It’s What The Market Is Doing
The Charlotte Observer reports from North Carolina. “Home building and sales are falling more sharply in the Charlotte area than nationally, a sign the housing slump is worsening in what has been one of the country’s stronger markets. Building permits, an indicator of future home sales, fell 40 percent in the eight-county Charlotte region during the fourth quarter, compared with the same period in 2006.”
“Sales of existing houses, townhouses and condos also fell 24 percent in the fourth quarter, according to Market Opportunity Research Enterprises.”
“‘The national malaise was late coming to Charlotte, but it happened very quickly once it arrived,’ said Chuck Graham of Newton Graham Consultants, a veteran of the area real estate market. ‘I think we still have a little further to go.’”
“Robin and Todd Calhoun are feeling the pinch. In 2004, they bought a four-bedroom house, built about 30 years earlier, for $165,000. Robin Calhoun says that an appraisal last year for refinancing valued the northwest Charlotte house at $210,000.”
“Her husband wants to move out of the city and get a house on several acres. They’ve been trying to sell for 15 months, through a Realtor and on their own. They’ve been unable to buy three houses they liked because they haven’t been able to sell. They’ve pushed their asking price below $180,000. They’re willing to negotiate lower.”
“‘We know people are having a hard time getting loans, and the economy is so bad,’ she said. And they’re competing with all the new houses around.”
“‘People could go in and buy a new home, no money down,’ she said. ‘For younger couples, they might want that.’”
The Times Dispatch from Virginia. “Foreclosure filings in Virginia jumped nearly 460 percent in 2007, according to RealtyTrac. According to Connie Chamberlin at a housing advocacy group in Richmond, 2007 is just the tip of the iceberg for Virginia.”
“‘We expect to see another 25,000 foreclosures in the next year,’ she said.” Chamberlin blames the situation on unscrupulous brokers who took advantage of homebuyers with poor credit by putting them in high-fee adjustable subprime loans. Those loans, she said, are now starting to reset, which explains the jump, she said.”
“Chamberlin said this predicament would make it difficult for some consumers to get themselves out of the bog. ‘Some of these loans should have never been made and can’t be fixed,’ she said.”
“Chamberlin called what is happening in Virginia ‘fundamentally a disaster.’”
The Carroll County Times from Maryland. “According to an estimate based on monthly data from Metropolitan Regional Information Systems, last year saw the lowest number of homes sold in Carroll — 1,649 — since the late 1990s.”
“One reason for fewer sales is a lack of confidence in the real estate industry because of the national subprime lending crisis of 2007, said Carroll County Association of Realtors President Rus Blackburn.”
“This lack of confidence has contributed to the fall of the housing market while taking away some demand for houses, he said. ‘Your listings or your inventory are your supply, and the demand is just not there, and people who just have to sell their properties in this market are going to suffer some on price,’ Blackburn said.”
“House prices aren’t increasing as dramatically as they were a few years ago, when the county’s average price soared from about $194,000 in 2001 to more than $358,500 in 2005.”
“While the final sale prices have changed slightly, sellers aren’t getting as much as they had hoped for their homes. In December 2007, the average sold price for a home in Carroll County was $345,820, about 90 percent of the average list price of $386,784.”
“In the real estate boom years between 2001 and 2005, homes routinely sold for 98 percent or more of list prices, according to MRIS data. ‘It’s not underpriced or overpriced,’ said real estate agent Terri Mand. ‘It’s what the market is doing.’”
The Cape Gazette from Delaware. “Sussex County has been averaging about 275 sheriff’s sales a year, but the number jumped to 418 in 2006. And there have been 137 scheduled so far in the first two months of this year. If that trend continues, the county could see more than 600 sales this year.”
“A recent state foreclosure task force found that the number of foreclosures in Delaware increased 90 percent over the same period last year and the number of those who are seriously delinquent in payments (90 days behind) jumped 57 percent from 2006 to 2007.”
“Most people are under the impression that sheriff’s sales are places where people can find unprecedented bargains on houses. That is usually not the case. Attorneys representing banks or other mortgage lenders bought most of the 40 or so houses sold during the Jan. 15 county sale.”
“That is the case across the country. About 80 percent of all houses are sold to the original mortgage holder, according to The Real Estate Library information center.”
“Lynn Kleb, who works full time on the mountains of paperwork involved with the county’s sheriff sales, said her work load has doubled over the past four to six months. She also said foreclosure trends are changing to include more expensive homes in coastal Sussex. It’s not unusual to find homes in excess of $400,000 or $500,000, or even more.”
“‘We are seeing a lot more in eastern Sussex towns like Lewes, Milton and Ocean View where we had very few in the past,’ she said. ‘And we are seeing condos that we never had before.’”
“She said many more second homes in the resort area are also showing up in the sheriff’s sale listings. ‘For some it comes down to a sale or foreclosure – whichever comes first – because they want to get out from under that second payment,’ she said.”
“Kleb said there is help for homeowners who face losing their home. Her first question is: ‘What have you done to rectify the situation?’”
The Courier News from New Jersey. “New Jersey’s prime location, situated in the metropolitan triangle of New York, Connecticut and New Jersey, seems to be providing some housing protection for both homeowners and Realtors.”
“According to RealtyTrac, 4,232 foreclosures were filed in New Jersey in November 2007, and 60,802 for the year through November.”
“Carl Reed of ERA Reed Realty Inc., which serves the Plainfield area, said the Queen City’s foreclosure situation probably is ‘a little better here than elsewhere.’ ‘The majority of my clientele are in a position where more is owed than there is equity from a fair market price on the property,’ Reed said.”
“Peter Cagnassola, a top-selling agent in Bedminster with almost 25 years in the field, and Reed pointed a long finger of blame at the lending institutions. ‘Some were willing to lend buyers 110 percent on new construction,’ Reed said.”
“Home buyers in the 1980s, housing’s last boom period, ‘would never have gotten today’s loans,’ Cagnassola said.”
“And he blames the lending markets for creating a pool of buyers not truly eligible to sustain a mortgage. When these new homeowners went out and got a second loan on the property, their problems increased.”
“Brian Graham of Century 21 Worden & Green in Hillsborough, with its own Real Estate Owned Department, gave a more sober appraisal of the state’s real estate situation than other Realtors contacted.”
“‘The market dried up about four years ago, and in the last two years there have been more foreclosures,’ he said.”
“And again, Graham cited the ‘high-end properties’ as succumbing to foreclosure, ‘much more than in the last wave a dozen or so years ago.’”
“Jack Gulla of Century 21 Golden Post Realty in Middlesex, reported median home prices at about $325,000, but added, ‘the more new suburban areas are another animal. All that new construction and subprime mortgages were being fed to buyers.’”
Fox Business from New York. “Thirty-four years worth of progress assembled street by street, block by block, house by house is crumbling before Cathy Mickens’ eyes.”
“‘It’s hard to see the neighborhood being torn apart,’ said Mickens, director of the Neighborhood Housing Services (NHS) of Jamaica, the gritty eastern edge of New York City.”
“Wander any of the side streets just off Jamaica Avenue, the neighborhood’s main drag, and her meaning is clear. Dozens of empty homes, ‘For Sale’ and ‘For Rent’ signs jammed into first floor windows, stand testament to an exploding housing crisis brought on by a flood of foreclosures tied to subprime mortgages.”
“Mickens said she and her staff of eight have been watching the storm clouds gather since around 2000, when they first began to see gimmicky loans created to help people with little money or bad credit — or both — obtain mortgages.”
“So they weren’t surprised when defaults and foreclosures started picking up around 2005. Still, they said they were taken aback by the deluge that poured down in 2007, when their client roster surged by 40% from a year earlier. ‘This isn’t a new problem for us, but now it’s huge,’ said Mickens.”
“Jackie Camacho, an NHS loan counselor, said many of her immigrant clients were duped into mortgages that promised payments of, say, $1,700 a month on loans often in excess of $500,000. Sounds great, right? A loan of that size would typically generate a monthly payment of more than $3,000.”
“But no one said anything about the interest rate adjusting higher in two or three years, at which time the monthly payment might jump by $1,000 or more. And no one said anything about prepayment penalties that penalize borrowers from paying off loans before those rates adjust higher.”
“Cerinelly Disla, an NHS foreclosure advisor, said many of her clients clearly got in over their heads. One client with a $28,000 annual income used a ‘no income verified’ loan (the name speaks for itself) to obtain a $650,000 mortgage.”
“Was there an element of greed at work on both sides — homeowners grasping for something too good to be true meeting brokers out to make a fast buck? Absolutely, said Disla.”
“Consider one of her clients, a babysitter with a stated income of $10,000, who obtained two mortgages on two properties with a combined value over $1 million. The broker who approved the mortgages told the babysitter the purchases would pay for themselves if she used rent from one property to pay the mortgage on the other. It didn’t work out that way.”
I hate to break the news but Jamaica Queens was never a garden spot to begin with. My Mom worked there for many years and was mugged 3 times. Now it just has alot of foreclosures to go with the crappy neighborhood.
Isn’t Charlotte the home of BofA and Wachovia? Boy they’re in for an even harder time that they’re having now.
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Charlotte is home to Bankrupter of Americans? Who did it acquire in Charlotte (Bank One?).
It was a great bank (Bank Of Italy in SF) a hundred years ago. Its founder, Gianini, was a genius. We don’t make bankers like him anymore.
Jas
Charlotte is home to both BofA and Wachovia. A significant portion of the jobs there are tied up with the banking industry. I saw a feature on Charlotte on CNBC about 4-5 months ago where a number of local businessman were interviewed. They were all asked about the real estate market and all said “It’s different here”. What is amazing that the same people who felt Charlotte was it’s own little world would probably go on at length about the globalization of the economy and how the city has benefited from it without even seeing the contradiction.
Traditional banks are faring better than investment banks right now, as I do see Wachovia stealing new deals from them. They are being flooded with deals to provide liquidity which the investment banks used to provide.
We were watching the tube yesterday, and a Wachovia commercial came on, and I forget what they were offering up, but after it ran, my wife and I looked at each other and said “my gawd, they are desperate”! at about the same time.
No doubt, but they and banks in similar position seem to be the only ones doing deals right now. Our Wachovia group is working nonstop. Our Wall Street securitization and derivative group is reading housing blogs.
I just got in from errands. stopped at local branch of Wachovia. The teller started asking me if I had heard of the rate cuts over the past few weeks. heehee. Got me running my mouth. I even said, damn, a 98 percent drop in profits in one quarter must have hurt. I also brought up the purchase of that bank in Cali and compared it to the moneystore. she laughed and said yep. Then started pushing a new savings account that paid slightly more interest than a regular one, but was for several years. Said no thanks, want to stay more liquid than that. I didnt even want to know the particulars. very desperate.
I’m with BofA and they have provided good service and when I owned, very decent mortgage service. But for the past couple of years they have driven me nuts with sales calls for insurance and other things I don’t want. Even though I registered with do-no-call, they seem able to skirt that because I am a customer of theirs. Wish there were a way to get rid of the intrusions without closing my almost 40-yr-old account.
Login to your boa online account and go to the privacy section. There’s an opt out option so they will stop calling. I did the same thing and worked like a charm.
IIRC NationsBank acquired BofA and took their name.
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Thanks. I was a customer of Security Pacific and BoA acquired it some twenty years ago. Huge consolidation, or monopolization, in banking and finance. Can’t be good.
Jas
Before about 1992 NationsBank was NCNB - “North Carolina National Bank” I believe.
Charlotte is indeed a huge banking center - the biggest in the U.S. in fact probably outside of New York. Actually lots of the banking folks in NC came from New York, which is why Charlotte is more New-Englandish than pretty much any other southern city.
(Which is why I never really liked Charlotte
)
B of A, (as well as Wells, Wachovia, and a bunch of other “name” banks) was bought by a no-name bank in Charlotte a few years ago, but they kept the famous name. Charlotte is home to a very acquisitive bank industry.
“It was a great bank (Bank Of Italy in SF) a hundred years ago. Its founder, Gianini, was a genius. We don’t make bankers like him anymore.”
They loose in a week what he earned in a lifetime.
But notice the NY housing counselors, after pointing to low lending standards for the problem (I bet they were saying the opposite two years ago), then say we need higher loan limits!
A million dollars to a baby sitter. And people wonder how we got in this mess.
“Consider one of her clients, a babysitter with a stated income of $10,000, who obtained two mortgages on two properties with a combined value over $1 million. The broker who approved the mortgages told the babysitter the purchases would pay for themselves if she used rent from one property to pay the mortgage on the other. It didn’t work out that way.”
Me thinks the babysitter needs her own babysitter.
I think the babysitter is probably still in high school.
The broker should go to prison for fraud. Supplying loans for 100x income? The is even more multiples of income than the 700k loan for the 14k/yr strawberry picker.
a babysitter with a stated income of $10,000, who obtained two mortgages on two properties with a combined value over $1 million.
Never in my wildest dreams did I think we could beat the strawberry pickers in California…yet here we are.
Behold…the power of fees.
Yup, this one definately takes the cake, no doubt about it. 100X income; come on.. Even a 1% loan would be more then 100% of their income!
I just can’t believe there wasn’t some fraud here; the lenders were stupid as he** during this whole event, but, seriously, 100X income? That’s just a bit difficult to believe.
Now, what I can believe is that they let a babysitter report a monthly income of 10K (120K/yr) and then gave her a loan for 1M dollars. I was told, several times, during the past few years that anything “under 10X your income” is fine for a loan. I almost puked when I heard that, every single time.
Hmm. My son is thinking of getting a paper route…
Really though 100x, 10x, even 5x - same endgame. Foreclosure!
yea, but the best part it was 100X STATED INCOME. What is the real income??
And here I was thinking that most babysitters were 15-year-old girls who couldn’t get dates on Fri. and Sat. nights, and who were happy to get paid less than minimum wage. Turns out, they were closet millionaires instead. Who would have thunked it!
less than minimum? hehehehe. When I was in High School I made bank babysitting. I lived in a town with a small number of babysitting aged girls, with a rising population of new families with children aged 1-6 years old. It was so hard to get a sitter that my neighbor put me on retainer to have first right. I would always call her and ask if she would need me that night before taking another sitting job. every week, a bit of money whether I sat or not. It was great.
Thankfulrenter is correct–we pay $10 an hour to college student sitters in Texas and are happy to have them.
And from the housing “counselor’..
““But no one said anything about the interest rate adjusting higher in two or three years, at which time the monthly payment might jump by $1,000 or more. And no one said anything about prepayment penalties that penalize borrowers from paying off loans before those rates adjust higher.”
Hey, dummy,in this country we sign mortgage contracts. You know, affix your signature with a pen to the paperwork that states clearly, Adustable Rate Mortgage. So, what madam counselor, do you think ‘adjustable” means?? And yeah, tell your deadbeat “clients” to look at what they signed.
All of these schmuck clients knew exactly what they signed, it was there lottery ticket in a game called RE Always Goes Up”.
Foreclose ‘em and firehouse ‘em out of the neighborhood. Would do wonders to clean the place up. And it is a crappy looking hood.
if they did not get the loans a few years back it was racsism
but now they are victims.
jamaica queens is without a doubt the major armpit of an otherwise decent borough of queens
Hey! My Grandmother (of blessed memory) used to live in Rochdale Village! (Jamaica Queens) Remember that disaster? One of the first “co-op” developments. There was a PBS special on its decline.
http://en.wikipedia.org/wiki/Rochdale,_Queens
Also, I can’t imagine naming a housing development “Rochdale” People will call it “Roachdale!” Duh!
(I hate to break the news but Jamaica Queens was never a garden spot to begin with.)
South Jamaica certainly wasn’t. But Southeast Queens as a whole has been one of the most affluent Afro-American areas of the U.S., ever since the Black middle class left areas like Harlem and Bedford Stuyvesant and moved there, turning the latter communities into low-income ghettos. (Southeast Queens is basically the suburbs, but because it is within the city boundaries you didn’t have as much housing discrimination there).
Now it is the outer-edges of NYC, and the suburbs, that face decline. My guess is the successful children of the Black residents of Southeast Queens will either move closer in or out of the Metro Area altogether.
wt- i think they already are moving out- from what i understand most upwardly mobile afican americans move south
for cheaper housing and other educated young people
nyc african american population is shrinking and being replaced by asian or latino immigrants
btw there are some beautiful tudor homes in southeast queens in mostly african american areas, lots of city workers own these homes and take excellent care of them too
My mom still lives between Hillside and Jamaica Avenue. The area is not the best, but go north past Hillside to Jamaica Estates, and you will notice how affluent people are up there.
‘The national malaise was late coming to Charlotte, but it happened very quickly once it arrived.’
Funny how that works. Our local RE crowd (Columbia,S.C.) less that a 100 miles south of Charlotte are twisting themselves into a knot, advertising heavily that we are immune to a correction etc.etc. Two large Condo projects were just canceled or course they used the tern ‘on hold’ until market conditions improve. What I thought we were immune?
Bingo, we were hearing the same here in Greenville, SC (100 mi. SW of Charlotte) that the real estate problems would not affect our market. People I know in the RE industry look as white as a sheet for the past 2 months or so. My observances tell me the economy overall in this area is going downhill faster than any time I have seen in my adult lifetime (17 years). Jobs paying over 50K are completely absent here right now - it has to be a rude awakening for the relocators coming here (this means you, Florida). You would not believe the number of college-educated couples with kids we know who are into muti-level-marketing schemes (full-time!) to get by right now.
I still think MLM is gonna be the next big scam-thing. It is gonna get to be much bigger than at any time before. This time we will get serial MLMers; people working several MLM schemes concurrently.
Desperation certainly helps the MLM “leadership”. A starving man is more likely to believe a heap of $hit is good eating.
I look for a return of the pyramid schemes, the pyramid parites and such that swept the country in 1979 or so.
Everyone was to bring $1,000 to a party at someone’s house and - presto- everyone attending would magically become super-rich just a few weeks later.
Everyone wins when these things get going; everyone loses when they stop. (Sorta like a real estate boom/bust.)
The broker who approved the mortgages told the babysitter the purchases would pay for themselves if she used rent from one property to pay the mortgage on the other.
This is exactly the type of fraud/ethical violations that occured all over the country. The broker should be charged with a felony and lose their license.
I would have to see more facts. For example. Why was someone relying on a broker for debt service projections? Was the broker an investment partner that toured the properties (I doubt it but why else would someone rely on a broker for such advice)? Why didnt the babysitter do her own research?
I dont know the facts of this case, but do have a problem with ppl suing those for bad advice when they had no reasonable basis for relying on such advice to begin with. If such lawsuits were successful, it would encourage more ppl to sue ppl involved in transactions when the real person they should be blaming is themselves, and its usually a he said she said kind of situation. Take your hits and move on. Litigation over such matters should be reserved for ppl that out and out lied, falsified documents, stole cash, etc. I dont want to see a world where ppl that lose money on stupid investments sue ppl they thought gave them bad advice or recommendations, especially if those being sued were not hired and being paid for the purpose of providing such advice. We have too many ppl trying to get out of their obligations as it is. I am much more concerned with why the loan was approved from an underwriting standpoint than statements made regarding projected cash flows by someone that was clearly not this person’s agent with regards to such matters.
The facts are limited in the article. However, there does appear based on the information stated in the article that there is sufficient probable cause to charge the broker with a felony.
If the broker knowingly and intentionally knew that the babysitter made $10,000 and advised her that she could pay for the mortgage via the rent, than the broker could be charged based on the current statues. The broker clearly should lose their license over this transaction if it occured as stated. It has that distinct smell of the brokers interest in collecting the fees instead of providing the proper due diligence as required by law.
This is a case that needs to be investigated further.
Yes. The broker seems shady. I was concerned that it is the babysitter that appears to be running the scam although the broker did his part. Did she accidently think she was making 300k+ a year or that properties at the peak cashflowed? Hardly. She was working the system and is trying to point fingers to avoid her own wrongdoing. If a reasonable person would not do what she did, one can make a fair assumption that she was not innocent.
And the baby sitter went “stated’ income for 10k?? Wonder if she filed any taxes on that. if she did, she could collect the $600 handout from the government. Somebody should notify Schumer, here’s a photo-op for him of another tragedy in the making.
The broker who approved the mortgages TOLD the babysitter
This is something I’ve been wondering about. Are all these brokers legally liable for what they “tell” to their clients? What about realtors who “told” buyers that they could always refinance? (how many of those have we read?) Or does it have to be in writing to be binding? What about Angelo Mozilo, or Moody’s ratings? They don’t still honor oral agreements, do they? I think all these lawsuits are going to fail.
Maybe people will learn something out of this: The best question is “Can I get that in writing?”
Remember it was the baby sitter that told the story. Much of the times it goes something like this, “I heard real estate was a great investment or I think i can flip or rent and then flip this place for a great profit, what do you think?” The statement is usually made to a real estate or mortgage sales person. If you want investment advisors you need to find and pay for them. It’s just an easy scape goat to blame others for your own stupidity. If you are taking free advice from sales people, I think you should be forced to eat your mistake unless that person lied or commited fraud. The buyer is best person to determine how much they can afford and how much risk they want to assume.
I just dont want to see lawsuits where ppl can claim, no one told me I was acting stupid or gave me accurate market forecasts.
To answer the legal question, the question is what duty of care is owed and whether that duty was breached resulting in damages. The extent of the duty will depend on the particular circumstances and nature of the relationship. Rarely are there black and white answers. I for one think that any duty should not be extended such that opinions or forecasts are regarded as guarantees, or such that ppl with dirty hands can shift their own fault to someone else. Every case is fact specific. I am sure that ratings agencies would have a higher duty of care to investors then real estate agents owe to buyers with respect to economic forecasts, as that is their particular business and why they exist. Realtors exist to open doors and make appointments. They are not even required to be educated.
Northwest Charlotte for $210,000? That must include his and hers uzis. Yee haw. Charlotte is overbuilt and bland. The only reasons it got so high were banking and relocating Yankees. How are those things looking now? Charlotte loves growth and hates pedestrians. That should work well. Seattle seems to stand alone as the one market still doing well. Or is it?
The banks did not make Charlotte nor did the yankees. The people here are from all over the country. Its not a bad place to live either. As far as the economy goes, well almost all of my friends own their own companys some small and some large and everyone of them are doing great including my own. I hope the real estate nose dives here because I want to invest here.
Regards,
Lane
Charlotte did go out of its way to attract the brightest from the East Coast for the banking business. When I lived in ATL and in DC, I used to get head hunters calling me several times a week. Its not bad, but seemed more like a congested suburban center than a city to me.
“The banks did not make Charlotte nor did the yankees.”
Ever been to South Charlotte, Lane? If you think the growth of the past 20 years wasn’t driven by banking and Yankees then we must be talking about 2 different Charlotte, North Carolinas. If BofA ever left Charlotte it would be a complete disaster.
Agreed. I know Charlotte well. Bank of America and Wachovia have played an enormous (and vital) part in the growth of Charlotte.
And Charlotte is one more American city that suffers from shite urban planning — unless one considers “sprawl” a plan. The traffic there sucks.
The current banking crisis will test Charlotte, no doubt. Not just BofA but Wachovia is there. All eggs are in one basket.
And not just any ol’ basket. That basket makes Shitti-bank smell like roses.
Oh, brother. His and Hers Uzis and babysitters as closet millionaires. Slim’s already had two uncontrollable fits of laughter, and the day’s just begun.
I lived in Charlotte as a teenager and while in college. I have fond memories of the place, but the bit about relocating Yankees, loving growth and hating pedestrians is spot on. Downtown Charlotte is still little more than a glorified office park.
I’ve mentioned here before a couple times that Charlotte wasn’t immune to the early 1990s housing collapse. My family sold our house in 1993 for about 15% less than we paid in ‘88. And it was a pretty nice house. (We moved there from Pittsburgh after all the jobs in Pittsburgh left, so yeah, we were part of the Yankee problem.)
One thing that turns me off about Charlotte is it tries to distance itself (1) from the rest of NC, which is a shame because NC is a quite agreeable state and I’m no born Southerner, and (2) from Atlanta, which is ironic becuase a miniature Atlanta with all Atlanta’s problems is exactly what Charlotte has been turning into over the past 20 years.
You mean uptown. Charlotte’s too good to have a downtown.
Those who drank the kool-aid there had delusions of adequacy for over a decade. My parents were there, and I remember coming home and reading articles comparing Charlotte (in the mid-90s) to New York and Paris. Yikes, even now that’s a stretch, but 15 years ago?
No, I mean downtown. I see your sarcasm, but when I lived there most people still called it downtown. The whole “uptown” thing was completely manufactured by the chamber of commerce, with help from the Observer, whose stylebook dictated calling it uptown. I will never, ever call the CBD anything other than downtown.
“Consider one of her clients, a babysitter with a stated income of $10,000, who obtained two mortgages on two properties with a combined value over $1 million.”
I don’t see the problem. She should honor her commitment to the loan. Doesn’t she know that walking away from debt is immoral?
“Consider one of her clients, a babysitter with a stated income of $10,000, who obtained two mortgages on two properties with a combined value over $1 million. The broker who approved the mortgages told the babysitter the purchases would pay for themselves if she used rent from one property to pay the mortgage on the other. It didn’t work out that way.”
What a great freeroll. All for the cost of your credit score. If I had a 10K income with no prospects, I would have done this in a heartbeat. The broker on the other hand…. eeessshhhh !
We are shocked that loans like the above were made, but that was the way homes were marketed from 2003-2006 .With traditional lending, a borrower would have to prove they could obtain a certain rent ,but during this cycle borrowers were using false stated rents as income if they even disclosed they had other property .
During the boom these investment groups and criminal promoters were looking under every rock to find straw buyers they could talk into purchasing property on stated income with no money down .It’s clear that people on 20k incomes don’t buy 500k properties unless they are getting some cash-back for doing the dirty .
Instead of the powers calling these FB’s ” poor home buyers” who didn’t know what they were doing ,more investigation needs to be done regarding these huge investment groups that were seeking out these people who would take a bullet for a little up front cash . This is another reason why bail-outs without investigations are not warranted .
Nobody can give the real estate sales people or the builders a pass on what took place in the final years of this boom regarding transactions that were set up . On bum deals there is always a RE sales person involved and a crooked appraiser/lenders agent , and a buyer and seller that did some dirty .
If the real estate community thinks they have “unclean hands” because the borrowers signed the loan docs ,they better think again IMHO. What the real estate sales people are saying is because the lenders and borrowers were willing to commit fraud ,than it was OK for them to bring buyers to housing they couldn’t afford and set it up for the crooked loan agent . I think people would be shocked at how many kick back incentives were being paid to the real estate agents by the crooked loan agents to bring them suckers . I am not addressing the certain % of agents that were honest but what % were honest in their business dealings ? The practice of double escrowing a transaction was also common with the real estate crowd ,which is a very questionable activity designed to deceive the lender in a lot of cases .
I’m saying that the housing boom was a major unchecked crime wave in every way and the marketing of homes was criminal .The public has no clue about the real job requirements of real estate people and enders agents . Also , it doesn’t excuse RE management or Wall Street for their lack of check and balance on fraudulent shady deals .The criminals thought “real estate going up” would hide all sins .
“Kleb said there is help for homeowners who face losing their home. Her first question is: ‘What have you done to rectify the situation?’”
My first question would be, “How did you get into this situation?”
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Are there still people on this blog who don’t believe that vast majority of people can be made to do almost anything, even when it is not in their interests, with the use of propaganda or brainwashing?
How many people owned CSCO, MSFT and INTC (all peaked at mkt cap very close to $600B each!) during 2000? And what about those who owned indirectly via index funds and mutual funds?
Rising home prices are bad for some 95% of the population, but how many were cheering high home prices?
Jas
It’s called herding. The modern populace enjoys it. Craves it even. WIthout herding most people would have no idea what to do with their lives in the modern age. I don’t think it is bad that man has this instinct, but the influence of bad shepherds can be devastating.
Have you not noticed the rise in “Leadership” courses at the University level? Have you noticed that people that are truly leaders and pioneers rarely take such courses? In the modern age, leaders are molded and created, herded even. True leaders with positive vision aren’t “certified” to lead modern man.
At least one school in the Midwest offers a BA in Organizational Leadership. WTF? You can get a much more useful degree for the same price. (and get a minor in Leadership just to make the resume look good.)
The American public has been trained to vote/act against it’s own interests, all in the false promise of becoming rich. As in, I don’t mind that the upper 1% can hide all their assets in a Bermuda bank, since someday I’ll be one of them. Freaks.
This babysitter really enrages me today. Since she went ’stated’ on 10k, under the table cash, I’d bet a grand she’s collecting welfare or SSI to boot. With medicaid to boot. Here are the deserving ‘poor’ Billary and Schumer keep bleating on about.
Forget debtor’s prisons, bring back work camps. This chick owes a million…should keep this sitter off her butt and working til she’s ready for a little permanent real estate…a grave.
This stated income tomfoolery would stop if the income staters were reported to the IRS. They have some very effective verification tools over there.
Thank you for noting that it is indeed the babysitter that appears to be running the scam. The broker aided for his commission, but give me a break. A victim she is not.
Life’s too short to get all worked up about stuff like this.
Have a beer. Or three. Or a whisky. Or three.
“‘We know people are having a hard time getting loans, and the economy is so bad,’ she said. And they’re competing with all the new houses around.”
I hate to burst their bubble :-), but, the economy isn’t even bad yet!
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It all depends on your definition of what bad is.
Jas
Good point Jas,
The first recession for these doofuses will be a doozy.
Has anyone been looking at the airline 4Q reports? Not pretty. We’re definitely seeing a decline in the HELOC vacations…
Got popcorn?
Neil
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“We’re definitely seeing a decline in the HELOC vacations…”
You want a real good one on this, Neil?
A group of friends of a handyman buddy of mine, who lives in SFV, are accountants and such in the movie/TV industry (I met them at few gatherings). Some of them have quite good-looking wives/girlfriends. Beginning in 2003 they started to take annual (some year twice) to Ensinada, Costa Rica, Cuba, Peru, etc., for prostitution purposes. My buddy doesn’t make much money so the best off in the group financed one vacation for him. You can guess what my answer was when I was asked couple of times to join the trips. I am sure that you can also guess what prompted the vacations.
Got no popcorn!
Jas
Lovely friends you have.
What is the definition if “is”?
Is this putting lipstick on a pig??
http://bloomberg.com/apps/news?pid=20601039&sid=aPSScH5rRBLM&refer=home
Just goes to show you:
HELLO….. THE BANKS OWN THIS COUNTRY…………
If things aren’t working in the banks’ favor…. JUST CHANGE THE RULES!!
“The wholesale approach includes lots of room for discretion. For instance, if a borrower’s credit score is too high, mortgage servicers can use an ‘alternate analysis’ and consider a ‘tailored modification for a borrower.”’
Of those three criteria, two were known or easily knowable on the day the loan was made.
Jobs numbers continue to hold steady, true the housing industry is bringing down the economy but a underlinning look shows that rates on mortages continue to slide and many people who have been on the sidelines are statrting to venture out into the market. Cash buyers and high down payment folks are getting great deals, look for a slight bump up in better numbers around late spring the fed is most likely thru with rate cuts for at least the next two sessions with the fed rate settled at 3%.
Builders will make a conserted effort in very late spring to move inventory right now the sun belt towns are looking for a big push in now with price cuts and incentives that will make many a 04′- 06′ buyers cringe when they see the values dropped across the board.
Mid and small builders will be gobbled out either by 60 cents on the dollar buy outs or auction of their homes, short sales will continue to be plentiful, this clearing out of builders who were not ever in the game except for a fast buck with poor locations homes and shoddy work is needed the dead weight must go and these home will sell very cheap by todays standards these wil be first time buyers chance at owning a home for a decent price.
If you have xlnt credit and have been in the waiting game for a luxury home mortage rates, quick closings,price drops, and incentives will make for a nice purchase for those who want a new quality home this is the opportunity many have waited for a 5 to 5% 30 and 15 year mortages, 30% or more drop in prices,upgrades you want included and little or no closing cost, in the past two weeks three homes sold in the area for cash at 30% off million dollar homes that sold for 700k and full landscape and even pools thrown in, all were out of state buyers who were renting and moved in for the kill.
Footnote> waiting of course is still okay because none of this is going away by summer but if you are in a position where you really need that home and get the kids settled or retired and have been waitig for prices to drop in sun belt climates i say take hard look right now, the better locations and lots are getting action still people are not pulling the trigger in droves true but they are circling the wagons, i haven’t seen this many people driving around in a long time and flyers are empty in the tubes and boxes finally?
“Jobs numbers continue to hold steady”
Link?
Latest data I’ve seen shows unemployment rising rapidly - from 4.7% in November to 5.0% in December.
http://research.stlouisfed.org/fred2/series/UNRATE
packman it looks like this friday labor dept will show that unemployment drop to 4.9 (insider trading), this is unoffical as of today so you may be right 5.0% may be in play again, but all in all hiring is stablized and the loss of jobs will continue of course in housing and low level positions but many of these people couldn’t afford a house even if the rates were 0%, companies continue to searce for better educated peple who can actually do the job and are willing to pay for it?
You don’t act like an insider. I call BS.
i haven’t seen this many people driving around in a long time and flyers are empty in the tubes and boxes finally?
LOL. Ye ol Costco trick. Want to move a non-seller? Put a pallet out with 5 or 6 boxes of “X” left next to pallets filled to the top. Sheeple will buy them thinking they MUST be good because look how many are left.
I’m outside i have witness many people stopping and getting flyers when they drive by and asking me how i like the area this isn’t twlight zone these are real people in nice cars who said, “looks like a nice neighborhood and it is coming down to earth finally we have wanted to live here for quite some time now it is going afforable” i report you decide, if you think this is a Costco trick fine and dandy???
Shadow - are you in the WashDC area?
Not where I live. It shot up 3 percent in 1 year.
Since we’re on an east coast thing here is the first article from the Pittsburgh Post-Gazette mentioning layoffs in the area related to the mortgage biz.
http://www.post-gazette.com/pg/08030/853212-28.stm
The first among many I’m sure. Places with similar demographics to Pittsburgh will begin to feel the housing crunch and subsequent sqweezing out of jobs, as the bubble proceeds to role. The more a home is worth the more fluctuation in equity that tends to occur. A working class town such as Pittsburgh mind not fair as bas as other, pricier suburbs.
From the Carroll County, Maryland article:
“House prices aren’t increasing as dramatically as they were a few years ago, when the county’s average price soared from about $194,000 in 2001 to more than $358,500 in 2005.”
“While the final sale prices have changed slightly, sellers aren’t getting as much as they had hoped for their homes. In December 2007, the average sold price for a home in Carroll County was $345,820, about 90 percent of the average list price of $386,784.”
For the folks who don’t live in Metro DC or Baltimore, Carroll County is a semi-rural county way the heck out there that serves as a bedroom community for both DC and Baltimore. My semi-retired uncle lives out there because he wanted that lifestyle, and he has told me about the crushing commutes into the DC area.
Moreover, the local culture in Carroll County can be charitably described as “hillbilly.” When visiting my uncle, I once met a local yokel there who admitted to me that his grandmother had been won in a poker game.
And all that goodness can be yours for the low, low price of $350,000. Thanks, I’ll pass. Carroll and Frederick Counties are going to be crushed as badly as anywhere in California or Florida, methinks.
DIE ZIT !
Greenspan told the German weekly Die Zeit that the Fed or political policies could “probably not” keep the world’s biggest economy from sliding into recession,
Aaah, the good ol’ Chermans.
They still believe in a decent amount of honesty. You have to love them!
“Most people are under the impression that sheriff’s sales are places where people can find unprecedented bargains on houses. That is usually not the case. Attorneys representing banks or other mortgage lenders bought most of the 40 or so houses sold during the Jan. 15 county sale.”
“That is the case across the country. About 80 percent of all houses are sold to the original mortgage holder, according to The Real Estate Library information center.”
can someone tell me why the banks would buy back those homes?
Taking bets wrote: “Can someone tell me why the banks would buy back these homes?”
Banks make money on foreclosures when the following three conditions apply:
1) The loan is old enough to have made a decent profit in interest: At 6%, the bank will have made back 40% of the loan value in interest payments by the seven year mark. This does not count the fact that they still have controlling interest in the property, which leads me to the second condition…
2) The loan is young enough to keep the paid off principal on the house within a narrow band of profit that locks out the bidders who would otherwise buy the property when it went to the foreclosure auction. When a property in foreclosure is put on auction “on the courthouse steps”. the primary mortgage holder is only allowed to bid up to the remaining principal value of the loan. This helps to ensure that the bank does not take a loss, but also keeps the bank from reaping extra profits if the remaining loan balance is very low. At 6% interest, a 30 year loan will have only paid off 10.5% of the loan at the seven year mark, which is well away from the target resale profits that real estate investors shoot for.
3) The general value of the house has appreciated somewhat by the seven year mark. Once there is no higher bidder than the bank at the courthouse steps, the primary loan holder is given full ownership of the property, and can sell it at whatever amount the market will bear.
Its often better, or deemed to be better, for the banks to bid the amount they are owed and keep the lien on the property than to accept fire sale pricing below what they are owed. Note they would clearly let it go for an amount that would make them whole, but thats not usually the case.
Exactly. The mortgageholder liens are nullified at the courthouse steps sale, and so the first mortgage holder (bank) wants to protect its interest in the property, while other mortgage claimants are kicked out. The others are not happy about this, mind you, but since their interest somes after the first lienholder, they’d be fools to put their money up for that.
The (first lienholder) bank will almost always let the property go to any higher bidder who pushes the price above what the bank is owed; they are more than happy to sell it and take their money.
I’ve talked to bank reps who in some cases thought that maybe they should bid less than what they are owed on an especially crap piece of property, if only a reasonably competitive bidder would appear, but breaking convention like that requires lots of work (appraisals, good judgement, etc.) and since any price on the courthouse steps is usually below what the bank thinks it can get later in an REO sale where buyers can take their time to survey the hopefully empty property better, it becomes standard operating procedure to bid and keep the property.
it makes alot of cence to operate it that way, but what happens when there are no buyers and they keep taking on more homes at these auctions? one would think they would have to unload the homes at give away prices?
Yes. They will try to sell using their standard procedures and will probably eventually end up taking the loss. They just have more control this way. In addition, most have high mark-to-market (i.e., their own estimation of current fair market) valuations on the properties, and now most are refusing to sell for less than that because they dont want to recognize major losses yet. After too long, however, they will have to dump. Especially if the regulators take over. Now they are just trying to keep the high mark-to-market on the properties so their balance sheets dont look worse then then otherwise would.
then then equals than
Because they didn’t get an offer from anyone else to cover what they hold on the mortgage.
http://money.cnn.com/2008/01/30/markets/morningbuzz/index.htm?postversion=2008013011
But the threat of stagflation, a period of both economic sluggishness and rising price pressures, has to weigh on the Fed when it puts together its carefully constructed statement.
The central bank needs to continue to talk tough on inflation and may need to signal to the market that after today’s expected half-point cut - which would leave the federal funds rate at a pretty accommodating 3 percent - that it’s time to hold steady for awhile.
As bad as the subprime mortgage mess has been, letting prices for many consumer goods run out of control by further weakening the dollar with aggressive rate cuts could have an even more damaging effect on the economy.
In fact, inflation could be contributing to the current slowdown.
“Domestic demand readings were weaker than we expected, not holding up well in the face of the inflation surge, driven mostly by energy costs,” wrote Citigroup analyst Steven Wieting in a report this morning.
And no less an authority than former Federal Reserve chief Alan Greenspan warned about the possibility of stagflation as recently as last month. And with food and energy prices continuing to rise, hopefully current Fed Chairman Ben Bernanke and the rest of the Fed will take Greenspan’s words to heart.