after extracting all the equity over the last two years (the last time was in Augsut 2006 to buy a truck and pay off credit cards again). He’s working and so is his girlfriend. But they are not taking it on at all. They are planning a wedding for the summer and leaving AZ for CA in July or whenever they finally get kicked out of the house. They just don’t seem to care one way or the other. I don’t why this amazes me so much but it does…..
It often strikes me that the people in the middle class, which I assume is most of us, are actually realtively moral.
Or are we just touting our stand on the moral high ground because we’re bummed we didn’t do exactly what they did and pull money out of this bass-ackwards system?
I’m not casting aspersions, people, I’m just being philosophical. I was looking at buying a house in ‘05 even though I had NO CLUE that I didn’t have enough $$$. PITI? Isn’t that like… empathy? When I realized I didn’t have enough, I stopped the process. The loan brokers I’d sent feelers out to ept calling, but only for a little while. Seems they had plenty of other fish to fry.
I’m reminded of the Bert & Ernie skit wherein they go fishing, and Ernie just says “Here, fishy, fishy!” and they throw themselves into the rowboat.
I feel like Bert, who sits absolutely astounded and appalled that they’re doing it.
But who is also, underneath his disgust, in stunned admiration.
Clearly, all these FBs and Lenders and bankers need to sit down and watch some Sesame Street.
That’s excellent. Extract the equity from the house, then bail.
Hopefully it’s the rich chinese, arabs and other foreigners left holding the bag (the defaulted mortgage). We need some wealth distribution from the people rich enough to be investing in “Mortgage Backed Securities” to people who actually work for a living.
This is one of those rare occasions where I’m not being sarcastic.
A lot of brokers are marketing these option ARM loans as “cash flow” loans for landlords. This is how many landlords (an larger investment groups) are able to rent for less than the mortgage - at least in the short term.
This sums up completely why housing is doomed to fall over the next few years. Housing payments are outrageously expensive relative to rents. Nationwide, housing prices must fall by 30% to come back in line with rents (to historical levels). Funny financing only delays the inevitable. Of course, this assumes interest rates stay low.
But, boy, what a sophisticated group of investors! A fool and his money….
no kidding… a “seasoned” real estate investment pro wanna-be suggested this route to make a alligator cash-flow positive, along with ‘refinance later’ all the while keeping a straight face. I almost fell out of my chair on hearing this stupid idea.
They work that way if you have a strategy especially in rent controlled areas they are a godsend. But it’s for pro’s not w2 wage slaves.
I think the question the broker asks is: “do you wan’t the $1232 per month loan or the $3411 per month loan”, so technically they are answering: “yes! I want the option-IO-neg-am-1year-arm”.
Get real people! Of course the customer asks for it. They are given a set of alternatives and all the hear is “blah, blah, blah, lowest payment, blah, blah, blah.” Happens to me all the time when my customers ask for a “ballpark” sight-unseen estimate in my line of work. I tell them the range will be Perfect World “A” through Average “B” through Worst Case “C”. But will most likely be between “B” and “C”. And yet the ONLY number they hear is “A”. Is the “A” estimate accurate? Sometimes. Enough that I have to include it. Yet no matter how many times I stress the “Perfect World” aspect of it they only remember the lowest number of the bunch.
I have no sympathy whatsoever for people who cannot fathom MULTIPLYING THEIR INCOME BY THREE to come up with how much house they can afford.
With option ARMs, borrowers tend to focus on the introductory rate and minimum payment, and to ignore the higher rate down the road. For the broker, that higher rate could mean the difference between a $3,000 commission and one several times as large.”
“‘Option ARMs are not a license to steal, but once a customer asks for it, I know I’m going to make four times as much,’ says Jim Moore, a Grand Rapids broker. ‘It’s what puts me down here at Best Buy buying a 40-inch flat screen.’”
Sorry, Joe6pack but it is every man for himself in this competitive world. You better read the fine print and do research. Otherwise, you will sold out for a nice plasma TV or a vacation for the broker.
Option ARMs are the new one arm bandits with the odds heavily in the house’s favor.
“borrowers tend to focus on the introductory rate and minimum payment”
My brother is a sub prime broker in OC CA and that is almost always and has been the main selling point. He was telling me early in 2005 that it was a ‘house of cards’ and when it fell it would be a disaster- especially in the Inland Empire.
Just like that first hit of meth feels SOOOO good, that introductory payment is sweet!
People can’t think farther ahead than the next couple of seconds anymore.
“‘Option ARMs are not a license to steal, but once a customer asks for it, I know I’m going to make four times as much,’ says Jim Moore, a Grand Rapids broker. ‘It’s what puts me down here at Best Buy buying a 40-inch flat screen.’”
Only 40″? From BestBuy? Not only did you rip off a customer, but you just got ripped off by BestBuy. Their prices suck in comparison to other online retailers.
The Deval is in the details…
MA - coucelors to be provided by taxpayers
anyone from MA in banking?
this is like the new deal-it’s big !
I thought Fannie Mae had stopped actual quarterly and annual reporting some time ago and that we were all just supposed to take the fact that everything was okay on faith.
“Option ARMs? Devaney loves ‘em. ‘The consumer has to be an idiot to take on those loans,’ he says.”
Sure … and the lenders were geniuses for offering these loans.
We love sheep! The market for wool has never been better! Keep ‘em coming!
PT Barnum would have founded New Century if he had been around today.
Getting rich off idiots nothing wrong with that,they are out there in droves may as well take their money.
I’m starting to agree. Any fool who thinks he can buy a $600k house on a paupers salary deserves what he gets.
Glad to see you join me BB.
Got 10% down?
I don’t know whether you’re being facetious or not, but in case you’re not…I disagree. Rather vehemently, I might add. Getting rich out of deliberately screwing over others ought to land you in jail, or earn you a hefty fine. In the good old days of Chicago, it’d earn you a bullet between the eyes, cement shoes or a bomb attached to the bottom of your car.
Screwing others over is not a form of ‘competition.’ It’s what people who can’t compete do.
Is it wrong to screw someone that’s begging to be screwed because they believe getting screwed will make them rich? What if the screwed one ultimately screws their community by making housing unaffordable to those who are smart enough not to desire being screwed?
“Is it wrong to screw someone that’s begging to be screwed because they believe getting screwed will make them rich?”
> Yes.
What if the screwed one ultimately screws their community by making housing unaffordable to those who are smart enough not to desire being screwed?
> Still yes.
Screwing someone over is not subject to relativism, at least not in my book. There’s no room to be indiscrimate when considering whether it’s okay to screw someone else over.
Screwing someone over is not “justice”. It’s screwing someone over. No matter who screwed over who first.
Yeah, but if someone signs up for it what can you do?
Credit cards are nice to have for emergencies and stuff, but if you don’t pay them on time you get screwed.
Does that make credit cards criminal?
Yeah, but if someone signs up for it what can you do?
> You can have a conscious. You also can believe that you have the wherewithal, persistence, smarts and talent to come out ahead without the need to screw over someone else, or hide the truth from them with your fingers crossed. You can point out to the other party how they are about to get screwed, your take be-damned. It’s called honor. (For a real life example, see the other post here about the son of a woman who turned down a lucrative job at Countrywide because he thought it wrong to knowingly screw people. He couldn’t do it. I bet her son becomes very successful over time, dignity intact).
If someone is of the mindset that it’s okay to knowingly participate in selling a third party a rotten bill of goods, then that someone is not anyone I want to associate with. My standards are higher than that and I’ve severed friendships because of it. I don’t deal.
“Credit cards are nice to have for emergencies and stuff, but if you don’t pay them on time you get screwed. Does that make credit cards criminal?”
> Huh? Not paying for charges incurred on a credit card in time to avoid penalties and higher interest rates (the credit card holder’s responsibility) is totally different than “fair and full disclosure” when an agent and seller are trying to unload a piece of property to an unsuspecting buyer. Of course the buyer should beware. He/she/they should read the fine print, determine whether they’ll be able to make payments should they lose their jobs, etc. They should also hire a lawyer to review any documents.
That’s a totally different “buyer beware” scenario than a criminally-minded real estate agents and sellers doing what they can to obfuscate risks. And there are plenty of sellers out there guilty of clouding things for FBs. The second an agent or seller realize that the buyer should be aware of something that they are not, they are screwing that buyer over.
Let me guess. So if the market were [still] climbing at 20%+ YOY then this comment would have read:
“Option ARMs? Devaney loves ‘em. ‘The consumer’s were very lucky to have those loans,’ he says.”
Man. He is Cruel.
Devaney the devil.
About a year ago my son interviewed with Countrywide for a position as a loan officer. They told he could make 150,000 to 200,000 per year. Being a 25 y/o, he was thrilled. When he went in for a second interview with one of their regional managers, the first words out of the regional managers’mouth were: how do you feel about people going broke? When my son asked him what he meant, the manager told him that many of the people they were lending to would probably end up foreclosed and on the streets, and they would be looking for someone to blame. Could he handle that. My son, knowing he has to look himself in the mirror every morning, said no thanks, there’s no amount of money in the world that could make me want to do that to people. Needless to say, he didn’t get the job. He did, however, retain his self respect. Now, whenever I hear a mortgage broker say they didn’t know what would happen to people they gave these loans to, i have only one thing to say: BULLSH*T!
As a side note, it made me really proud of my son, especially since he really needed a job then.
Trishyla
Angelo Mozilo (cuntwide CEO)has been selling 70k shares a day now for a month. What a dirtbag. That guy should be staked out naked on an anthill and pissed on by angry borrowers while he dies a horrible death.
Good visual… too bad we won’t get to do it.
Just stake him out under the hot sun. let him get burnt ’till he looks like a stick of beef jerky.
oh wait, someone must have done that already.
moqui
The first a** pounding is the hardest…
“The first a** pounding is the hardest… ”
rofl
Make sure it’s a fire ant mound.
Mozilo made a ton of money and he’s got a quality George Hamilton tan to boot!
Trishyla, you should be proud. You must have raised him well.
Comments like this one above
“Getting rich off idiots nothing wrong with that,they are out there in droves may as well take their money.”
unless said as a joke are just astounding to me. But, I’ve been jumped on already for blaming greedy sellers (some who post here and boast) at the height of the bubble as much as everybody else involved. People who actually care about those at the end of the line or left holding the bag are apparently regarded as fools here, too, so I’ll leave it at that.
Trishyla, you should be proud. You must have raised him well.
There were a hundred crooked dirtbags right behind him who would grab the job in a heartbeat.
The POS operation should be investigated by the FBI and charged with RICO rackeetering violations
hd74man–>”But, I’ve been jumped on already for blaming greedy sellers (some who post here and boast) at the height of the bubble as much as everybody else involved”.
just as the buyers during the bubble were clueless, sellers during the bust will be clueless. your point that sellers during the bubble are greedy (or buyers during the bust are greedy) does not make sense, the problem is when a SELLER OR BUYER does not use common sense and loses money either by holding on too long(seller during bust) or buying more than they can afford(buyer during bubble).
if you sell high or buy low–> that is a smart decision, doing the opposite is DUMB, end of story.
Ok Incredulous, there is an old adage about a “fool and his money” and it is an appropriate commentary about the housing situation.
Obviously the buyers during the boom were more greedy than the sellers as they saw nothing but ever appreciating home values. My question to you is why do care so much about the bag holders (aka. buyers) who are, in your terms of gradations of greed, even worse than the sellers?
Lenders and the companies behind them, dishonest appraisers, and unscrupulous realtors top my list.
Though it would have been extremely interesting for him to take the job and then actually tell people what their payments would adjust to 6 months down the road. I expect he would have been fired in a few weeks, but it would have made one Hell of an op-ed piece for a major national newspaper.
This is precisely why Countrywide was so honest about what they are doing at the second interview. They want to weed the guys with a conscience out, so there is nobody in the organization to rat on them.
Got 10% down?
You should write that up and send it to Senator Dodd.
This explains a lot. My 26-year-old relative works for Countrywide in Sacramento area and made $170,000 in 2005. I’m not sure if she has any self-respect left, but she did buy a boob job, which kind of shows where her priorities are.
Boob job: check
Did she also get a Hummer and a plasma TV?
Hey! That’s money well spent. At least she is going to have those lovely things when she is trying to find her sugar daddy after she goes broke….and homeless.
Ah, but did she plan for the *replacement* of said boob$???
Fake$, depending on the manufacturer, have to be replaced every 5-10 years.
~Misstrial
I learn something new here everyday.
What a touching story. You raised him right.
Come’on are you kidding me? I couldn’t imagine a recruiter saying something like that when his job is to put a$$es in the seats to sell loans. I find that one hard to believe…
then you don’t work in sales
It’s always better to filter-off the unreliable ones in the early stage.
GMAC Has $305 Million 1st-Quarter Loss on Home Loans (Update2)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aywQ.eI5JUcU&refer=home
Isn’t Ditech owned by GMAC? They’re still advertising 125% loans on my tee vee. Will they ever learn?
Yes, Ditech is owned by GMAC. When I worked at Equifax, I saw a lot of these loans being processed.
This is how it starts.
GM bleeding several billion a year in North America….spins off GMAC which owns Ditech and still advertises F.B. loans on the boob tube and starts losing a 100 Million a month.
Summer 2007, the year when it all started to crack up…..add an Iranian war and 5 dollar gasoline from it and we are going to be in high clover if you are a bear.
Excluding ResCap, GMAC would have reported $605 million in net income last quarter, saying its results were hurt by the “sharp downturn in the U.S. mortgage market.” ResCap generated $2.2 billion in new loans, GMAC said.
Ummm… in round numbers, ResCap lost GM close to $1 billion USD for $2.2 Billion in new loans? Ummm… Someone please tell me more about this winning business strategy.
And yes, I realize it includes losses over earlier loans… but some of those most have “seasoned.” Krike!
Got popcorn?
Neil
“Krike!” is the perfect call Neil. Crocodile loans. Eat the borrower, then turn on the lender. New version of the old Pac Man loans.
Wait until about the 3rd quarter, Neil….you will be eating GMAC’s popcorn by then.
9% drop in GM motor vehicle sales this month alone mainly because there is no more equity to squeeze out of the Bubble.
GMAC maintaining those loans on vehicles that were sold plus the the monkey business with Bubble RE loans via Ditech….
Expect a several billion dollar loss for GM and GMAC (Cerberus) this year….two or three years they are in bankruptcy or gone….
Car/trucks are piling up and even Autoworld and other major big box dealers cannot stash them out of view anymore.
This economic model is toast.
I agree with you.
I’m trying to convince my future MIL to sell her GM stock… no joy.
Car/trucks are piling up and even Autoworld and other major big box dealers cannot stash them out of view anymore.
Anyone have car inventory links? New/Used?
I stand by my prediction that banks expecting a 25% down payment won’t be that out of what during the darkest days of this downturn. When? Good question. But you know its a good time to buy when its tough to borrow money.
Got popcorn?
Neil
“several billion dollar loss for GM and GMAC (Cerberus) this year”
And the chairman of Cerberus is Mr. Potatoe Head, Dan Quayle. Tell your MIL that.
This part of the thread reminds me of the links that were posted here I believe more than a year ago, to a blog featuring stealth photos of huge hidden inventories of Hummers in California.
That blog was a hoax.
Got 10% down?
GM the stock didn’t even blink…
stocks are detached from reality…..buy buy buy!
Only 64 jobs generated March v ….buy buy
GDP . 1.3 not1.8 as expected,or 2.5 in Q4…buy buy buy !
Heck, in Eureka, CA, we are almost already at $5/gal gasoline (OK, it is at $3.599, but still higher than 99.9% of the country).
Try $15/gal gasoline…and yet people will still buy those hideous jacked-up trucks.
Not by much…..2.89 a gal. in Minnesota….yes, gasohol country, too…..
Anyone figure the slowdown/clogging effect of 5 dollar a gallon gas on the home sales (no one coming out to look on Sundays)…..
Would not want to be running a tourist trap this summer.
Go into the new Targets and older Kmarts and Walmarts on Saturday mornings and instead of a full parking lot you can park right next to the store and the stores are empty and only one check-out is open. I know it is anidotal (sp?) evidence, but has anyone elase notice this in their area?
Yes, I have here in Chicago.
But, just as the price of oil and manufacturing now are not near as influential on our economy as they were in 1980, domestic retail sales now are not near as influential on our economy as they were in 1995.
Of course, local sales (meaning “sales conducted within in the United States”) remains extremely important. But nowadays, retail sales overseas is becoming a very big deal. Our companies are setting up shop and capacity like mad to increase their sales and profits there.
By 2015, it’s very possible that many of our home-based companies will generate more than 1/2 their sales overseas. The risk barometers to our economy will change as a result - to possibly emphasize such things as government stability overseas, for example.
May we live in interesting times indeed.
The carnage makes me numb.
http://www.youtube.com/watch?v=H2lbiS1fris
GMAC has no idea how much they have lost yet. They just foreclosed on a home in Sacramento for $670,000. They listed it at $630,000. It is worth $445,000 today and dropping 1% a month. The agent says they set the price and she has no say in the matter. It will be months until they get near the market.
Jingle,
I do think the worst hit areas are losing 1% a month…
The areas that are going to do the last stand are only losing 1/4%/month. But that will change…
Wait… patience… wait. I’ll buy. If nothing else but to have a hedge against the inflation that’s coming. But since that time isn’t for a bit… wait.
Got popcorn?
Neil
Yes, and we are still in the early innings. There is something like a 2 to 3 year supply of $1 million plus homes in the Sacramento market. It is a swinging door on the escrows. 50% are being cancelled do to financing contingencies. I looked up some listings that are for sale in high end areas and nearly all of them have 95-100% financing, purchased in 2005. Imagine eating that lunch on the first of each month. The Bank of NY just foreclosed on one, $1.125 million (100%). Put it up for sale at $925,000 and went under contract after a couple of months. Fell out yesterday. Buyer could not qualify and it is back on the market. So much more is coming down the pike. It is very interesting, but definitely a time to be patient. Deals that look good today will be millstones tomorrow. Unless you can buy something for 10 times the annual rent, do not even think about buying it.
Sheesh…What SORT of a LOSER BROKER would associate their NAME to a 40 inch BestBuy Crapola TV as their main Claim to FAME on the internet ?
Oh!…Hi There, JIM MOORE, from GRAND RAPIDS ha ha ha
One with Grand Rapids work ethic. 40″ too small? Check his SAVINGS accounts.
“But when television is bad, nothing is worse. I invite you to sit down in front of your television set when your station goes on the air and stay there without a book, magazine, newspaper, profit and-loss sheet or rating book to distract you–and keep your eyes glued to that set until the station signs off. I can assure you that you will observe a vast wasteland.”
Newton Minow, 1961
Want to get ahead of that rush for a digital television before analog goes away on February 13, 2009……subprimes + Alt-A’s + inflated housing + FB’s + digital widescreen television = the apocalyse….
“Mom….I killed the world financial rube goldberg machine and all I got was a crummy digital tv with a lousy picture quality.”
Yummy……
LOL. Coffee through the nose hurts!
Sacramento Ground Level Report.
2700 SF house sold to Flipper 5/30/07 for $620,000 ($229/SF). Wells lent 100% on 80/20 sub prime. They forclosed last week and just listed with an agent at $425,000 ($157/sf). I could give you about 15 similar examples, some as short sales, some foreclosures, some with builder cash back rebates. The dam is leaking in multiple orifaces…..
Here is the really interesting part. The home above rented for $2,000/mon last year in 2006. So the purchase price today would be about 17 times annual rent. Still way too high a multiple, but better than when the idiot that bought it in June 2006 at 25 times annual rent. Here is the catch: There are so many houses for rent now, the rent has dropped to $1650 for the last identical unit rented two weeks ago. So the GRM (gross rent multiplier) is back up to 21!
Aladinsane is right. The route is on starting right now. It is just a matter of watching the cards collapse ever more rapidly.
Jingles, I found a few 2700 sqft damn near new monsters in West Sac for around $140 sqft, bank owned. If we could just turn them into halfplexes, they might be a doable product for the first time home buyer.
btw, someone on Sac Landing tossed us a $78 sqft number for EG sales in 1998. Kinda give you an idea of how much farther down we’ll be going.
Yes, the banks are seeing the writing on the wall. Even at $140/sf they properties are just sitting. They all have Mello-Roos bonds that add $300/mon, so they don’t work as rentals unless you can buy them for $200,000, not $375,000. A long way to go. 3% inflation on $78/sf is $101. You will have to buy below reproduction cost is you want rentals.
Great point about the Mello-Roos jingle. Doesn’t Natomas and other areas also have a new flood protection assessment?
Yep… and all that new crapbox development has huge Mello-Roos payments. I looked at them last Dec thinking maybe if they were way below Davis prices I might be tempted. All those assessment jack the prices right back up.
“Here is the catch: There are so many houses for rent now, the rent has dropped to $1650 for the last identical unit rented two weeks ago. So the GRM (gross rent multiplier) is back up to 21!”
The amount of housing available to people will never be the same again. Thus, I believe not only will price adjust to 1998 level but dare I say it, goes down even further. At least until renting becomes more expensive than buying. A scarry thought for homeoweners, whether they buy pre not to mention at the height of this bubble.
apology…first line should say…. “sold to Flipper 5/30/06″.
It took a year to lose $195,000 (31.5%).
Jingle: The route is on starting right now. The rout is starting right now. Talk about Mr. Potato Head.
A spell checker wouldn’t have caught it. We’re not THAT picky here.
Thank you 45north for reminding me that HBB is great because we hold each other to a higher standard of spelling and grammar than we hold the highest executives of the country!
Also, thanks for offering such an entirely new perspective on that incident. A stranger on the internet might correct another for spelling the same way a Vice President corrects a 12 year-old. Except the VP was wrong! Wow.
I guess it loses a little flavor given the current state of things in the office. Expectations and all.
that is potatoE head to you………
“‘Option ARMs are not a license to steal, but once a customer asks for it…”
Yakuza attitude. “If the mark comes to us and asks to be victimized…”
Larry cinderella Kuntlow, CNBC’s show airs in about an hour and for sure he will gloat over his story never told.
When will it end?
“Greatest Story Never Seen on a 40″ Plasma TV”
Guys over at Implode o Meter got another two today closing or changing their loan operations….first big Alt-A lender, too.
http://ml-implode.com/imploded.html#lender_NationOneMortgage_2007-05-02
There’s one called “Trojan Lending”.
Can assume the FBs who used them are safe?
McMansions breeding out of control?
The Horror.
Interesting that the one dated 4-30, Dana Capital, left a note on their door stating “Dana Capital has chosen to wind down its activities through dissolution under State Law. Dana Capital will not be filing a bankruptcy — but rather will orderly liquidate its assets. You should receive notice of such and a status report within the next couple of weeks via email.” That’s somewhat better than a bankruptcy…
Wow… that’s clean. Nothing wrong with just closing a business. But that will be one of what… 300?
Got popcorn?
Neil
Forgive me if I’m stating the obvious, but there are a lot of REOs suddenly in California, I checked the websites today from some regional banks and some other REO websites not expecting to find much (usually there isn’t), and their inventory has really ballooned. Cheers all!
No REOs yet in “the good areas”, mind you.
Most of the stuff I’m seeing is Northern California, I’ve checked a few myself still slim pickings on the Westside.
Saw an auction site with Lennar auctioning new houses near Palm Springs at over 30% off original list prices.
David LIE-reah moved to Move Inc, stock down 11%. Everything he touches turns to lead.
http://www.marketwatch.com/news/story/economist-lereah-leave-realtors-move/story.aspx?guid=%7B400443CB-51C2-4690-9132-C392B1D62488%7D
Everybody bomb their yahoo message board (figuratively speaking, of course).
will do
“‘Now, as the spring selling season shows signs of being a bust and a stunning surge in mortgage credit problems is roiling the nation’s mortgage market, 2007 looks to be a complete wash out,’ wrote Joseph Snider of Moody’s, ‘while 2008 is probably the earliest that some stabilization will begin to occur.’”
There is no bust, because subprime problems have been contained. End of story. (Inserts fingers into ears and loudly exclaims “Nana-na-na-na-naa!”)
“This cycle is different, because 18 months into the downturn, many companies still have negative cash flow, Moody’s said. And that cuts into their capacity to handle debt payments.”
Good thing that subprime problems have been contained, so that positive cash flow is right around the corner…
This guy was on CNBC this morning. VERY blunt.
http://money.cnn.com/2007/04/09/real_estate/shiller.moneymag/index.htm
“Money Magaine) — Robert Shiller is worried about your home’s value, and that’s not good. A finance and economics professor at Yale, Shiller proved he could see a crash coming with his book “Irrational Exuberance,” which forecast the end of the 1990s stock bubble and hit bookstores in March 2000 - almost to the day the Nasdaq started to collapse.
Today, Shiller believes homes are roughly as overvalued as stocks were then and, once again, he’s worth listening to. “
Robert Shiller is the one that hinted this chaotic real estate market was a bubble to burst. About a year or two ago.
one of the very few to admit to it in the earlier phases
interesting that he mainly has foreign stocks - he doesn’t think too highly of the $
I’m glad I’m on the same page with Mr Shiller.
“Wall Street’s rocket scientists keep finding more sophisticated ways to repackage and resell mortgages. Now a lot of that lending looks foolish. Mortgage delinquencies among so-called subprime borrowers have risen to 13 percent, the highest in at least 10 years.”
It looks so foolish that we have been saying how foolish it looks for a couple of years now. How can all these ‘rocket scientists’ be so dense?
I’m not sure that they are that foolish. In fact I think the people who chopped up the debt to resell mortgages are a lot more like rocket scientists than we give them credit for. Consider that from their perspective, it doesn’t have to work for ever, it just has to work “long enough”. Which it has. Swimmingly so for them it seems.
The real problem here is the definition of ‘long enough’. I’m guessing that whoever invested in the end product - or rated it for that matter - never troubled themselves to find out what the actual design criteria were. But I have no doubt that most of the geniuses who actually figured out the models for repackaging were well aware of the potential failure points and the results of them being triggered.
Still there is always the hope of a bailout, and if that doesn’t happen, I hear that Capri is absolutely lovely at this time of year. (If you made a bundle of cash by selling dodgy mortgage debt and can afford to relocate there).
“It looks so foolish that we have been saying how foolish it looks for a couple of years now. How can all these ‘rocket scientists’ be so dense?”
To quote a Tom Leher song:
Once the rockets go up,
Who cares where they come down,
That’s not my department,
Says Werner Von Braun…
“I aim for the stars,
but sometimes I hit London.”
Is that from Pinchon?
“‘Option ARMs are not a license to steal, but once a customer asks for it, I know I’m going to make four times as much,’ says Jim Moore, a Grand Rapids broker. ‘It’s what puts me down here at Best Buy buying a 40-inch flat screen.’”
They are more like vehicle for lender-assisted financial suicide, with a high price tag.
This guy was on CNBC this morning. VERY blunt.
http://money.cnn.com/2007/04/09/real_estate/shiller.moneymag/index.htm
“Question: How are you investing now?
Answer: I’m probably a little over 60 percent in stocks, almost all of it outside the U.S. I have a lot of cash. And I’ve been reducing my exposure to real estate. It may be at the end of a cycle.”
Is he missing out on the resurgence of the U.S. stock market’s irrational exuberance, then?
Between missing out and trying to time the top (or near top), which would you do?
I’m struggling with this question right now. For what it’s worth, right now I’m in, but I’m also 36 and not planning to touch the money for 25 years….
Im 37 and Im OUT.
playin with fire right now…….MAJOR correction is coming, and when the bulls stampede, you best watch-yo-@ss.
heloc_jock,
At 36, yes, you’ve got time to recover from a 30% decline….the point any decent investment person would make to you is; do you have some “balance” between asset categories? If your all “in” just US stocks, S&P like, you might consider putting some in cash…you haven’t done too bad since 03, no?
The problem with re-allocating to many other asset categories right now is that, as Jeremy Grantham pointed out the other day; just about everything is at a high. Gold, US stocks, Oil, international stocks, REITs, corporate bonds……his point was there doesn’t seem to be anything that’s a bargain out there.
What that means to me is that everyone is happy taking risks with everything……with the probable exception of US residential real estate,which is itself just topping out of a bubble.
When everyone is ok with historically higher P/E’s, low bond spreads and increasing or record leverage exactly where is the NEW money going to come from to propel markets (anywhere) higher?
If everyone’s “in” who’s left to buy? Goldilocks?
Its hard to take profits, pay taxes and to be a bear (sometimes missing out on the last legs of a move) but consider one fact; to recover from a 50% decline you need a 100% grain….just to recover.
So, even if you have 30 years to recover, if you’re over exposed at the wrong time that first decade or so in “recovery” can be a bitch.
Indeed, deliberately missing out on the last legs of an upward move is a chief goal in investing in stocks, imo. Thanks for putting that so simply.
….”as Jeremy Grantham pointed out the other day; just about everything is at a high. Gold, US stocks, Oil, international stocks, REITs, corporate bonds……his point was there doesn’t seem to be anything that’s a bargain out there.”
> The price of something - a stock, a fund, a commodity, a bond - doesn’t matter per se. It never has and never does. (A stock priced at $5 does not mean it’s a better deal or a bargain compared to another stock that’s at $10. The comparison is meaningless). What does matter is valuation. If the rising price of a stock is not justified/supported by a corresponding rise in earnings/profits, watch out. Something is off.
Thus far, record company profits DO support our new all-time stock market highs. Price/Earnings is 16/17; the historical norm over 111 years is 15/16. In year 2000, P/E was 28, nearly double the historical average. Dangerous as hell and a red light signal to get the hell out as fast as you can. (And that was the S&P, not the high-flying NASDAQ, which had a P/E in the 40s and no profits to speak of. Insane Fast Company “paradigm” crapola.)
However, I agree the time for a significant correction (30-50%) is drawing nearer. Nothing signals that it’s imminent. However, it is likely that it will start sometime during the next 12-24 months, perhaps as soon as six. Our current runup is remarkable both in size (90 percent plus) and duration (more than four years). Neither necessarily means anything, but it is interesting.
Heloc Jack - Like others have said, you’ve plenty of time to do well. Take the time now to get educated. If you want to put some money in the market, do it very gradually now. You’d be buying into a market that’s not necessarily tapped out, but it’s most definitely not the proverbial “golden opportunity” either. That was in late 2002/early 2003 when everyone had “sworn off stocks forever” and accepted a 40-70 percent loss after riding stocks down from what was then their all-time high. All in the attempt to “break even” of course.
“…to recover from a 50% decline you need a 100% grain…”
Jag — can’t let that typo go by without capitalizing on it:
To recover from a 50% decline, you’ll want 100% grain!
I’m in my late 30s, and although I agree we’re in an asset bubble all around, I don’t think the Fed will permit system-wide deflation - the consequences are just too brutal, for everyone, not just the stupid. I think they will have to loosen the money supply and inflate away both the Gov’t debt and private debt. It’s a not-so-hidden tax on savers, since whatever inflation-based appreciation you have from the only safe harbor (inflation hedges), those ‘capital gains’ (which really aren’t gains at all) will be taxed. Unfortunately, inflation hedged assets are the only place you can safely park the money, excepting, perhaps, foreign currency indexes.
I’m personally out of everything but energy, consumer products (people will still have to buy soap and razors), and foreign currencies (some ADRs). I’m just an amateur.
I’ve LOTS to say about this subject, but I don’t know if Ben Jones wants to us talk stocks. I’ll throw the dice and see where it lands (Ben, if you don’t want such talk here, please let me/us know).
Right now, IMO, the stock market is not overpriced - P/E of the Dow right now is about 16/17, which is very reasonable (meaning prices are reasonable. In comparison, P/E in 2000 was 28 - obscenely high). Looking forward, my thinking is that low inflation and the decline in housing will have a null to slightly positive effect on the stock market (the slow growth rate in the economy, 2-3% is beneficial to stocks. GNP rates that are slower than that - which they are now becoming - puts a damper on the prospects for inflation and boosts the odds that the Fed will cut rates. The rise in gas prices is curbing inflation as it removes money from the economy that consumers could spend elsewhere (it’s hard for those outside the energy biz to raise their prices when consumers have less disposable income available TO spend).
If the economy remains at its now present 1.5% growth rates, the Fed will have to cut interest rates to ward off a recession. If that rate cut happens, stocks will go up.
So is it a good time to invest in stocks? Hard to say. The stock market is up 90%+ since 2003. However, since we’re in a bear market (which started in 2000 and will likely last until 2017-2020), a major pullback (a decline of 30-50%+) is likely in the offing in the next year or two. In fact, our current run-up is long-in-tooth historically speaking.
So what does one do? You have to decide that for yourself. The above is how I see things only. I am no expert.
I do have some advice, however:
Don’t EVER try to time the top. You’ll lose. And probably a lot. Instead, shoot for nabbing 80 percent of all possible gain and be willing to forgo 20 percent of the possible total gain. ‘Tis always better to miss out on 20% of the gain than suffer 20% of the loss.
Put another way in light of investing/real estate: It’s much easier to come out ahead by forfeiting 20 percent of the upside than it is trying to “break even” after a 20 percent loss. Do the math and you’ll find out why this is so. You’ll find that it takes a greater than 20 percent gain of the money you have left remaining to “break even” following a 20 percent loss. Even if you accomplish this (and good luck!), you’ve still lost. And you’ve lost something potentially a great deal more important: Time. The opportunity cost of trying to “get back what I’ve lost and then I’ll sell it” is enormous. Don’t ever do things to sacrifice the power of compounding.
Speaking for myself only, I’ve done well by remembering the 80/20 rule known to marketers (20 percent of your customers are responsible for 80 percent of your sales).
By applying to many areas of life: investments, human resources (where the goal should be to find and reward those 20 percent of workers that do 80 percent of the work), I’ve come out ahead. And I have very few worries to boot. I’m not trying to get the utmost out of anything. I don’t need to in order to be successful. Further, I know I can make errors here and there (which I will be commiting until the day I die) and be just fine. That, in turn, makes me a better investor because my head is clearer and I’m thinking more rationally.
In principle, this is no different than those who locked in their gains in real estate by selling in 2005 and not waiting until 2006 or later to try to sell in a market that had gotten way out of hand.
“Is he missing out on the resurgence of the U.S. stock market’s irrational exuberance, then? ”
Good thing, the down leg(s) are coming.
Apparently Cheny’s agrees:
“The article is called “Cheney’s betting on bad news” and provides an account of where Cheney has socked away more than $25 million. While the figures may be estimates, the investments are not. According to Tom Blackburn of the Palm Beach Post, Cheney has invested heavily in “a fund that specializes in short-term municipal bonds, a tax-exempt money market fund and an inflation protected securities fund. The first two hold up if interest rates rise with inflation. The third is protected against inflation.”
“Cheney has dumped another (estimated) $10 to $25 million in a European bond fund which tells us that he is counting on a steadily weakening dollar. So, while working class Americans are loosing ground to inflation and rising energy costs, Darth Cheney will be enhancing his wealth in “Old Europe”. As Blackburn sagely notes, “Not all bad news’ is bad for everybody.”
http://www.counterpunch.org/whitney07052006.html
If I had $25 million, I could afford to be that conservative too.
This is nonsense. Alexander Cockburn is a joke.
Cheney’s assets (like the assets of every administration figure, Democrat or Republican) are in a blind trust. He can specify the degree of risk he wants to take but not the specific investments.
First, this info is not from Alexander Cockburn, it was originally from Kiplinger:
http://www.kiplinger.com/features/archives/2006/05/president.html
Second, it isn’t a blind trust. He knows where the money is invested. Mainly in Vanguard, but also American Century International Bond. BUSH has a blind trust Let me guess, you will now tell me that Cheney has a nearsighted trust
Isn’t that a problem: helping to devalue the dollar while shorting it with the Euro bonds?
Seems like a conflict of interests. I’m amazed it’s even legal.
$$$ are toast - that’s why
“The problem is that it’s taking much longer to sell finished, vacant homes. At DR Horton, that’s largely because cancellation rates are still running double their historical average. CEO Don Tomnitz doesn’t see that changing soon, even though Horton is building fewer homes and cutting sales prices.”
What are the builders doing with all this vacant inventory? Are they planning to move it quickly, or hoping to wait out the bust? What is the upside scenario?
“What are the builders doing with all this vacant inventory? Are they planning to move it quickly, or hoping to wait out the bust? What is the upside scenario?”
They seem to have no clear plan. With staggering numbers of completed homes sitting vacant, there are even more in the pipeline. It’s really fugly. They are really pushing interest only products with zero payments for 6 months, you know, suicide specials.
These houses will not sell until the executives of the HB have finished packing their golden parachutes and have left the burning plane. Because once they realize how much their land is REALLY worth, they will have to report negative stockholder equity (like Ford and GM just reported).
negative equity, not good.
In one of the articles, a builder mentioned that they had huge margins and therefore could cut prices for some time to come. No surprise there, except to the FB resellers. Also why you”ll be able to buy the same brand-new house model with the same trim for a lot less next year than this — by then, not only will the margins have been trimmed, but also cost reductions, e.g. lumber/trusses, will have passed through the cost accountants’ hands. Lookin’ good from my personal point of view, relative to what little in this world I can control.
It is true that they can drastically cut prices. I have heard that the vast majority of houses run less than $120.00/sq.ft. to construct, so if the land is really cheap (or the house is crowded onto a tiny lot), builders could knock off a 2000 sq. ft. house for about $240k. However, this will benefit builders who bottom feed (i.e. buy land NOW). Those that took options or, worse yet, bought land at the peak will have to write down the cost of the land in order to build and sell at near construction cost. Then they will have to pay off the debt they acquired to buy the land. We will have to see just how far the HB can cut prices before they detonate…
I think it’s just posturing. The builders are in a much worse shape, because the FBs are going to kill them with the foreclosures.
“Some on the brink of losing their homes will benefit from the foreclosure delays advocated by Massachusetts Gov. Deval Patrick, but many are so financially troubled that a delay won’t make a difference, the state’s top lenders association said Tuesday.”
I wonder if they have the same mercy for folks who are behind on their property taxes. How about no tax liens/ foreclosures? Predatory taxing never seems get much attention from the government folks.
no, all of us poor suckers - well, we are just supposed to bend over twice a year and cough
“How about no tax liens/ foreclosures?”
Great point, Climber. Hopefully, the “Let a Peon or Two Speak” sessions will include enough of those wake-up calls to bag the forbearance issue altogether.
Excellent point. I don’t recall from any of the times I’ve been a buyer (long, long ago), having it fully explained to me by an agent of the State, before signing a contract, how much the property taxes are and how much they could increase in the future.
“John Battaglia of The Cambridge Mortgage Group, said he applauded Patrick’s efforts, but said it will be a daunting task for the state to determine which complaints have merit and which are just trying to take advantage of the extra time. The state has no power to force lenders to negotiate new terms.”
Yes, but the state can decide to hold foreclosure papers for a couple of months while it does a ‘fraud check’. Pick their collective noses for awhile… let the eviction papers age a bit in the in basket… etc. etc.
Yes, but the state can decide to hold foreclosure papers for a couple of months while it does a ‘fraud check’. Pick their collective noses for awhile… let the eviction papers age a bit in the in basket… etc. etc.
Hence why I think Mass just voted their minimum down payment up to 20%.
They just ended any type of loan that could be seen as fraud…
Got popcorn?
Neil
It’s actually very good news in general, because if Mass does this, the fear is going to be on the part of the lenders that such a scheme will spread to other areas even harder hit.
People have jokingly said that one day its going to be 30%+ down. Perhaps that is not so far fetched.
Somewhat OT, but an article that is very bearish on the stock market:
http://www.smirkingchimp.com/thread/7205
Some select paragraphs:
“The stock market cheerleaders are ooooing and ahhing the Dow’s climb to 13,000, but it’s all a sham. Wall Street is just enjoying the last wisps of Greenspan’s low interest helium swirling into the largest credit bubble in history. But there are big changes on the way. In fact, the storm clouds have already formed over the housing market. The subprime albatross has lashed itself to everything in the economy —dragging down consumer confidence, GDP and (eventually) the stock market, too. The real damage is just beginning to materialize.”
…
“The Fed may have quit publishing the M3 data, but they continue to publish all the data that goes into the calculation and our friends over at Shadow Government Statistics have a chart which demonstrates
why the Fed decided to keep M3 under wraps. A look at the chart shows the Fed is pumping up broad money supply at an astounding rate of 11.8% per year! All of this rapid money supply growth is reflected in an increase in equity prices. The stock market needs to rise just to keep pace with all of this newly-created money. As long as the Fed doesn’t rock the boat with another rate hike or by turning off the spigot of money flowing into the markets, the equity markets will continue to run.”
“Ah-ha! So the Fed gooses the money supply, stocks shoot up, and everyone’s happy—right?”
“Wrong. Growth in the money supply should (closely) parallel growth in the overall economy. So if GDP is shrinking (which it is) and the money supply is increasing then—Viola!—inflation. (“11.8%” to be precise)”
…
“Consider the average hedge fund for example. The fund may have originated with $10 billion of its own cash and swelled to $50 billion through (easily acquired) credit. The fund manager then creates an investment portfolio that features CDOs (collateralized debt obligations) and Mortgage Backed Securities (MBS) to the tune of $160 billion. The majority of these “assets” are nothing more than shaky subprime loans from struggling homeowners who have no chance of meeting their payments. In other words, another man’s debt is magically transformed into a Wall Street staple. (Imagine if you, dear reader, could sell your $35,000 credit card debt to your drunken brother-in-law as if it was a bar of gold or a vintage Ferrari. That, believe it or not, is the scam on which bond traders thrive)”
“So, the fund is leveraged, the assets are leveraged and (guess what) the investors are leveraged too—either buying on margin or borrowing oodles of cheap, low interest credit from Japan to maximize their profit potential.”
“Get the picture; debt x debt x debt = maximum profit and skyrocketing stock prices. That’s why the face value of the market’s equities far exceeds the world’s aggregate GDP. It’s all one, big debt-Zeppelin and it’s rapidly tumbling towards planet earth.”
“KABOOM!”
…
“Doug Noland at Prudent Bear.com explains it like this: “We’ve entered a euphoric phase of financial arbitrage capitalism with extreme Ponzi overtones, a pyramid scheme of revolving credit rackets and percentage spread plays completely abstracted from any reality of fruitful activity. The reason we don’t even call “money” by its former name anymore is precisely because we realize at some semi-conscious level that “liquidity” is not really money. Liquidity is a flow of hallucinated surplus wealth. As long as it flows in one direction, into financial markets, valve-keepers along the pipeline, like Goldman Sachs, Citibank, or the hedge funds, can siphon off billions of buckets of liquidity. The trouble will come when the flow stops — or reverses! That will be the point where we will rediscover that liquidity really is different from money, and if we are really unlucky we’ll discover that our money (the US dollar) is actually different from real wealth”.”
Debt-Zeppelin…
Beauty~
GMAC bought the repartments I’m living in now at the height of the boom for 41 million or 300K+ per unit. No unit has more than two bedrooms. I’m enjoying the granite/stainless/tile/hardwood.
You’re cool. Probably no more than 1300/mo depending on where you’re at.