A “Sharp Downturn” In The Mortgage Market
Some housing bubble news from Wall Street and Washington, Bloomberg. “GMAC LLC, the finance company partly owned by General Motors Corp., said it had a $305 million first- quarter loss and injected $1 billion into its home-lending unit amid a ’sharp downturn’ in the U.S. mortgage market. GMAC’s Residential Capital LLC lost $905 million. GMAC’s loss reflected ResCap’s drain as delinquencies on so-called subprime loans climbed to a four-year high.”
“ResCap also will report a loss this quarter, CFO Sanjiv Khattri told analysts.”
“CEO Eric Feldstein said in the statement that ‘in light of the major setback incurred by ResCap, we have already undertaken measures to significantly mitigate risk,’ including paring its subprime loan portfolio and writing fewer loans to people with poor credit.”
“Credit-default swaps based on $10 million of the company’s bonds jumped as much as $16,000 to $191,000, the largest increase in two months.”
The Star Tribune. “The three top credit-rating agencies downgraded their outlooks for Residential Capital after the Bloomington mortgage company said Wednesday that it lost nearly $1 billion in the first quarter because of bad subprime loans.”
“S&P, Fitch Ratings and Moody’s Investors Service all cut their outlooks on the company’s ratings to ‘negative” from ’stable.’”
“‘Although the company’s exposure to this [subprime] business has diminished significantly, the effects of higher delinquencies and depressed asset valuations continue to linger,’ Fitch Ratings said.”
The Dealbreaker.com. “The US subprime market claims another victim. Dillon Read, the hedge fund started by UBS just 2 years ago, is being shut down by the Swiss bank after incurring 150 million francs in losses primarily from the subprime market. UBS does plan to pay an additional $300mm in shut down costs.”
“This is seen as UBS’ largest hedge fund gaffe since LTCM in 1998, when the bank incurred almost $700mm in losses.”
From MarketWatch. “CFO Clive Standish said Dillon Read contributed a loss of 150 million francs from its trading in the U.S. mortgage market, where conditions have been difficult since the subprime-mortgage market collapsed.”
“Morgan Stanley downgraded UBS to underweight from equal weight, saying the decision to close Dillon Read could lead to ‘organizational turbulence.’”
“Title insurer and mortgage-data firm First American Corp. said that for 2007 it expects a ‘continued slowdown in housing activity and an increase in defaults and foreclosures.’”
The Associated Press. “The practices of mortgage lenders will come under greater scrutiny Thursday, as two senators will unveil a plan to address rising foreclosures and high-interest rate home loans given to people with weak credit.”
“Sen. Charles Schumer along with Sen. Sherrod Brown will introduce legislation to strengthen standards that mortgage lenders use when providing loans.”
“The new legislation, which comes amid growing calls for Congress to enact an anti-predatory lending law, could affect big lenders such as Washington Mutual Inc., Wells Fargo & Co. and Countrywide Financial Corp., which could be forced to evaluate whether a borrower meets federal standards before issuing a loan.”
“Schumer said last month that hundreds of millions of dollars in new federal aid may be needed to assist homeowners at risk of foreclosure. Presidential candidate Sen. Christopher Dodd, who is chairman of the Senate Banking Committee, said last month he is ‘not interested’ in a bailout.”
From Reuters. “The two largest mortgage lenders in the United States have declined to endorse a set of principles that would help troubled subprime borrowers avoid foreclosure, a lawmaker who proposed the principles said on Wednesday.”
“Representatives from Countrywide Financial Corp. and Wells Fargo & Co. both attended a mid-April ’subprime summit’ organized by the chairman of the Senate Banking Committee, but those companies did not endorse the seven principles, which were formalized after that meeting.”
“A spokesman for Wells Fargo said the company ‘believes that many of the points raised at the summit are especially important, and also describe long-standing practices’ at Wells Fargo. However, the spokesman would not explain why Wells Fargo did not fully endorse the principles.”
“The seven principles are meant to aid borrowers and save them from foreclosure, according to a statement from Dodd’s office.”
“Among the principles, mortgage servicers should seek to modify the terms of subprime loans before the interest rates are reset higher, and they should set aside dedicated resources and staff to help those borrowers.”
“Another principle calls for servicers to make early contact with subprime borrowers with adjustable-rate mortgages to determine if they qualify for a more stable loan.”
The Atlanta Business Chronicle. “Haverty Furniture Cos.’ profit dropped 84 percent in the first quarter, hurt by the national housing slump, lower sales volumes and negative comparable-store sales.”
“CEO Clarence H. Smith noted the negative impact of the housing slowdown. ‘The housing sector, which is tied to our industry, has been in a severe slump,’ he said.”
“More than a third of all U.S. home builders are vulnerable to rating downgrades over the next two years as a downturn in the housing market lingers, data released by Standard & Poor’s this week showed.”
“‘The sector is now about one and a half years into what we believe may be a roughly three-year downturn,’ S&P said in a report. ‘Our home-builder rating bias is emphatically negative, as the sector is in the midst of an inventory correction of uncertain, and potentially protracted, duration.’”
“About 13 percent of U.S. home builders were on review for a possible downgrade by S&P at the end of the first quarter.”
“Ratings weakness is concentrated in junk-rated home builders. While investment-grade home builders appear to have adequate liquidity, ‘we will be looking for these companies to pare their inventory and demonstrate an ability to operate profitably at lower volumes,’ S&P said.”
From Business Week. “Maybe you guessed it, but now it’s official: The housing market has not hit bottom. Poor home sales in cold-and-quiet February may be excusable; but in March, April, and May, they are a sure sign of distress.”
“The latest numbers indicate that the spring of 2007 will go down as one of the worst real estate seasons in years.”
“March, April, and May are traditionally the strongest months for home sales. But this year, the usual throngs of spring buyers just aren’t there. On May 1, the National Association of Realtors reported that home sales closed in April will remain soft, with some drag possible into May.”
“‘March [home sales] weren’t anywhere near where they should have been, but April is going to be the month that reveals that things really aren’t good,’ says Pat McPherron, housing economist for Moody’s Economy.com. ‘If April doesn’t go well, then that’s it. This is the market.’”
“Tighter lending standards are only part of the problem. ‘Even if they kept [standards] the same you wouldn’t get the same recovery,’ says McPherron, noting that house prices accelerated faster than incomes during the housing boom.”
“McPherron says he wouldn’t be surprised if home sales were still soft well into the summer months. ‘Many people think, ‘if I can just hang on ’til the spring,’ they will get an offer,’ says McPherron. ‘This spring, they’ll be lucky to sell.’”
Let the ass harvesting of the cube farms begin.
nice one
I love this comment:
“Another principle calls for servicers to make early contact with subprime borrowers with adjustable-rate mortgages to determine if they qualify for a more stable loan.”
Thats all they need ANOTHER REFI to gouge yet more fees out of FBs.
After this is over there will be a whole new class of renter known as ‘former FB’s’ who will never buy again (until the next top of market cycle! haha)
ANOTHER REFI…. thats what it always has been. More fees, etc for the lenders. They new the outcome. Dirty loans that could never be paid back but “let’s clean them up a little for now” of course with added fees for the lenders. Great scam and they are getting away with it.
Same thing during the S&L scandal. They just kept rewriting the bad loans for a little more money and voilla—–>no more bad loans and profit for the company.
This works fine till it don’t, and when it don’t work it REALLY DON’T!!!
Essentially the REIC version of the “payday loan”
Lets keep ‘em turning the same loan over via re-fi’s -
collecting fees and penalties forever and ever.
Another step down the road to the sharecropper society.
“Thats all they need ANOTHER REFI to gouge yet more fees out of FBs.”
What a great scam. Not only did the lenders capitalize on the FB’s the first time around, they guaranteed future profits from them as well (or so they thought). Since when is it a good idea to get a loan knowing you have to refinance down the road? There are no guarantees as to future interest rates, loan products, qualifications, etc. This was gross negligence on the part of the borrower as well as the lender.
Or …. they end up making the new loans on properties that are sold under duress or forclosed on.
I’m beginning to think the mortgage companies (and individual real estate agents) who survive the next couple years will end up doing pretty well for themselves. Of course, they will have to work harder to get loans closed — like folks had to do back when I was in real estate (mostly property management and retail leasing, but a few sales, as well) back in the 80’s.
But plenty of pain still ahead in the near term.
wasn’t negliance on the part of lenders. More like complicity.
They want another shot at the FB’s! These poor FB’s are going to be wearing diapers for the rest of their lives after this one!
“After this is over there will be a whole new class of renter known as ‘former FB’s’ who will never buy again (until the next top of market cycle!”
Some of ‘em have learned or will learn :-).
“Thats all they need ANOTHER REFI to gouge yet more fees out of FBs.”
I don’t think it has ANYTHING to do with fees this time. Whatver fees they charge won’t be cash, they’ll be rolled into whatever loan the sucker gets.
This one is about:
Is there equity in the house?
if yes, how can we lock the person into the house for as long as possible so we don’t have to book another foreclosure. Keep them paying every penny they can, for as long as they can.
If no… well, we’re screwed.
I’m reminded of National Lampoon’s Vacation.
Sleezy car repair man: Car’s fixed.
Grizwald: Great, how much?
Sleezy: How much you got?
Grizxald: {snicker} Funny. No, seriously, how much?
Sleezy: {very serious expression} How much you got?
These “rescue teams” are the sleezy bank repair men.
Sleezy: I’m here to help you save your house.
Owner in over their head: Great, how much will my payment be?
Sleezy: How much you got?
Owner: Funny. Now seriously, how much?
Sleezy: How much you got?
The bank’s hope is that the federal government will step up and provide the capital at a cheap enough rate, that the bank can refi to a low enough rate, that the home owner’s income will be enough to continue to overpay for their anchor.
Not sure if someone posted this..New Century laid off 2,000 more today
http://blogs.ocregister.com/mortgage/
Hope springs eternal.
maybe this summer i can sell my overpriced house. I am still hanging on for that offer. This summer, yeah.
well, if not then there is always the fall. and next spring…..and next summer.
It cracks me up to see all these idiots like Dodd now backing away from the whole bail-out idea. Just like a politician to open his/her yap before assessing the situation. Now that they’ve had time to digest the magnitude of the problem at hand, you can almost here their collective “oh sh*t!”.
It seems that what is most important to these politicians is to dialogue the issue in the media. At that point is seems that there is some sort of vigilance and urgency. After it has surfaced and received media exposure - it can begin to slowly die out and they can move on to the next issue.
I am proud of our CA governor … he is a pro at it.
Right. In politicians minds, publicly addressing a problem is just as good as finding a solution. Can anyone say insincerity?
More like triage doctors. If the patient is sick beyond the capacity of their insurance to heal, then confort them for as long as required.
Maybe they just figure out that the people in the subprime sector do not vote and they certainly do not make campaign contribution. So why stick your head out for them, when the rest of the population will fry you for it. ah, the beauty of politic.
Our actor/governor’s immediate solution to an extended drought?
Build more dams, for non existant water.
Arnie:
Please get a clue and deaslinate, sooner than later.
Our actor/governor’s immediate solution to an extended drought?
Build more dams, for non existant water.
Arnie:
Please get a clue and desalinate, sooner than later.
Contrast that with other politicians… once they’ve made a mistake, they charge forward making the same mistake, only more vigorously and more destructively.
I don’t mind a flip-flop, as long as the ‘flop’ arrives on the path of wisdom.
“Sen. Charles Schumer along with Sen. Sherrod Brown will introduce legislation to strengthen standards that mortgage lenders use when providing loans.”
Blah-blah, blahblahblahblahblah. Blah.
How about a law requiring the Federal Reserve to observe credit restraint.
The “world has a surplus of savings” (let’s take it) attitude is criminal.
“…the lives of the cast of citizens of this great country are going to be dramatically altered by a calamitous development. The difference is that this one will come as no surprise; it is of our own making, and it is within our power to prevent. While we frolic in the surf of immediate economic prosperity and are consumed with all sorts of other political and economic melodramas and intrigues, we are being threatened not from some foreign enemy but from within.”
http://tinyurl.com/24tm9q
Richard W. Fisher
April 16, 2007
Richard W. Fisher is president and CEO of the Federal Reserve Bank of Dallas.
Wow. That’s some quote.
Quite an amazing speech! I wonder though, if most Americans would be so complacent about the Federal debt if they weren’t shoveled debt porridge themselves by the Fed itself, zero reserve rates and a negative interest rate. Who will vote for responsibility when they are drunk with excess? (People like you on this board aside)
Why is he making this speech on April 16, 2007? Where was he on April 16, 2004? Yelling out loud at the top of his lungs from the pulpit like a fundamentalist preacher after the milk has been spilled, does this mean he is suppossed to be some great economist/public servant/enlightened statesman/seer/guru/holy person/whatever?
Got 10% down?
They (legislators, Congress) have a big problem because the law assumes that if you sign a document, you have read and understood it.
~Misstrial
Damn, I knew I’d need reading skills some day. Can’t I just fake it and sign anyway?
If this legislation had been passed into laws 10 years ago, would they have prevented the severity of this housing bubble mess we have today?
Got 10% down?
“However, the spokesman would not explain why Wells Fargo did not fully endorse the principles.”
Perhaps because they have already booked the unreceived interest on Option-Arms as earnings, and will have to restate up the wazoo whenever they admit the money isn’t coming?
My thoughts exactly. I wonder how long they’ll be able to sweep this under the rug?
At least they’re being honest. I give them points for that. I much prefer a business or a politician who looks you right in the eye and says “I’ma screw you silly”, than one who has jars of Vaseline behind their back.
Okay, Palmetto, enough. I’m eating my lunch at my desk and reading this. I almost choked on a chicken parm sandwich. That was funny.
How’s the sammy?
As I recall, you’ve caused me to spit coffee on my laptop on occasion, so we’re even. Just don’t choke on that chicken!
He’s too busy choking the chicken to choke on it!
What happens in the server room stays in the server room. Literally!
I haven’t had a desk job in quite a while so I’m glad to hear that it is still acceptable to choke one’s chicken at work. It just seems like all the fun is taken out of work these days. Glad to hear it is still OK! Say, do they still allow “ballwalking” where you work? My last employer discouraged it.
Wells Fargo never offered option-arms.
Are you sure? Why wouldn’t they?
A few quotes from WF’s 2006 annual report:
“We do not believe negative amortization or option ARMs
benefit our customers and have not made or purchased
these loan products.”
and a few sentences later…
“….We offer interest-only products but ensure that the customer qualifies for higher payments after the initial interest-only period. “
Wow. Will Wells still be standing strong after this mess is eventually resolved? Wells stock has been flat for a very long while, maybe it’s a good buy?
The biggest issue that Wells has in my opinion is $65 bil (or 20% of the total assets) in residential seconds and HELOCs. $24 bil in CA alone. It has to have some consequences.
“The biggest issue that Wells has in my opinion is $65 bil (or 20% of the total assets) in residential seconds and HELOCs. $24 bil in CA alone. It has to have some consequences.”
These are what I’m interested in. I know plenty of people who have ATM’d their house to death.
They can kiss that 24B goodbye because there isn’t anyway those loans aren’t underwater right now, to say nothing of next year.
Have they released what these 7 principals are?
My “out of my behind” guess is that it has something to do with pooling profits from performing loans to help bail out the non-performing.
I know Countrywide is bigtime into sub-prime, but they also are the largest prime issuer, right? They were back in ‘93 when I bought my first house (2400 sqft for $98K).
Countrywide used to advertide how they resold very, very little of their prime loans to the bond market.
Wells Fargo is also huge in the prime market.
My guess is that the other lenders have a much higher sub-prime to prime ratio. They have no problem pooling their tiny “prime” profits to bail out the sub-primes. The people with a good ratio of prime to non-prime wouldn’t be nearly as eager to donate their prime profits to the cause.
Again, just out my backside.
Back in February we were talking with a builder about a home he finished in November that was listed at $285k until Jan when he raised the price to $307k. His rationale: “my costs came in a bit higher than I expected.” Two months after the house was completed?
He was completely unwilling to negotiate and stated firmly “it is spring and that house will sell at my price.” Now it is May, the peak selling season is over here, and the house still sits…. along with several other of this builders spec homes that are nearly completed. Good luck!
…that was listed at $285k until Jan when he raised the price to $307k. His rationale: “my costs came in a bit higher than I expected.”
He raised the price in time for the Super Bowl XLI Bounce.
He was completely unwilling to negotiate and stated firmly “it is spring and that house will sell at my price.”
Is January Spring where you are?
In the mind of an FB every month is spring.
January is just about spring in Fla.
“…that was listed at $285k until Jan when he raised the price to $307k. His rationale: “my costs came in a bit higher than I expected.””
Anybody ever tell this guy the market doesn’t care? Idiot.
Don’t be too hard on him. He’s just a guy building houses. He doesn’t have a clue about how prices are set in the marketplace. Amazingly, there are still economists who adhere to Marx’s labor theory of value (i.e., the cost of a good is determined by the cost of the labor required to produce it). Those are the true idiots.
I had a similar situation with a KB sales person. She popped her head out of her office and asked if I had any question. The office was empty except for me and her so I told her she wouldn’t like my questions. “No no, not to worry, questions are always welcome” she protested. I’m thinking ok, she’d open-minded so I asked “so when are you going to bring prices down inline with the new market?”.
She replied “our prices are appropriate!” and literally stomped off.
I think my work was finished there.
I think my work was finished there.
LOL.
I experienced a “stomp off” at B of A recently. The person behind the desk asked me if I wanted to pre-qualify for a home loan and I said “No, we’re waiting for the market to crash.” She stomped big time… probably bought within the last year or two. Oh well.
Oh my, what a barrell of chuckles. Actually, you were engaging in one of my wifes favorite pastimes. Every couple of months we’re down in SoCal to visit family, and every time she and her sister makes it a point to visit at least a few sales offices to rile the poor sap who happens to be in the hot seat that day. For such nice girls, they certainly do derive immense pleasure from this sadistic sport.
Certainly explains her enjoyment of “angry sex”.
So nice to have a wife who gets her jollies that way, rather than browbeating her husbund to grow up and buy a house.
LOL in my house, it’s my husband that wants a house and me putting on the brakes. His field is politics so I just explain why the market is broke and what needs to happen to bring the economy back in line. I always end with “and you Lenny, will have saved the lives of millions of registered voters”.
He laughs and lets me go back to brow-beating listing agents.
Hell we’re all sweetness and light if you need us to bake cookies, pick up your kids from soccer, borrow my Choo sling backs for a charity event, or need a policy decision on some wacked-out IRB ruling. Just don’t mess with our nesting urges by jacking up the RE market or someone is going to pulling back bloody stumps!
What was interesting to me is that if was a singular event, you just smile and spin and hope I take the bait. Instead, this chick was pissed. Someone else got to her long before I arrived.
A couple of months ago we called our mortgage company rep to see what they would lend us to buy the overpriced home we had been considering. She called last week to see if we decided to buy, and we told her that we decided to wait as it looked like the market was tanking. “I understand completely,” she said knowingly. That was affirming. I expected at least a comment on the inevitability of rising interest rates.
I love it!
all you gotta do is wait long enough for his sign to fall down. Then you know he’s spitting up blood from the stress due to financial destruction…
Those cheese-d*ck spec house builders think they are so smart, now they are running out of money, time, and the will to go on…..6 more months…. then offer 1/2 the original ask….buck forty sound about right?
Everyone repeat after me, “Real estate only goes up!”
Need more…. Kool…. aid……
Define up…
Josh
Look what the REIC frowed up!
“Morgan Stanley downgraded UBS to underweight from equal weight, saying the decision to close Dillon Read could lead to ‘organizational turbulence.’”
‘Organizational turbulence’ follows ‘irrational exuberance’ as the night follows the day.
‘organizational turbulence.’”
In-flight barf bags for everyone!
“Organizational turbulence” = financial jobs outsourced to India
Wall Street does not understand the home loan business and proved it these last several years by mis-pricing the risk on subprime, Alt-A and everything else. They also under estimated how unprofessional, incompetent, unethical and criminal the home services providers could be: Agents, appraisers, loan brokers. So now when it is too late, they are concerned with companies and the loan products being produced. This is very entertaining.
“This is very entertaining.”
Da Boyz must be shocked, I tell you, shocked! See, in their twisted universe, they don’t play by the rules and they don’t obey any laws, those are only for the li’l schmucks. Must be a b*tch to realize some of those down on the food chain are just as morally bankrupt as they are.
It must be a b*tch to realize that the laws of economics even apply to Da Boyz.
You’d think they could spot their own kind…
Do you remember the movie The Sting?
I was thinking about that, NYCityBoy. If this mess collapses Wall Street in some way, fine by me. How did we ever get to the point where a casino can interrupt the entire economy, anyway?
When the revolution come, I’m gonna go a hedgie-huntin’. And drop the hedgie in a cell full of gang-bangers.
Maybe wall street never though it could be possible for anybody else to be as unprofessional, incompetent, unethical and criminal as themselves?
Got 10% down?
One of the most entertaining aspects of this whole thing is watching the multitude of new ways people attempt to twist the English language to suit their purposes. Great stuff!
Organizational turbulence … isn’t that when you have gas?
I always thought releasing gas would lift you higher.
“The Dealbreaker.com.”
You know, sometimes when reading these reports, at first glance various words seem to be something other than they are. For example, at first I thought it was “Deadbeater.com” and I didn’t even do a double take, because it is a fitting name.
May 3 (Bloomberg) —
Ninja Loans
You might have expected renewed caution among lenders after the willingness of some U.S. mortgage companies to grant so- called Ninja loans — No Income, No Job or Assets — triggered the collapse of the U.S. subprime mortgage market and helped sink an armada of companies.
http://tinyurl.com/2gscgz
So how is a loan to an illegal immigrant not a NINJA loan? This development is of concern to all U.S. taxpayers (other than those on the receiving end of middleman commissions), as the more loans the kingpins make which are unlikely to ever be repaid, the stronger will become the political pressure for taxpayer funded bailouts.
————————————————————————
Big Banks’ Loan Push: Illegal Immigrants
By Robin Sidel
Word Count: 743 | Companies Featured in This Article: J.P. Morgan Chase, Citigroup, Wells Fargo, Fifth Third Bancorp, Genworth Financial, Deutsche Bank
The nation’s big banks, scrambling for customers, are pitching mortgages to illegal immigrants.
Two years ago, making home loans to people who are in the U.S. illegally was largely limited to community banks that wanted to revitalize neighborhoods by offering low-cost mortgages to local workers. There are signs that these loans, which comply with regulatory requirements and which represent a sliver of the nation’s $10 trillion mortgage market, are starting to take off in the broader banking industry.
http://online.wsj.com/article/SB117815439999290317.html?mod=hpp_us_at_glance_markets
Legends foretold of a white child who would become the greatest ninja in the world, and Sensei adopted the child as one of his own. By the time Haru grew up, though, it seemed rather obvious that he was not the prophesied Great White Ninja - he had plenty of heart and dedication, but no ninja skills whatsoever.
Beverly Hills Ninja
Ummm, excuse me, but here’s Slim with a news bulletin from Tucson: Neighborhoods with high concentrations of illegal immigrants are among the most stressed in the city. And giving them home loans is NOT going to turn things around.
Slim
Amazing, isn’t it?
Banks counting on this country’s illegal aliens to bail them out. What’s next? Small business loans to Al Qaeda?
Already happened.
Web Of Terror
Rita Katz and Josh Devon 05.07.07
Forbes special report
http://tinyurl.com/2lshz6
And giving them home loans is NOT going to turn things around.
It will if they use cash from said loans to buy one-way tickets back to Oaxaca…:-)
phillygal, I think that’s the idea. Imagine what a cash-out re-fi could do for an illegal. Take the money, go back over the border and live the sweet life in Mexico or Central America for peanuts. I’ll bet some have done this, but we’ll probably never hear about it.
Have you found a nice cugine for your roomie yet?
palmetto -
No “cuz” yet for roomie. I asked my BF if he knows anyone. We’ll get her mind off the parasite one way or another.
(BTW I read above that you were advising NYCity Boy against choking his chicken. I think he uses three fingers and a Snickers Bar for that purpose.)
No, no! I was advising him not to choke ON his chicken.
Snickers Bar? What does that even mean? Sigh. I probably don’t want to know.
How about if we bribe illegals to go home? Here’s the deal: we’ll give you $20,000 (about what you and your family cost US taxpayers in a year) if you go home and never return. If you or any member of your immediate family do sneak back in and are caught, the border jumper will serve a mandatory 20 year jail sentence (with no parole).
“How about if we bribe illegals to go home? Here’s the deal: we’ll give you $20,000 (about what you and your family cost US taxpayers in a year) if you go home and never return. If you or any member of your immediate family do sneak back in and are caught, the border jumper will serve a mandatory 20 year jail sentence (with no parole).”
How about we don’t give these criminals a dime, and spend the money rounding them up from all of the construction sites, meatpacking plants, and other industries which they have infested? Then we ship their illegal @$$e$ back to where they came from, and levy enormous fines on the employers, threatening to shut them down for good should they ever think of hiring them again.
I agree, Bantering. The penalties have to be so Draconian as to make people faint at the mere thought of violating the law. I was pulling out of a gas station one day and right across the side street a car full of illegal devil spawn had cornered the car of a young lady by the side of the road. They were throwing trash at her and starter opening the doors, until I pulled up behind them with my cell phone in plain sight. They took off, with hand gestures at me. This is in a formerly quiet Florida town, until the building boom.
Spending money to round them up is a total waste.
Spending money to try to keep them from crossing the border is a total waste.
It is about the jobs.
Create a real database of worker info. Every company has to verify info on their workers, get an answer back in a day whether they are citizen or not. Any company found employing an illegal that wasn’t cleared by the system, faces HUGE files and jail time for the person responsible for the hire.
We supposidly have this system, but it is SOOO not enforced. Quite the contrary. Employeers hire people they know are illegal, and report the info to the feds. The feds ignore the info, and the employeer is shielded from fines because he reported the info.
Just ACTUALLY use this system!!!!!!
When the illegals can’t get jobs, they’ll leave on their own. Super cheap, super effective.
Truth is, the politicians don’t want them to go home becasue they are anti-inflationary, working harder for less.
Stopping illegal immigraton is easy. Round up as many illegal aliens as possible, then make them dig a 20ft deep x 20ft wide ditch along the border. After that, make them build a 20ft high wall right behind the ditch. After they are done, we pay them for their work and send them back to their home country. From there, they can apply to come over here legally.
Alien Bailout
Think the MacArthur Park fiasco was bad? Just wait until taxpayers have to start bailing out illegals (who may even be living in nicer homes than said taxpayers). Baaaad idea.
Yeppers…..taco munchers will be going back home in boxcars at bayonet point if that little detail comes out.
We are screwed.
You don’t need boxcars. Just do like Ike did. Load em on boats and take them way down the coast to the southern end of Mexico. I’d love to be the ship’s pilot: swing the wheel waaayyy over to the right, then waaayyy over to the left, all the way down the coast.
And I would do this in memory of buddy Steven’s late wife, who was “murdered” by a drunk illegal construction worker who slammed into her car on his way home from “happy hour”.
Charlotte, NC has had several of those happen in the past year. Our friends told us about that.
Even better… drop them off in Guatemala and let them try to get back into *Mexico*. That southern border is supposed to be patrolled tighter than the old Berlin Wall.
And if you are a Central American illegally in Mexico don’t expect to be treated with kid gloves either. Start marching around demanding “rights” and you will be on the receiving end of a serious butt whooping.
About this incident in LA…
I’m trying to understand what happened here. I can’t make any sense out of it. Some people started throwing things at the police and damaging private property? Sorry but you get some stick time. What would you expect?
I’m rather sick of this situation. I am not for deportation but I’m all for a reciprocal situation with Mexico. You want amnesty for illegals. Fine. Then I want an end to all anti-gringo laws in mexico and the right to buy property there.
The real problem is Mexicans want a free pass to come here and do as they please. Then they want to be able to shut Americans out from buying property in Mexico or having equal rights down there.
So, I think this is a Mexico problem more than a US problem. Honestly, if we were allowed to have civil/property protections then we could invest in Mexico. The “illegals” would just follow the money and return there.
Probably be a great economic expansion down there.
I also noticed the Mexicans acting hostile and waiving their flags at us again. Not good. Not good at all.
Given that there are peaceful and helpful solutions; humanity will not let me down. I figure some bad riots this summer.
I’m taking my overtime money and stocking up on food stuff, ammo and heavier weaponry. Never know when I’ll have to defend the homestead.
So, I think this is a Mexico problem more than a US problem. Honestly, if we were allowed to have civil/property protections then we could invest in Mexico. The “illegals” would just follow the money and return there.
Wait a minute…wasn’t that what NAFTA was supposed to do? Didn’t a zillion and ten American jobs relocate to Mexico? NAFTA already sent a multitude of jobs south of the border, so why so many Mexicans crashing North to take more gringo/a jobs?
Why did you put the word “illegals” in quote marks? Do they have any kind of authentic naturalization papers?
My parents immigrated here - legally- from Europe. They observed the laws of the USA. Can someone give me one good reason why the rules are different for Mexican border-crashers?
“Can someone give me one good reason why the rules are different for Mexican border-crashers?”
The businesses want them.
It is that darn voter getting in the way again. Politicians want one thing, the voters want something else. So, the politicians pretend to do one thing, while really doing the opposite.
The people want the illegals out. The politicians create mass loopholes that let them in, while pretending to be trying to keep them out.
“The people want the illegals out. The politicians create mass loopholes that let them in, while pretending to be trying to keep them out.”
Testify, Darrell. And if the politicians and even the business people understood the culture and background of these illegals (going back centuries) and the mental state of many of them, there wouldn’t be a wall at the border, there would be a canal or strait a hundred miles wide.
We’ve had it relatively easy in the recent history of the US and for the most part, we all agree to a rule of law. And so we are sitting ducks for a group of people that does not agree to a rule of law. That is why assimilation is important, so that universal societal agreement exists. You can’t have one group ascribing to a rule of law and the other not, it doesn’t work, as we’ve seen. You have a population entering the country that has been so oppressed by their elites going back centuries (well before the Spanish), they are looking to get even with somebody, big time. And that’s us, even though we are the wrong target. Their elites know this very well and are all too happy to see them cross the border, because it take the heat off them. They had a near miss with Obrador. And mob rule is key. Not good. Anyone who has seen the Eric Volz story on TV recently ought to be very concerned about any merging of the US legal system with the sort of system that exists south of the border. Even the AG of the US, who is at least two generations removed from illegal entry, can’t wrap his arms around basic Constitutional principles like habeas corpus. And this is someone who is fluent in English and went to Harvard Law. I’m not taking a dig at the guy, I really think that he just doesn’t get it.
Bread and circuses, welfare, etc. won’t work, either. Chavez has tried that in Venezuela and Caracas is rated the most dangerous city in the Western Hemisphere.
There is really only one thing that holds the US together and that is our agreement on the rule of law. This agreement has been violated by politicians, multi-national corporations, Wall Street and illegal immigrants.
This dialogue really doesn’t have direct bubble relevance as far as I can tell. Illegals may have participated in the bubble, but they don’t seem to be conspicuous drivers of it even in SoCal.
As far as the cultures being different, do you mean the part about being willing to work hard? Maybe employers see things differently because they must focus on getting things done instead of talking up perceived differences amongst each other? Did your parents of whom you boast have to wait the ten year average that is typical today?
My experience is that every one of your easy answers turns out to be overly simplistic and not only wrong, but essentially anticapitalist in nature.
Did your parents of whom you boast have to wait the ten year average that is typical today?
If this question is directed to me: first of all, I wasn’t aware that I was “boasting”. I was merely making a statement of fact. Is there a little projection happening here?
My mother and father were separated for a period of time before she cleared all the hurdles and could join her husband here in the States. Mom was very young, not yet 19, when she crossed the Atlantic, via an Italian liner - alone. No knowledge of the English language, out of her element, on a boat surrounded by strangers. Why? Oh, mom and dad were just following the rules set forth by the immigration authorities. Upon arrival to the USA, she was subjected to a battery of physical examinations, and was vaccinated according to whatever the presiding medical professional deemed necessary.
Are the Mexican border crashers being vetted for any communicable diseases?
Mom made it just under the wire. Once she was here, she applied to have her parents, two brothers and one sister join her. No go. The quota for her country had been filled. So to answer your question, yes, my mom endured a separation of about a dozen years before her family members could join her in the States. And they weren’t allowed to all come at once. Quite a few of my relatives just gave up and emigrated to Canada. They didn’t have to wait as long to go there.
As for illegal immigration not having relevance to the housing bubble, you’re joking, right? Haven’t you read the posts about entire neighborhoods being trashed by illegals who don’t respect the prevailing township codes? There’s a thread today about subprime loans being marketed to illegals, thereby extending the bubble…hello?
Wherever you live, I’m going to guess your neighbor doesn’t have 16 people crammed into a four bedroom house, with 6 cars parked in the driveway, spilling out into the street, and mariachi music blaring at all hours of the night. (And don’t forget the cow skull on their front lawn). From what I recall about gentrifying neighborhoods in the city, that kind of activity simply isn’t tolerated.
For the record, the details of my family’s emigration from their native country is really none of your business. But since you asked…
and also for the record, I’m going to assume that I don’t meet your standard of politically correct sanctimony.
Gee, too bad for me…
As far as the cultures being different, do you mean the part about being willing to work hard?
No we mean that the US had a culture based on the rule of law. Now, with the illegal invasion, we are descending into the corruption and lawlessness that has always characterized Mexico.
But, if you insist, we can imitate Mexican hospitality…they have their army stationed on the southern border to keep even poorer hispanics from central america out of the bounty that is mexico. In truth, the mexicans do not “work harder’–ever watched them?–they just work cheaper. If they worked better, the construction jobs they stole would not have produced crapola from sea to shining sea.
“I don’t meet your standard of politically correct sanctimony.”
There is nothing correct about condoning illegal aliens. Supporting illegal aliens is simply collusion with criminals.
Everyone now see the iceberg ahead and the Titanic can’t not move out of the way of this mess.
I can’t wait for the sequel
They already made it: Voyage to the Bottom of the Sea.
“‘The sector is now about one and a half years into what we believe may be a roughly three-year downturn,’ S&P said in a report. ‘Our home-builder rating bias is emphatically negative, as the sector is in the midst of an inventory correction of uncertain, and potentially protracted, duration.’”
How does that report (which suggests no light at the end of the builders’ tunnel until 1 1/2 years from now, at year-end 2008) square with repeated assurances from certain members of the REIC that the storm will blow over without much precipitation by year-end 2007?
Pushing the projected time-horizon out until year-end 2008 has the added advantage that most folks will forget what was said in spring 2007 by the time December 2008 rolls around. If things still haven’t turned up by then, S&P can simply forecast another 1 1/2 years of bad times.
Well my memory isn’t that short and I remember them calling a bottom about six months ago. Now they’re calling a new bottom every friggin week it seems.
Reminds me of being on a long drive as a kid with my dad. Everytime I asked “how much longer”, he never failed to reply “just 10 more minutes”.
Yeah okay, so I’m waiting for a bottom too, but very different reasons
This is no place for peccadillos…
Couple’a years ago it was all us bubble believers saying “are we there yet?” and looking for any evidence that the runup in prices was ending.
As the saying goes, we were too early, therefore we were wrong.
“CEO Clarence H. Smith noted the negative impact of the housing slowdown. ‘The housing sector, which is tied to our industry, has been in a severe slump,’ he said.”
Didn’t this guy get the memo from the Fed that the housing slump would not affect the rest of the economy?
One reason why the talk of bailout is getting quieter, is that they would need tens or maybe hundreds of billions, not hundreds of millions. Plans to prevent more people from getting subprime loans that may default will have at least two, less appreciated consequences. First, it will make refinancing more difficult, leading to even more foreclosures. Second, it will make selling more difficult, leading to more foreclosures. There is no easy way out.
Bill, it sounds like we have two choices: 1) more foreclosures or 2) more foreclosures. Congress should go with the flow and fund $1500 security deposits for all the GF/FB’s to use in their new rental units. That would only be $3 billion! And it would actually be helpful. Trying to keep the idiots in their over-priced over-mortgaged houses is like trying to swim up Niagra Falls.
A self propelling feedback loop in so many words.
Ain’t enough money on the planet to patch this hole.
We can print all the money we need, but somehow I don’t think this hole can be papered over…
From buyers desperate to buy a home…to…sellers desperate to sell a home…to banks desperate to get rid of foreclosed homes.
I can already feel the cool crisp winds of October already beginning to blow while I sit in the great empty pumpkin patch with Linus…waiting for the seeds of spring to bring forth a great bounty of pumpkins and watch as the Great Pumpkin rises up out of the pumpkin patch “with his bag of foreclosure relief for all the good children”
“Charlie Brown you’re a BlockHead!”
It is utterly essential for the REIC to convince the Charlie Browns of the world that now is a good time to buy. Otherwise, the housing market will collapse from the weight of inventory and absense of willing and qualified buyers crushing prices.
Try as they might, it’s just not happening. New listings are crushing closings.
Obviously. Every time Lereah opened his mouth, he was doing exactly what every Realtor wanted him to do, namely saying whatever he had to to lure in the next batch of fools. Why some of the regulars on this blog still don’t seem to get that is beyond me. And now that he’s leaving, who do you think the NAR will get to replace him? Shiller or Thornberg? Methinks not.
But nobody who actually has any money is going to loan any more to Charlie Brown. The only person left with the ability AND desire to loan money cheap enough that CB can service the loan is the guy who can print money at will.
It is also utterly essential that the Wall Street cargo cultists remain convinced that “the stock market can only go up.” Otherwise, the Ponzi scheme collapses — game, set and match.
What squashed the spring boom? February’s unseasonably cold weather, like January’s unseasonably warm weather, jumbled the normal cycle. But despite better weather in March, April still isn’t looking up…
I guess weather could affect things like traffic at open houses, but if I really wanted to buy a house, a brutal cold snap isn’t going to stop me.
Now, most of the blame has fallen on the new stricter lending that has reduced the pool of potential buyers. “Although the weather improved in March, we’re starting to see the effects of a decline in subprime lending and tighter lending standards,” Lereah says of March’s Pending Home Sales Index reading.
Reduced the pool, yes - but didn’t close it. Buyers are out there. Qualified buyers, even! (Imagine that.) We’re just waiting for realistic prices. Gonna’ go thru many bowls of popcorn before that happens…
Buyers are out there. Qualified buyers, even! (Imagine that.) We’re just waiting for realistic prices. Gonna’ go thru many bowls of popcorn before that happens…
Yes they are. (I’m actually shocked)
the house across the street from me (I’ve spoken of it before) was renovated completely. It’s now on the market. I think it’s overpriced by about 30%. If it sells, it will be the 2nd most expensive sale on our block ever, and that house is MAYBE the 10th nicest on the block. maybe.
This weekend 8 people looked at it. I was flabbergasted. who knows if anyone will put in an offer.
we’ll see.
I was just surprised that anybody would be looking here now… especially given these brutal sales stats out of MSP area…
then again, here “bad weather” really means something. We’ve had really nice weather (60’s) for the last 3 weeks now though… so maybe in our case it was weather?
What’s the price compared to the local median income? With 100% financing available only to a few, what percent of those lookers are likely to have the necessary 10% or 20% down? If they have it, it’s likely from equity in their current house. What’s the chance they can sell it right now?
My brother handled the sale of our elderly mother’s house back in 2002, when she moved to a progressive care facility. He said there were 10 offers, and all of them were proposing 100% financing. So if she were trying to sell today…
Good point.
Lots of people test drive cars they’d never actually buy.
Tell DL ’storm clouds are gathering over the housing market’ is just a figure of speech AND weather did not stop yesteryear’s specubuyers from camping outside of developments hoping to be FIRST!
sure but jmf had camped out earlier and bought up all the choice POS’s.
SELL THE HOUSE
SELL THE CAR
SELL THE KIDS
FIND SOMEONE ELSE
FORGET IT
I’M NEVER COMING BACK
FORGET IT
The 1st Assassin’s Letter in “Apocalypse Now”
Or WAS THIS David Lereah ?
Ah, the sage words of Lt. Colby. Nicely done.
FBs = “paralysed force, gesture[s] without motion.”
And we’ll remember them, “– if at all — not as lost violent souls, but only as the Hollow Men, the stuffed men”.
Glad to see that someone the other day started to comment on how the housing crash could create a sluggish labor market with people’s inability to move to match skills with employers’ needs. An ex-colleague of mine and I started talking about that very thing before we each sold in May and June of ‘05 in NoVA. I occaisionally look up my old condo, Woodlake Towers in Falls Church, to see how things are going. My buyers had a zero-down, I/O ARM but I don’t remember when it resets. Could be soon. Another log on the fire/pyre…
I like that, Put Another Log on the Pyre [Ballad of the FB]
Put another log on the pyre.
Cook me up some bacon and some beans.
And go out to the Hummer and change the tire.
Wash my socks and sew my J-Crew jeans.
Come on, baby, you can fill my gas-can,
And then go fetch my lighter.
And pick me up another Starbucks latte.
Then put another log on the pyre, babe,
And come and tell me why you’re leaving me.
Now don’t I let you wash the Escalade on Sunday?
Don’t I warn you when you’re gettin fat?
Ain’t I a-gonna take you house huntin’ with me someday?
Well, a man can’t love a woman more than that.
Ain’t I always nice to your RE agent?
Don’t I take her driving every night?
So, sit here at my feet ‘cos I like you when you’re sweet,
And you know it ain’t feminine to fight.
So….
[Chorus]
Check out our newly-invented “Median $ Value” charts at:
http://www.viewfromsiliconvalley.com/id326.html
Thanks!
Yep. I think this says it all.. What you see here in Si town is gains in y-o-y condos and house prices but of course this is because the fewer buyers out there that see this market as a buying opportunity are buying at the inflated prices.. which they believe are still good deals. The problem is, there just aint too many of those buyers out there. In fact, in my immediate area, 2 town home clusters that are relatively nice, there are 7 listings that have just been sitting, & sitting & sitting… They all have asking prices that are consistant with what viewfromsiliconvalley says (DQ data) appreciation has been over the last few years. The difference is that NOBODY IS BITING (at least where I am in Si town)…And here we are in prime season and NOBODY IS BITING. Some of these listings have been on the market several months, with one that was listed back in Novemeber last year. Based on what I see where I am, I think the # of closings is even lower than what DQ is reporting… Cause, let me say it one more time… NO ONE IS BITING!! Not one sale at the inflated prices where I am. And the few suckers that do bite in the whole of Si Valley, well, they keep DQs nice median price statistics nicely rising cause your missing half the sales you would normally see (the smart buyers aren’t even trying to negociate down price…They figure time will do that for them). Meanwhile, what I call the ‘other RE market’, that of REOs, & near REOs is bulging up, bulging up… Banks buying these properties back up, trying desperately to soak up excess inventory and downward price pressure. I have heard from RE people that the lenders are putting alot of pressure on individuals not to do short sales… For the obvious reason that dont want to be left holding the bag but also because desperate short sellers popping up all over the valley could change market psychology in a hurry.. So, in the end, its the story of 2 markets.
‘Many people think, ‘if I can just hang on ’til the spring,’ they will get an offer,’ says McPherron. ‘This spring, they’ll be lucky to sell.’”
You don’t have to be lucky to sell, this spring or any other time. Just price it right
Price it right, and sell for a loss? That would be unlucky…
Why sell at a loss when you can live in it for free for many months while you wait for the bank to come and take it from you?
Esp. in Taxachussetts…
“The latest numbers indicate that the spring of 2007 will go down as one of the worst real estate seasons in years.”
That’s just until next year. 2008 has the potential and probability to make these guys weep.
That’s just until next year. 2008 has the potential and probability to make these guys weep.
Yep… No one is going to have the needed down payments in 2008.
Sellers will still be demanding wishing prices and rents.
and I wouldn’t want to be an MBS bond trader between now and then.
Reviewing previous cycles, most of the price decline occured during “Capitualation.”
While Florida will lead the pack, nationally we’re still on this time line:
http://recomments.blogspot.com/2007/04/real-estate-emotions-update.html
(Yea, shameless plug for my blog)
Got popcorn?
Neil
Neil, I liked the timeline, but then I came across this morsel -
Oh, expect fewer posts from yours truly. Today is T-minus one month to my wedding
Congrats!
Neil,
Whoa. Congratulations!
Does she love popcorn?
Oil + Politics = a story… for Ben’s HBB
The Oil boyz in Houston won’t sign off to Hurricane Hugo…
Venezuela threatens to expel ConocoPhillips:
“ConocoPhillips participated in an operational transfer Tuesday ordered by Chavez, but it’s the unsigned agreement that has Venezuelan officials steaming.
Reuters reported that Oil Minister Rafael Ramirez told state television that ConocoPhillips has been knocked to the lowest priority in the negotiations, and went on to say that the OPEC nation would not offer cash concessions or assume debt.
Ramirez also said that if talks break down, Venezuela will assume a 100 percent financial stake.
ConocoPhillips representatives did not immediately return calls Thursday”
ConocoPhillips:
http://finance.yahoo.com/q/mh?s=COP
% of Shares Held by All Insider and 5% Owners: 0%
% of Shares Held by Institutional & Mutual Fund Owners: 76%
% of Float Held by Institutional & Mutual Fund Owners: 76%
Number of Institutions Holding Shares: 1281
Sue Ellen Wooldridge:
Wooldridge served as Solicitor for the United States Department of the Interior, that agency’s highest ranking lawyer, after being appointed by President George W. Bush in a… recess appointment
She was formerly the United States Assistant Attorney General in charge of environment and natural resources, a division of the United States Department of Justice. As such, she was the U.S.’s top environmental prosecutor. She resigned from this post in January 2007.
Controversies
In February 2007, it was reported that in March 2006 Wooldridge had purchased a $980,000 vacation homephoto on Kiawah Island, South Carolina, together with two other individuals: Don R. Duncan, the vice president for federal and international affairs and a lobbyist for ConocoPhillips, a Houston-based oil corporation; and J. Steven Griles, a former deputy interior secretary of the United States (now an oil and gas lobbyist) who pleaded guilty to obstruction of justice in a Senate committee’s investigation into the Jack Abramoff affair.Nine months after buying the home with Duncan and Griles, and just before stepping down, Wooldridge approved consent decrees giving ConocoPhillips three more years to pay millions of dollars in fines for a Superfund toxic waste cleanup and install pollution controls (which are estimated to cost US$525 million) at nine of its refineries
Gas at my local Union 76 station: $3.45
Unlimited ride MetroCard in my wallet: $76 (pre-tax)
I forgot to mention this personal connection between the two “partners”:
Will these two be included in the bail out schemes?:
She lives together with J. Steven Griles, whom she began dating while he was one of her supervisors at the United States Department of the Interior.[1] They were married in March, 2007, “three days after Griles pleaded guilty to lying to Congress about his relationship with [Jack] Abramoff and a previous romantic partner.”[1]
http://en.wikipedia.org/wiki/Sue_Ellen_Wooldridge
NAR would be wise to Cancel next Spring and head right into their “Mid Summer Night” Disaster Sale !
“GMAC LLC, the finance company partly owned by General Motors Corp., said it had a $305 million first- quarter loss and injected $1 billion into its home-lending unit amid a ’sharp downturn’ in the U.S. mortgage market. GMAC’s Residential Capital LLC lost $905 million. GMAC’s loss reflected ResCap’s drain as delinquencies on so-called subprime loans climbed to a four-year high.”
Let’s think about this a minute folks. One Billion in losses last quarter and more expected again this quarter. I have no “feel” on what their going forward losses will be… but I’ll be surprised if GMAC doesn’t need to send another $1 Billion to ResCap during 2007.
The cube farms are definately going to be harvasted.
I stand by my prediction that 25% down payments for homes will be pretty standard during the darkest days of this downturn. Let’s face it, with today’s default rate.. .they’re losing billions. As it gets worse (and it will), they will need enough cushion to cover a bad year’s depreciation. Besides, what MBS buyer is going to sign up for the first 25% of risk now?
Got popcorn?
Neil
“Besides, what MBS buyer is going to sign up for the first 25% of risk now?”
Think Linus waiting for the Great Pumpkin…
Looks like Ditech lost another loan to fraudsters.
“I stand by my prediction that 25% down payments for homes will be pretty standard during the darkest days of this downturn.”
Don’t go out on a limb or anything.
Yeah that pretty much means the entire California market outside the Central Valley and the IE will grind to a standstill. It will take me oh about 15 years to save up 25% down here in West L.A. at the current prices.
“…at the current prices.”
Which is why current prices cannot survive a revival of downpayment requirements without a huge correction. The Fed knows this, so the moral hazard to try to shift home price inflation out of reverse and back into drive must be immense!
25% downpayment = argmageddon
Will it happen? I would like to think yes, as I have been saving to put a large downpayment down on a home, and it would lower prices dramatically, which would be good for me. However, the havoc it would cause in the housing market would be beyond compare. It would cause a crashing of home prices that would make stock market crashes look tame by comparison.
A 25% downpayment would cause a Greater Depression that you won’t be able to escape. Major economic downturns are cause by tightening of credit after a period of loose credit. I think 10% down with a lender appraisal and dismantling of the GSE’s should fix the RE market.
Yes, but realistically why would any lender accept only 10% down when they know that the borrower would be underwater inside the first year? Higher DP’s are inevitable.
“The practices of mortgage lenders will come under greater scrutiny Thursday, as two senators will unveil a plan to address rising foreclosures and high-interest rate home loans given to people with weak credit. Sen. Charles Schumer along with Sen. Sherrod Brown will introduce legislation to strengthen standards that mortgage lenders use when providing loans.”
‘Mabel, I accidently left the barn door open last night, and all the horses have run away.
That’s OK, Wilbur — just go out and lock the door so that in case they return, they won’t be able to get back into the barn.’
That’s OK, Wilbur — just go out and lock the door so that in case they return, they won’t be able to get back into the barn.’
Yep… law of unintended consequences. Result: even tighter credit.
Note: I’m all for the new standards. But oh will that hurt the fippers.
Got popcorn?
Neil
The investors: How to get rich trading “idiot” loans
Investors have made a fortune trading bonds backed by mortgages.
“The housing boom was good to John Devaney. Really good. He owns a Rolls-Royce, a Gulfstream Jet, a 12,000-square-foot mansion in Key Biscayne and a 143-foot yacht, as well as a few Renoirs and a valuable 1823 reproduction of the Declaration of Independence.
“Devaney’s not a developer, and he’s certainly not a flipper. The 36-year-old 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.”
“Devaney’s not out to get people into bad loans - or into good ones. He just makes bets on how many people will repay and when. Still, the $5.7 trillion mortgage-backed-securities market had a key role in today’s housing mess.”
Hmm … you have to wonder about UCM’s exposure to CDS issues. If the consumer defaults, will Johnny have to cover?
If there was only a way to see where this guy is going to be in 5 years. He may come out ahead if he takes his gains or he may end up in the toilet if everything falls apart. This is one of the problems with stories like this. This guy has a lot of toys(probably bought with debt) but as the saying goes easy come easy go.
Don’t be McFearing the McMansions, McReaper…
“McPherron says he wouldn’t be surprised if home sales were still soft well into the summer months. ‘Many people think, ‘if I can just hang on ’til the spring,’ they will get an offer,’ says McPherron. ‘This spring, they’ll be lucky to sell.’”
“He owns…a valuable 1823 reproduction of the Declaration of Independence”
I declare…he’s achieved independence…the old fashioned way…he’s earned it.
The 36-year-old CEO of United Capital Markets:
“The consumer has to be an idiot to take on those loans,” he says. “But it has been one of our best-performing investments.”
Bugs: eh, got bonds?
Daffy Duck: Yes Bugsy, I do, I do have bonds!
Catastrophe bonds have a “low probability of default, but if the default happens, the severity is fairly high,” Patel said.
http://www.reuters.com/article/reutersEdge/idUSN0321086920070503?src=050307_1406_INVESTING_comment_n_analysis&pageNumber=3
any layoffs at FRE & FNM
nope they’re GSEs and everyone gets a raise
“Things got worse and worse. Finally there came the awful day of reckoning for the bulls and optimists and the wishful thinkers and those vast hordes that, dreading the pain of a small loss at the begining, were now about to suffer total amputation-without anaesthetics. A day I shall never forget. October 24, 1907″
Jesse Livermore, from the book “Reminiscenses of a Stock Operator”
Welcome to the new and improved “Panic of ‘07″…
You really liked that book!
If you get the time read
Judgments, Decisions, and Public Policy
Rajeev Gowda and Jeffrey C. Fox
A most excellent piece on cognitive economics.
from Amazon’s Book Description
When people make judgments and choices, especially when faced with uncertainty, they behave in a manner that seems complex and irrational. Cognitive psychologists have identified and organized these patterns of behavior into a descriptively accurate model of human judgments and choices called behavioral decision theory.
- Not nearly as pithy as Jesse Livermore’s sayings but a different way of looking at why we end up in the same messes all the time.
“The seven principles are meant to aid borrowers and save them from foreclosure, according to a statement from Dodd’s office.”
“Among the principles, mortgage servicers should seek to modify the terms of subprime loans before the interest rates are reset higher, and they should set aside dedicated resources and staff to help those borrowers.”
Ok, so let me get this straight: if you are fiscally prudent, honest borrower who does his research, saves for a reasonable down payment, provides accurate income/assets numbers and takes out a responsible, conforming, full-doc loan, you get: no help.
OTH, if you are a reckless, mouth-breathing spendthrift, incapable of saving two nickels to rub together, one who “must have” every shiny new toy advertisers dangle in front of you and who knowingly defrauds your creditors by accepting a toxic NINJA for a house you clearly cannot afford, you get: a bailout.
No moral hazard here, people, move along.
The innocent will be punished and awards handed out to the facilitators and the guilty parties.
Remember this is an hallucinating economy…..for awhile until gravity and entropy reasserts itself.
Are you actually reading that? It says bankers should renegotiate before the loans explode. That’s because the bankers don’t even want the houses they would be repossessing. How exactly in specific steps to you get from “mortgage servicers should …, and they should” to a bailout.
If you are concerned about a bailout then you should use common sense. If you keep crying wolf, then you might not be taken seriously. There is a huge difference between “mortgage services should” and a bailout. Perhaps you meant to quote something else?
Harm — Sorry to nitpick, but economists refer to contracts which adversely select the worst quality applicant as flawed by “adverse selection.”
“Moral hazard,” on the other hand, pertains to situations like a mortgage loan to an illegal immigrant whose personal incentives might work in favor of his leaving the country rather than facing the consequences here once he finds out he accidently purchased a home he cannot afford.
If that would get illegal immigrants out of the country, I say we should give mortgages to all illegal immigrants.
Politicians don’t know the meaning of the term “moral hazard”.
Federal regulation on tighter lending standards is the same as if someone handed you a free ice cream with one hand, and then immediately slapped you in the face with the other.
[HAL won't let Dave into the ship]
Dave Bowman: All right, HAL; I’ll go in through the emergency airlock.
HAL: Without your space helmet, Dave, you’re going to find that rather difficult.
Dave Bowman: HAL, I won’t argue with you anymore! Open the doors!
HAL: Dave, this conversation can serve no purpose anymore. Goodbye.