The Problems That Exist Everywhere Now
Some housing bubble news from Wall Street and Washington. Morningstar, “Total loan impairment charges at HSBC’s US personal financial services division soared by 70 pct to 11.7 bln usd, lifting the group’s overall bad debt charge to 17.242 bln usd, an increase of 63 pct. Europe’s biggest bank, which lends to US consumers through its HSBC Finance Corporation unit, has been suffering from rising default levels for the past 18 months as flat or falling house prices make it impossible for overstretched borrowers to repay their debts by tapping into their housing equity.”
“In a statement, HSBC chairman Stephen Green confirmed that the bank’s US operations could face further bad debt problems this year, saying that conditions in the US ‘may well get worse before they get better.’”
“In a conference call, HSBC finance director Douglas Flint said that the US bad debt crisis should come to an end by the middle of 2009, provided the economic slowdown did not trigger a sharp rise in unemployment.”
“‘It depends on your view of whether the US will have a recession, and if it does, how long it’ll last. If employment holds up, we should see a turnaround in 18 months or so,’ Flint said.”
From MarketWatch. “Shares of Thornburg Mortgage Asset Corp. fell on Monday, plunging as the lender said that it has not been able to meet a new wave of margin calls worth at least $270 million and that it’s facing a possible liquidity shortage.”
“‘There is no assurance as to Thornburg Mortgage’s ability to sell such assets or raise additional funds in the current market at acceptable prices, or to raise additional capital,’ the company said in a statement. ‘If the company is unable to satisfy outstanding margin calls, any or all of its reverse repurchase agreement counterparties may declare an event of default and liquidate the pledged securities.’”
“Thornburg’s been hit hard by the fallout in the mortgage market because it’s specialized in two industry hot spots: adjustable-rate ‘jumbo’ mortgages and the trickier ‘Alt-A’ loans.”
From Bloomberg. “Fannie Mae and Freddie Mac, the biggest sources of financing for U.S. home loans, agreed to overhaul the way property appraisals are conducted under an accord with New York Attorney General Andrew Cuomo, according to a person familiar with the negotiations.”
“Fannie Mae and Freddie Mac agreed they will no longer purchase loans from mortgage originators who use their own in- house appraisers, according to the person, who spoke on condition of anonymity.”
“Most homeowners at risk of foreclosure have yet to ask lenders for help and may lose their homes as a result, Treasury Secretary Henry Paulson said. More than 80 percent of ‘at-risk homeowners aren’t responding’ to letters sent by the Treasury-backed Hope Now Alliance of mortgage lenders, Paulson said.”
“‘Homeowners must actively engage with their lenders and demonstrate that they want to keep their homes,’ Paulson said in a speech. ‘If borrowers don’t ask for help, they will have to bear the consequences, which may very well mean losing their homes.’”
“Paulson had a tough message for homeowners: Don’t think about walking away from your mortgage if you can afford the payments. In a speech Paulson said people who can afford their mortgage payments but decide to walk away from their homes because of falling home prices were nothing more than ’speculators.’”
From City Business. “The Federal Reserve’s lowering of interest rates looks similar to the moves that set up the housing market collapse, but a repeat scenario is unlikely, said Lawrence Yun, chief economist with the National Association of Realtors.”
“‘Many blame Mr. Greenspan for having fueled the housing market bubble and subsequent collapse by keeping the rates too low for too long,’ Yun said.”
“Yun said real estate speculation was a key factor in the first collapse, with buyers using subprime loans to acquire investment property. When those properties flooded the market and did not sell, speculators often walked away from mortgages they couldn’t afford. Foreign investors who gambled on subprime loans in the secondary mortgage market were burned.”
“‘Is the current action by the Fed simply trying to replay the same volatile game? The answer is an unambiguous no,’ Yun said. ‘The same game is played out because the global capital providers will not be taken for fools again. German mutual funds or the Chinese government or the Florida’s teacher pension fund will no longer buy toxic subprime loans.’”
The Associated Press. “Folks on Humphrey Hill Drive were still waking up on the icy Saturday morning the shark hunters came to town. They rounded the suburban traffic circle in a pair of rented school buses after a half-hour ride from far more modest neighborhoods, rumbling to a stop at the Garmone family’s driveway. Forty-two caffeinated Clevelanders piled out, their leaders carrying bullhorns.”
“Their quarry, Mike Garmone — a regional VP at Countrywide Financial Corp., the nation’s largest mortgage lender — didn’t answer his door. So they deployed, ringing bells at the big homes with three-car garages, handing out accusatory fliers and lambasting Garmone and his company’s loans.”
“‘The problems that exist everywhere now … showed themselves earlier here because there was no getting out of them,’ says Zach Schiller of Policy Matters Ohio, a Cleveland nonprofit focused on the state’s economy.”
The LA Times. “Insurance lawyer David Grais has been poring over equations in finance books to get up to speed on his new specialty: lawsuits stemming from the sub-prime mortgage debacle.”
“‘This whole area is a new dawn’ for lawyers, Grais said.”
“Sub-prime borrowers are suing loan brokers and lenders, accusing them of deceptive practices. Wall Street firms that bought now-delinquent sub-prime loans are trying to force lenders to buy them back.”
“Investment-bank shareholders are going after those firms’ managers, saying they took excessive risks by loading up on bonds backed by sub-prime mortgages. And investors are suing money managers whose sub-prime-laden funds have suffered hefty losses.”
“‘Somebody described it to me as, ‘Everybody’s standing in a circle shooting at each other,’ said lawyer Kevin LaCroix.”
“In all, the 278 civil sub-prime-related cases filed in federal courts last year already amounted to half of the 559 actions brought during the entire savings-and-loan crisis from 1989 to 1995, according to Navigant Consulting Inc.”
“The Securities and Exchange Commission, the Justice Department, the FBI and many state attorneys general all are conducting sub-prime-related probes. If government regulators show that banks didn’t adequately disclose the risks, it ‘would put this litigation into an entirely different and far more serious category,’ said Jonathan Macey, a securities-law professor at Yale University.”
“‘That would take these from ‘kind of improbable to win’ to ‘How many zeros are we talking about on the check?’ he said.”
The New York Times. “Real estate and mortgage industry executives said today’s ‘rent versus buy’ decision is more complicated than in years past. For one thing, mortgage executives say, even people with good credit face difficulties getting mortgages these days.”
“Matthew Hackett, underwriting manager for a Manhattan mortgage lender, said buyers who need jumbo loans - those above $417,000 - must typically have enough savings after the purchase to carry them through at least six months of mortgage payments.”
“‘And if you want a good rate,’ Hackett said, ‘it’s more like 12 months.’”
“Mark Obrinsky, chief economist at the National Multi Housing Council, a trade group in Washington, said the shadow rental market of unsold homes and condos put up for rent was rising, although no good data exist on the extent of that phenomenon. Nearly 3 percent of the homes now for sale are vacant, he said, a number that far exceeds historical highs.”
“Sam Heskel, the executive VP of a real estate appraisal and consulting company in Brooklyn, N.Y., said he had seen ‘a lot of developers changing from condos to rentals just to weather the storm.’”
“Some homeowners are doing the same. Heskel said he had appraised a home for ‘more than $500,000′ in Massapequa, on Long Island. The owner had renovated and had initially planned to sell it for a profit. Now she will try to rent the house until prices rise.”
“And even if, after accounting for the mortgage’s tax benefits, the landlord can charge enough rent to cover the mortgage, Obrinsky of the housing council said, yearly property maintenance costs can run from 1 to 1.5 percent of a home’s purchase price.”
“‘Most of the time, if you can sell something for more than you bought it for,’ said Michael Moskowitz, president of Equity Now, the mortgage lender, ‘you’re better off selling it and walking away.’”
From CNBC. “With home prices falling and families losing their homes to foreclosure, some people who under other circumstances would be looking to buy their first home now see greater security in renting.”
“One such person is Lisa Chesnut, who lives in Tucson, Arizona. With a good job and two young sons, 29-year-old Chesnut and her husband, Bryan, look like classic first-time buyers. They had considered it, until the the market started to slide a year ago.”
“‘At first we thought, prices are falling, that’s good,’ she said in a phone interview. ‘Then we started reading about the foreclosures and the ARM rates and people losing their homes. We thought, what if something happened where we could lose our house?’”
“‘Turnover is slowing and the rate of moving out for home purchase we also saw slow throughout 2007,’ said Fred Tuomi, president of property management at Equity Residential, who oversees about 150,000 apartments nationwide.”
“‘There’s probably 700,000, maybe 800,000 people out there that are not getting into the market either as a renter or as a homebuyer,’ said Walter Molony, spokesman for the NAR. ‘Where are these folks? They’re out there, they’ve got jobs. Some of them are moving back with their parents, never left the house, they’re doubling up with roommates.’”
“‘They’ve seen what can go wrong in the mortgage market,’ said said Bob Moulton, president of Americana Mortgage Group, whose company brokers $300 million of mortgages a year. ‘Everybody’s advising them, from the mother, to the father, to the uncle, their co-workers, telling them, ‘Don’t buy. Prices are coming down.’”
“Paulson had a tough message for homeowners: Don’t think about walking away from your mortgage if you can afford the payments. In a speech Paulson said people who can afford their mortgage payments but decide to walk away from their homes because of falling home prices were nothing more than ’speculators.’”
Ok. So if they don’t go under water by hundreds of thousands of dollars, you’re going to call them names?!? We bears already get called names and there isn’t (yet) that kind of money involved!
Got Popcorn?
Neil
Poopie-time for the banks!!!
This is the most fun I’ve had in the last five years.
Paying mortgage is just throwing money away. You’re better off renting.
Watch out, debt deflation, here we come.
WHEEEEEEEEEEEEEEEEEEEEEEEEE!!!
Is that a former Wall Street guy disparaging speculators?
“Somebody described it to me as, ‘Everybody’s standing in a circle shooting at each other,’ said lawyer Kevin LaCroix.”
That may be the next step.
Actually, it’s a clear signal that the PTB get it completely. As completely as the collective wisdom here.
‘Everybody’s standing in a circle shooting at each other,’
My how times change. Aren’t these the same dudes who circle jerked each other for the past 5 years.
Now I have this song stuck in my head now. HELP!!!
You just slip out the back, Jack
Make a new plan, Stan
You don’t need to be coy, Roy
Just listen to me
Hop on the bus, Gus
You don’t need to discuss much
Just drop off the key, Lee
And get yourself free.
Bend me, shake me, anyway you wanna.
Long as you sell me, its alright.
What song is that?
Bend Me, Shape Me, by The American Breed. Reached #5 on the Billboard charts in 1968.
You could change the lyrics to:
50 ways to lick your lover?
Just drop to your knees Lee
50 ways to wok your dog ?
Just throw it in the pan, Stan
Sorry.
I will gladly accept the blame for that, as I believe I was the one to first post those lyrics here…
If they’ve gotten over being labelled a “deadbeat”, why should being called a “speculator” get to them?
I’m sure being called “speculator” is going to make a difference on whether they walk or not.
Maybe they should say “NI !!” instead.
It’s interesting to note that there was no actual threat besides name calling.
My-tee Uncle Sam is reduced to finger wagging and browbeating. The banks are down to openly wishing and hoping that employment doesn’t start tanking big time.
Masters of the Universe indeed!
Their desparation is palpable now.
“employment doesn’t start tanking big time”
I was in Bakersfield, CA this past weekend and while reading the local paper the following stuck out: 1) 9.9% unemployment rate 2) 2000 new jobs (government) added last year in Kern County.
While in a shop doing business I overheard a conversation where some people were saying that they held weekly meetings in their development for deed restrictions such as leaving you trash can outside of the gate (even produced pictures of the offense), etc.
While in a shop doing business I overheard a conversation where some people were saying that they held weekly meetings in their development for deed restrictions such as leaving you trash can outside of the gate (even produced pictures of the offense), etc.
AKA arranging deck chairs on the Titanic.
I got called worse then that 5 times in the last hour. They need to protect their families. The banks assumed the risk when they accepted less than 20% down, and the requirement for sufficient income and a great credit report. I guess in summary he is telling borrowers to rob their 401ks to bailout the banks. That’s the last thing they need to be considering.
Yes, indeed. The risk that the banks assumed in order to make the deal is now be called. Their problem, not the home-renters. The home -renters will suffer a credit drop. So be it.
Is it against the law to walk away, or does the standard mortgage contract give the owner the legal right to do this?
It’s probably never been considered. Who would want to walk away since real estate always goes up.
This was discussed some last week, and I think the resolution was - it’s not technically against the law. I.e. you can’t be sent to jail for defaulting on your mortgage. Technically you’re still “abiding by the contract” - in that the contract probably normally has some such statement that if you don’t make payments, you forfeit rights to ownership. Many folks are saying so bet it - I’ll opt for the latter.
It depends mostly on what state you’re in too - being recourse vs. non-recourse; at least in determining how the bank could come after you. I’m sure in all cases though, they can’t throw you in jail, just put a lien against other assets.
PB, c’mon! I expected more from you.
Completely legal, of course.
You are taking on debt (= mortgage) against collateral. You have the right to make the payments, or just hand back the collateral.
The only interesting question is if the collateral falls in value, can they come after you for the difference (= recourse) or not (= non-recourse)?
That seems a stretch. The mortgage was made based on the appraised value at the time of sale. The collateral of the physical structure (unless it’s trashed) is still based on that loan amount. The problem for a bank isn’t that homes are falling in value - it’s that they devalued the risk of that fall and allowed loans that were too close to the appraised value.
The ‘contract’ is still valid on the collateral - the collateral is just worth less.
Nope, you can hand back the collateral at any time. That’s what collateral quite literally means. It is no different from getting a loan from a “pawn shop”.
The problem is what happens if the collateral drops in value from what was loaned. Can they come after the difference?
The answer is depends on the state, and refinancings, etc.
I would surmise that the intrinsic value of the thing remains exactly the same, i.e., the true value has not fallen, it was just ARTIFICIALLY inflated.
It’s not like everyone did not know it.
Actually, it doesn’t.
The rent (= cash stream) depends on income, and valuing a cash stream depends on the risk-free rate (= at what spread to the risk-free rate will you value it?)
The Fed has manipulated the economy using this idea since the early 80’s but it’s a one-way ticket. You can’t play this game again. The game is over.
“I expected more from you.”
I expected you to recognize a rhetorical question when you saw one.
Under the new BK laws, they do look at your assets and income in relation to what you can pay. You can’t just discharge all of your debts because you feel like it anymore.
You can get foreclosed upon without declaring bankruptcy, all you have to do is stop making payments. What happens after the foreclosure depends largely on whether you live in a recourse or non-recourse state.
It’s perfectly legal, but the (former) owner has to accept all the consequences (damaged FICO scores, harder to get credit, etc.) that having a foreclosure on their record means. In a recourse state, they also have to accept the risk that the lender may try to come after their other assets or income.
But it takes only 2 short years to clean up your credit score.
So, why not? If I were to have bought and the price of home went down that much and the payments went up that much, darn tootin I would
These boots are made for walkin
thats just what they’ll do,
One of these days these boots are going to walk
all (over you) the way out the door..
sorry!
seven from a foreclosure, I believe.
What consequences? When so many people walk, what are they gonna do?
Banks exist to lend money, and if they don’t lend, they don’t make any.
There will be barely any consequences. I’d just recommend tossing the keys back.
Paulson said people who can afford their mortgage payments but decide to walk away from their homes because of falling home prices were nothing more than ’speculators.
No, they are BuH-Buyers who are walking away singing ‘ I don’t want her…..you can have her….she’s to (fat) underwater for me’
what a phony… gooberments and business have been walking away form their debt for a thousand years,, and NOW the same folks want a homeowner to be responsible?
I’m not in favor of people walking away either, but if it happened to me I wouldn’t feel too guilty for too long.
Anyone who walked away already could end up feeling stupid if the year long foreclosure freeze comes into effect.
Al,
True. What are you going to do Hank? Not like me? It’s also incredible to get a moral lecture about “doing the right thing” from the Gov. when much of the mess lies squarely w/ them? Please, just not on a Monday O.K?
Testify! Aw, Gawd, it almost makes me wish I was an FB just to stick it to the old cueball. That clown really has a nerve. His daddy Goldman Sachs does anything it wants, so why shouldn’t red blooded Americans take a cue from their “betters”, LMAO!
Firstly, it’s unlikely to. Secondly, there may be legal challenges. Thirdly, you are going to start seeing people “buy”, and get foreclosed immediately, and live free for a year.
That will completely nuke the MBS market.
I’m sure if they do pull it off (let’s hope not), it’ll be retroactive so you can’t go buy a house the next day to live rent-free for a year.
It’ll still nuke the MBS market. You gonna buy a security if nobody’s gonna make the payments, and you can’t get back the collateral for a year?
No doubt about it. All I’m saying is if they’re stupid enough to do it in the first place, hopefully they’re not so stupid as to make it extend to future “buyers”.
Naah, not gonna happen.
Nuking the MBS market means they will have to buy all that crap (= nationalize debt) which will just about tank the dollar, and hence the entire derivatives market attached, and then each domino in the chain will drop, and send the whole Global Financial System into a meltdown.
They know this; they are perfectly aware of the fragility of the system.
There is lot to comment on this post. Bernanke, Yun but the Paulson comment is outrageous to me. WTF you gonna do to a speculator Stutterin’ Hank??? Bring it on big guy. Guess what Hank….. Kiss my ass… From me to you.
Why so touchy Mr. Paulson? Now, individual people are simply making the exact same “business decisions” that Banks, big corporations, and government have been making for decades.
————————————————————————-
“Paulson said people who can afford their mortgage payments but decide to walk away from their homes because of falling home prices were nothing more than ’speculators.’”
Erm, Mr Paulson, what do you call a government that leaves out food and oil prices when calculating the rate of inflation? Suggestions anyone?
You say “foreclosure”, I say “write-down.” What’s the big deal?? It was no matter to gimme the liar loan, why are you surprised at this latest development?
Businesses have been throwing their vendors, creditors, suppliers and pensioners under the bus for years…..just another way of doing business. And were congratulated/rewarded for it most of the time.
Kinda sucks to be on the other end of the Joshua Tree, doesn’t it? What goes around………
I can remember in the late 70’s when the wall street vultures swooped in and bought a company. they looted the pension funds, laid people off, and generally stripped the company of all its assets.
and ole hanky wall street boy is giving us a moral lesson. hanky baby-san, go talk your spin to the chinese. please.
Paulson: “Pay your bills, or I’ll never speak to you again. No more sleep-overs, no more pajama parties, no more pillow fights. And I’ll unflattering things about your hips. I will, don’t make me do it.”
There isn’t a homeowner out there who’s going to give a rats butt what Paulson says about them.
Let him rant and rave all he wants…isn’t he the guy that was floating the idea of giving tax dollars directly to lenders?? Guess his pals aren’t doing so well.
What a crash and this is just one institution !
Something about his supposed comment smelled fishy and I think Paulson was (deliberately?) misquoted.. Unless I’m mistaken, here’s the actual quote, from a talk regarding bailout efforts:
at the very bottom of the page…
http://www.axcessnews.com/index.php/articles/show/id/14145
“Being “underwater” when you can afford your mortgage does not affect your ability to pay your mortgage. Homeowners who can afford their mortgage should honor their obligations. And nearly all do. Homeowners who can’t afford their payments are the borrowers we are working to reach with affordable solutions. Homeowners who gambled in the housing market and viewed their purchase as a short term investment may choose to walk away. Those who do this are nothing more than speculators, and they are not the focus of our efforts.”
Wow…. that is a lot different, isn’t it!
yeah… kinda throws a wet blanket over this party.. sorry.
‘Paulson said people who can afford their mortgage payments but decide to walk away from their homes because of falling home prices were nothing more than ’speculators.’
Huh? I don’t see any real difference.
He’s labeling people who gambled as “speculators”, which they are. He expects them to walk away. He’s not trying to demean them for walking away by calling them a name. He’s saying the bailout efforts do not include or target speculators/gamblers/whatever..
..but i guess the interpretation depends somewhat on what one wants to see..
It seems very different to me. In one it appears he’s making a threat and calling names. In the other he’s simply pointing out that speculators will not be the focus of the mortgage prevention help.
You might be able to derive the first from the second but you lose the whole context by doing so.
‘i guess the interpretation depends somewhat on what one wants to see’
Your words not mine. I am sure that tomorrow you will be vindicated with networks retracting and the headline, “Paulson Meant Speculator In A Nice Way”
Sticks and stones may break my bones …
I dunno know, Neil. If I was some FB $100K underwater on my house, I’d have to think twice about walking away, knowing I’d have to live with the consequences of…umm…let’s see…being called a “speculator” by Paulson? Not much of a stick there…on second thought, screw it, I’m walking!
Memo to Paulson: “Tough talk” with absolutely nothing to back it up and no leverage over FBs [thanks to your easy credit policies] makes you look like an impotent jackass.
““Paulson had a tough message for homeowners: Don’t think about walking away from your mortgage if you can afford the payments. In a speech Paulson said people who can afford their mortgage payments but decide to walk away from their homes because of falling home prices were nothing more than ’speculators.’””
This reminds me of an old Robin Williams stand up bit where he’s talking about unarmed British police officers. (Not a direct quote) “You know in England if you commit a crime, the police don’t have a gun and you don’t have a gun. So if you commit a crime they yell: “Stop! Or, or I’ll say stop again!”"
Don’t walk away from your debt or I’ll wiggle my finger IN YOUR FACE! Congress forced the IRS to let the bad debt off the hook and now the FB’s should be afraid of Paulson? Yawn, yeah that’s gonna happen.
“More than 80 percent of ‘at-risk homeowners aren’t responding’ to letters sent by the Treasury-backed Hope Now Alliance of mortgage lenders, Paulson said.”
Hmmm. I wonder why. Just thinking out loud here.
A good many are speculators who know they don’t qualify.
To complete your unwritten thought, a great many no longer care to pay for a rapidly DEpreciating asset.
Kinda related story, but a co-worker has been tracking a 2006 BMW M5 that KBB says is “worth” $63k — the likely FB has lowered the price to $49k from $54k a week ago. 10% off is still 100% too much for all the other FBs in the area who are in the same boat. Good luck getting rid of that albatross.
Rob
An 06 M5? I’ll buy it for $25,000!
I’m guessing a sizable percentage of these ‘at-risk homeowners’ have no intention of playing along with Paulson’s “No Hope Alliance” charade, when they can better end their misery by simply mailing in the keys and walking away.
“Paulson had a tough message for homeowners: Don’t think about walking away from your mortgage if you can afford the payments. In a speech Paulson said people who can afford their mortgage payments but decide to walk away from their homes because of falling home prices were nothing more than ’speculators.’”
Wow. That takes a set of big ones, for the guy who made as much money at Goldman Sachs as he did to call other people speculators, or even use the word in a negative connotation.
Hey, Paulson is one of the good guys standing between you and the Democrats that want to send your tax money to “bail out” people, money which may as well be sent to the Sun for all the good it will do. I think his comments here, and from last week are very telling. He’s figured out that many, many people are bailing, or planning to bail on their homes because they are upside down or way over their heads. Way more than they expected in their worst nightmares. They don’t want help staying, they just want to live rent-free for as long as possible. They don’t want to talk to their lender, they don’t want to talk to the government, they don’t want to go visit the guidance counselor.
“Paulson is one of the good guys standing between you and the Democrats that want to send your tax money to “bail out” people”
Bwahahahaha!
“Bwahahahaha!”
You took the words right out of my mouth!
“Bwahahahahha”.
So Paulson has been reduced to name-calling. Now this is entertainment.
Sorry…..IIRC Paulson is the guy who was trying to drum up support for a program that would give tax dollars directly to lenders so they could “work” with FB’s.
Doesn’t sound like that to me at all. From last week:
WASHINGTON (Dow Jones) — The Bush administration is hardening its opposition to the chorus of Democrats, bankers, economists and consumer advocates calling for a big-money government rescue program for struggling homeowners.
President Bush took aim at Congressional proposals to help struggling homeowners at his first formal press conference of the year, saying a Senate bill would provide an unnecessary bailout for lenders and speculators.
Bush also expressed optimism about the U.S. economy, despite a spate of recent bad news. “I don’t think we’re headed to a recession, but no question we’re in a slowdown,” he said.
In an interview yesterday, Treasury Secretary Henry Paulson branded many of the aid proposals circulating in Washington as “bailouts” for reckless lenders, investors and speculators, rather than measures that would provide meaningful relief to deserving, but cash-strapped, mortgage borrowers.
“I don’t think I’ve seen any scenario where the American taxpayer needs to be stepping in with more taxpayer dollars,” Paulson told The Wall Street Journal.
Paulson’s stance highlights the rifts appearing in the bipartisan cooperation that led to the passage of a $152 billion economic-stimulus package by Congress earlier this year. Both the Bush administration and the Democrats who control Congress now appear to be staking out increasingly rigid positions.
Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee and typically an ally of Paulson’s, said that, until now, he had supported the Treasury’s steps to address mortgage delinquencies and the credit crunch they have spawned. “But they’re not helping enough people,” Frank said yesterday. “We’re not going to get out of the crunch until we stop this cascade of foreclosures.”
What do you call cutting interest rates in the face of a crashing dollar and rising inflation. It’s a bailout for lenders. Borrowing rates have not unpredictably gone up, so it sure isn’t a bailout for borrowers.
What do you call allowing banks to borrow 160billion dollars using used toilet paper as collateral. It’s called a bailout for lenders. Would Countrywide be standing now if not for bailout loans, I think not.
What do you call reving up the printing presses at the FED to hyperdrive, and driving the US gov deeper into debt. It’s called a bailout for piss poor government.
While I am as anti-Bush and Republicans in general as the next guy, I gotta agree with you here. If we can get through 2008 with the Bush admin rejecting Congress’s attempts to bail out the specuvestors, I’ll no longer be able to say that this admin has been an “unmitigated” disaster.
I have to agree. This would be the first time in 7.5 years that I can agree with ANYTHING chimp and company have done or said. It was bound to happen eventually!
SFC, You are correct. We have been in our rental home in the Phoenix area for 2 years and decided to look for a rental in a nearby retirement community. Three of the rentals we decided on turned out to be owned by a speculator that had stopped paying the mortgage several months ago and was headed for forclosure. Our realtor checked on the mortgage status on each home before we entered into a lease. After learning of the third deadbeat owner we decided to stay in our current rental house. It is getting tough out there. I am stocking in another years supply of pop corn. Thx for this blog Ben.
Yeah for a minute there I thought he was going to bring the wrath of the judicial system upon them, not call them names.
Says who, big guy, ya gonna make “me” stay in this house and pay the mortgage or what?
Who does Paulson think he is? GOV and corps always walk away from debts and “WE” aren’t allowed to?
Makes ya want to laugh when you hear these bullies try to act like they “are the boss of me”. NOT. I am not in this position, but it sounds like the gov and banks are getting really scared.
Gosh, I guess what is good for the goose IS good for the gander.
They are indeed very scared. I always pay my mortgage during the grace period. Last month they called me, only 5 days into the 16 day grace period, and asked if I was going to pay. I was really tempted to have some fun at their expense and say something like “I’m really beginning to wonder if its worth it, etc.”, but instead told them to not worry.
And so you instead told them that the check was in the mail?
It was, actually.
If I currently owned a house, this threat from this d*ckhead would make me want to walk away even faster. LOL
I think the NAR is wrong about 700,000 - 800,000 people not renting or buying. I suspect that a lot of this number represents speculative housing purchases where the house remained empty. The remainder are immigrants both legal and illegal going back to their own country.
I’d like to see the number of Russians and Chinese for example that are heading back to greener pastures in the mother country. I’d also love to see the number of wealthier immigrants leaving the US.
There’s something called the “household formation” number that the BLS publishes. Don’t know what it is, but you should look it up if you have some time.
Yeah I know about that. BLS numbers are so messed up they are useless. I look at local tax receipts and Uhaul numbers for the truth. Immigrants esp on the coasts make up a large percentage of the population if they are leaving then it will have a fairly big effect on our wealthier regions. However I don’t know of a shadow stat or real data that captures this. Probably long term driver license renewals or drops in entry visas.
Puh-leeze. Driver’s licenses? They can’t get them in VA without documentation. They drive without licenses. If they’re caught more than twice, they switch to bicycles. Visas? The ratio of illegals (no visa) to legal ‘immigrants’ is 100 to 1. Sorry for the bile. I’m just disgusted at having my country hijacked.
Maybe he just didn’t like the food…
Who wants to bet this is not housing related?
http://www.msnbc.msn.com/id/23450392/
How ’bout this one? Bankrupt builder or “eco-terrorist”?
http://news.yahoo.com/s/ap/20080303/ap_on_re_us/luxury_homes_fire
I didn’t make that connection right away either but the more I thought about it….? Do I understand they claim ELF already took credit for it? C’mon, those @ssholes are so disorganized it would take them a week to come down off their buzz (let alone make a phone call at the very first phone booth they came across?)
“The fires looked suspicious b/c they were ignited in several places at the same time” (or words to that effect) Well isn’t that what a skilled arsonist DOES!?
That was my first thought too when I read that article.
LOL, what do you want to bet we see builders masquerading as the ELF?
some people suggest that the twin towers came down under fals e accusation, as a means to take down the towers in a way that would circumvent the several hundreds of millions of dollars in cost for asbestos removal/decontamination. in addition to the hundreds of millions of dollars and years in dismantling the twin towers, and all the liability risks off all these things. Just knock them down in a couple hours, and say “terrorists” did it. Collect a couple billion dollars from your insurance company, and rebuild. within a few years.
I was thinking the same thing… It seems very suspicious… I wonder how much prison time a developer would get for impersontating the ELF and committing fraud of burning thier own developments down, to collect on insurance or escape other financial problems they have.
I have already seen a lot of stories that involve FB’s and murder/suicide.
It makes me think of the stories in “maxed out” (the documentary about debt) that involved suicides over credit card debt. It is easy to forget how many personal dramas are involved in this. I am waiting for a good documentary about the housing crisis to come out.
“In a conference call, HSBC finance director Douglas Flint said that the US bad debt crisis should come to an end by the middle of 2009, provided the economic slowdown did not trigger a sharp rise in unemployment.”
OK, so HSBC has maybe one year left to gear up for the implosion of the UK property bubble (which will have FAR bigger fallout if it happens). Maybe they can learn something
“‘Turnover is slowing and the rate of moving out for home purchase we also saw slow throughout 2007,’ said Fred Tuomi, president of property management at Equity Residential, who oversees about 150,000 apartments nationwide.”
I have been seeing a large disparity between home prices and rent whereas rent is much lower than owning a home. If you listen to the special interest groups such as the associations for realtors, builders and mortgage brokers informing people to buy, you will most certainly lose lots of money.
Fannie, Freddie Agree to New Appraisal Standards
American Banker
Monday, March 3, 2008
By Rob Blackwell
“New York Attorney General Andrew Cuomo and the Office of Federal Housing Enterprise Oversight announced Monday that Fannie Mae and Freddie Mac have agreed to implement new appraisal standards.
The agreement, which was reported last week by American Banker, prohibits lenders that want to sell mortgages to the two government-sponsored enterprises from using in-house staff for appraisals or an appraisal company they own or control. Mortgage brokers will also be prohibited from selecting appraisers, the GSEs said.
The new code will go into effect Jan. 1.
As part of the agreement, Fannie and Freddie agreed to fund $24 million toward the creation of the Independent Valuation Protection Institute, which will implement and monitor the new appraisal code.
The institute includes a complaint hotline, and serves as a contact for appraisers themselves if they feel their independence has been compromised. The institute’s board of directors must be approved by Mr. Cuomo’s office and OFHEO and report on its activities on a bi-annual basis.”
*Now that’s what I’m talkin’ about!”
HDhandyman,
I’m wondering, does this have you smiling? Or do you think it is still circumventable in some way?
Is that Jan 1st, 2009?
A lot of funny stuff between now and then…
Circumventable? Always. But at least it levels the playing field from a 45 degree slope to a 5 degree slope.
Got Popcorn?
Neil
Sounds like there will be alot of shenigans by the banking/lending industry in the year for “Appraising” correctly, and then the FB ers will again be duped into trying to buy VALUED houses. When After Jan1, the Values will probably be much much lower.
Just like diamonds. Even the reputable grading agencies such as GIA lull people into a false sense of security about the value of their diamonds because the whole market is rigged.
“…But at least it levels the playing field from a 45 degree slope to a 5 degree slope…”
Don’t bet the farm on that train of thought…it’s just more sh*t filled M & M’s
The crazy thing about appraisals is that in fastly rising bubble markets, even “honest” appraisals are based on . . . comps.
Now to get this to matter, they gotta get Superman to fly around the world backward really fast, reversing time so they can put this into effect January 1, 2000.
LOL!
At least this is a start, but I’m assuming other states will need to copy it in order to make the code of conduct effective elsewhere.
While it can’t help the current situation, directly, it can indirectly help force prices down faster to get to more realistic prices sooner.
“More than 80 percent of ‘at-risk homeowners aren’t responding’ to letters sent by the Treasury-backed Hope Now Alliance of mortgage lenders, Paulson said.”
Gee, think maybe they don’t WANT the house now that it’s not worth what they paid for it and never will be??!!
Nah, sadly that many people can’t be that savvy. More likely is that most of them aren’t even aware of their situation. When that group eventually does become aware…well…then it will get interesting. It is possible that only Maginot Line of ignorance is all that separates us from the panic stage.
Could it be that a majority of the letters are being thrown out because the recipients think they are a bulk mail type scam? That would be hilarious in a slightly sad sort of way.
guilty of throwing out something once that looked like a bogus check. Gladly it wasn’t with alot of commas, but still, I can definitely see this happening to many others who think the letter is a scam. I mean who do You know that sends you letters with fraudulent looking return addresses?
I would think that the homeowner isn’t answering the mail because they are in some other location or State and the house is vacant .
ding ding ding…you sir have the correct answer
Yup. Here in Florida a lot of people, both Floridian speculators and snowbirds, have mail sent to the empty residence that they are claiming homestead on. They’ve been planning on beating the capital gains tax on their profit after 3 years. Snicker. Ain’t gonna be no profit, so no need to have homesteaded.
I also see people who own condos asking about double in rent what the market will bear. One I know has been empty for two years. They will claim to the IRS that they have been “Holding it out for rent” and simply weren’t able to find a tenant. Bull.
Could it be that a majority of the letters are being thrown out because the recipients are illiterate?
They were savvy enough to buy houses using none of their own money, at a subsidized teaser rate, at a time when their terrible credit history didn’t matter. Now they’re savvy enough to stop paying their mortgage and live for free for 6 months. In the end they’ll probably rent a place just like they just got thrown out of, from the same bank, for the same price they were paying for an apartment 1/4 the size before this all started. Sounds damn smart to me. It’s the bankers that were stupid.
SFC,
You’re probably right. If they sign the lease on their rental home before the foreclosure becomes finalized they’ll be able to say “Oh yeah, we had a couple of late payments but it’s in the process of being sold” (or whatever it takes to put the LL at ease) I think the only thing LL’s care about is if you have a JOB!
Other than that they’re good w/ it. The temporary firming of rents is about to come un-glued.
“They were savvy enough to buy houses using none of their own money, at a subsidized teaser rate, at a time when their terrible credit history didn’t matter. Now they’re savvy enough to stop paying their mortgage and live for free for 6 months. In the end they’ll probably rent a place just like they just got thrown out of, from the same bank, for the same price they were paying for an apartment 1/4 the size before this all started. Sounds damn smart to me. It’s the bankers that were stupid.”
That’s sickening in that it’s so true to some extent. However, I wonder how much of it was being ’savvy’ and how much of it was just a convenient match of their behavior to the market conditions? My guess is that most of these people are financial dumba$$es and that any benefits or windfall they may get out of manipulating the current environment with be short-lived.
Sort of like saying any RE people that got into the biz from 01-04 were really bright to have made so much easy money.
flat or falling house prices make it impossible for overstretched borrowers to repay their debts by tapping into their housing equity
Er, how can you repay your debts by borrowing more money?
Tough having a shell game with only one shell.
Ha ha - so true.
“Engage brain before opening mouth” - live it, learn it.
“Their quarry, Mike Garmone — a regional VP at Countrywide Financial Corp., the nation’s largest mortgage lender — didn’t answer his door. So they deployed, ringing bells at the big homes with three-car garages, handing out accusatory fliers and lambasting Garmone and his company’s loans.”
Mr. 6Pack doesn’t fancy the SerfLife. It’s revolting.
Where are the rotten eggs and tomatoes? A few broken windows might also be a lot of fun.
Count De Monet - Sir, the peasants are revolting!
King Louis - You said it. They stink on ice.
“The extra yields investors demand on bonds backed by assets from commercial mortgages to credit cards rose to records last week, as the debt slump prompts banks, hedge funds and other investors to shun the securities. The extra yields, or spreads, have surged since mid-2007 as a weakening U.S. economy erodes confidence in the bonds’ credit quality and as losses on debt investments lead to forced sales and reduced demand. The spread widening may herald more losses for the world’s largest banks, which have reported more than $180 billion in mortgage-related losses. “People are calling it financial Ebola.”
Of perhaps it is supply and demand. With so many seeking to be debtors, very few savers, and many of those savers spooked by defaults and inflation, is this any surprise?
“The answer is an unambiguous no,’ Yun said. ‘The same game is played out because the global capital providers will not be taken for fools again. German mutual funds or the Chinese government or the Florida’s teacher pension fund will no longer buy toxic subprime loans.’”
that’s why the current action by the fed’s aint doing jack shit but just causing inflation.
benny boy keeps talking about core inflation. core inflation is a great measure during stable times because food and energy prices are very volatile, moving UP and DOWN. but when all they are doing is going UP and UP then they CANNOT be ignored any longer.
Yeah, Benny boy doesn’t eat and doesn’t drive. I always thought he looked odd. The man must have some core values.
WOW big news day for HBB.
And it is only 11:30 am.
“Yun said real estate speculation was a key factor in the first collapse, with buyers using subprime loans to acquire investment property. When those properties flooded the market and did not sell, speculators often walked away from mortgages they couldn’t afford. Foreign investors who gambled on subprime loans in the secondary mortgage market were burned.”
So (fun)Yun used the word “collapse” or did the writer take editorial liberty? I’d be surprised if FunYun used the word…..
Not only that, but he said “first collapse”!!
Implication being of course, that there are more to come. Wow.
Yun also used the words “housing market bubble” …gadzooks!
‘Everybody’s advising them, from the mother, to the father, to the uncle, their co-workers, telling them, ‘Don’t buy. Prices are coming down.’
How about, “Don’t buy, because you can’t afford it unless you use some crazy-ass financing”? That’s what the “mothers, fathers, uncles, and co-workers” should have told all of the FB’s instead of, “Hurry up and buy before you are priced out forever”.
People are not buying because they are scared, it’s because things are still too expensive!
Buy now and be priced in for a very long time.
Nah, nah, they’re exactly right. If someone would just tell me to think something else, I would comply and obey. Even if it meant taking out a loan for a half-million dollars. It’s because of what I’m being told.
But that’s not what I’m hearing from friends and most relatives. I’m being told that now is a good time to buy before prices go up again.
There’s no way that these people can comprehend RE deflation because for most of them their house is the one significant asset they own. They don’t want to hear 20% haircut.
20% haircut?
You little optimist, you!
The last time I talked to my MIL about housing prices (they own several rental/investment houses bought around the peak), the party line was that in a couple of years houses would start to head back up. I didn’t feel like mentioning that RE cycles sometimes run as long as decade and that we’ve just come off an unprecedented (loose) lending cycle. No need to sully optimism with facts. *grin*
No need to sully optimism with facts. *grin*
Nobody wants to hear it. I didn’t think about it myself until I began to research the data. In my metro, there’s a 40 point spread between the peak and the trough during the last down cycle. So 20% is optimistic…but if they can’t visualize a 20% drop, they’re certainly not going to accept the possiblity of 40% off.
Two years ago, they wouldn’t accept the possibility that prices would fall at all. It kind of doesn’t matter what they will or will not accept. Reality is reality.
At least some people are starting to get it. When the shoe shine boy says it’s a crappy time to buy, then you know it’s time to buy.
What a day when we have Wall Street types disparaging middle-America a lack of integrity and a single-minded pursuit of cash through leveraged speculation!
Main Street to Wall Street: Take this toxic loan and shove it.
Ayn Rand would have a field day with this situation.
Watching Wall Street implode brings tears to my eyes - from laughter!
“‘Is the current action by the Fed simply trying to replay the same volatile game? The answer is an unambiguous no,’ Yun said. ‘The same game is played out because the global capital providers will not be taken for fools again. German mutual funds or the Chinese government or the Florida’s teacher pension fund will no longer buy toxic subprime loans.’”
It cannot be good news for sellers to hear the NAR’s chief economist say things like this that actually make sense.
Corollary to Yun’s point: Markets where speculators drove prices up far above affordable levels have a considerable correction ahead of them before affordability returns.
your missing the other side of the equation. Wages never kept up with home prices and I expect wages to fall during this downturn like any other. There are many many more falling knives left waiting to be thrown.
BUBBLE? GAME? FOOLS? But I thought the increases in prices were based on sound fundamentals - isn’t that what the NAR was preaching less than a year ago?
This story of “$2 million homes burn in ‘act of terror,’ developer says”
http://www.cnn.com/2008/CRIME/03/03/seattle.fire/
seems very suspicious. Could it be that the developer’s proposed claim of “ecoterrorism” actually be a case of fraud committed by a developer trying to survive their financial problems in a real estate market downturn, by causing a fire and accusing innocent persons? It’s been done before, perhaps as we see more homes, and businesses go up in flames, we may see such set up’s to hide the true arson’s idetity and intention.
Hey….everybody….speaking of bubbles….ya think this could the starting of a fire bubble? mr. bubbles…where are you?
It’s the FIRE economy!
It may be interesting to see how insurance companies respond… in terms of cutting off or significantly increasing premium costs… or perhaps eliminating coverage for fires?
This could add another interesting element to the housing bubble melt down.
Did the NAR just throw in the towel?
“‘Is the current action by the Fed simply trying to replay the same volatile game? The answer is an unambiguous no,’ Yun said.”
My first knee-jerk was that he was admitting prices will not go back up.
Then I relaized that he wasn’t attributing the run-up to the loose lending standards. He was attributing the first run-up to low interest rates.
First run-up = Low interest rates.
First crash = crazy loose lending standards.
We are back to crazy loose lending standards, so another run up will be starting any second now… wait for it… wait for it…. wait for it….
And this one won’t ahve a crash because it won’t be accompanied by crazy loose lending standards.
Obviously, the flaw is that the low interest rates only created the frist 10%-20% or so of the gains, with the rest of the gains coming from the crazy loose lending standards. The market has another 30-40% fall needed to get back in line with the low rates.
Well any thing to shelter the obvious (the REIC Ace in the hole) A ridiculously biased tax code that favors RE at every turn! Builders also tried to get a 10K CREDIT into the Stimulus Package and were shocked when it wasn’t!
Cap Free gains, MEW/ATM you know, just a little walkin’ around money. Now further imagine a tax code where you can’t build CG free money into the mix and you have a REAL correction!
Edit:
We are back to low Fed funds rate, so another run up will be starting any second now… wait for it… wait for it…. wait for it….
“The Problems That Exist Everywhere Now”
So long, Mr. Containment.
Its still contained to planet Earth. The universe is in great shape.
“Its still contained to planet Earth.”
Oh, yeah?
http://www.lunarlandowner.com/
Gives “bubble” a whole new meaning.
“‘Homeowners must actively engage with their lenders and demonstrate that they want to keep their homes,’ Paulson said in a speech. ‘If borrowers don’t ask for help, they will have to bear the consequences, which may very well mean losing their homes.’”
Which is a bad thing?
what he doesnt understand is it was never their home. Anyone who thinks they own a home just because they have a mortgage is deluding themselves.
Consequences: if they misbehave, they’ll get to live in their house for free another 6 months. If they’re really bad, they’ll have to stay there a year. Come to think of it, there are some places where that might be an effective form of punishment.
What a joke. Godfather Paulson actually telling people if they can afford the mortgage (even if they are paying a full mortgage on a property they bought for $600,000 which is now only worth $300,000) they should not walk away or they are nothing more than speculators.
This moral tone from one of Wall Streets Godfathers! The biggest bunch of crooks and financial whores ever to walk this earth. It’s like the head of the Gambino Crime family telling people, “You shouldn’t gamble and play the numbers racket. If you do it’s just because you are trying to get rich quick.”
Anyway, I love it when I hear these clowns pontificate. I get a good laugh. The good laugh before the Paulson comment was Bush saying, “$4 a gallon gasoline. Mmmm. I never heard that.” Boy, is this country in trouble.
People wanted a president they could “have a beer with”. Unfortunately they now cannot afford the gas or the beer. Next time pick someone qualified. Oh wait, I see they are running McCrazy. Never mind.
“Paulson said people who can afford their mortgage payments but decide to walk away from their homes because of falling home prices were nothing more than ’speculators.’”
Oh wait, Mr. Paulson - These are actually home-vestors who are currently “right-sizing” their overhead, remember?
“The good laugh before the Paulson comment was Bush saying, “$4 a gallon gasoline. Mmmm. I never heard that.” Boy, is this country in trouble.”
And 5 sentences after that lie, he states “we’re busy trying to fix high gas prices”…
He fixed things alright.
Bush & the neo-cons claimed Operation IRAQI FREEDOM would be self-financing due to Iraqi oil, and that the new supply would help keep world prices down. Yeah, that’s worked out real well for us. And dupes can still be found to vote for McCain, who doesn’t seem to have learned a damned thing for this fiasco.
So, did you get a chance to listen to Evan Sayet yet? Just curious.
Evan who?
“Paulson had a tough message for homeowners: Don’t think about walking away from your mortgage if you can afford the payments. In a speech Paulson said people who can afford their mortgage payments but decide to walk away from their homes because of falling home prices were nothing more than ’speculators.’”
Don’t walk away or else what? Henry Paulson will call you names? How is this a tough message?
“‘This whole area is a new dawn’ for lawyers, Grais said.”
Anytime a Lawyer says those words, it makes my butt pucker and I hold my wallet.
“‘Many blame Mr. Greenspan for having fueled the housing market bubble and subsequent collapse by keeping the rates too low for too long,’ Yun said.”
When did Yun start conceding that there was a housing bubble?
Paulson’s message is right on track if you ask me. Why walk away from a home you can afford. If you do, good bye credit rating. Look, I just sold my house in South Carolina and moved West. To rent a house out here I had to submit to a credit check. How would I have done with a foreclosure on my record?
Please don’t underestimate the power of BAD credit. Employers look at this part of your life. In my job, I could easily get let go if I go into foreclosure. In short, you can laugh it up but Paulsons words ring true to me and maybe they should to most HBB’er? After all, most of the people who post here seem to suggest a home is not an investment…it a lifestyle. My daddy was pretty smart and always told me a home is not an investment and he made a few bucks in the RE industry.
You can hate Paulson but deep down his message rings clear to me and many other people who think their signature on a piece of paper means something. In other words, I sign a mortgage and that means I do what it takes to pay off that debt. Just my rant…think what you want.
“Paulson said people who can afford their mortgage payments but decide to walk away from their homes because of falling home prices were nothing more than ’speculators.’”
When I retire in about 6 years and the Social Security is out of money, I guess we can call them “speculators”, maybe crooks would be better.
Bernanke is my hero
“This situation calls for a vigorous response,” Bernanke said in a speech to a banking group in Florida, encouraging banks to do more to combat the problem.
One of the suggestions Bernanke made was for mortgage and other financial companies to reduce the amount of the loan to provide relief to a struggling owner. “Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding deliquency and foreclosure,” Bernanke said.
http://www.cnbc.com/id/23463783