A Housing Bust In California
The Mercury News reports from California. “The seekers boarded the bus Saturday, questions on their minds and dollar signs in their eyes. Possibilities abounded in South San Jose, where numerous ‘for sale’ signs dot the lawns. Again and again the bus stopped at select houses where the tenants had left and foreclosure auctions failed, leaving lenders to repossess the homes.”
“‘You can make steal deals,’ advised broker Don Crozier, as he stood in front of the bus, microphone in hand, ‘even though it’s already below market.’”
“From San Diego to Stockton to San Jose, members of the real estate industry are offering such bus tours to entice home sales in a bad market. ‘Sometimes to get people to move off the dime, you have to have something more than the norm,’ Crozier told the Mercury News before the tour. ‘What do you need to do to snap people out of the little cocoon? Let’s get people on the bus.’”
“Each flaw, said contractor Rick Steiner, was a chance to haggle with the banks holding the mortgages on these empty shells. Take the trim cream-colored home on Goldfield Drive, the one with a market value of $640,000 that’s listed for $575,000.”
“If the tiled pool in the back yard isn’t cracked, Steiner estimates it’ll take $15,000 to get the house up to shape, but he could probably persuade that bank to cut the price by $40,000.”
“The last home on the tour was a townhouse on Communications Hill, turnkey ready with hardwood floors, rich brown carpeting and $70,000 under market.”
“Susi Steiner nodded approvingly. The ‘budding real estate investor’ was looking for a home for her mother and a possible investment for herself and her husband.”
“Standing in the immaculate master bedroom with its walk-in closet, she noted, ‘This is a great thing for my mom because she wants it live-in ready, and I don’t want her to pay full price.’”
“‘It’s a buyers’ market,’ said Cecilia Manibo, whose financial planner advised her to buy real estate. A tour was the most efficient strategy. ‘If we were left on our own,’ she said, ‘we probably wouldn’t do it.’”
From KSND TV. “In 2005, Marty Ummel and her husband bought a four-bedroom house in Carlsbad for $1.2 million. The Ummels say their agent was dishonest about the price of other homes in the neighborhood, and then rushed them to close the deal before the Ummels found out comparable houses on the same street sold for as much as $175,000 less.”
“She has now filed suit against her real estate agent, claiming fraud. ‘We feel that we were misled. We feel disappointed. We do feel angry,’ she said.”
“But in a deposition, an expert witness hired by the defense said of the Ummels: ‘They simply didn’t do what is expected of a knowledgeable sophisticated buyer, and are now looking for someone other than themselves to take responsibility.’”
“People in the real estate industry are calling this a ‘landmark lawsuit.’”
“The National Association Of Realtors said it has failed to find any legal cases in the past five years that revolve solely around the question of valuation. The Ummels’ case goes to trial in Vista on Monday.”
The Voice of San Diego. “Economic disquiet means fewer sales in the city’s stores and restaurants, funneling less general sales tax money to city coffers. Without the confidence boost instilled by a sizzling housing market, a weekend trip out for a flat-screen television or a new couch is less and less common for shoppers in Lemon Grove.”
“And so, Lemon Grove’s Graham Mitchell and the other city managers and financial officials for San Diego County’s 18 cities grapple with sales tax revenues that hardly resemble the economic boom time in recent years. And even among cities whose managers thought they were being quite conservative with revenue projections, some find themselves lowering their expectations.”
“The trouble has hit El Cajon’s car dealerships and Lemon Grove’s home improvement stores. San Marcos’s building permit fees have dropped, and Chula Vista’s new mall hasn’t magnetized the hordes of shoppers envisioned.”
“‘The slumping housing market and drop in consumer confidence has a very direct effect on cities in California,’ said Rod Gould, city manager in Poway. ‘I don’t think any will be exempt from this economic malaise.’”
“Officials in the city of El Cajon last week warned its City Council and mayor of ‘an impending fiscal emergency.’We’ve known that we’ve had this imbalance for a long time, and I think we were all hopeful that the sales tax revenue would go up,’ said Mike Shelton, El Cajon’s finance director. ‘But not only did the economy not get better, it got worse.’”
“Haynes said even though the housing price drops have been very slight in some neighborhoods, many city residents have been hit psychologically.”
“‘There may be something to be said for the decline in prices hitting people psychologically,’ Haynes said. ‘Where they used to feel a little bit more insulated, now [they're saying], ‘Maybe now’s not the best time to go out and make a big purchase.’”
“‘People are people, and they’re going to have to buy a new car eventually,’ said El Cajon’s mayor, Mark Lewis. ‘But you’re seeing if you can make a coat go another year, asking, ‘Do we really need to go out to eat again?’”
The Daily News. “Already grappling with a regional economic squeeze, consumers shivered with concern again last week as news of a possible U.S. recession rippled through the San Fernando Valley.”
“Making money is arguably hardest in the state’s housing market. While 4,935 new homes were built in the San Fernando Valley in 2006, just a year later 1,500 fewer homes were constructed, Blake said.”
“And the slip has given way to job loss in the construction industry, where about 6,200 jobs in housing-related industries were lost in December, according to the California Employment Development Department.”
“‘We don’t call it a housing crisis in the construction industry; we call it a housing bust,’ said Bill Davis, executive VP of the Southern California Contractors Association.”
“‘It’s ugly, bad, horrible - it depends on how dependent you were on the housing business as to which one of those adjectives you’d use,’ Davis said. ‘But it’s just plain not good.’”
“Sales of big-ticket items such as vehicles also are taking a hit, with the California Motor Car Dealers Association saying sales last year dropped 8 percent, the worst in eight years. Hummer sales dropped about 41 percent in 2007.”
“‘I think with all the news we’ve heard about the subprime mortgage (crisis), people are seeing they have less equity in their homes,’ said Crystal Jack, spokeswoman for the association. ‘When you see less equity, you feel less able to make those bigger-ticket purchases.’”
From CBS News. “Stockton is a city of 280,000 people in the Central Valley. A few years ago, it was one of the hottest real estate markets in the country; today it is the foreclosure capital of America.”
“As of last week, there were 4,200 Stockton homes either in default or foreclosure; $1.4 billion in bad loans in just one California community, and it is far from over.”
“Matt and Stephanie Valdez say they knew exactly what they were doing when they bought a small two-bedroom for $355,000. They…planned to refinance the mortgage before the interest rate jumped to 11 percent. But they couldn’t do it because the value of the house had fallen below what they owed on the mortgage. They say they can afford the higher payments, but see no point in making them.”
“‘The house keeps going down, payments keep going up. Where’s the logic in that? And how can we fix it? I mean, that’s what this whole thing’s about for us is how can we fix this? And if we can’t fix it, then what do we do?’ Matt Valdez asks.”
“‘Why pay a $3,200 payment on a 1200-square-foot home? It makes no sense,’ Stephanie Valdez adds.”
“‘That’s what you agreed to do when you bought the house,’ correspondent Steve Kroft points out.”
“‘Fine. If the value is going up. But we’re not going anywhere. The price or the value is going down. It makes no sense because we will never be able to refinance and get a lower payment. There’s no way,’ Stephanie Valdez replies.”
“Real estate agent Kevin Moran, says it is happening every day. They were never really invested. Most of the people who lost the houses didn’t lose any money because they never put any money down.”
“Though their credit is damaged, and they could face legal action in some circumstances, they got to live in a new house for a couple of years, and some of them even managed to get some money with home equity loans or by refinancing.”‘
“Nobody seems to be saying, ‘Look, I made a contract with you. I borrowed money from you. I’m gonna do everything I can to pay off that obligation.’ People just seem to be saying, ‘Look, take the house. Good-bye. I’m leaving,’ Kroft says.”
From The Sun. “It’s almost like having a piece of Orange County under your feet. But no Meadowbrook Park Lofts homeowner opening their front doors will experience that hip, trendy lifestyle once they step outside.”
“Twelve live-work townhomes on Third Street in downtown San Bernardino went on the market a couple weeks ago, boasting two-car garages, balconies, and ground-level space for office or retail use. As of last week, one loft was sold. They range from $350,000 to $360,000.”
“If you’re pondering whether to buy, be prepared to get showered with monetary incentives. ANR Homes and San Bernardino have partnered to offer some pretty hefty draws, like a $100,000 down-payment assistance program for people who already live or work in the city.”
“‘We’re just trying to stimulate some interest in downtown,’ said Lisa Pereira, director of sales and marketing for ANR.”
“The facts are as plain as day: These pristine townhomes are surrounded by a moribund downtown. Adjacent to a jumble of older tract homes, the lofts are located across the street from a couple of old business buildings and Meadowbrook Park.”
“‘The disadvantage to that project, particularly for a senior, is two flights of stairs,’ said Dale Rauch, a contractor who lives in Grand Terrace and took peek at the lofts a week ago.”
“But seniors aren’t the sales target. City leaders hope young professionals - county workers, lawyers, teachers - will move into Meadowbrook.”
“Rauch can’t picture himself living there, at least for now. ‘I think it’s a little ahead of its time,’ Rauch said.”
“His wife works right down the street for the San Bernardino County Superintendent of Schools Office. ‘It’d be fantastic for her,’ he said. ‘But … just down around the corner they found two people murdered.’”
“If dreams of transforming downtown San Bernardino come true, getting in on the ground floor could be one of the best real-estate decisions you’ll ever make. The area, though, has a long way to go.”
“Night life is virtually nonexistent unless you count the homeless people hanging out at local parks after the sun sets. Also, 48 registered sex offenders live in the 92408 ZIP code.”
‘Nobody seems to be saying, ‘Look, I made a contract with you. I borrowed money from you. I’m gonna do everything I can to pay off that obligation.’ People just seem to be saying, ‘Look, take the house. Good-bye. I’m leaving,’ Kroft says.’
60 Minutes can act like this is some new phenomena, but then why is the term ‘jingle mail’ so well known? I’ve posted many times that when folks get in these situations, they bail. Especially when they probably could care less about the subdivision, etc, and were only in it to make money.
I’d bet Kroft would walk too, if he was underwater by six figures. Reap what you sow, REIC.
Interesting commentary on the CBS piece on Minyanville
The issue Kroft is alluding to here is what one might call “the morality of contractual obligation.” Without saying it explicitly, Kroft implies (”That’s what you agreed to do when you bought the house,”) that Valdez and her husband, by walking away from the house, are engaging in some vaguely immoral behavior. It’s a promise. They are breaking their promise. Left dangling for the viewer to arrive at is the conclusion that people who break promises are immoral.
But Valdez is outlining a perfectly rational economic argument for exiting the mortgage contract and is willing to accept the full penalty - credit impairment - for her actions. Still, Kroft carries the vague morality objection a bit further in the segment.
“Nobody seems to be saying, ‘Look, I made a contract with you. I borrowed money from you. I’m gonna do everything I can to pay off that obligation.’ People just seem to be saying, ‘Look, take the house. Good-bye. I’m leaving,’” Kroft observes to real estate agent Kevin Moran. “There was a time, I think, when people felt really bad about not paying off a debt.”
“Yeah, I think in those days, loans were made by your local banker or building and loan associations or savings and loan,” Moran replies. “They were guys you saw in the grocery store. They were on the little league team with you, the PTA, the school. And I think as mortgages became securitized and Wall Street became involved, they became very transactional and there was no relationship built with the borrower and the lender. And I think that makes it easier for someone to see it as an anonymous party at the other end of the transaction and just walk away from it.”
“Just a business decision,” Kroft says.
Implicit in this segment is that families are not entitled to make “business decisions.” But you know who is entitled? Why, businesses of course. When businesses laid off 1.5 million workers in 2007, it was purely a “business decision.” When Wall Street banks “wrote down” more than $100 billion in losses in 2007, it was purely a “business decision.”
Look for families to become more comfortable making “business decisions” of their own in 2008.
http://www.minyanville.com/articles/index.php?a=15692
I’m not making a moral judgement on paying debts, just saying that’s what I have seen people do. BTW, corporations do it all the time. And governments.
your absolutely right ben. Remember its trust in the system that keeps the system (any system) going. Once the trust of any contract is broken, the system can fall apart is this behavior becomes widespread. That is exactly what is going to happen if it already hasn’t. We will all become familiar with the phrase “counter-party risk” in 2009.
We will also see the return of the phrase “cash on the barrelhead”.
Cash me out.
isn’t cash just another promise to pay?
isn’t cash just another promise to pay?
Sure is. And what does the price of Gold tell us about this promise?
Promise Sorry Notes
corporations do it all the time. And governments
That’s exactly the point of the piece I quoted: why is “everyone” (not you, obviously, I’m referring to the MSM and lenders) acting shocked that individuals are going to make the same kind of rational economic decisions that businesses make every day? Especially when they didn’t have any skin in the game to begin with?
I guess I expect more of human beings than corporations or businesses - my bad. Only purpose of business is to make profit - I guess I was naive and thought there were other values humans were supposed to possess.
I guess I expect more of human beings than corporations or businesses
Why? Corps are, in fact, composed of one or more human beings. I would expect their behavior to be exactly equal.
Corps will be corpses before too long…
The bigger they are, the bigger the fall
Interesting, on one hand the choice to resort to jingle mail is portrayed as a morally suspect business decision. Yet, on the other hand the pols and NAR shills speak about the lofty goal of keeping “families” in their “homes”.
The whole situation is rife with hypocrisy all around, but it sure sounds like the PTB is quaking in their boots on this one. Tonight’s speech might give us some insight to as to how nervous they really are.
Nah…
’ssshrubery will just babble on, and get clapped at.
While I would also hope that the people who work for a corporation would behave ethically, I suspect the ethics and morality of corporations are dependant upon the same key factor in so-called “mob mentality”. The members of the group feel capable of taking actions they otherwise wouldn’t but for the anonymity of the crowd (or Articles of Incorporation).
Corporations are not like people, they’re more like zombies. “Brainssss, brainssss”
“Only purpose of business is to make profit - I guess I was naive and thought there were other values humans were supposed to possess. ”
Not true. Business has moral obligations. It’s a two-way street, and, as we see, the traffic is now going the other direction.
And conversely, humans require a profit as well, except for all of you self-sufficient farmers out there. (And don’t be buying any goods at the market behind our backs or you lose your self-sufficient status and are back to profit-motive.)
IMO, corporations should be held to a much higher standard than individuals. They have limited liability, while you and I do not.
When I was young, my plan for cleaning up the worlds affairs was to reinstate full liability to all corporations and their shareholders.
So did you give up on that plan?
They have limited liability, while you and I do not.
Do you mean some type of limitation beyond the usual financial limitation?
And OT: At least you had a plan for cleaning things up that is in the realm of possibility, unlike say, me, who lived in a utopian paradise of ideas.
Too many years of Corporations AND people walking away from their committments, and then coming up smelling like a rose afterwards. But mostly I blame the corporations, for setting such a fine example by throwing everyone under the bus for the past 20 years.
What I find amusing is the assumption by Wall Street that after 25=30 years of being treated like a smuck, that “ordinary, average guy” wold continue paying his upside down, half million dollar mortgage forever, while Mr/Hedge Fund/CEO/Playa’ continued to give themselves seven figure bonuses for BS-ing everyone, including themselves.
A corporation is a fictitious person, that assumes liability of decisions made by real people.
‘So did you give up on that plan?’
Well, I came to understand that our governments are corporations, as are their supporters. It is hard to cut the Gordian knot, but it would still work, IMO.
I love your plan, Ben.
Agree that there is no moral incentive to do the right thing WRT business/money these days.
Used to be, employees would suffer for the employer during hard times (temporary pay cuts, etc.) because they would be rewarded for their loyalty when things picked up. There used to be a more symbiotic relationship between employers/employees.
Now, employees and customers are treated like commodities. Why should businesses expect anything different in return.
“It’s not personal…it’s just business.”
That’s what we get for pushing profits over people. You reap what you sow.
“‘Fine. If the value is going up. But we’re not going anywhere. The price or the value is going down. It makes no sense because we will never be able to refinance and get a lower payment. There’s no way,’ Stephanie Valdez replies.”
Now contrast that with someone borrowing money from a loan shark. They’ll be housed in cement or found floating with the fishes. I guess the moral of the story is that you ‘can’t cheat real private enterprise’ only government backed ones.
well, lets look at things from a political and legal standpoint.
FB’s are doing the maximum legally allowed by law and I have no problem with that. Remember this about politicians and wall street, “Only pay attention to what I say and not what I do.” For example….How many ARM loans did Alan Greenspin take out? Just wondering.
When you’re dealing with individuals and institutions that are completely devoid of integrity, and couldn’t care less about your best interest or their fudiciary responsibility to you, I can see why so many FBs just shrug off any notion of honoring their contractual obligations.
What bothers me is how pervasive and accepted it is to walk away from any inconvenient obligation, be it a house you’re underwater on, or your spouse and children.
Sammy,
We have big problems in this country, but I don’t expect the line to get drawn over hastily-built boxes with half-million dollar price tags.
Ben,
I fully agree. Part of basic integrity is honoring your obligations, even when it costs you. But if you’re dealing with less-than-honorable individuals and institutions - not to mention foolish lenders who pandered to people’s ignorance and sense of entitlement - I can’t really be too critical of people who walk away from overpriced houses many of them should never have been allowed to buy in the first place. The fault lies far more with the lenders that faciliated and encouraged such irresponsibility.
Sam’s most famous quote:
“Why get married? Just find some bitch you can’t stand, and then buy her a house.”
Now look who’s talking about family obligations. Hmph.
Why get married? Just find some bitch you can’t stand, and then buy her a house.
I don’t think that quote originated with Sammy. Unless Sammy was that guy next to me at the bar in Dallas in the late 80s, of course.
Hey, don’t knock that one. It was hilarious.
Its a Rodney Dangerfield line.
I think it is a Rod Stewart quote.
businesses do what all the time? don’t pay back loans, stay in business and borrow again? i don’t think so.
Yes, that’s exactly what they do.
Years ago, I worked for some very wealthy businessmen.
It was their M.O. to start a new business, grow it, grow thier debts and declare BK while opening up their next venture.
They used to have pricey bodyguards, but made some very serious $$$ in the process.
One thing, perhaps not considered, is, “How many of these people had bad credit to begin with?”
If you have bad credit to begin with and someone tells you you can get a no doc loan for hundreds of thousands of dollars. And then on top of that you can refinance, put hundreds of thousands of dollars of liquid cash into your pocket and the very worst thing that can happen as a result of all this is that your credit is ruined, who would say no?
It’s a win-win for every deadbeat on the planet. I would really be interested in seeing some these foreclosed individual’s credit scores at the time of original loan.
Maybe it’s a go for deadbeats. There is something in the character of a person that impacts the decisions a person makes. Many here do not get involved with all the housing nonsense even though they could have. It sometimes feels like the deadbeats not only got away with getting tons of money for nothing, but everyone else profited, while those that were prudent and wise have watched their savings devalue while prices jumped up crazily. That’s why I’m surprised more are not angry at those that gambled and now that they lost, feel entitled to walk away with no remorse. They helped push prices up and the loss the bank writes off is going to hurt investors, individual and institutional - that hurts everybody. Some will now get the double whammy of suffering again for someone else’s greed and gamble plan.
Interesting, how much cash would you take to trash your credit score for 7 years of bad credit, $50,000, $100,000, $150,000. Hmmm, maybe extend that to 10 years, max out all the credit cards too, live in a new house for a year or two then declare BK. With nothing more than bad credit for 10 years. If you planned it right, married and used the other person’s credit for those 10 years, who wouldn’t!??
I guess thats all thats left in this country, me first, and greed $$$
Glad to see I’m not the only one left who thinks that a contract to actually pay your mortgage is something to be honored. I purchased a home in Lancaster, CA in 1992. In 1996, it was worth 35% less than I paid. Six of my neighbors walked. None mind you lost there jobs and all had the ability to continue paying their mortgage. The difference being, back then, you had 30 year conv loans a you still didn’t pay more than 3.5x your salary. I payed my loan, live in the home until Nov 2001. I made a whopping $17K over nine years.
Now these dumb asses are only a year into the slide and already upsidedown $100K of a 4 year slide. These oxygen theives paid 8x and sometimes 10x their salary on home that sold for half that only 4 years earlier. In the 90’s people walked, with downpayment mind you, over $30K losses. Just think of the carnage that is about to unfold when tens of thousands are $100K and $200K upsidedown.
I despise these people, i.e. my name “Let’em Burn”. I quit the best job I ever had and left California becuase I could not afford a descent home in a safe neighborhood. These dumb asses are adults and need to be accountable for their decisions. Yes, there should be great pain endured by those who made this all possible. I have no pity for someone who lacks the brains to read a loan document and claim “I didn’t understand”. We need debtors’ colony like Austrailia or Florida used to be.
Now its us smucks hoe did the right thing that will be asked to pay for the clean-up. Yah, let’s give everyone $600, $1200 or $2400 that we dont’ have. Why not be honest, let me addopt one or three of three dumb asses and I can write him the check directly. Maybe he could send me a picture of himself at Christmas with a beer in his hand, smoking of him unloading his jet-ski’s he bought with a HELOC two years ago. Outstanding America, shit where’s that bottle of high blood pressure medicine?
Agree with you Ben. As they say, a fish rots from the head. The “Greatest Generation” was well behaved in part due to receiving pretty good treatment from government and corporations during the prime years of life. Yes, a lot of guys died in WWII. But most of the vets came home safely to heroes parades and to GI bill homes for $8,000 and GI bill educations if they wanted them. Then their real salaries soared from 1945 to 1970 while they accumulated fully funded employer pensions. When the 1970s California housing inflation ran up their property taxes, they got proposition 13. Then they got well funded medicare and social security in addition to their capital gains. Pretty sweet actually.
Every generation afterwards has gotten a progressively worse deal and has been increasingly angered by government and corporate abuse. The elite has shown no concern or loyalty to the masses for almost 40 years. It is not surprising that the masses have finally learned to mimic the dishonorable behaviour of their economic betters.
BRAVO New Zealand Renter!
Which is why a lot of these flippers and speculators were baby boomers with little or no prospects for retirement. Look at the surveys, its very telling. 40% of boomers ( or close to that) expect to work till they die. Granted, in the 80’s they jumped from corp to corp, whoever paid the highest salary. Thats how pensions went out the window with little employee backlash. No one stayed with one company anyway. Loyalty works both ways. Now in their fifties, they need that big capital gain score. So you have the tech bubbble and the RE bubble. Not the entire reason for the bubbles, but a good portion of it.
“‘Fine. If the value is going up. But we’re not going anywhere. The price or the value is going down. It makes no sense because we will never be able to refinance and get a lower payment. There’s no way,’ Stephanie Valdez replies.”
I would love to see these asshat Valdez’s in Vegas. “Sir, you have $500 on the table and have lost your bet.” “But, I only wanted to be $500 if I was going to win.”
That quote doesn’t make them look good, but I see know reason why they should pay attention to anything more than their own self interest. Why should middle class people stick around and pay more than they have to when guys like Mozillo walk away with millions of dollars in golden parachutes?
If people like this keep paying for their overpriced house, thats one less foreclosure and one less resale to bring down the prices. So send in the jingle mail. One more step to house prices that actually make sense.
About 6 months ago, someone on this blog noted that the borrower is making a promise. She promises either to pay back the loan or to hand over the collateral. It is perfectly rational for FB to choose the latter course, and the bank is culpable for not passing that little piece of info along to the investor.
that doesn’t explain 120% LTV with collateral less than the debt. They made a promise to pay, period.
I agree with you. These deadbeats leave somebody else holding the bag. They already got the money, somebody else’s money, and they need to pay it back. They’re not getting revenge on Countrywide or CityBank or the like by cheating; they’re doing in somebody’s unwitting grandmother whose pension fund was invested by some idiot duped by promises of huge returns. I doubt anybody of note on Wall Street will go broke, or even give back a cent of his or her ill-gotten gains, but tens of thousands of little people will be wiped out by these speculators and fake home owners who bet on instant wealth and lost.
Meanwhile, everyone’s credit card interest rates will go up to cover the losses, and the economy will be crushed to boot. I cannot imagine borrowing a half million dollars, and then walking away smugly to let someone else suffer in my place. Who cares if corporations do it? Someone needs to a draw a line and say enough is enough.
There are no morals in tort law. Trying to invent them now, and inflict them on the least powerful side of the transaction, isn’t exactly going to work.
It’s business. Grandma may own the loan, but then do I also get to blame Grandma if I get cancer and she forcloses on me, putting me out on the street?
No, I don’t.
Which is why this is NOT a moral problem, it’s a legal one.
If some asshat wants to loan money to a bad credit risk with no collateral for most of the loan, they deserve to lose it.
Fine… they are bad people for breaking their promises. I’d say many are complicit in fraud. But to be frank, who cares? We already know a lot of these borrowers were stupid and/or lazy and/or greedy. Such has been the condition of humanity from the beginning.
The problem is that the elite running our government and corporations have been screwing J6P for generations now, J6P knows it, and when he gets the opportunity to “stick it to the man”, he does what he can. The REIC corrupted our government enough to loosen the regulatory systems that are supposed to prevent fraud, opening a flow of free money. Now it’s hangover time. Sad thing is that it’s cautious savers like me who are going to pay. FBs walk away as expected (surprised?) hedge fund guys go back to their mansions, and my savings are being eaten by low rates, high inflation, and a tattered currency.
FBs walk away as expected (surprised?) hedge fund guys go back to their mansions, and my savings are being eaten by low rates, high inflation, and a tattered currency.
———————
Feeling your pain, here.
The problem is there are other victims: the neighbors who had to pay higher property taxes because of people who bought houses at crazy prices that they had no intention of paying back.
Of course, people who don’t want their house to increase in value faster than wages do are few and far between, but they do exist! Me, for instance. I want to pay as little property tax as possible.
So I was victimized by these FBs
Good point reuven. Also the people that did qualify for the loan ,and will pay back the loan, are affected by the foreclosures that reduced their property values . Some people in good faith bought property with a trust that lenders would not make faulty loans to establish values in a neighborhood .
The borrower that bothers me the most is the one that did qualify for the payment ,but they are walking anyway ,with sometimes a ton of money in their briefcase . The borrowers that committed fraud to obtain the loan cannot be considered
anything but in violation of a moral misdeed and perhaps a criminal one .There is some speculation that 70% of the borrowers had false loan applications . If you commit fraud to obtain a perceived gain ,than thats a moral and criminal violation .
Back in the old days of lending ,only a certain % would default on loans and generally it was because of job loss ,divorce ,or perhaps a medical emergency .
When a Corporation hires a employee ,usually it’s a” at will “employment contract in which either party can quit or be fired ,and both parties know this going in. Unemployment insurance is provided also for laid off workers . While it is true that Employers are not as loyal as they use to be ,likewise employees aren’t either . So, the employment example is no excuse for a party to walk on their contract obligations IMHO .
Let face it ,this was a “Crime Wave ” real estate market in which values were falsely inflated and incomes were falsely inflated ,and now the criminals are walking because the real estate gamble didn’t pay off .
While it’s becoming very popular today for a FB to walk on a house they can’t make easy money ,I think that there should be more talk about the housing boom real estate scheme that was promoted and what caused these FB’s to even go to the point of filing a false loan application . Some of these applications had to be faked by the loan agents ,and some had to be faked with the permission of the borrower or with the help of the loan agent .
My point is that in large part the inflated prices were caused by a “crime wave ” of false appraisals and false loan applications . So what do you do with a borrower that pulled out cash and benefited by their ill-gotten gain by their false loan application in spite of the stupid investor that was told it was decent AAA loan paper by a faulty rating ? Do you say that this greedy borrower has a right to walk and affect us all because corporations aren’t fair when they need to cut jobs? I don’t think so .
Does the REIC get off the hook for promoting false investment advice and are they morally and legally on the hook for false promises while being involved in setting up borrowers on loans they couldn’t afford .How many Realtors were involved in being the set up artist for the “cash back” deal that so falsely raised values or fake bidding statement . I hate to tell you this but RE Brokers are suppose to review all work that their agents do .
I have always blamed all parties to the RE transaction ,including the borrower ,whenever any loan packaged was obtained by fraud . These loan packages didn’t have minor inflating of the income ,but major inflation of the income to obtain the loan .the losses are not petty for these crimes but major losses are taking place because of this crime wave .I don’t like it one bit .
Rant off .
My point is that in large part the inflated prices were caused by a “crime wave ” of false appraisals and false loan applications
I have a google news alert trying to find news about ONE homeowner who was brought up on charges for misstating his income on a mortgage application.
It hasn’t happened yet, as far as I can tell.
Politicians just don’t want to go after these people.
I think that everyone with a stated-income loan should face a choice:
1. Face criminal charges or
2. Pay Income Tax (plus penalties if late) on your stated income amount
Certainly they should go after these clowns that bought numerous properties by fraudulent loan applications . There is no question that a lot of the loans funded between 2005 and early 2007 were the result of fraudulent cash back loan wheeling and dealing that was in violation of the loan guidelines .
Law and order needs to be restored in my humble opinion . A Society cannot function without law and order . While I understand why the FB’s were going for the brass ring ,I still think that it can’t be condoned and a penalty should be exacted .Make no mistake that the investors are going to sue for their losses .
A repeat of a tune I dreamed up a month ago, and it was old news by then…
Dashing through their dough
In a most consumerist way
O’er the fields of cash-flow
Never saved any pay
Bells of exit do ring
Making spirits fright
What fun it is to laugh and sing
A foreclosure song tonight
Oh, jingle mail, jingle mail
Jingle all the way
Oh, what fun it was to ride
Until the time came to pay
Jingle mail, jingle mail
Jingle all the way
A 41 Cent stamp on an envelope
Ought to get it there ok…
Ha Ha
I am perfectly fine with people acting this way. Look, it may bee immoral. Their gambling like this has severely affected us savers and will continue to hurt the economy. But what should they do ? They took advantage of the system while buying and are being kind of “smart” now. As long as this is within the legal boundaries, I am fine.
This will hurt the lenders. Big deal. They are the last ones for whom I will shed any tears. Hopefully they will come to their senses, if not already.
This sort of behavior by borrowers has some positive side effects. It will help us reach the bottom very fast. This is why we are not Japan.
The idiot policy makers can try whatever they want to prop up the house prices. But the “market” will take care of this in its own way.
But, SIBA, what about the “Sanctity of contract law”? Those evil, nasty FBs are sure taking advantage of those Wall Street banksters and unlicensed mortgage brokers (LOL).
They are fulfilling their contract. Unfortunately for the banks, there was the “or” clause.
“Pay us $X,XXX.xx per month or we take your house.”
Exactly. Lenders need to give people a compelling reason to honor their commitments. 100% financing for a declining asset tends not to do that.
Oh, ha ha, that’s what I said above.
Why do banks need to provide a compelling reason for people to pay their loans now as opposed to past real estate downtrends? I guess if people have no skin in the game, they don’t feel like they’re losing something if they lose their house. Maybe that’s the difference - it’s not their home, it’s just a house, just a business transaction. If that’s the case, then why all the gnashing of teeth to try to save homeowners? Seems like those that can’t really afford their homes or screwed themselves up with refis or arms, are trying desperately to hang on while those that could afford to hang on are bailing.
it’s not their home, it’s just a house, just a business transaction.
It’s ALWAYS been “just” a business transaction. It’s just that lately, there have been a lot of poorly educated business people executing those transactions.
20%-50% down will do wonders for the long-term viability of these transactions.
20%-50% down will do wonders for the long-term viability of these transactions.
I think thats whats missing in all these walk aways, no money down. How stupid of the lenders to think otherwise. This is not the first time borrowers have walked away during a housing downturn and I bet almost all of them buy again at a much lower price.
I just wonder if some of the banks holding this stuff aren’t going to try to hammer the crap out of some of these people before the trickle becomes a flood. Assuming they can figure out who holds the note on what.
“I am perfectly fine with people acting this way”
You have got to be kidding?!! These a##holes bought anything at any price and kept honest people and their kids out of the market through greed. By God, they were going to make a killing and no rationale was going to stop them. Now, rationale (no free money) hit so they walk and leave others to pay their way free from any consequences. And don’t tell me their credit will be trashed; when housing turns you can bet there will be a lender there to sign them up on the ‘how much’a a month it’a gonn’a cost me plan’.
It will be “a while” before lenders lose their mind again.
This was a financial transaction. The borrower always has the choice of not paying and face the consequences. That’s what will happen here too.
Please don’t misunderstand me. Nothing was “right” about this mother of all bubbles. But at this point, looking forward, such borrowers have very few choices. Not being a debt-slave is in their best interest. It was always so, but they are realizing it a bit too late. Better late than never.
I will repeat. This has hurt all of us, and will continue to hurt us. But writing off bad debt is the least painful way from here.
salinasron,
The fact that these people participated in bidding up house prices with Krazy Kredit is not to be condoned or commended. I don’t think that was SIBA’s point here. He was basically asking, which future scenario would you prefer?:
1. Underwater FBs walk away & send jingle mail to NINJA lender. FB (and millions more like him) goes back to being a renter and continues to consume, “stimulating” the economy, etc. and we get a relatively short recession. NINJA lender eats loss on 1000s of similar bad loans, goes out of business. FB house goes back on market for market price, based on supporting area incomes and much tighter lending standards. You & yours can now buy a house at a fair price.
2. Underwater FB cannot walk, and is tethered to house until he inevitably goes BK. Does not spend on other goods/services, or “stimulate” the economy while servicing bad loan. Millions like him act similarly, and the economy tanks hard. NINJA lender never has to eat the loss, so goes on to make 1000s more new bad loans, propping up house prices for years to come. FB’s house never goes back on market for market price, so inventory declines, further supporting inflated prices. You & yours *still* cannot buy a house at a fair price.
Damned if you walk, damned if you don’t.
HARM: It’s the attitude that the f###ed buyer has that pisses me off. No remorse, no guilt,and no RESPONSIBILITY but an in-your-face entitlement air even while walking out the door. I want things to unwind and let the chips fall where they may but the unwinding of mortgages is just the beginning. CC, cars, etc are just the next walk away from contract on the table and even after the write-downs I don’t see the banking industry going back to tougher lending standards on CC’s, cars, boats, tv’s, etc. My son joined the service and in 9 months managed to get himself into debt through CC’s to the tune of $14K. Yes, I blame the banks but he will be responsible as I now have control of his finances and he will feel the pain of living on $150 a month until all is paid back. I had his company commander pull his CC’s and he gets a debt card every two weeks with $75.
But, the lenders won’t be the one losing the money. It’s pension funds, annuities, foreign investors, Savers, that takes the financial hit.
The damage goes beyond the FB and the Lender. It’s everyone who has money invested somewhere that will take the real hit.
“The damage goes beyond the FB and the Lender. It’s everyone who has money invested somewhere that will take the real hit.”
Right now its all about avoiding real big hits.
Dear Lumpy Dreams:
I am not taking a big hit, except for the fact that I am forced to continue renting until the market bottoms out. I own no stocks and no house. My dollars are getting kinda worthless, but, compared to houses, they’re actually getting more valuable. I’m not making out like a gold bug or anything, but I’m not taking a hit either.
These a##holes bought anything at any price and kept honest people and their kids out of the market through greed. By God, they were going to make a killing and no rationale was going to stop them. Now, rationale (no free money) hit so they walk and leave others to pay their way free from any consequences.
The undisputed truth. However, here’s the hard fact: irresponsible and shifty people will always be with us. It is the lenders that ENABLED such a##holes to indulge their greed and ignorance by proferring ridiculously easy credit and not requiring “skin in the game” (i.e. 20% down) that would make FBs think twice about walking away (and would’ve helped prevent so many FBs from buying in the first place.
The lenders are getting exactly what they had coming, and I hope they get burned so bad that we’ll never again see the kinds of lending practices that caused the bubble.
Caveat venditor
Caveat venditor
Beautiful! I may have to “borrow” this later, if you don’t mind.
Believe it or not, the latin phrase you wanted is Caveat creditor (lender beware)
The phrase you posted means “seller beware”, which is wrong because the sellers all got paid.
Bravo, Sammy!
The best thing that can happen is for the credit markets to clamp down and stop cramming debt down people’s throats.
I’m all for 30% down payments and super-tight regulations with 28% DTI ratios, etc. Imagine housing prices actually being affordable again!!!
And don’t tell me their credit will be trashed; when housing turns you can bet there will be a lender there to sign them up on the ‘how much’a a month it’a gonn’a cost me plan’.
So does that sound like a systemic failure or “immorality”? I’m pissed at a system that rewards greed and does not adequately punish failure, but I can’t say I’m too upset at the people who gamed the system. As they said in the CBS piece: “”It turns out that if you give people free money, they will take it without really worrying too much about giving it back. Because after all, it was free,”.
Hey Ron.
I’m mad at all these people for buying like crazy and driving up the market, but I ENCOURAGE them to give up their houses now. The quicker they all take the plunge, the quicker I can become the proud owner of a financially sensible residence.
RE: The quicker they all take the plunge, the quicker I can become the proud owner of a financially sensible residence.
You can see the FEDS are doin’ a scorched earth plan to keep values pretty much where they are.
With the coming bankruptcy of the senior citizen entitlement programs-they can’t be havin everybody’s single most important financial asset go down the crapper.
And with the escalation of lending limits for the GSE’s, FHA, HUD, VA it’s a manipulative back door done deal.
As far as securing a house in the future…you will have to decide what it is worth to your quality of living.
You either pay 40/50% of your income for the priviledge of a single-family detached house…or you opt for the freedom of a tenancy to free up the money to do other things.
With the US goin’ 3rd world-the days of having it all are finished.
I’m with you. And the people on here that think this is something new, it’s soooo not. I got my first taste of deadbeat debtors some twenty years ago. I used to hang out at bankruptcy court, hoping they would sign a reaffirmation to their CREDIT UNION (that was, mind you, located in the very plant in which they were employed at one time). If they got laid off and couldn’t afford to make ends meet, their loyalty was out the window. In a battle between personal honor and survival, guess which one prevails…
There is no honor among thieves. That goes for Wall Street and FBs too.
There is an alternative to the propping up of prices. Buy land and hire your own contractors.
I was wondering when the Voice of Moral Consequence would speak up. Hear, hear!!! Thank you, SalinasRon!
Let people walk away from houses, it will only help prices drop faster and more. It’s the smart thing when you are a FB underwater. Do they not even need to pay taxes on foreclosures? Then it’s like a free ride.
The sellers are delusional but banks *must* sell at some point and they are the ones reducing the price big time. It could be possible my first house will be from a bank at 3/4th the price that sellers wish.
mine will likely be bought from an F’d Bank for 1/3 of the price the FB’s want now.
I read the posts above. It’s in our best interest to let all those FB’s walk away. They can’t or won’t reduce the price enough. Those who bought before the bubble are too often greedy and will chase the market down. Damn them, I don’t feel sorry because they will spare some knife catcher from becomming a FB and parting with his hard earned money. Let the seller be denied “bogus” equity that was never legitly his to begin with.
I wish my parents sold their house, but then whoever bought it would be screwed. They saved someone’s finances at the expense of their own. That’s half a million going bye bye as the bogus equity evaporates away.
Jimmy Jazz:
“As they said in the CBS piece: “”It turns out that if you give people free money, they will take it without really worrying too much about giving it back. Because after all, it was free,”.
With the acceptance of this mentality it is a small leap to: if the property is not nailed down, or no one is home, go in and help yourself without any thought of recourse to prosecution or consequence. I know that we all feel that the banks should reap what they have sown but let’s be careful of the message being sent as it can go further than you imagine.
That’s a far-fetched slippery slope. the law does distinguish between non-repayment and felony breaking and entering. And the FB’er are “honoring” their contracts by giving the house back to the bank- that is the exact provision of non-payment, as specified in the contract.
It might make them rotten people, but it is not illegal.
You make one giant leap and that is that there was no fraud in the transaction and secondly, you have to get caught for stealing or misappropriation of property. The slope is not as far-fetched as you’d like to believe when morales go out the window. You’d like to believe that everyone is playing from the same rules but greed on the way up is no different than greed on the way down (ie, how much can I hold onto?). Gotta lov the Mafia and Vegas where a contract is really a contract; you put your money where your mouth is and you live and die by it.
Of course there were frauds- on both sides. But the recourse to the bank in the face of nonpayment is stated explicitly in the contract- they the get house back. A borrower walking out on the house fulfills that contract. to. the. letter.
Now if you think that mafia rule is better than the rule of law then we are quite far apart about what constitutes civil society.
You’re free of the tax consequences only if you work with the bank and do a short sale.
I’m not so sure. I know someone who just got a 1099 on a short sale. Has it in writing it’s a short sale and still got a 1099. Bank said they were required to send the 1099, but that it doesn’t have to be claimed on fed taxes as it is forgiven.
Forgiven by the bank, not the IRS.
I believe a new temp Fed law exempts it. Just a recent change by Bush and co. I have read state’s saying “you are forgiven at the Federal level now, but not at the state level” so don’t forget to pay the state taxes which all FBs WILL still owe.
The lenders sold the mortagages to Freddie, Fannie, and a zillion other agencies and groups, many representing ordinary workers, and THEY, not the lenders, will get stuck with the losses. There is no way to contain the suffering to those you think deserve it; everyone will suffer because of these unconscionable home “buying” slobs.
Which is why all the hedge fund managers, corporate executives (investment banks, mortgage companies, ratings agencies, etc.) should have EVERY SINGLE PENNY of their assets — held domestically and overseas — confiscated, including future earnings and wealth, inheritance, etc. This money should be used to shore-up the FDIC and PBGC. Otherwise, let the chips fall where they may.
So by this rational, one should only pay their mortgage if the house is appreciating? Why not throw in cars, too. Why make a car payment because they are certainly a depreciating asset.
People hold onto cars because they need them to get around. IMO, if there were loans on collector cars, and the market turned lower, those keys would jingle too.
Ben, Where do you think the heloc money went to. Have you noticed that the car fad started around the same time as the housing mew? How many car shows were there before 2000? I’m talking about “street rods” here.
Long ago, I posted a car mag link where the writer wondered about the collector bubble and mentioned that the last time it happened was during a housing boom.
It’s in the art market as well. I post this stuff from time to time, but so much is happening I can’t spend a lot of time on it.
These people’s thinking is like going out to dinner, and paying by credit card and then not paying the bill because the dinner was eaten.
You go out to dinner you know you are paying what the dinner you chose was selling worth. You pay the price if the price and your desire for the dinner are in harmony.
You buy a house because you need a place to live and the place you choose is worth the price to you in order to live in it.
It should never have become about an overblown sense of entitlement to unearned gains.
If you read stories in countries with hyperinflation, this was very common. People would “forget” their wallets, and come back to pay it back the next day (when it was worth far less.)
Restaurants (many famous ones even) lost boatloads of money, and ultimately shut down.
In my contracts course in first year of law school, the prof. explained that it is not against the law to break a contract, you just have to be prepared to pay damages. Lenders basically rely on the down payment to ensure that they can collect damages (at least to some extent). Lenders voluntarily decided to forgo this aspect of the deal in order to increase/maintain the flow of business. So, while I don’t have much sympathy for those who have lost money buying overpriced homes, I would never condemn them for walking away. To quote a famous housing bubble sage: “Reap what you sow REIC.”
And the bank gets the collateral…
Xactly. That’s why purchase-money mortgages are classified as secured loans –the lenders forgo the right to sue/garnish for lost interest & principal (”no recourse”) in exchange for the right to take possession of the collateral (the house).
If the banksters miscalculated risk and that collateral is now worth less than the outstanding note… tough titties! Next time, perhaps they (and the Fed) will price risk a little better –and stop punishing the prudent & responsible for a change.
Didn’t the banksters sell these toxic loans as fast as they could ?
Couldn’t agree more.
I just wish I would have bought 10 houses during the bubble with a $100K cashback deal on each. I’d make zero payments. At the same time, I’d go to every mortgage broker I could find and strip any more “equity” out from those houses that I could. All the while I’d have my pick of whichever of my rent-free houses to live in- By the beach, of course. The day before the sheriff arrived to evict me, I’d seal the envelope with the keys, and disappear with my $1M+ in cashbacks and MEW’s.
Yep, it is sometimes called an “efficient breach.” I have read and understand the anger (such as that of Salinasron). But I personally don’t think this is an issue of morality. The banks drafted the documents and created the lending guidelines that they wanted in order to give them the protection they felt they needed. If it turns out that they were wrong (e.g., the loan value exceeds the value of the collateral), then they mispriced their risk. The FB who uses jingle mail is simply exercising the “put option” that was built into law in California (with non-recourse loans), and which the banks knew about before they made the loan.
No one thinks it’s immoral for a borrower who loses his job and can’t pay the mortgage to default. But some people are claiming that someone who intentionally defaults (i.e., they have the capacity to pay, but choose not to because they are underwater) is immoral. I just don’t see it that way. Just like in merger agreements that have a break-up fee or a purchase agreement with an earnest money deposit, purchase money loans in California have a built-in liquidated damages provision (the lender gets the property back, but nothing more). I don’t see using that built in, agreed upon remedy (whether the break-up fee, deposit, or foreclosure) as immoral.
If ones word means nothing, then nothing means anything.
Most of the house buyers didn’t need to buy houses; they were jumping on a bandwaggon in hopes of instant riches. They lied about their incomes, they lied about their intention in live on premises to get tax breaks, they lied about everything. What a world where legalistic mumbo jumbo becomes the ultimate escape hatch for the morbidly unethical. To many lawyers, there is no right or wrong, only what is legal or illegal. Well, it used to be legal here to own other people and abuse and kill them. It was still immoral to do so, no matter what the law claimed.
To live without honor, straddling the line between legal and illegal, is pretty lame. I always thought we were here to learn something and improve ourselves and and the lives of others, not to game the system just so we could have more stuff.
“The FB who uses jingle mail is simply exercising the “put option” that was built into law in California (with non-recourse loans), and which the banks knew about before they made the loan.”
And what happens when they put a HELOC on the property? Yep, let’um walk. Don’t want to pay for the tv, let’um walk. Don’t want to pay for that car BMW anymore, let’um walk.It’s only the banks that will suffer. Well, we will see where all this leads us as to how deep the recession goes and then revisit our feelings tempered with a good dose of reality.
I would argue alongside this, in a more prosaic way, that many people trying to find their way through home ownership expected (wrongly, but they did) that RE professionals, Mortgage brokers and Banks would exercise some degree of fiduciary responsibility. I think that for a lot of people, the idea that their real estate agent would screw them, or that their mortgage professional would really screw them, just didn’t seem right. They were professionals who should have some reputation and consideration for fair and proper dealing.
Yeah, right.
Well, now that we’ve got chickens roosting all over, many of these people - not the gamers, but the gamed - are looking around and thinking, “why should I get screwed?” Nobody looked out for them - the comps were inflated, the mortgage rates were high and reset higher, the excuses (you can always refi) were BS. I would be pissed too, and I would say “here - take your fucking house, assholes.”
And that’s what’s happening.
The fact is that so many FB borrowers committed fraud in order to get the original loan and get further cash outs . If the foundation of a business contract is conceived in fraud ,than you cannot say that the FB is simply exercising their option to give back the property .
While I agree that the FB’s feel justified in walking because they feel that they were conned by the REIC into committing fraud to obtain the loan ,still this isn’t a good excuse .
We are all going to suffer (except for RE prices falling ) for what these FB’s are doing . Think about how many innocent people suffered , who never even invested in stocks ,after the big stock market crash of 1929, because people decided they wanted to get rich quick and buy stocks on margin .
The fact is right now many people are sweating bullets on where a safe investment is because of the FB’s walking .If people aren’t sweating ,they are scratching their heads over the low interest rates that are now being offered on CD’s and insured saving accounts .
Everybody is going to the food stores and getting pissed at the increases and I won’t even talk about oil increases .
Look at all the people that have lost money in the stock market because of this crash of a false RE market .
When the powers raise taxes to cover loss down the road ,people are not going to be so thrilled with these greedy fraudulent FB’s that were going for the easy money (or all the lenders that put society in this spot) . And I bet a lot of people are just thrilled with the fact that they might of been paying 50% more property taxes that was due based on a false real estate market driven by fraud and speculation or because appraisers/lenders wouldn’t so their job .
What about the day when somebody on this blog finds out that their mother or father lost their pension or investment account because it was invested in a SIV’s that was rated AAA that some FB walked on the obligation that they committed fraud to obtain .Or ,the worst ,that somebody might loose a loved one because some FB sits fire to a house and it burns the neighborhood down .
Yes, I feel there should be penalty for any parties that engaged in any deception to obtain or pass on a fraudulent loan .
Couple points in response.
First, I never said I condone fraud. If you lie on the contract, you have committed fraud and that is not part of the “deal.” In that case, a lender should sue. At the same time, lenders undoubtedly understood fraud was being committed and did nothing to check it. Sort of like waiving the right to enforce a provision in a contract by failure to enforce.
Second, as to the secondary implications of this bubble, I’m in the same boat as many on this blog. Had money to buy in 2004, realized the game was rigged and decided to rent it out. I’m not sure whether I will end up better off or worse off financially for having waited, but it has caused some inconvenience because I have a wife and kid and would like to settle down. But other than inconvenience, I really haven’t felt the repercussions (not to say that I won’t at some point).
The ones who will suffer the most are those who bought into the hype. We will pay some to alleviate their suffering, but they will still suffer. And my personal opinion is that they need to suffer. Most people don’t learn unless they get whacked on the nose with a newspaper. FB, meet newspaper.
The fact that the lenders did not prevent fraud or underwrite the packages they were passing to the secondary market will put them in a spot for possible lawsuits for that failure . If it can be proven that their loan agents helped the borrower commit fraud ,than the lender is liable for the acts of their agents .
Right now the FB’s are being painted as poor put upon borrowers that just wanted a nice home to live in . You had FB’s who were making 20k a year going for 500k properties for God sakes .
The entirety of the scheme of putting borrowers into property they couldn’t afford needs to be exposed for what it was …….A Get Rich Scheme ,promoted by the REIC ,that induced borrowers into fraud in order to get in on it .
Many of the loans that were offered were defective product anyway (even if the borrower did qualify )because its foolhardy to base qualification on a low teaser rate that goes up in 3 month on the effective rate .A loan of that nature should of been rated high high risk . There is a serious problem with how these loan were rated and that lured investors into buying them .
Had it been disclosed to investors that they were buying junk paper ,than it’s the investors fault for their folly and greed. But, in this market we had deception from the borrowers right up to the ratings on the paper ,(never mind that the lenders didn’t even do their job to prevent fraud or prevent bad appraisals ).
Click over to this page and look for the Jingle Mail video:
Yahoo Videos
(I would have posted a direct link, but I think j-script would get filtered out of my post.)
Man, listen to that guy shill for the banks. I hope he’s getting a kick-back.
faux news comes with the territory.
Watch closely at 2:40 in that video, as the sweat starts to drip off that shill’s face and all the color leaves his face. Priceless, the rest of the interview he is scared $hitless after the reporter keeps dropping the bombshells like this nuggest “it seems like the stigma from doing this isn’t so strong anymore”
Oh man, the banks this guy represents are losing it!
The “60 Minutes” video segment, was actually very well done, especially for a mainstream media report:
http://www.cbsnews.com/stories/2008/01/25/60minutes/main3752515.shtml
They explained all facets of the housing bubble (even calling it a housing bubble) from top to bottom, and pressed the FBs who were dripping with entitlement:
These folks are right. It make no sense for them to keep the house. They could rent a similar house in Stockton for about $1200 a month, a savings of $2000 a month. That $24000 a year would easily make up for any hit to their credit rating. It’s a no-brainer.
–
Ben,
I have two possible explanations for CAR not posting the Dec’07 resale data:
1. Intentional Delay
2. They want to post the Monthly and Annual data at the same time because the 2006-07 annual comparison would be far better than Dec’07 monthly report.
Jas
It’s been so long, I’d forgotten about the used house people. I wonder what’s going on.
–
Don’t worry, I will keep an eye for you.
Jas
San Berdoo used to sport the highest murder rate in the country, for a city of it’s size, maybe it still does?
“It’s almost like having a piece of Orange County under your feet. But no Meadowbrook Park Lofts homeowner opening their front doors will experience that hip, trendy lifestyle once they step outside.”
“Twelve live-work townhomes on Third Street in downtown San Bernardino went on the market a couple weeks ago, boasting two-car garages, balconies, and ground-level space for office or retail use. As of last week, one loft was sold. They range from $350,000 to $360,000.”
“Park Lofts homeowner opening their front doors will experience that hip, trendy lifestyle once they step outside.”
May work out well for the ‘edgy’ buyer though.
This place is a arm pit. My wife works around the corner from the lofts. I don’t think that the article mentioned that the jail is around the corner as well.
Sprinting a zig-zag pattern to my car, trying not to trip over the fornicating winos or dead bodies as my wife lays down covering fire from the upstairs windo, really isn’t my idea of hip or trendy.
LOL! I can totally picture that happening.
You know what? If the City would place hundreds of surveillance cameras on all of the public streets, and a few cops to clean up the evil do’ers, the problems would go away. But you know this will never happen, there are too many people worried that pictures of their infidelity with the secretary will somehow will be seen by their wife. I really don’t understand why people hate security cameras on every street, they only the record what is already public. It is OK for people to see me at any time when I walk down the street, it is OK for you to record this in your mind, but you are evil if you record this with a video recorder. (Sorry for getting off topic)
1984 was 24 years ago, not today.
Maybe his segment was sponsored by Merrill Lynch and Citibank??
“From San Diego to Stockton to San Jose, members of the real estate industry are offering such bus tours to entice home sales in a bad market.
Passed one of these this weekend. Could have sworn it was filled with cardboard figures. Kind of twilghtzone’ie.
No doubt it’s a short bus.
bawawawawahaha
Wasn’t something similar tried a few months ago? I seem to recall someone posting a parody of the idea here, complete with changing the conveyance references from “bus” to “turnip truck.”
Somebody ought to get the names of everybody on that bus and send the resulting list of stooges to e-mail scammers in Nigeria. And somebody’s “financial advisor” recommended real estate! I bet the advisor has a few houses he/she is trying to get rid of.
The Nigerians have gobs of oil money, let’s try and do a reverse 419, on them and bury them in real estate.
Something like:
Dear sir,
We want to transfer to overseas ($ 126,000.000.00 USD) One hundred and Twenty six million United States Dollars) from a Bank in San Diego, I want to ask you to quietly look for a reliable and honest person who will be capable and fit to provide either an existing bank account or to set up a new Bank a/c immediately to receive this money, even an empty a/c can serve to
receive this money, as long as you will remain honest to me till the end for this important business trusting in you and believing in God that you will never let me down either now or in future.
I adore this idea. Compared to the subhumans that fell for their scam here, I wonder how many there would fall for it.
“‘It’s a buyers’ market,’ said Cecilia Manibo, whose financial planner advised her to buy real estate. A tour was the most efficient strategy. ‘If we were left on our own,’ she said, ‘we probably wouldn’t do it.’”
there’s a very slight possibility that Cecilia’s financial planner is getting a kickback from the realtor who is sponsoring the bus tour.
It’s possible.
I unfortunately sensed the same thing. It is very irresponsible, if it is true, for a financial planner to advise buying RE. Either she is lying or the financial planner gets a hefty cut.
People are smart… thats why they don’t know the difference between an illusionist and a magician. Its just a fancy word after all.
Buy Now……or forever live on a bus
Any bets the financial planner was wearing a gold jacket?
Got popcorn?
Neil
That is mean and cruel and funny.
The Gov’s Health Care Plan is Dead, the dems just killed it in the Cali Senate Committee. Good thing, state is already in a “fiscal emergency”.
http://www.latimes.com/news/local/la-me-health29jan29,0,917448.story
The worms have turned on BlackVader…
Just because you are invincible on the silver screen, doesn’t make you so in real-life.
Governator: I feel sick about it……just wait until I release the prisoners into their cul de sacs….hahahahaha
I cringe… For I know a FB would bought into one of the blocks in Lancaster that prison families also bought into. Good luck ignoring the parties when daddy comes home. There will be some cul de sacs that will become roach motels: You can get in, but you can’t get back out.
I’m not sure how to end this post… freeing prisoners is… not going to encourage them to behave.
Neil
“The facts are as plain as day: These pristine townhomes are surrounded by a moribund downtown.”
They’re trying to sell the “hip, urban living” thing in downtown PHX also, and while there is some life there due to the new ASU campus and various sports/entertainment venues, it’s not quite the 24/7 city the condo developers would like you to believe it is. So, I pay 800K for my perfectly ordinary 1400sf 2 bedroom condo at the new 44 Monroe building, and it’s 10 PM on a Tuesday night and I discover I’m out of milk. I take the elevator down to the lobby, walk out the front door, and…..?? Nope, not even a convenience store anywhere within walking distance. The nearest grocery or drugstore is nearly 2 miles away—and they’re trying to market these places to the “busy, urban professional.”
I can remember being urban and broke during my hipster days.
Yep, another housing bubble by-product that only made ’sense’ in a mania. And there are thousands of these things going up in LA.
There are hundreds going up in downtown NYC where you can’t even get a freakin’ pizza after 7pm.
They’re trying to sell the “hip, urban living” thing in downtown PHX also
I spent a couple days in “Old” Scottsdale last month, they do have some new condo’s near the shopping center that looked really
nice.
Have you seen the condos by the Chandler fashion mall ? they look nice too in a Omega man sort of way.
I posted my favorite (empty) urban condos here in Missoula. I don’t think they’re moving..
The last one looked like a dive motel. Someone would pay $525/mo rent for that?
My recollection of Missoula from a visit there three years ago was that the downtown was smallish, but with some decent architecture. Those ultra-modern condos appear both out of scale (too large) and of a style that doesn’t blend with the existing architecture at all. Those would look fine in San Diego, but Missoula?
Yes and we’re seeing a lot of that “style” here for commercial too. Where in hell did it come from? It’s sort of a retro googie look and I think it’ll look real dated in 10 years, sort of like those shingle-shake faux roofs in the 70s.
“with the California Motor Car Dealers Association saying sales last year dropped 8 percent, the worst in eight years.”
I wish it was only 8% - these numbers dont tell the whole story.
From same article:
“Hummer sales dropped about 41 percent in 2007.”
You people should absolutely be ashamed of yourselves for driving these things. ABSOLUTELY!
You know, that’s the first time I’ve seen any blurb about plummeting Hummer sales.
It was inevitable, thus the new Hummer HX concept. It’s supposed to be available in 2010 and run on biofuel. Reminds me a of dune buggy…
The amount of food calories in the corn used to make the ethanol for just one 20 gal fillup equals about the number food calories a person consumes for a whole year. The US is already converting ~25% of its total corn crop to ethanol. Food prices are on the way up…
Look Not Missing It, The last time I checked it was a free country…I own a Hummer and I am proud of it. 15 years ago I got hit head on by a drunk driver. My joints still hurt. spent years healing. Lets see what you drive after you get hit by a drunk junky. If it does happen again me and my family will atleast walk away.
I hate when I hear judgemental b.s from do-gooder’s like Not Missing It
Not missing it is entitled to his opinion as well. Me personally, Hummers are just too big. You cant see around them, they take up too much of the road, they block pedestrians and bike riders from your view, they take two parking spots, and waste a lot of fuel.
Hummers are the same as the big a$$ trucks you see all day on the road. I personally drive a very small SUV for gas consumption reasons, but I don’t see any harm in a Hummer. If you drive a hummer and what to waste your money on all that gas, so be it!
hummers suck, and i ain’t no do-gooder. speaking my mind, dude.
BS??
1 trillion dollars, 4000 US lives, 10’s of thousands w severe injury,100,000’s of Iraqi lives 9 11. Pakistans bomb, Irans nuk program, Saudi terrorism, all brought to you by our addiction to oil.
You put others at risk so you can drive a Hummer.
They should be outlawed.
Why is it nobody questions the 150 250 350 dually quad cab long bed trucks or the econoline tricked out vans, or the luxury cars with the 5L engine or the sports car that seats 2 if your lucky. I dont understand how a majority of SUV’s that are lighter and more economical than all of the ones listed above (except the small sports cars) get a free pass. Any of you Hummer haters care to comment on why you hate just SUV’s and why only SUV’s are labeled as excessive?
I think for most people, the Hummer just is peak of the excess and ‘look at how awesome I am’ consumer culture. Many other SUVs are as wasteful and harmful as the Hummer. To each their own, but all of these behemoths are very dangerous (to the occupants (rollover) and others (getting crushed by them)). These dinosaurs only go off road in the TV ads. In reality, few people actually ‘need’ these cars and all they do is endanger others, our planet and clog up roads and cities. Hummers/Escalades/etc were (!!) the vehicle of choice for the successful realtor ™…
I sometimes equate a purchase decision to ‘voting with your wallet’. If we all stopped by enormous SUVs/Happy Meals/etc, we would force the resp. companies to come up with something better. In the end, we should have the freedom to do what we want, but also understand the consequences and responsibilities. Seems like the latter two concepts have become afterthoughts in our current world.
http://www.fuh2.com. Funny stuff, I should submit the H2 with a ‘Keep Tahoe Blue’ sticker from my office’s parking lot. You can’t make that up!!!!
They all suck, and the truth is that an old Delta 88 was just as good on snow and ice as a 4WD.
Well, I’ll tell you what - nothing’s better for pulling a four-horse trailer than one of those long bed 3/4 tons. I own a 7 yr old Dodge. I use my truck all the time for my livestock (hauling both them and their food). When I’m not hauling, I drive 60 mph and get 20-24 mph to the gallon. There is nothing wrong with a big truck as long as there’s a valid purpose for owning it and NO “I need to be bigger than everyone else so I do the squashing instead of being squashed” is NOT a valid reason.
Oh dear I know how you feel. I once got pooped on by a seagull and now I carry my shotgun when I walk the beach. People act really funny towards me but hey, no more pooping gulls!!
Nevermind the lives you endanger should you collide with anyone. Not suggesting you’re an unsafe driver, but most people drive these things with a false sense of security. And drive them as fast as a car with lower center of gravity/better stability.
I drive an SUV (company car) and can’t wait til the lease is up. I want a safe sedan. Everyone buying a tank isn’t the answer. What’s next, everyone gets a semi-truck?
I’d hate to get hit by a “drunk junky” driving a Hummer. Methinks the chances of that are going up every day as this bust unfolds…
thanks for the lesson in auto arms race. Let’s see, I’m going to go out and drive a Bradley to smash your Hummer, aka the stupidest passenger vehicle ever to travel our tax-payer funded freeways.
http://www.fuh2.com/
My sentiments exactly on these wheeled tributes to conspicuous consumption.
And here I thought they were just overcompensating…
Remember after 9/11 with the 0% car loans? There were many, many new cars on the road, with the dealer placard in the license plate holder before the new plates arrived.
Now? I hardly see any new cars waiting for plates.
Which is exactly why it won’t work this time. All the people who could overextend themselves already have.
“the one with a market value of $640,000 that’s listed for $575,000″: hey, ho - some people will never learn what market value means.
Exactly…however, The Media goes along blindly with the scamster’s seeming definition…that the market value is the asking price of the house at the last top of the market (and, presumably, the price it will be worth ‘in six months when this whole housing bust is behind us’).
The Media needs to understand that the *real* market value is the price the house sells for if it has been sitting on the market for a bit. If it sells within hours, it is probably priced below market. If it doesn’t sell after a few months, or not at all, it is probably priced above market.
However, these scamsters excite “investors” by quoting “market values” that are the same as previous sellers’ wishing prices. They go on to say “look, instant equity, in this case they *are* “just giving it away”.
Some day The Media will actually challenge people with these “below market value” statements.
$640k bull value. Real value is more like $200k
–
““If dreams of transforming downtown San Bernardino come true…”
Does anyone have any data, or reports, on how many of these dreams come true in cities with high crime rates? Didn’t Flint, MI do that in 1980s and it was a bust?
In 2002, San Bernardino was #2 in the nation in violent crimes per 1,000. I was dumbfounded when I saw the home prices skyrocketing in SB during 2005-06.
Jas
““If dreams of transforming downtown San Bernardino come true…”
If I suddenly became a billionaire, I’d be a billionaire!
All they need is the Guggenheim and Rockefeller Center.
San Bernardino is the NEW “Indian Country”. Send Bush a friggin dispatch rider and a memo and inform HIM that the Bad Guys are STILL winning
I went to CSUSB and own a condo not 5 minutes from downtown during college. This place is a haven for illegals and cops don’t give a sh#@! about anyone.
I had some dirt bag break into my car while it was in my garage. I called the police and told him that I had the guy pinned in and they said to me on the phone they could get out my way for another 45 minutes. HUH?! 1 1/2 later when the guy finally ran off after hitting his ass with a cheat-a-bar a few times; the police finally showed up. Said he’d write a report, but honestly they will never find the person he says. Told me I should feel lucky he only broke a window and didn’t get anything else. Said that they really can’t do anything about the illegals, too many he says. Made no sense to me what so ever, but why would I waste my time with a report if the police don’t care
I’ll tell you why. to cover your a**. My brothers car was hit late at night by 3 people in a car. They took off and my brother never bothered to file a report. 4 months later my brother gets a letter saying he is being sued by the people that hit him. They filed a false report and said my brother hit them and that he took off. My brother lost in court and had to pay the scums money. True story.
“Each flaw, said contractor Rick Steiner, was a chance to haggle with the banks holding the mortgages on these empty shells. Take the trim cream-colored home on Goldfield Drive, the one with a market value of $640,000 that’s listed for $575,000.”
————————
Why does this guy think that the house has a “market value” of $640k? Did someone make a standing offer at that price????
NO, of course not, but the REIC shills just CANNOT admit that “market value” is EXACTLY what a buyer is willing to pay at that moment, and not a penny more. And given that this is a California property, the REAL market value is probably about $350k, not $575k.
$350k is too generous
‘This is a great thing for my mom because she wants it live-in ready, and I don’t want her to pay full price.’
Don’t worry about that, she’s paying well North of ‘full price’ if she’s buying now, but of course you guys were riding the short bus.
Good luck on winning a lawsuit in RE based on the agent not telling the buyers what the comps were or sellling prices of homes in the area, resales suits can be a tough go.
What i can tell you is a new builder who knows that loan papers were falsified and that buyers who checked they would occupy a home then rented soon after escow closed could see a flood of lawsuits, buyers have no comps or anything to go on other then the builder’s selling agents saying Mr and Mrs Jones who bought next door to you are great people and you find out that the builder knew several sales in the development were to investor groups that put no money down and were going to rent the house, then i think buyers have a case of fraud.
‘The bubble has burst. Hundreds of thousands of Americans are upside down on their mortgages or worse, the economy is shuddering and the real-estate industry — predictably — is freaking out.’
‘Where Realtors are concerned, it’s wise to focus on what isn’t volunteered. For instance, what about sellers, who in most cases are the Realtors’ actual clients? If you grab a bargain now, the seller is probably selling in extremis — an extremis possibly due to having been nudged by their trusty Realtor to bid higher, higher, higher during the bubble when they bought the place to begin with.’
‘The National Association of Realtors is fighting back with ads reminding Americans of real estate’s enduring value. Two TV spots portray cheerful, well-to-do young people moving into beautiful, spacious houses in leafy suburbs as the quintessential bottle-blonde real-estate lady walks around slinging enticing half-truths.’
‘The campaign…is a perfect miniature of the inherent conflict of interest Realtors wallow in, like pigs in the sty, all the time. They have no incentive to perform due diligence for buyers. They don’t even have incentive to protect their clients, the sellers. Their only interest is in closing the sale. Seven percent of $500,000 is $35,000, no matter who else takes a bath.’
‘That’s why they steer buyers to their own listings. That’s why they have cozy understandings with appraisers and mortgage brokers. That’s why they sniff the cat odor and declare it a piece of lint in the furnace. They are now and always have been salesmen posing as advisers. Please note that your CPA does not have a magnetized sign on his car door.’
“My financial planner told me to do it.”
Is this a defence?
It’s the same as saying, “The devil made me do it.” EXACTLY the same.
“The U.S. Economy Faces the Guillotine
America is on the road to recession, and many predict a worldwide slowdown. But it’s a new economic order, and the emerging markets could take the lead.”
By Daniel Gross | NEWSWEEK
Feb 4, 2008 Issue
Cover page of Newsweek.
http://www.newsweek.com/id/105558
The word guillotine instantly conjures up parallels of the French Revolution, for me.
Let them eat $600?
I don’t know whether I’m more insulted by politicians trying to buy my vote with my own money, or by the fact that they think they can buy it for a measly six hundred bucks
Six hundred bucks is a fart in a hurricane.
you don’t do it? what do you mean, you don’t do it? everybody does it. I just did it, and I’m ready to do it again.
“But it’s a new economic order, and emerging markets could take the lead.”
Another cynical con game by Wall Street and their MSM mouthpiece to keep the emerging markets bandwagon rolling just before it goes over the cliff. Have a look at this:
http://alternativeanalyst.com/index.php?option=com_content&task=view&id=47&Itemid=32
IMHO the writer does not have the faintest clue of which he writes. If he were to look at the reality of the Asian economy, he would know that 80% of trade with China is ‘pass through’.
“In this regard, one common thread that runs through most of the countries producing these strong gains, is that they are commodity exporters and have been riding the commodities boom since the beginning of the century.”
36% of US exports are commodities, you better hope that the commodity market stays strong.
We are the largest importer for finished goods. I guess that makes us a third world economy.
And in other news, Gold hits a new high again today…
To all of us loyal HBB’ers, I’m sure that comes as a shocker!
Wow! Gold keeps going up and up. Reminds me of houses back in 2004.
AMEX just missed earnings. They stated that we are in a recession (per the Conf Call)…
The societal implications of those home buyers who just walk away is most troublesome. I fully understand the financial motivation for such a move. You cant fault someone who makes a prudent decision based on facts. However, we are missing the bigger issue here. When millions of people make decisions just like the couple in the 60 minutes piece, our whole collective value system of trust is destroyed. One of the biggest problems encountered in South America is corruption. What we are seeing in this country are the first signs of a corrupt society.
Get real - corporations, governments, businesses, banks, Wall Street and elites have been using “get out of jail free” loopholes for decades now - bankruptcy, defaults, forbearances, etc, etc, etc.
NOW the little guy is in on it too, and suddenly there are “troublesome societal implications”, and our “whole collective value system of trust IS destroyed”? TRUST??? Who still thinks the big boys have any respect for the rules? (and doesn’t this all depend on what the definition of “is” is?)
Not to say that your concerns aren’t legitimate, and most of us do yearn for simpler, more honest times. Unfortunately this place has been a jungle for 20 years - Welcome to America “Red in Tooth and Claw”.
Indeed, I’ll feel bad about it when we stop rewarding CEO’s with golden parachutes for losing 100’s of millions and when corporations don’t get to write off losses. Why shouldn’t a person be able to act like a business ?
az_owner, I like the way you think
You happen to be a fan of The Wild Bunch? :
Pike Bishop: He gave his word.
Dutch Engstrom: He gave his word to a railroad.
Pike Bishop: It’s his word.
Dutch Engstrom: That ain’t what counts! It’s who you give it to!
I wonder where religion comes into play? With the groundswell of religiosity, how does this gel? I would think churches would take a more moral as opposed to business attitude.
This is a very interesting observation you raise.
Without getting into to it too much, my family are Christian. In fact, my wife used to work as a bookkeeper at what one would define as a megachurch. You would be astonished at how much of it is run as a business and “faith” goes out the window, esp. when builing these megachurch buildings. Gotta pay the mortgage, ya’ know!
Ps 37:21 again, “The wicked borrow and do not repay, but the righteous give generously.”
OC Dan, you’re exactly right about some of the churches (maybe most) being run like a business. It’s not the way it should be.
You all ought to flip open a history book. Churches are, have always been and will always be about money.
… and they make no bones about holding your soul hostage until you hand over the cash!
First signs? I think you’re witnessing the last gasp: the part where it finally dawns on the masses that the elites tore up the social contract decades ago and stuck them with the bill.
Jingle mail is Joe 6-pack’s response & contribution to the socialization of losses.
The borrower and lender both agreed to the terms. Unlike the borrower, they have staffs of lawyers and no excuse for not understanding the implications of writing a ridiculously-overvalued no-recourse loan in their greed for transaction fees.
The bank wouldn’t hesitate to screw them over if some unread clause in the contract allowed it, so I don’t expect anything more from the borrower.
It’s be be nice if we were all ethical and trusted each other, but Joe Sixpack sees too many powerful people in politics and corporations lie and cheat and walk away with impunity. Corporations flush down the toilet their retirement obligations to employees so frequently it’s hardly news any more. If it’s legal and short-term profitable (or even if it isn’t but they can somehow get away with it), you can count on them to screw you over sooner or later.
I would argue, and I think I did elsewhere, that many of the people who are walking away from bad deals, trusted the professionals who steered them through the RE swamp. Trusted them to give good advice about home values and about mortgage rates and terms. Now that it’s all unraveling plenty of average people are seeing that their misguided trust was betrayed. I see nothing wrong with their walking away. What goes around, comes around, and as far as the big boys go, it’s coming around.
Why pay a $3,200 payment on a 1200-square-foot home? It makes no sense,’ Stephanie Valdez adds.”
Well Stephanie, then, why did you sign on the dotted line and agree to pay such an outrageous sum? I didn’t sign on the dotted line and agree to such a dumb move. I would have read the documents first.
I blame the Reagan Revolution personally. Free markets and deregulation and all that. Downhill ever since. Greed sows the seeds of its own destruction no?
I blame the Reagan Revolution personally. Free markets and deregulation and all that. Downhill ever since. Greed sows the seeds of its own destruction no?
HOLY SMOKES!!!
Reagan certainly destroyed are educational system. Now we have idiot 30-40 yr olds from the public school system.
The NEA, CTA, and the other school teacher unions destroyed our educational system. Why won’t they let the parents have choice? Just like the lefty abortion freaks. Boy I feel good now!
Delicious irony: “Reagan certainly destroyed are educational system.”
Love it.
How they hell did RR destroy it anyway. It’s a state & local funding issue, locals set the curriculum, hire & fire teachers, subject to the unions. State gets about 10% federal money for this and that and OPI squeals like a pig if it falls off a little. State ed should not be feeding at that trough in the first place.
I wasn’t a fan of that revolution. Just seemed a bit too greed-oriented for my taste.
They obviously knew what they were doing. 0% down equals risk free. If the house doesn’t appreciate, simply walk away. If it appreciates, sell it for profit.
Hard to believe that the banker on the other side of the table also didn’t know that this was the risk.
There was no banker at the other side of the table.
There was a salesperson on commission. He got his, the homebuyers got theirs; and soon the investors funding this are going to get theirs as well.
Exactly, I hope they got their $100K cashback at closing too.
You know when lenders opened the cash floodgates to Subprime candidates, I don’t know if they even knew what type of people they were dealing with. After seeing the 60 Minutes clip and reading and watching the “victims” tell their story, MOST of them are the type of people you definitely not lend money to period. It’s crazy.
The housing bust is hitting the Bay Area and California HARD in more ways than just housing: Budget cuts were announced for the East Bay city I live in. Emergency meetings with anxious parents have been called for. The “It’s special here” attitude is vaporizing rapidly and the realization that many of those “smart people” paid way the heck more than their home is now worth is sinking in.
As evil as this sounds… GOOD! Its about time! Me and a buddy of mine from LA were talking. He’s actually thinking they’ll buy in anotyer year or two because he’s already seeing homes in the area he lives for 350k. They were 500k a year ago.
The bust is on and I’m feeling better about it every day.
Care to elaborate which East Bay City?
Thanks, want to know how close it is getting to the South Bay.
$350k is still too much. I call for as much as 75% off peak prices. $800k becomes as low as $200k
$200k? That’s like 1992 pricing. Why not call for $50k. Then it will be a toss up - NW PA or Bay Area???
Prices are declining, probably will decline more, but $200k median is a wishing price.
Fortress houses still selling, but a bit less than summer 2007. I saw a 1950 1350 sqft in Los Altos, listed at 1.35 or so, sold in 2 weeks.
otoh houses by the freeway or power lines, or in the B-grade school districts linger.
Hasn’t really hit the Penninsula yet, but I have noticed a change in mood and water cooler conversation. Give it another three months and the Penninsula will begin cracking.
Any guesses as to when rents will finally be going down? My rental company seems to thinks rents are going to go up… they offer lower monthly rents on short term leases over long terms. A short term 6 month lease will go for $1700 a month while a long term two year lease will go for $1900 on the same unit. This seems backwards to me… but that is what they are betting on.
Get the short term lease and if rents go down, you win. If they go up, simply relocate like millions are doing.
Not evil at all, Jetson Boy. Just good ol’ common sense.
That genius Jim Cramer calling for further rate cuts, just said, “We need to stem the decline in house prices.”
http://www.cnbc.com/id/22881942
(it’s in the video)
Thanks, Jim. I cannot wait for the other gems he will have for us when sh-t really hits the fan in 2009 and 2010.
He’ll get his rate cuts.
Inflation too. Now, can we go into recession fast enough to avoid $100/bbl oil?
Got popcorn?
Neil
“Inflation too. Now, can we go into recession fast enough to avoid $100/bbl oil?”
Thats a good question. Unless more folks start losing their jobs I vote no.
has popcorn gone up in price now that corn is being used for fuel ?
Speaking of d0uche bags, the other day Kudlow was saying that the .75 Fed rate cut was, I think he used the word, “fabulous”, (I could be mistaken),and that instead of giving out individual refunds they should lower the corporate tax because, what are people going to do with a refund anyway, but go over to the drug store and buy bread and soap? What a mo.
That a-hole should have to flip burgers for a year on min. wage and see how it is. This guy was on last week talking up the jumbo loan increase and lauging about how he is a jumbo and asking the others if they are to. I swear if he went broke and was homeless, I would not feel any less for the guy as I do.
And what is Larry Kudlow, who probably makes a gazillion dollars a year, doing with a mortgage anyway at his age?
“And so, Lemon Grove’s Graham Mitchell and the other city managers and financial officials for San Diego County’s 18 cities grapple with sales tax revenues that hardly resemble the economic boom time in recent years. And even among cities whose managers thought they were being quite conservative with revenue projections, some find themselves lowering their expectations.”
I beg of you, Tijuana-adjacent…
Paint the donkeys to look like zebras and set up a chicklet economic zone, asap.
Yeah, this is pretty ironic. 6 weeks ago, I interviewed for the CFO position at “Water District” the Coachella Valley area. The GM, who had been the former CFO, was interviewing me. I inquired about projections for real estate taxes, a not so insignificant portion of their revenue base, in light of the housing downturn. He proceeded to lecture me about how this is SoCal and the house prices will level off and start going back up again in 2009. For further emphasis he also added that he lives in La Quinta and all of the houses around him cost around $1M. Yes, he was the former CFO and now GM….I was speechless. I thought it was 2005 all over again. I calmly replied that I didn’t agree with that assessment and cited the exotic lending and exceedingly low interest rate environment of the past five years as being unprecedented in previous housing bust. He just stared at me incredulously.
Needless to say, I didnt get that job………
I would refuse to work for an idiot as boss. Count your blessings you didn’t get that job.
I’ve heard a lot of the same rhetoric among city and county govt. types here in Tucson. I’ve had to keep The Troublemaker (aka my mouth) on lockdown.
Slim: I learned my lesson, too. I don’t say a word - but I smirk inside my head big time.
JWM,
since tax revenues in Cali are already falling and the state is in a “fiscal emergency”, you have to conclude this guy is heavily invested in RE. Trying to discount reality is a tough job for a GM or a CFO, reality usually wins. I’d be curious about who the GM finally hires, and how long both last. Sounds like he’s determined to hire another FB to keep him company.
You deserve to work for smarter people, IMO.
I use to audit the water districts in that area. I have first hand knowledge that most of the CFOs for water districts are effing idiots! A degree or a CPA in accounting does not assure that the person has common sense.
I guess they will just have to raise the water rates to compensate for their lower revenue. First you need a shortage ( never mind the rain ) then a crisis like global warming and then a moral duty ” it will help with new projects” and there you go rate increases and raises all around.
Well, this district in particular is about to embark on a $100M waste water treatment facility and their water rates are already extremely high. So, I don’t know how they are going to pull that off since I don’t think that the state or feds are going to subsidize 50M given the current state of the economy.
san diego update
may be a Re crash ,but th restaurants are full
wow, i love that twon
Has anyone noted that the restaurants are going bimodal? One week no wait at a prime time and the restaurant stays half empty the whole leisurely meal; the next week my wife and I go early and as we leave the wait hits 40 minutes?!? Overall business is down, but its sporatic…
Got popcorn?
Neil
My husband and I eat at the seafood restaurant at the corner just about every Friday and lately it’s been a ghost town. I even overheard another customer comment on how empty it was. Oh, and more exciting news: our 60’s suburban tract is the proud owner of its first foreclosure! (/cry) It has a “No Trespassing” sign in the window and everything!
Interesting. I set up a dinner party the Saturday before Xmas at one of the better restaurants here in Petaluma. I did it at the very last minute (procrastinator) and was able to get reservations in the afternoon for that evening. The owner (who answered the phone) even said, “Thanks for thinking of us.” I thought I was going to be outta luck, but they had plenty of room…
Today I was at a popular breakfast/lunch place where I know the owner a bit. He was saying how the economy was affecting him - business down, etc. He’s a pretty affluent guy, but he may be leveraged a bit. He said he was enthusiastic about the proposal to raise the conforming limit. I said how I didn’t see how it would really help anybody, and he said, “maybe not, but I might be able to refi my house, take out $50K and have the same payment.” Before I could stop myself I said, “Yeah, but isn’t people ‘taking money out of their houses’ what got us into this situation in the first place?” Whoops!
Good comeback.
“Without the confidence boost instilled by a sizzling housing market, a weekend trip out for a flat-screen television or a new couch is less and less common for shoppers in Lemon Grove.”
I don’t know about y’all but the notion of just popping out on the weekend to pick up a flat-screen TV is ludicrous. I bought one on amazon two months ago but I spent the previous 2 years saving up + checking out specifications and prices before pulling the trigger (and of course, didn’t finance it with a HELOC).
Ahh same here…. Amazon was having a fire sale a few weeks ago. I’ve been saving for about two years as well… and was refusing to spend more than $1,000 on a flat screen. Well, Amazon’s sale was running around 48% off on a Samsung 1080P 46″… I couldn’t resist and finally have my first HDTV. = )
Hey, that’s exactly what I got!!!! (well, the model number on mine is 4671). I’m glad I waited, this one is pretty sweet.
Last two TVs were free (35″ tube, now a 42″ LCD). Fringe benefits of having Sony employees as friends. Good golfers, too. Serial number on the HiDef is 8000048. He said it’s the 48th off the production line. I say, “What, the boss took 8000001?”
He replies, “You don’t want the first one.”
Engineers.
Mitsuwa’s bulletin board is another good place to get semi-used-but-good-condition stuff on the cheap (lotsa engineers in town for 3 years leave good stuff on their way home). Got our washer & dryer set for $250 (9something for same at sears).
Welcome to the lower ‘48 state of being…
“Night life is virtually nonexistent unless you count the homeless people hanging out at local parks after the sun sets. Also, 48 registered sex offenders live in the 92408 ZIP code.”
“The last home on the tour was a townhouse on Communications Hill, turnkey ready with hardwood floors, rich brown carpeting and $70,000 under market.”
How many examples have we seen when a used house salesperson calls a listed house with no buyers “under market”?
Attention RealtWhores: “Market” is what someone will pay. If it’s listed and not selling….it’s over market.
Real Estate Translator: “Under Market” = “How much less than the last person overpaid for it”. I know that area, those town homes are EASILY $300-400K overpriced.
The real investors that is the source of funds for the mortgage money will get tired of this attitude and move money into more productive uses. This attitude of fraud by both the lender and buyer will certainly be noticed and action will be taken to protect capaital.
True. And good news for the bitter renters on the sidelines with cash. As mortgage money dries up, prices must come down, as only those with sufficient cash can buy.
I posted this above but most people don’t read back. Here is the post again. it’s very good
I read the posts above. It’s in our best interest to let all those FB’s walk away. They can’t or won’t reduce the price enough. Those who bought before the bubble are too often greedy and will chase the market down. Damn them, I don’t feel sorry because they will spare some knife catcher from becomming a FB and parting with his hard earned money. Let the seller be denied “bogus” equity that was never legitly his to begin with.
I wish my parents sold their house, but then whoever bought it would be screwed. They saved someone’s finances at the expense of their own. That’s half a million going bye bye as the bogus equity evaporates away.
I wish the Korean flipper that bought our house for way too much money in Aug 05′, didn’t.
Not.
Re: San Bernardino.
I lived in the area for about 10 years and the idea of placing high priced condos there is rediculous. For those of you who aren’t aware, there is a mall in “downtown” SB; at the mall, the security guards are actually real cops, some of which carry TWO guns.
Re: Not missing it.
I’m also ABSOLUTELY happy to know that we have someone here who will tell us WHAT to drive, do you want to tell us WHAT to eat and WHERE to live? I know your type. People like you make me FURIOUS. Tell me, WHAT should i be driving? Go ahead, enlighten us. I’m surrounded by your type here in SEATTLE, the type to meddle, who like to tell others WHAT THEY SHOULD BE DOING. Please, why don’t you make a list for those of us who are less fortunate to not have your insight as to what we should be doing with OUR lives.
Get a life.
Why don’t you walk? It would probably be good for your peace of mind.
Your right to do stuff ends at the point where it effects me.
Driving a Hummer effects me in a negative way, so be assured that I’ll mock you for it.
It’s not “effecting” you…it is “affecting” you…
Sorry - minor gripe and is OT but the effect/affect mixup always makes my teeth hurt
Broken promises, broken contracts, broken relationships, broken marriages, broken homes, broke realtors, broke brokers, broke banks. Did this all start with Brokeback Mountain? I’m not making a moral judgement.
I’m not broke, so don’t try to fix me.
Hey Mormon tea, that broke me up!
I drink Mormon tea once in awhile, not too bad.
We’re all going to be doing a lot of bending over before this is through.
Speak for yourself. There isn’t any excuse for letting ones finances get abused. How long have you known about these problems? Did you do nothing?
Ben, I’m not sure there’s much one can do if the “Gates of Hell” so to speak really do open. We certainly are in very interesting times. I’m sure we will eventually work our way through this housing debacle albeit with a lot of pain. What concerns me more is something a lot more terrifying. For instance………..What if the monoline insurers go TU and it looks like they could very well do so. Then we get a real domino effect. Mark to market everybody!!!!!! JMHO
Sorry Ben, I meant to include this in support of my thinking.
Derivatives boom raises risk of bankruptcy.
http://www.ft.com/cms/s/0/1fcd23c0-cd29-11dc-9b2b-000077b07658.html
Also, we will all be faced with the socio-economic impact of the credit bubble, unfortunately.
Even those of us who have supposedly planned and prepared don’t really know how badly this will turn out. That’s why I want to get it over with as quickly as possible. I think dragging it out will have much worse consequences, because people can deal with being out of work for 6-12 months (maybe more), but if gainful employment doesn’t look likely for years and years, even formerly “law abiding” citizens might resort to crime. That’s what I want to desperately avoid.
Hi All:
I think we should start to shift our converstion on this blog toward the rental market, don’t you? Since rents are going up in SJ and SF, but flat elsewhere, and many renters on this blog are/will be affected by their FB landlords losing their houses, it might benefit us all to share what we know about prices, areas, laws, tacticts, etc. Do you all agree?
I just reviewed Craigslist in my area for rentals similar to the one I’m in. There are a lot of options, I’ll say that. Since NOTHING is moving, non-FB homeowners with any sort of equity are renting until things turn around. Some super-fancy houses are listed, too, but they want over $4K a month. Rots o’ ruck!
Sounds good to me. Have to give 30 days notice in AZ from the day the rent is due not just any day. Good luck getting a cleaning deposit back why should I even bother to clean next time? So I won’t.
I’m looking for a place right now in St. Paul, MN and I’m finding lots of options. I’m looking to move in June, and as a lark I placed an ad about a week and a half ago on Craigslist. I’ve had about a dozen honest responses and three realtors. The realtors probably won’t be calling back after I told them why it’s a bad time to buy. Three of the honest responses admitted that are pulling out of the sales market, and I suspect that a few more are that way too. Looks like rent for an older 3 bedroom single family house in middle/upper-middle class neighborhoods is going to be about $1/sq. ft. maybe a little less.
The townhouse complex (all rentals) I’m moving out of is offering two months free rent on any 12 month leases… I don’t think it’s getting any better anytime soon.
And now, to span the USA in a single bound, just see what you can get for $700+/SF on the RIGHT coast RIGHT NOW:
http://tinyurl.com/2uvt3k
Is it legal to sell a “residence” in North Carolina without a BATHROOM?
Check the pics, it does include a bathroom.
I see a room with tile in the corner, but the stat say “0.0 bathrooms”.
In 7 years the FBs can do it all over again, right?
When I get to the bottom
I go back to the top of the slide
Where I stop and turn
and I go for a ride
Till I get to the bottom and I see you again
Yeah, yeah, yeah
“I’m not making a moral judgement on paying debts, just saying that’s what I have seen people do. BTW, corporations do it all the time. And governments.”
I took a couple of courses in commercial real estate finance. Jingle mail is a formal strategy there. It’s called the “borrower’s put.” You threaten it to get a “cram down,” ie. cram new terms down the lender’s throat.
The kind of wacky mortgages this cycle brought to residential real estate are common in commercial real estate, where different busienss strategies require different mortgages. And default rates are much higher on commercial mortgages.
Import the terms, import that strategies.
My observations:
1. Stay away from the newbie LLs, even if they’re not FB. They have no knowledge of/respect for the law, and still carry the residue of “homeowner pride”, which is really just snobbery and lies behind an actual disdain of renters, who happen to be their new customers.
2. Stay away from SF and SJ. It’s worth it to commute an extra 5-10 minutes each way if you can rent a much better place for the same price in a surrounding area. The BART doesn’t even go to SJ.
3. Don’t give a holding deposit without a written agreement. You can write something up very concisely above the endorsement line on the check. That way, if the LL cashes the check, you can show the judge that the check was always contingent upon a lease.
4. I tried asking for a 2-year lease, but didn’t get it. I think it’s a good idea, though.
5. I’m thinking rents go up for 1-2 years, but then flatten due to all the new construction that is finishing up right now.
““‘Fine. If the value is going up. But we’re not going anywhere. The price or the value is going down. It makes no sense because we will never be able to refinance and get a lower payment. There’s no way,’ Stephanie Valdez replies.””
Makes me sick how these nimrods conveniently swept the reality of the “worst case scenario” aside when they signed the loan. And just as sick regarding the RE and Loan/Finance A-holes that did the same. Zero accountability. Well deserved Joshua tree recipients.
The only integrity I’ve seen over the last six years has been displayed by a few close friends and folks on this blog.
I pasted this link to this “vandalized” bank owned crapbox yesterday, but thought some of you that missed it might want to take a look…this is what’s going down in Stockton, and it’s just getting started, IMO, thanks to a**holes like the above couple.
When the page pops up, click on “montebello way” (last link down). Sobering…
http://pmz.com/mypmz/search/results.asp?data=st:p|pt:res|at:ci|ct:Lodi|bd:1|ba:1|pp:200-300&cp=6
DOC
I am completely hammered, and watching this odd spectacle of our leader talking about all the things he didn’t do, and taking credit for all of it…
Group-think is evident, as 1/3rd of the room gets up and claps every other paragraph, for no apparent reason.
There isn’t much left, in this bottle of Lagavulin.
A fascinating (to me) thing occurred at the end when President Bush was signing autographs and one of the Republicans asked him
“How do you give a rebate to people that never use bait? HaHa”
An arrogance that I hope was heard by every voter.
“The First Lady is in a very nice dress, even if it is bright hooker red.”
Loved that comment. Also the comment about “Wearing that wussy baby-blue tie, again”
I liked the Dem response, or - We need to work together to find American solutions. “American” in this case, appears to mean, “spending money on what democrats want to spend money on.”
Didn’t you love Pelosi’s new face lift. What a zid.
“If you send me a bill that doesn’t cut the number of earmarks in half, I’ll send it back to you with my veto.”
Sure, just like he did for the last seven years. How many vetoes was that Mr. President?
That’s exactly what I was thinking! The other thing I was thinking was how on CNN today, they had a little article about things you should never say at work. I don’t know why I read it, but I did. One of the biggest no-no’s was to say “or else”. Apparently, giving ultimatums and making threats are counterproductive. Who knew?
There are some AMAZING drinking games you can play while watching the state of the union address!
Ooops!
Page changed…Click on “montebello” on th top of the page…Here’s the correct link…
http://pmz.com/mypmz/search/results.asp?data=st:p|pt:res|at:ci|ct:Lodi|bd:1|ba:1|pp:200-300&cp=7
DOC
thank goodness it is just grafetti. If they were propper realtor’s they’d describe it as ‘decorated in an modern rustic art that blends street with house but in a cheeky but not too imposing way’.
The Fed will cut another 50 BP because if they don’t they lose all credibility (i.e., this would confirm that they were either duped last Tuesday or are just Dow whores). In order to prove they are “independent” and “rational” they will cut again.
The cut will send the NAR into another frenzy, trying once again to convince people that this is really, really it. THE bottom to end all bottoms and if you don’t buy now you will NEVER own a home and your children will die of typhus in a cardboard box in some dirty alley.
A few morons will buy but most will be unwilling or, more importantly, still unable to buy. The new rate cut will probably also bring lots of sellers back into the market again, ramping up the total supply and months inventory stats back to reality.
Bush meanwhile gives his last State of the Union, confident that he will not be impeached now nor persecuted later. idem Greenspan. Both go to the private sector and continue their multi-billionaire lifestyles. God save America, because we are not able to save ourselves
NAR doesn’t get it. Its not a liquidity crisis its a credit risk and derivatives crisis.
“THE bottom to end all bottoms and if you don’t buy now you will NEVER own a home and your children will die of typhus in a cardboard box in some dirty alley”
I seldomly laughed so hard aloud reading this blog !
Well I just got a letter from my old neighbor back in Cali. I was floored to hear the HOA has increased from 339 to 391 per month. Its been about 1.5 years hows that for DEFLATION ? It was 118 when I bought in the early 1990’s. Another reason not to buy a Townhome or Condo.
Hoz,
Thank you for the link to QandO. The live blog commentary to the STOU address and the Democratic response was hilarious. By the way how many shots did you end up with?
Has anyone read the bizarre post on Financial Sense which blames the bubble on Mozillo and calls him a liberal. Apparently, Countrywide did not give out liar loans, etc. just to make money. Oh, no. Mozillo did it because he wanted minorities and poor people to share in the American Dream.
The author obviously owned shares in Countrywide and failed to sell his house at the peak. Probably voted for Bush twice and can’t understand how a tree-hugging, communist like Mozillo was allowed to control US real estate for so long.
Does anyone know if Mozillo is a Democrat or a Republican? Not that it matters, but just out of curiosity.
More to the point:
Is he a root or a tuber?
Shirt tail lifter or pillow biter?
Based on his political donations, he’s definitely a GOP. Only since the November elections has he hedged his bets to contribute to a handful of Dems. He’s one of those compassionate conservatives, right. All tan and no skin in the game.
sanity is returning to North County San Diego. San Marcos is not a ghetto either, take a look at this new comp for this neighborhood. The sq footage isnt huge, but the old comps in this hood were 500k.
No liens or tax obligations on this property:
http://sandiego.craigslist.org/nsd/rfs/554101622.html
We are just at the start of the banks clearing all their inventory, this home will be even cheaper in 2009
Have you checked out O’side lately? Especially 92057? Down 50% or more already. Woo-hoo!
Ugh, these garage-centric units with living quarter attached are depressing. You couldn’t pay me to live in one of these.