Between A Rock And A Hard Spot In California
The San Francisco Chronicle reports from California. “Vallejo is the Bay Area’s version of ground zero for the subprime loan crisis. A significant number of residents of the largely blue-collar city of 120,000 have taken out subprime loans. Vallejo home prices fell 8.5 percent from November to March, according to DataQuick. For people who bought in recent months without putting any money down, that means they may owe more on their mortgage than the house is worth.”
“In addition to Vallejo, other Bay Area localities facing the problem are Richmond, Antioch, Pittsburg and parts of Oakland.”
“At nonprofit counseling agency Vallejo Neighborhood Housing Services, the phone has been ringing off the hook for several months, with about 40 people a week calling because they have fallen behind in their mortgage payments, according to Carol Hardy, a housing counselor there.”
“That contrasts with the 12 months that ended in August, during which the agency advised just eight families on foreclosure prevention.”
“The people seeking help have almost identical stories, Hardy said. They bought homes using subprime loans. After a low initial rate, their monthly payments skyrocketed. Meanwhile, home prices in their neighborhoods went down, so they cannot easily sell or refinance. The result is that the homeowners owe more on their homes than the houses are worth.”
“‘They’re between a rock and a hard spot,’ Hardy said. ‘Nobody sat down with them and said if your interest rate goes up just 2 percent, here’s what your house payments will be. These people all of a sudden are getting notices that in 60 days their house payments will go up $600 or $800 a month, and they say ‘I can’t do that.’”
“In Solano County, 116 homeowners received notices of default last March, according to DataQuick. By August, the number of foreclosure notices had almost doubled. By March, it had almost tripled to 338. During the 12 months ended in March, 2,555 Solano households received the notices, according to DataQuick.”
“In Solano County, seven houses were sold at foreclosure auctions in March 2006. The number has built steadily since. In the same month this year, 89 properties changed hands in foreclosure auctions, according to DataQuick.”
“‘Until six months ago, we could almost always save the person’s investment, either by helping them to refinance or explaining that they needed to sell and get their equity out before foreclosure,’ said Martin Eichner, director of a nonprofit HUD counseling agency in Sunnyvale.”
“‘But more and more, the calls we’re getting are from people who bought on a shoestring and have few, if any, options to avoid the foreclosure. They haven’t built up any equity and they put themselves in loans that were essentially doomed to fail with 100 percent financing and/or negative amortization,’ Eichner said.”
“Hardy said she tries to negotiate with lenders to arrange for an extended loan period, but so far none has been amenable. Instead, all of Hardy’s clients have put their homes on the market at the request of their mortgage holders. None of them has received an offer.”
“‘We have very large inventories in Vallejo of houses for sale,’ said Jeff Dennis, president of the Solano Association of Realtors.”
“If the homeowners do sell their homes, it is likely to be what is called a ’short sale,’ where the purchase price is less than the amount owed on the mortgage.”
“Vallejo Neighborhood Housing Services is too overloaded to handle new cases, so it refers calls to a toll-free number run by a nonprofit group that tries to preserve homeownership.”
“‘Calls (from across the nation) have been increasing at an absolutely crazy rate,’ said Tracy Morgan, a VP at the foundation. ‘We’ve been getting 650 calls a day for the last month or two. A year ago we were only getting 75 calls a day.’”
From Bloomberg. “The U.S. housing slump is squeezing Mexican migrant workers from Los Angeles to New York, where permits for new home construction are down 20 percent this year, according to the Census Bureau. That’s reducing the pace of money transfers.”
“In Los Angeles, Miguel Saldivar is struggling to find work. ‘There has been no work for two, three weeks,’ Saldivar said as he waited at the corner of Oxnard Street and Van Nuys Boulevard. He said he sends as much as 75 percent of what he earns back to his mother and brother in Mexico.”
“‘It depends on how many days we work,’ Saldivar said. ‘Now I am making nothing.’”
The Arizona Republic. “Twelve people, suspected of being part of a sophisticated white-collar crime ring led by an ex-convict, have been indicted involving a mortgage-loan scam stretching from Arizona to Nevada to California.”
“‘This was a brazen scheme. To shut it down, a top-notch team was assembled,’ U.S. Attorney Daniel Knauss said. ‘The result is a significant indictment that should put criminals and would-be fraudsters on notice that the investigation and prosecution of loan fraud is a top priority.’”
“The indictment says defendants fraudulently financed 16 properties, as well as 11 luxury cars mostly purchased at Arizona dealerships. One member, Charles Dozzell of California, financed a $124,496 BMW 760 series by falsely saying he was an engineer and made $135,000 a year, according to the indictment.”
‘U.S. home prices dropped 1.4% in the first quarter compared with a year earlier, the first year-over-year decline in national home prices since 1991, according to the S&P/Case-Shiller index released Tuesday. A year ago, home prices were rising at an 11.5% pace. Prices have been falling for the past three quarters.’
‘As a result of falling prices, foreclosures are rising nationally, especially in regions with a weak economy, such as the Midwest, and in the bubble regions of Southern California, Florida, Nevada and Arizona. The Case-Shiller index is considered a superior gauge of home prices compared to the median sales-price data released by the Commerce Department or National Association of Realtors, because it tracks multiple sales on the same property and is therefore not influenced by a different mix of homes sold in a period.’
‘Unlike the price index produced by the Office of Federal Housing Enterprise Oversight, the Case-Shiller index does not include refinancings. And, also unlike the OFHEO index, it includes homes with mortgages larger than the conforming limit of $417,000.’
‘In San Mateo County, the money and the students are starting to slowly dry up for some school districts causing talks of school closures and cuts for districts funded by daily attendance. Many districts in northern San Mateo County are dealing with dwindling numbers.’
‘Over the past 10 years, enrollment in San Mateo County dropped about 1,500 students. The problem isn’t unique for the Bay Area. Numbers were on the rise from 1993 peaking in 2004 with 6.322 million students. Over 35,000 less students are enrolled in California public schools this year, according to the California Department of Education.’
‘Families are leaving most of the state, except the Central Valley, in droves in search of more affordable areas to raise children.’
‘Over 200 southern California homes located in Bakersfield, San Diego, Santa Maria, Los Angeles, Victorville and West Palm Springs will be auctioned on June 12-17 at various sales sites. Valued from $150,000 to nearly $700,000, the homes are likely to sell at auction for significantly reduced prices.’
‘According to Realtytrac, California reported 30,505 foreclosure filings in April, giving it the largest foreclosure total of any state for the fourth month in a row. California’s foreclosure rate of one foreclosure filing for every 400 households is nearly twice the national average.’
‘Families are leaving most of the state, except the Central Valley, in droves in search of more affordable areas to raise children.’
I’d despute the central valley claim. Many school districts here are experiencing declines and are looking to layoff personnel already.
“Children Vanishing from Elk Grove, Population Growth Stumbles”
Sacramento Land(ing)
http://tinyurl.com/2a32tk
There’s more info out there. Lander’s was just easiest to grab fast and I’m lazy >; )
Don’t forget Fresno
http://abclocal.go.com/kfsn/story?section=local&id=5337086
Yep, families are moving away from the BA but they aren’t stopping in inland communities. They are high-taling it out of the state.
Moving to the CV was so 2001.
We have noticed an increase in California tags here in South Carolina in the last couple of years. I keep telling them to go back, this is the South we are poor stupid rednecks that date our cousins, we kept Strom Thrumond in D.C. for a 100 years for heaven sakes. Doesn’t seem to be working though!
I absolutely do not understand why anyone would want to move to the central valley? Oh I suppose there are worse places to move;
Rwanda, Burundi, Uganda, Central African Republic, Congo Brazzaville, Angola ..
Save your breath, we only send the dumbest ones to South Carolina.
…thereby increasing the average IQ of both states.
Just kidding. I love the South, the culture, food, and the people, and find the California belief in their natural superiority to be badly mistaken. I also love California, and the scenery and culture and opportunity. I got issues, I do.
I go to Nashville, Durham, and Bethesda all the time for work. I love the people in the south and I’m one of those crazy crunchy granola CA liberals. It’s only when I get back to CA that the judgements start flying, mostly from friends here asking “how can possibly think of moving there?” You’d think I’d be physically assulted the minute step foot in the land of Dixie, the way people here carry on. These people seriously need to get out more >; )
Yep, physically assualts are relatively rare in the South these days. OTH, in L.A. or “Oaktown” it’s pretty common.
LOL…..Bethesda is NOT the South in any way shape or form.
Yes gab, the Cali folks coming here sure are really dumb. I hear that our teachers are having to flunk most of their kids at the local elementary school because they are so thick in the head.
Probably has to do with the CA parents (who are on antidepressants). I hear their only job “skills” are realty licenses or mortgage broker experience.
Since at least 80% of the people in California seem to be moronic judging from this blog, please just stop sending them here period. Thanks.
OMG! That’s my elementary school!!!!
Even crazier than that, the older woman interviewed on tape (Cindy Smith) WAS MY FIRST-GRADE TEACHER! My jaw is hanging on the floor right now. Thank you for posting that, as somewhat nostalgically depressing as that is. I was sure she had passed on by now.
I think what’s happened with the area served by this school is that it has largely been gentrified by DINKs and retirees. Oh and my wife has some gay friends who live around the corner–no kids there, either.
Yes, the “except the Central Valley” comment didn’t ring true to me either. Up here in the foothills NE of Sacramento, the local school district is cutting back on staff. We heard that part of this was due to lower-than-projected enrollment.
Same up here in S. Oregon. 2 out of 5 schools are now kaput. Gentrification, and becoming a mecca for retiring locust are the apparent drivers here as in the other towns mentioned. I can’t tell you how much I love reading this stuff. I thought Ashland was going to the dogs, but it could be any one of a hundred towns in the West. Whoever said “all real estate is local” was drinking the bongwater. This is,as they say, bad and nationwide.
‘U.S. home prices dropped 1.4% in the first quarter compared with a year earlier, the first year-over-year decline in national home prices since 1991, according to the S&P/Case-Shiller index released Tuesday. A year ago, home prices were rising at an 11.5% pace. Prices have been falling for the past three quarters.’
The home price velocity has recently been decelerating at a 10.1% pace (11.5% - 1.4%). If the force of gravity continues to operate with similar effect going forward, then we might expect an 8.7% YOY drop by Q1 2008 (1.4% - 10.1%). That would confound the experts, wouldn’t it?
BTW, 1991 was at the tail-end of a fairly nasty recession for most of the country, which really did not end in California until much later (1995?). Given that homes are already dropping in price against a supposed backdrop of economic strength, how fast will they drop if the economy goes into recession as some have said might happen (Greenspan)?
Generally speaking, households become much more precautious about doing stupid things like buying houses they cannot afford if the risk of job loss increases. Similarly, lenders become far tighter with money during a recession, and the lending industry is already tightening, if for no other reason than 76 of them having recently gone out of business.
http://ml-implode.com/
A little known, but odd fact, is that the number of children one has is inversely correlated with income and education. In other words, the higher one’s education and income, the few children one has. Given this, it is not unusual to see that regions such as the Peninsula that are increasingly the enclaves of the upper middle class will show a decreasing number of kids.
‘Unlike the price index produced by the Office of Federal Housing Enterprise Oversight, the Case-Shiller index does not include refinancings. And, also unlike the OFHEO index, it includes homes with mortgages larger than the conforming limit of $417,000.’
Am I correct to infer that the OFHEO index essentially excludes nearly all California mortgages issued in the past few years?
I would like to speak to the U/W who approved a 19-22 year old borrower making $10,000 a month - I wonder if he/she looked at the borrower’s credit, work history on the credit report, etc etc….
correction remove “19-22 year old” and insert “min. wage student”
Even at $10K a month (120K a year, this SHOULD put a ceiling of around $350K in loans. Seemed like everyone in CA was getting 500K loans
There you go….being logical.
You are just ruining it for all the ostrich out there……
It is in my nature to be logical. I guess that is why I like to hang out on this particular blog. Don’t worry about the ostrich though, they all have their heads burried somewhere and are paying no attention
Seems like all the SFRs in CA cost over $500K (at least until recently…). As I type, there are 12,007 SFRs for San Diego county on ziprealty.com, with 7,988 (2/3) priced over $500,000.
I’ve started a fund to help the stranded whales which are currently near Vallejo. And 15 % of all contributions made by local residents will go to FB’s.
As the whales move towards the ocean so will the fund.
I was at the Strawberry music festival, near Yosemite, on the weekend and it’d been awhile since i’d hung around the loony left fringe, mostly from the bay area…
Lots of tie die and seemingly every car had to have a minimum of 6 protest stickers, 28 being the most I saw on just one auto.
Went to Strawberry two years ago instead of the usual Telluride BG fest trip. People yelled at us the first night for being too loud (it’s a festival!), the music was terrible (except for New Riders) compared to Telluride and there was this weird religious undertone to the whole thing. Freak show — and not in a good way.
“‘Until six months ago, we could almost always save the person’s investment, either by helping them to refinance or explaining that they needed to sell and get their equity out before foreclosure,’ said Martin Eichner, director of a nonprofit HUD counseling agency in Sunnyvale.”
Sunnyvale ? This crap is happening in Sunnyvale, the home of the richer demographics in the area ? Look out East Side San Jose !
Keep an eye on the stock market. It still has a ways to go (upward). It will (easily) cross 14,000 this summer. However, after topping , it will descend fast. Consequently, the magnitude of housing’s problems will be unmasked. Psychology will shift exponentially. It will be the major turning-point … toward the housing correction most (on this site) are waiting for.
Market does worse June - October, on historical average. Your mileage may vary; past performance is no guarantee of future results, etc. etc. On the other hand, strength of world markets may make this summer different. Who knows?
I thought it interesting that the article in the Chronicle never mentioned that Santa Clara County was THIRD behind Contra Costa and Alameda for NOD for the nine BA counties. The article talked at length about Solano which is 4th on the list. Odd isn’t it?? It is already happening in SV. Check out the foreclosures in central (downtown) San Jose and East SJ. The low end is going first…
“‘They’re between a rock and a hard spot,’ Hardy said. ‘Nobody sat down with them and said if your interest rate goes up just 2 percent, here’s what your house payments will be.
To bad! I know it’s “not their fault”. These are the same people that would finance a car for 20/30 years if they could, and don’t care to know how upside down they are or will be, it’s the monthly payment man. They could be told this is a bad deal and you’ll never get it paid off, they would sign anyway. It’s all about instant gradification and besides they never plan to pay it off anyway.
“These are the same people that would finance a car for 20/30 years if they could”
Isn’t this called leasing?
Have fun, see you in 36 months/36,000 miles.
wmbz:
although I agree that people are consuming in an out of control way, I also saw first hand how some people were fooled into thinking an ARM was more benign than it was.
For instance, a WaMu rep told my friend that the ARM could adjust up to 2% per year, and then went on to say that this means the payment could go up 2% per year.
My friend didn’t have the math skills to realize that going from 4% to 6% is a 50% (not 2%) increase , and thus the payments will raise up 50% (and not 2%)
This has been a common statement of mine for the past several years when I’ve gotten on my soapbox. People just don’t seem to get it. And when you combine that with the magnitude of people facing adjustments…well, you get the picture.
“In Los Angeles, Miguel Saldivar is struggling to find work. ‘There has been no work for two, three weeks,’ Saldivar said as he waited at the corner of Oxnard Street and Van Nuys Boulevard. He said he sends as much as 75 percent of what he earns back to his mother and brother in Mexico.”
“‘It depends on how many days we work,’ Saldivar said. ‘Now I am making nothing.’”
Illegals are going to get slamed very hard. There is nowhere to hide when there is no work … only crime.
This is the scary part. Will they return to Mexico and live off the money sent home or will they stay in the area and add to the crime statistics? I’m guessing the latter.
I tend to agree with you. I and others here have sounded an alarm. As low paying jobs dry up the illegals will turn to crime, all of them (they’re already committing a felony by using stolen Social Security numbers).
But our elected “leadership” in D.C fiddles while Cali burns. Will the people here wake up and smell the gangbangers before we are overwhelmed?
Right now on KFI640 (local SoCal AM radio station) they are lambasting Feinstein, Boxer and Kyle (AZ). The radio station website has their respective phone numbers listed so folks can call them and give opinions on the amnesty bill.
Although at this point, I would just say its time to leave Cali. Dont get me wrong I love the place and will move back (from AZ) if/when they clean up the place.
Why is it someone else’s mess to clean up?
“Right now on KFI640 (local SoCal AM radio station) they are lambasting Feinstein, Boxer and Kyle (AZ). The radio station website has their respective phone numbers listed so folks can call them and give opinions on the amnesty bill.”
I am a fan of AM 640 and almost never miss John And KEN but even they jumped om the anti-illegal alien bandwagom rather late, as virtually the entire right-of-center AM Radio. Back in 2003 when I was temporarily out of work i blasted J&K with 20+e-mails. faxes, even a mailed letter with my anti-immigration views, which may have had some effect.
Also send 300+ messages to every big-wing pundit, newspapers, politicos back in 2003 because i was actively campaigning against then Gov Gray Davis who just signed that drivers license for illegals bill(which was overturned by Arnold).
I was really worked up then but my stance goes way back to pre-911 when i used to listen in on the legendary news journalist George Putnam on AM 870 every afternoon during my delivery routes. He was over 80 then but very forthright and with tremendous knowledge and experience of national.world issues.
He was at that time the lone wolf crying in the wilderness over the illegal immigration issue, which at that time was only having negative effects in LA/Scal- it did not go full-bore national till the first decade of the 21st century.
The entire country and CA is 20 years behind the curve on this- though Californian’s did pass prop 87(or 187)in 1994 which would have denied benefits to illegals, which was of course overturned in Federal court.
from the article:
“If I don’t find work soon, we’re moving back home,” Perez said last week as he walked away from the corner in Queens, New York, where he and dozens of Hispanic workers hope to get chosen for construction jobs. On this day, Perez gave up after a six-hour wait.”
Course “home” to him might mean LA
It just breaks my heart.
They can hide just fine in Mexico.
My brother in law is an electician here in Fl. He told me they do
not have enough work…He has been working for this company for
20 years and I have never heard him worried about work…It is not just the illegals that are getting slammed.
Econ,
and there is the rub. What happend when American citizens are competing for jobs against illegals (especially in tight field like construction)? Will the subs continue to give the jobs to the lowest bidders (illegals)? Or will Americans stand up and demand the jobs? Will middle class wake up and quit buying homes built by illegals? Only time will tell…keep your powder dry.
happend = happens
Even if the immigration bill passes, the overall timeframe is long enough to allow for a hasty reversal once the depression hits. There isn’t a Congress-person alive that’ll vote for amnesty when citizens are screaming about jobs.
Have you seen “Children of Men”? I can foresee a similar scenario here for illegal immigrants.
“He said he sends as much as 75 percent of what he earns back to his mother and brother in Mexico.”
What, he survives on 25% of what he makes, which includes what he pays in taxes? I’m impressed. The best I can do is 50% of what I make. Sounds like a lot is getting pumped into the local economy as well. It’s all good.
Taxes?? Surely you jest. These guys are under-the-table cash paid help.
ex-nnv, I’m shocked, shocked to hear that these guys aren’t paying taxes…
Of course, I’m just bitter because I don’t have a cash biz. Reminds me of when my kid was in college and told me they knew the campus bookie at a very large university.
He doesn’t mention that he lives in a one bedroom apartment with 20 of his bestest illegal immigrant friends.
Show me one person from South of the “Border” that begs for money. They will stand in front of Home Depot looking for work, but they do not beg for handouts.
They don’t beg because people in Mexico don’t give. Americans are used to people giving to panhandlers, so they beg. The older illegals will go home while the younger ones turn to crime.
“Illegals are going to get slamed very hard. There is nowhere to hide when there is no work … only crime.”
Illegals come from such poor roots that they can literally survive on beans and tortillas for weeks. Plus they will bunch up 2-3 to a single bedroom, sleep on the floor. ect, in a SFH/apt with 10+ per household. And they pay no insurance nor have any monthly debts so can go for long periods between jobs. And their cars are usually old beat up used salvage vehicles payed for all cash.
You would be surprised how illegals can subsist in a down recessionary economy, even without resort to engaging in illegal criminal cons and scams. But make no mistake some % of the illegal population(the ringleaders)do initiate cons,scams,and racketeering rings such as drug dealing, auto accident fraud, medi=cal fraud, illegal alien smuggling, warehouse looting and fencing, ID theft, ect. These activities should increase as the construction jobs decline or the economy goes into recession.
Most illegals are normally law-abiding and just want to make an honest living but even many of these get pulled into committing criminal scams, usually as cappers. A capper would be some illegal who is a participant in an auto accident fraud, usually as a passengerr. Or he/she might be a ‘patient’ in a medi-cal scam.
This kind of stuff probably will increase as more and more illegals get laid off or cannot find construction work.
SideNote1 : Some of you who have been living in SCal for a long time may have(or known someone who had) gotten into a ’staged’ accident, or any accident, with a car filled with illegals. Guess what! !100% guaranteed they sued and extracted $from the insurance company. There was an epidemic of this sort of thing where illegals were getting $2000-$4000 each for Phony claims filed thru a network of corrupt doctors, lawyers, and insurance agents( Something of this sort would also be a template for a much more profitable RE Mort SCam/Fraud).
This type of sh+t quite common back in the good-ol’ 80’s and 90’s which was a period of heavy immigrant influx and also a period when LA crime rates were soaring.
SideNote2 : AS assistant manager for a fast food franchise, i was cooperating with the LAPD in their investigation into a large sophisticated Stolen SUV Ring involving two former workers at the franchise, both illegals using fake green cards. This was in Carson, CA, 1992.
Maybe actual citizens of the USA could learn a thing or two from the illegals about getting by on what your pay actually is. Eating simple foods, buying used cars and doing the repairs yourself, and living in modest housing will save you a lot of cash.
“Sunnyvale ? This crap is happening in Sunnyvale, the home of the richer demographics in the area ? Look out East Side San Jose !”
—————–
I’m sure it’s more on the Northside of Sunnyvale (Lakewood by Lawrence and 101)–that’s pretty similar to Eastside San Jo.
We need a recession in California. The sooner the better. Labor costs are too high! $25/hr for non-illegal day labor. Oh, so I’m suppose to hire the chicos and pay them $ __/hr (put in your own number)? Shiller says the fall ? It’s too slow, just like the housing price regression. The phonies are still touting the monthly median price increases as if we were still in boom times.
“$25/hr for non-illegal day labor”
When arriving in Bakersfield Friday pm I heard a woman on a local radio show (one of the hosts) bragging about how her son just got his first job and that it paid $20/hr. What was the job that he got and that she said was a lot of work? A RE sign twister!
He should buy a house ASAP before he is priced out forever!
The Bay Area has held up surprising well. But the downturn is now starting to hit. We are probably a year behind Sacramento in the downturn. We will see what happens.
“These people all of a sudden are getting notices that in 60 days their house payments will go up $600 or $800 a month”. LMAO, all of a sudden? As in I all of a sudden got pregnant? I sure hope that the majority of these MBS were foisted off on foreigners, then maybee they will tell us to shove our dollars and the Gov will be forced to make the really tough decision of tax or cut spending rather than print endless dollars.
“loans that were essentially doomed to fail”. Huh, these loans seem to have worked out just as they were intended. They held together just long enough to get them off of the originators books and into the hands of the MARK.
I could go on, but don’t have the energy for a rant atm.
Peace
Along time ago, a smart poster on this board pointed out that many of these folks, when they were told their loan could go up, say 2%, assumed that it was 2% of the monthly cost, not 2% of the total loan.
I expect he/she was right…explains why all these folks are so schocked…they’ve been trained to figure everything on a monthly cost basis. I think huge numbers of FBs never realized there might be a difference in the numbers.
Everything Ben posts seems to demonstrate that whatever we spend on education, simple arithmetic, the sort you need to survive in a capitalist market, is beyond the understanding of the majority of American consumers. I think a lot of these people can’t understand simple numbers. This is depressing.
Spike,
thanks, that is an interesting point (in your first sentence). I never thought of it that way.
“many of these folks, when they were told their loan could go up, say 2%, assumed that it was 2% of the monthly cost, not 2% of the total loan.”
no doubt
see my comment above.
but basically, yes, I have several friends who were led to believe that a 2% increase in the interest rate would translate into 2% rise in payments.
this is why I want WaMu to go BK.
I also want WaMu to go into the toilet. My leap puts will be worth a fortune. I missed the Black Swan in March when the Shanghai market hiccuped. My fault.
If the WAMU staff here on the West Side of Manhattan is any indication of their hiring practices, I don’t think they are capable of intentionally misleading anyone. They ain’t that smart.
When they opened a branch at 90/Broadway, I went in to check the costs of a safety deposit box. The nice little girl standing in the Your Financial Planner booth didn’t know what they were.
Probably the majority; some of them, however, must have thought or realized it’s just too good to be true, don’t you think??
And did it anyway -
“I think a lot of these people can’t understand simple numbers. This is depressing.”
Not really, normally banks wouldn’t make loans to math deficient people unlikely to repay huge loans. The problem isn’t a lack of education. Sometimes I wonder if CALPERS, and these gigantic pensions funds bought these loans/MBS’ because they knew they would implode, which gives them an excuse to default on their massive unfunded liabilities without blame.
Joe six pack may not understand finance but I find it incredibly hard to believe bankers don’t understand banking.
“Along time ago, a smart poster on this board pointed out that many of these folks, when they were told their loan could go up, say 2%, assumed that it was 2% of the monthly cost, not 2% of the total loan.”
That would be me. And it is true. The sharks learned they could throw out this fact and most wouldn’t question it.
It can only go up 2%. Oh really? Not so bad.
There is a reason that basic math is a required subject in every school. Of course this just confirms that you can lead a horse’s ass to knowledge, but you cannot make him think.
This situation could never happen if my proposal were widely adopted, whereby a prospective borrower is required to calculate what his mortgage payment will be, as a function of interest rate. Wrong answer means application denied.
“They held together just long enough to get them off of the originators books and into the hands of the MARK.”
Brings to mind homes that are designed to last long enough for the builder to go BK before they fall apart.
Not only are there “for sale” and “open house” signs popping up all over Andover/Tewsbury/Lowell (MA) but a lot of HELOC toys are parked out front with “for sale” signs. You know, the snowmobiles, the Corvettes, Harleys, boats, and other little-used man-toys that stupid people “bought” with MEW money on which they’ll be paying, and paying, and paying…
MEW, which rhymes with Boo! as in Boo!Hoo!Hoo!…
Nothing like trying to sell a boat, when gas at the marina is $4/gallon.
At the the Harley and the Vette get decent mileage. Too bad no-one has any leftover MEW to buy them.
I wonder how upside down folks are on the toys.
Yup, the beauty of being “stupid”. I left my home equity “in” my house. Now, as it evaporates, I don’t have to pay interest on it and I don’t have to pay it back. My taxes will be a bit lower next year too.
“…and other little-used man-toys…”
yes, next to go is trophy wife
I still like the one that someone posted about his bud banging the too-good-looking-for-him wife of some obnoxious hedge fund person he met.
Nah, a trophy wife could be converted into an “income-generating asset”.
Imagine, for a second, an earthquake hits in the middle of the housing plunge. Would this be a good thing with all those magical Fed dollars rolling in and now construction jobs happening all over the place? Or would this be the tipping point for the Fed piggy bank to crumble? Now, think about Louisiana and the hurricane, and remember the destruction that would be NOTHING compared to an 8.5 shaker in LA county on the West.
Would this galvanize the community, or would it make Rodney King riots from 92′ look like a mild day in the city? Considering that OC is douche bag central and the home of the mortgage industry, it would be interesting to see the douche on douche crimes being committed if society had this hiccup.
yes, it would galvanize the community. As in, galvanized barb-wire fences going up all over the places. Which reminds me, I need to renew my Guns and AMMO subscription.
Got tinfoil?
(I need some for my het making business.)
het = hat
“het = hat”
oh, with all dat talk ’bout guns, we just figured it was a regional pronunciation
Well, not too long after the 94 Northridge quake, housing prices started turning up so… who knows. Oh, and there were no quake related riots. Sorry.
Ahhh….and there was no 8.5 either, this was a measly moment magnitude of 6.7, couple hundred times weaker than an 8.5. If that happened now, in this day with the build up that has been out here…I think mayhem wouldn’t be that much of a stretch for the imagination. Freeways closed, water off, energy off, fires rage….ohh and it is Summer time also real hot. And the question isn’t if - it is when, in better times with better people who knows, the new Pepsi generation I doubt it would be pretty.
Just a hypothetical question, and I think it would be devastating to say the least.
Well, sure, it would be. But, despite that, we’re at least sort of prepared for quakes. Now let’s imagine that one of the faults under Manhatten pops. Thye’re due actually… Holy unreinforced masonry! Or maybe the New Madrid system pops again. Hell, that one caused the Mississippi to reverse direction for a while. SoCal has no monopoly on hypothetical apocolyptic scenarios.
The last really big SCal quake of 8.0+ magnitude was the fort Tejon Quake which occurred in 1857 or close to that date(need to recheck on google). Quakes of that magnitude are pretty rare geologic events in SCal?LA county(knock on wood). Not to say that a an 8.0+or greater magnitude cannot occur along the San Andreas fault at any time but I would consider the chances of a 7.0+ mag quake occurring along any one of a hundred or so major secondary faults crisscrossing the LA basin to be much more of a possibility in the near future.
These secondary faults, which may be offshoots of the main SAn Andreas fault, are the ones which caused the two quakes in the SFV(sylmar and Northridge)and others such as the great Long Beach quake of 1933.
Don’t worry to much: these faults often lie dormant for 100’s, even 1000’s of years before suddenly snapping. And CA/LA has a pretty good emergency-preparedless plan for such natural disasters, though everyone should have their own disaster plan/kit prepared.
The worst thing would be to get caught outside near tall buildings or below fwy underpasses. Generally shf resdential areas fare OK except in areas built in alluvial river beds/former filled swampland(Playa vista, Long Beach,Huntington Beach,Venice, Oxnard,marina Del Rey,Harbor city, Wilmington.ect.)
Another misconception. A 1 point increase in Richter scale magnitude is not a linear increase in shaking. In other words, a 6 is not 20% bigger than a 5, it’s ~3000% bigger in terms of energy release.
“Well, not too long after the 94 Northridge quake, housing prices started turning up ”
not in the San Fernando Valley they didn’t, no sir…
SFV went down another 10% and stayed there till bout 2000…
I believe LA proper was also flat at best (both purchase prices and rents) from 1994 until at least 1998.
It’s as if we were watching one of those Doomsday shows on the discovery channel, or the 6:00 news. “What if?” Blah, blah, blah…
We are watching as the main stay of the Cali economy is imploding…so why not?
It’s as if we were watching one of those Doomsday shows on the discovery channel, or the 6:00 news. “What if?” Blah, blah, blah…
Thank you, it is as if subprime loans create earthquakes,
To shut it down, a top-notch team was assembled,’ U.S. Attorney Daniel Knauss said. ‘The result is a significant indictment that should put criminals and would-be fraudsters on notice that the investigation and prosecution of loan fraud is a top priority.’”
—————————————————————————
Don’t forget about Sweeeet Casey!
Don’t forget the executives at Ameritrade and other sub-prime firms.
They are all living large!
Thank you.
Ameritrade in sub-prime business?
I stepped on an ant the other day just to put those vermin on notice. Somehow, they didn’t seem to notice. The spiders weren’t impressed either.
Nice…
‘This was a brazen scheme. To shut it down, a top-notch team was assembled,’
- The brazen scheme took a top-notch team to catch? Even Gomer Pyle should be able to figure this one out. What will it take to catch the sublte scams - some kind of genius?
I’m not impressed with their “A” team. If this is “top - notch” work the fraudsters must be laughing all the way to the bank. (wait, they’re running the banks).
Yep, paying 1 to 2% interest and lending out at 6 to 20%. What a easy way to make money. Kind of like running a casino with the odds heavily stacked in your favor.
“Even Gomer Pyle should be able to figure this one out.”
Surprise!!!… Surprise!!… Surprise!!…
“One member, Charles Dozzell of California, financed a $124,496 BMW 760 series by falsely saying he was an engineer and made $135,000 a year, according to the indictment.”
Hmm? Even making $135k (falsely or not), a $124k car seems expensive.
I only make $80K a year and I got a $90K car. A fully converted 22′ Benz Sprinter that is a camper. And I pad cash.
All in the savings and the use
I saved a lot for several years. I live WITHIN my means. I have no debt of any kind.
Financing is NOT living within your means.
I argue the other way. I think luxury cars are spectacularly cheap. Back in the olden days a luxury car like a Rolls or Ferrari cost the price of several houses. Now you need to work hard to find a luxury car that costs more than the median POS in San Jose.
Would I prefer to live somewhere outside of CA and drive a Ferrari or San Jose and drive a used Honda Accord. Ok this is hard, really hard, smog, bad commute, high taxes, no culture, long work hours, crappy schools, used Honda, two bedroom POS.
Decent house, Ferrari, used Honda Accord (when Ferrari is in the shop), shorter work hours, lower taxes, clean air, possibly better culture, better schools.
I can’t figure it out. I can’t see the catch, I better stay in San Jose.
Oliver
I vote for “both houses and luxury cars are obscenely expensive” and I’d sooner suck on a tailpipe than move to middle America.
I don’t get this, interest makes up most of the monthly nut, if the interest rate goes from 4 to 6 percent, the monthly payment, using totally imbecile math, should go up by 50%, no?
My thoughts exactly. To afford a car like that I would have guessed the fraud number would be at least $650k.
“Such sales require the lenders’ approval and can have negative tax consequences for the homeowner, but they do prevent the black mark of a foreclosure on the homeowner’s credit report”
The black mark of foreclosure? WTF? I was just looking at Delta Financial SEC filings and their classes of loan risk were “A” ch 7 discharged 2 years ago and open ch 13 considered - to “D” risk which was only that ch 7 be discharged prior to closing. Are you kidding me? At the worst the “black mark” is a two year time-out.
So I am a single 44 year old and one of the unfortunate aspects of our culture is that almost half of the single women I date are insolvent in ARM loans. It’s heartwrenching. Most kept the house in a divorce, have kids, and did whatever they could to maintain their lifestyle, which meant chugging a big mug of MEW and the fuse is burning shorter and shorter.
I would like to be able to at least pass on informed advice and would like to know - “Why would anyone consider a short sale?” Assuming you’re okay renting for a couple of years and you are insolvent - isn’t it always better to just give the keys to the mortgage co. Any attorneys out there? The only reason I could come up with is if the mortgage co is okay with you not making payments but staying in the house and keeping it clean for showing - ie free rent.
“So I am a single 44 year old and one of the unfortunate aspects of our culture is that almost half of the single women I date are insolvent in ARM loans. It’s heartwrenching. Most kept the house in a divorce, have kids, and did whatever they could to maintain their lifestyle, which meant chugging a big mug of MEW and the fuse is burning shorter and shorter”.
I too see a lot of these sophisticated women in way over their heads.Mx ex is under water at least 50k on her brilliant condo investment.Another ex landord just lost 65000 on her house due to an ARM.I do not want their debt. Most of these ladies are looking for a sugar daddy to help pay their bad debt. I may be single for awhile at this rate. I might have to leave the country to find a real woman.
Sadly, this will cause many women to become desperate and try to earn money in ways that reflect their desperation….
I’m having trouble just finding a decent young woman these days. Too many ass tattoos and tongue rings. I don’t want to think about where that tongue has been and how many bikers have been in her pants
I may just get an ass tattoo to ward off the judgemental assholes who are out there.
LOL.
My sister is single - 15-year mortgage 1/2 way paid for (bought in ‘01). Her car is paid for, too.
They’re out there. Just gotta look in the right places.
But yes, for conservative financial women, try the Netherlands. I notice that the Eastern European mail-order brides tend to like the rich ones.
just maybe too tall for a typical american
Damn, so if I was single with decent savings account and no killer mortgage, I’d be more attractive then a female FB with all the “work” financed off the heloc?
**min rant incoming**
You know, I have to call bullsh!t here. How would you market yourself to those males looking for fiscally intelligent women? Is there going to be a special eharmony or match.com category? What do you call it - financially trim, fiscally athletic build?
If your intent is to go man-fishing, then I’d have to say the heloc money was well spent. Most women know the ugly truth about…. well, ugliness. I’m not even going to wade into the whole savior complex thing.
Good rant, Gwynster!
The guys who complain about “gold-digging” women are the same ones who expect their “woman” to look top-notch, with not an ounce of fat or any wrinkles (God forbid she’s over 25 years old!).
You get what you pay for…
For some homebuying programs, you are ineligible for 2 years after a bankrupcy and 5 after a foreclosure. For people who don’t budget well and rely on credit cards to bridge between paychecks, either option is much worse than a short sale (with a short sale you just have to pay taxes on the lender’s “gift”).
I emailed the writer of the SF Chronicle article on foreclosures. Here’s her response:
“Thanks for writing. You make excellent points about people in houses they couldn’t afford and the artificial starter rates. But the huge difference between Vallejo and Noe Valley is that if your house has appreciated — which of course is true of houses in Noe Valley and other affluent areas — you have equity, which gives you options — you can refinance or you can take out a home equity loan or you can sell your house for more than you owe on it. Even if someone did 100% financing in Noe Valley just a year ago, they still would have equity because houses there are in such demand. Are you involved in the real estate or mortgage industry?”
Pass the popcorn, please.
which of course is true of houses in Noe Valley and other affluent areas — you have equity, which gives you options — you can refinance or you can take out a home equity loan
Ride that ARM to the bitter end, honey!
“Ride that ARM to the bitter end, honey!”
My thoughts exactly. The negative press is always about “someplace else”, some other buyer, some other loan category. No one wants to admit that this mortgage mess will have consequences across the board, for all neighborhoods, price points, credit scores.
But until the next door neighbor gets his BMW taken away, no one can imagine the scope of what’s coming.
you can refinance or you can take out a home equity loan
Wow. Just wow. Forget the popcorn, somebody better start wielding the clue bat soon.
I’d rather see txchick57 wielding that 20-pound trout.
Fine, make it the clue trout. But for god’s sake, give that reporter a clue.
(Hey, isn’t tx supposed to be veg? Why the cruelty to trouts?)
I guess it’s different there. What amazes me is how many people fail to see that the local bubbles are moving at different paces. The homebuilders in Virginia can’t see it, the reporters at the Chronicle can’t see it, the realtors, Idaho, Washington. You peaked later, you’ll fall later. But you’re still going to fall. I hope the ethanol boom doesn’t jack up the corn prices. Gonna be making a whole lot of popcorn.
“Even if someone did 100% financing in Noe Valley just a year ago, they still would have equity because houses there are in such demand. Are you involved in the real estate or mortgage industry?”
Oh really, even after the 6% skim by the dimwit realtor? Who are these people trying to fool?
you have equity, which gives you options — you can refinance or you can take out a home equity loan
Oh f*ck yeah, if you’re in over your head, the solution is MORE DEBT!
“In Los Angeles, Miguel Saldivar is struggling to find work. ‘There has been no work for two, three weeks,’
So don’t let the f$%%#@in door hit you on the way home or, as they say in Mexico:
Largate pendejo!
I dunno, I get the sinking feeling that someone’s going to tell him:
“Go east, young Mexican! Many jobs await in Pennsylvania! Ed Rendell give welfare to everyone”…except if they were born here.
I was born in PA. So, I guess, no welfare checks sent to me in AZ.
Sigh. Looks like I’ll have to work for a living.
Actually “pendejo” is US-Latino slang, not Mexican.
“not Mexican”
Spanish?
Was this posted yet? Looks like someone’s found the next real estate bubble: surreal estate.
HONOLULU (AP) — Real estate is often a long-term investment. But 10,000 years?
Lo’ihi Development Co. will soon start offering oceanview lots speculators won’t even be able to stand on for many millennia. That’s because they’re currently submerged more than 900 metres below sea level — on an underwater volcano called Lo’ihi, located about 32 kilometres southeast of the Big Island.
The website will be renovated in the next couple of weeks to officially begin selling parcels for an introductory price of US$39.95. Buyers will receive a brochure and a “deed,” but much like Internet groups that claim to sell stars, they probably can’t call themselves owners.
“What’s the scam?” said Norm Nichols, co-developer of the online venture. “If you really think there’s something here that you can’t live with, nobody’s forcing you to buy it. It’s meant to be fun.”
The website advertises, “Lo’ihi Seaview Estates: Real Estate for the Future. Grand Water View Front Lots.” A photo of the sales office is a raft in the middle of the ocean.
Nichols and his business partner, Linda Kramer, both Honolulu entrepreneurs, envision online chat rooms and newsletters to discuss everything from street names to what kind of government to install. They want to hold a “homeowners association” meeting — a boat ride over the volcano — every April Fool’s Day.
Scientists don’t really know when, or if, Lo’ihi will break the surface of the Pacific Ocean. Many guess about 10,000 years, but it could be much longer than that.
Stephen Levins, head of the state consumer affairs office, said the offer could be a problem if it were serious. “However, if the website is clear it’s a parody and you’re not going to be receiving an actual interest in real estate, that’s something else,” he said.
I think we’ll just move to the star I had named after my wife for her birthday about 25 years ago. I believe it was also $39.95. If we leave today, probably will arrive about the same time as that Hawaii lot pokes it’s head out of the Pacific.
If I only knew where I put that ever so official looking deed …….
“That’s because they’re currently submerged more than 900 metres below sea level — on an underwater volcano called Lo’ihi, located about 32 kilometres southeast of the Big Island.”
I would personally rather invest in Greenland real estate. I am expecting global warming to reveal a lush green landscape nestled in mountain valleys by the time I reach retirement age.
I wanted to make a clarification about me as a post I made yesterday seemed to cause some confusion.
I have moved to New Mexico (Albuquerque). When I started reading this blog (when Ben started it), I was living in the East Bay area of California. I had endured the endless why don’t you buy, and thought I was alone and didn’t want to get into a toxic loan. Finding this blog gave me the group that thought this whole thing was a bubble. Our family circumstances became such to leave CA (wife wanted a house and you know that pressure). So we relocated and found a nice home here. We got it about $20K below the market value, and to date the values have held here. If it goes up, fine. If it goes down, oh well. I never plan to move out of this house. We have sufficient savings and can make our mortgage payment with a fixed loan that is a fraction of what such would be in CA. We have a much better quality of life here (for us at least). We are in a low crime area (big help to have a police officer across the street who keeps his squad car parked and highly visible). I mentioned I got a garbage piece of mail offering me a $396K toxic loan and it looked like a check. I thought that was strange as the house is worth about $320K. I asked if others had gotten such unsolicited garbage. I also mentioned that I really enjoy reading about CA folks upsidedown, as it gives me my vindication that I was correct. I saw enough FBers first hand, as I did some financial services work while in CA, and read the loan docs first hand that some FBers had taken out. It was unbelievable what some folks had been put into.
So where do you draw “guilt line”…..towards the stupid borrower who did not know what they were getting into….or towards the “anything for a commission” pressure of the RE/mortgage agents?
Both sides are at fault in this debacle.
So FBs should get no bailout (instead getting a very hard but valuable life lesson), but agents/brokers who facilitated these type of transactions should “do time” (these slimeballs are the lowest form of predatory being).
“I mentioned I got a garbage piece of mail offering me a $396K toxic loan and it looked like a check. I thought that was strange as the house is worth about $320K.”
Think of this as an offer to become an accomplice in a $76,000 fraud scheme.
Homebuilder Pulte to Cut About 16 Percent of Work Force, About 2,000 Jobs in Restructuring………
“The homebuilding environment remains difficult, and our current overhead levels are structured for a business that is larger than the market presently allows,” Richard J. Dugas Jr., president and chief executive, said in a news release.
Pulte said it expects to take pretax charges of $40 million to $50 million for the restructuring, mostly in the second quarter of 2007.
Yep……..it’s all contained
http://biz.yahoo.com/ap/070529/pulte_cuts.html?.v=2
‘Nobody sat down with them and said if your interest rate goes up just 2 percent, here’s what your house payments will be.”
I don’t get that part.
It’s the most important purchase they’ll probably ever make, yet they don’t research the terms of the loan? They spell it all out in a simple statement sheet. But nobody took the time to do the math?
I know I did when I signed a mortgage.
Vallejo home prices fell 8.5 percent from November to March, according to DataQuick. For people who bought in recent months without putting any money down, that means they may owe more on their mortgage than the house is worth.
For some reason I can hear the faintest sound of a violin, but I can’t tell where it’s coming from.
I believe it is the Vallejo Symphony Orchestra you hear…
http://www.vallejosymphony.org/
Imploder,back in 2000 they gave all the high school teachers in oakland california a literacy test.literate was defined as understanding 80% of the words on the front page of the sf chronicle. 50% passed.by definition half the populace has an IQ under 100.drive safely.
Does the Chronical write to an eighth grade level? Oh sorry, it’s Oakland ,3rd grade? When do you start making sentences? It’s been so long!
That’s pretty bad. Newspapers and periodicals are written at a only a sixth grade reading level.
“The people seeking help have almost identical stories, Hardy said. They bought homes using subprime loans. After a low initial rate, their monthly payments skyrocketed. Meanwhile, home prices in their neighborhoods went down, so they cannot easily sell or refinance. The result is that the homeowners owe more on their homes than the houses are worth.”
I am guessing there is one main reason San Diegans do not read similar stories to this one about the impact of the subprime collapse on Bay Area communities like Vallejo, Richmond, Pittsburgh and Antioch applied to San Diego County communities like Chula Vista, Lemon Grove, Escondido, Oceanside and El Cajon:
Unwritten rules prohibit the SD Union Tribune from publishing negative reports about the county’s real estate situation.
Unwritten rules prohibit the SD Union Tribune from publishing negative reports about the county’s real estate situation.”
I assume that this rule is a nod or a wink. Never is it written. Are you telling me that some news outlets have this in writing? I’m naive here and want to know.
Cinch
‘Unlike the price index produced by the Office of Federal Housing Enterprise Oversight, the Case-Shiller index does not include refinancings. And, also unlike the OFHEO index, it includes homes with mortgages larger than the conforming limit of $417,000.’
Bingo! There, in a nut shell, is why the Case-Shiller index picks up a 6% drop in San Diego home prices which the OFHEO index misses. I guess that is another reason to increase the conforming loan limit — to get more accurate readings on how quickly SD home prices are dropping…
“‘But more and more, the calls we’re getting are from people who bought on a shoestring and have few, if any, options to avoid the foreclosure. They haven’t built up any equity and they put themselves in loans that were essentially doomed to fail with 100 percent financing and/or negative amortization,’ Eichner said.”
At least they enjoyed the pleasure of living for a time in a much nicer home than they could have ever purchased in the pre-subprime era.
SFRs? is SFR serf for rent? ergo they take money and become a bank serf for 30 years right? after 30 years what do they get?
wanted to share a story that shows not only how ridiculous not only the run-up was - but how real estate moves in cycles. RE isn’t dead by no means, just at the two-minute warning before half.
I bought a new house in the Natomas area of Sacramento for $87,000 in 4/87.
Sold it for $139,000 in 10/90
Bought it back as a VA repo 10/97 for $90,000
Sold it 08/05 for $360,000
The last 3 transactions, mostly by shear luck, were the absolute top and bottoms of the market, at least in Sac.
Get Stucco - do I have the right option. I take their $396K and invest it off shore in gold or something. I quit paying CountryPuke and take 6 mos free rent until they FC. Before they do, bring a herd of pigs in to take care of the place while we take our $396 and money not paid in rent and pay cash for something else. isthat the game they want?
chinese index down 6.5% overnight. This what got the crash party started in February.
Perhaps the bears will finally get a little break?
Good luck to all the HBB traders today!
I think it’s funny how many people root for CA to fall. if CA falls so does the USA. Alone, CA is in the top 10 richest “countries”. I wonder where the US would be without it?
i most certainly am not rooting for ca to fall; howver, i can’t ignore how downhill things are there on almost every front. pertaining to this blog, it is most bubblicious. i will not buy there under any circumstances so i am not rooting for a huge crash… that said, i might change my mind if montecito goes under 200k.