A Much Simpler World
Some housing bubble news from Wall Street and Washington. Associated Press, “Fremont General Corp. said Tuesday it received default notices on about $3.15 billion of loans it sold in March 2007. The bank received notices from two investors who purchased the loans, saying it violated sales terms when its tangible net worth fell below $250 million.”
“Fremont was forced by its regulator in early 2007 to stop originating mortgages because it was not operating with proper risk-management oversight. The company proceeded to sell its mortgage assets after the lending operations were closed.”
From Bloomberg. “Bank of Montreal, Canada’s fourth- biggest bank, reported…trading losses and writedowns on debt tied to the U.S. subprime mortgage market. The bank had pretax writedowns and losses of C$548 million as the value of its debt investments declined.”
“ICICI Bank Ltd., India’s second- largest bank, reported $264 million of costs to write down the value of overseas investments, the biggest loss disclosed by an Indian bank since the collapse of the U.S. subprime-loan market.”
“The value of the subprime-related investments in its $2 billion of overseas assets dropped because investors are shunning all except the safest securities, said Chanda Kochhar, ICICI joint managing director.”
“PMI Group Inc., the California-based insurer, said losses from U.S. mortgage insurance totaled about $236 million in the fourth quarter.”
From Reuters. “The Pasadena, California-based parent of IndyMac Bank said the delinquency rate on prime loans rose to 6.85 percent from 3.83 percent in last year’s first quarter. It said subprime mortgage delinquencies rose to 28.18 percent from 18.55 percent a year earlier, and late payments on home equity loans rose to 16.35 percent from 5.78 percent.”
“IndyMac also said the rate of loans in foreclosure was 3.02 percent in January, up from December’s 2.65 percent and 0.88 percent in the year-earlier quarter. Meanwhile, January loan volume totaled $2.9 billion, down 33 percent from December and 66 percent from January 2007.”
“IndyMac long specialized in ‘Alt-A’ home loans, which often go to people who cannot fully document income or assets.”
“Federal Reserve Chairman Ben Bernanke called Tuesday for additional action to prevent more distressed homeowners from falling into foreclosure. One of the suggestions was for mortgage and other financial companies to reduce the amount of the loan to provide relief to a struggling owner.”
“Bernanke acknowledged this idea might be a tough sell to lenders. Lenders, he said, are reluctant to write down principal. ‘They say that if they were to write down the principal and house prices were to fall further, they could feel pressured to write down principal again,’ Bernanke said.”
“To date, permanent home mortgage modifications that have occurred have typically involved a reduction in the interest rate, while reductions of the principal balance of the loan have been quite rare, he said. ‘Measures that lead to a sustainable outcome are to be preferred to temporary palliatives, which may only put off foreclosure and perhaps increase its ultimate costs,’ Bernanke said.”
“Any new rules to improve governance of U.S. banks must not increase the already high regulatory burden on this industry, Federal Reserve Chairman Ben Bernanke said on Tuesday.”
“‘Banking is certainly one of the most regulated industries in the world,’ Bernanke told the national convention of the Independent Community Bankers of America.”
“The Bush administration will release within weeks proposals that address deficiencies in the regulation and functioning of U.S. financial markets, Treasury Secretary Henry Paulson said.”
“‘We’re looking at the mortgage-origination process, we’re looking at the securitization process, we’re looking at rating agencies, we’re looking at disclosure issues, we’re looking at capital issues and regulatory issues,’ he said in an interview today with Bloomberg Television.”
“Paulson said in the interview that ‘almost too much’ has been made out of concerns about homeowners whose house prices have dropped below their mortgages. He said borrowers who can pay their loans should do so regardless of whether the home value is ‘under water,’ he said. Otherwise, ‘you’re a speculator,’ he said.”
The New York Times. “According to the data from Hope Now, lenders completed ‘loan workouts’ for 638,000 troubled subprime borrowers from July through the end of January. But about two-thirds of the people who received any help were put on repayment plans that simply allowed them to catch up on missed payments and back interest.”
“Mr. Paulson acknowledged that mortgage lenders and mortgage-servicing companies were not moving as rapidly on loan modifications as he would have liked.”
“‘Am I satisfied? No,’ he said. ‘Am I surprised? Not really.’”
Dow Jones Newswires. “Fannie Mae and Freddie Mac reached an agreement with New York Attorney General Andrew Cuomo to only purchase loans that meet new standards designed to ensure independent, reliable appraisals.”
“‘With this agreement, Fannie Mae and Freddie Mac have become leaders in transforming the mortgage industry,’ Cuomo said in a statement Monday. ‘Now national banks have a clear choice: Immediately adopt the new code and clean up appraisal fraud in the mortgage industry or stop doing business with Fannie Mae and Freddie Mac - it is that simple.’”
“‘We believe that the appraisals were often fraudulent because there were conflicts of interest and pressures on the appraisers,’ Cuomo said at a press conference, referring to the alleged improper activity his probe uncovered.”
From Newsday. “Under the new code announced Monday, lenders won’t be able to use in-house and affiliated appraisers and mortgage brokers won’t be able to select the appraiser if they want Fannie or Freddie to buy their loans.”
“The two government-sponsored agencies buy about 80 percent of the nation’s home loans and package them for sale to Wall Street, freeing up lenders to make more loans.”
“‘It’s going to make it more difficult for brokers to do what they’re supposed to do, which is help the consumers,’ said Richard Biondi, incoming president for the New York Association of Mortgage Brokers.”
“Brian Clarke, chief financial officer for Bethpage Federal Credit Union, said the clear winners are Fannie and Freddie, who in theory would be buying less risky loans. But the impact of the new standards will depend on the extent of appraisal fraud in the industry, he said.”
“‘This could deflate housing prices a bit, but it depends on how much of this is going on,’ Clarke said. ‘That’s the question and that’s a hard one.’”
The Sun Sentinel. “CEO Ken Lewis of Bank of America, the nation’s largest bank, which will also become the largest U.S. home lender later this year when it completes its $4.1 billion acquisition of troubled Countrywide Financial Corp. Lewis spoke recently with Paul Owers of the South Florida Sun-Sentinel.”
“Q: Will you discuss the effect of subprime lending on the banking and housing industries? A: It’s been devastating to the capital markets even more than the housing market. Subprime loans get packaged with securities, and that’s caused massive losses around the world.”
“Q: Will you allow Countrywide to continue in the subprime business? A: They have stopped all subprime loans and have stopped buying subprime loans from brokers. That would be the model under which we would operate.”
“Q: How will the mortgage industry be different now that the housing boom has ended? A: It’ll be a much simpler world. We’re not going to see as many complex loans because there are no takers.”
The Palm Beach Post. “Karen Weaver, a managing director at Deutsche Bank, painted a bleak picture in her speech to the National Association for Business Economics convention. She predicted recovery would take years, that sharply lower home prices are ‘unavoidable’ and that foreclosures will continue at a ‘pretty heavy level for the next 15 months or so.’”
“Weaver displayed charts showing that after the last housing downturn in the early 1990s, home prices in certain markets did not return to their peaks for six, eight or even 11 years.”
From Business New Haven. “Members of the New Haven Mayor’s task force on subprime lending have said they may recommend that the city sue lenders over surging foreclosures.”
“Three task force members told a group that they are considering filing a class-action against major lenders who made high-interest loans, the New Haven Independent reported. Connecticut homeowners hold 71,000 subprime mortgages worth about $15 billion, with as many as 8 percent of loans seriously delinquent.”
The Boston Channel. “The chief economist for the National Association of Realtors offered a ray of sunshine to his New England members.”
“‘The worst in the sub-prime foreclosures is probably peaking at this point, but most of the mortgages — 90 percent of the homeowners — are not exposed to sub-prime loans. A vast number of neighborhoods are doing fine,’ said Lawrence Yun, of the National Association of Realtors.”
“‘I am very encouraged, as a matter of fact. I think he had a lot of good messages for all of us as Realtors in the region,’ Duxbury Realtor Georgia Taft said.”
“‘We are in the middle of a five-year downturn, so if we are at the bottom, we are going to start coming up. That is great,’ Orleans Realtor Linda Collins said.”
“In fact, Yun predicted that most of New England will see home prices stabilizing and possibly seeing a modest increase. ‘By 2009, I think we will be back to normal. In that case, people can anticipate a 4 percent to 6 percent price appreciation,’ Yun said.”
“Dorchester homeowner Michelle Anthony, however, does not live in one of those neighborhoods, so she is getting help from the Neighborhood Assistance Cooperation.”
“‘First, I got separated from my husband, so I am in the middle of a divorce. Then on top of that, I got laid off in January,’ said Anthony, who is on the verge of losing her home.”
“The worst news was her sub-prime mortgage rate. Within three years, her monthly payment doubled to just less than $3,000 per month. ‘It didn’t look like it was getting any better to me. A lot of people are in the same situation that I am in,’ Anthony said.”
Ha! The market has determined the valuation: junk.
Radian “expects to file its Form 10-K as soon as practicable following satisfactory determination of such valuation,” the company added.
http://www.marketwatch.com/news/story/radian-miss-filing-after-struggling/story.aspx?guid=%7BBCE74D55%2D2DAC%2D4581%2D9DA6%2DD9775106D04E%7D&dist=hplatest
This Yun guy is a real cancer. A traveling clown who pumps BS up the keysters of whoever is buying his lunch.
Bring back Leareah.
Thanks for the imagery. Now, I’m going to take a break and get some mental floss.
Look at the brain trust that’s paying Yun’s lunch tab:
“We are in the middle of a five-year downturn, so if we are at the bottom, we are going to start coming up. That is great,’ Orleans Realtor Linda Collins said.”
Truly wonderful, the mind of chil…er realtor.
I want what she’s smoking!
Middle of a five year downturn? Sez Yun? Sez who? These imbecile RE mobsters are delusional. Sales peaked Aug2005 and prices have slide maybe 15% so this means we’re at the bottom? Good Lord……
In Eureka, CA, prices haven’t even slid 15%. Maybe 5%. This is one of the most–if not the most–distressed states in the nation. I’m not sure where this new money is coming from, but people are still buying…and I’m actually seeing more of it in the last several weeks. I can’t believe the difference in housing price movements between the central valley and the north coast.
Move!
I wish I could! I am keeping my eyes open, though. No way I will buy a house in a place that will probably cost more than San Diego in a year, given extrapolation of recent trends.
I can’t believe the difference in housing price movements between the central valley and the north coast.
LOL Apples to oranges my friend, apples to oranges.
“If we are at the bottom, we are going to start coming up.”
No. Duh.
Being in the middle of a 5 year downturn would indicate to me that there are 2 1/2 years more “down” before you get to “up”. Perhaps I am just too simplistic.
If we’re in the middle of a 5 year downturn, then there’s 2.5 years to go, by my calculation.
Hire the handicapped; it’s fun to watch them work!
And if we are not at the bottom it will continue to go down, Isn’t that great.
This Yun guy is a real cancer.
Yun and the Nar have no credibility left whatsoever! I find it amazing that the media even prints his nonsense. How can anyone believe a person who has repeatedly missed his predictions month after month since he has been in the position and the NAR has not been correct since the housing bubble burst.
Both the NAR and Yun remind me of the kids story about the boy who cried wolf too many times.
“By 2009, I think we will be back to normal. In that case, people can anticipate a 4 percent to 6″
So owners should be able to cover our fees and closing costs and only take a small loss, rather than they bath they are currently taking.
So Yun is going around the country saying the same thing: “There is no national housing market and (your area) should do well.” The implication is that while the numbers are bad as a whole, (your area) will do well.
The problem is that I think he’s said that in just about every area. For goodness sakes he’s even used that line on Florida. I haven’t seen him make a comment about Nebraska or Kansas. Boy, those places must be falling hard if everything is great everywhere else. (sarcasm)
Seriously, someone should make a map of all the places Yun has gone and used the same line.
Things Yun is missing in his economic model:
1) incomes are low
2) incomes will be going lower
3) people don’t have any savings
4) people have tons of debt
5) people won’t take on more debt
6) glut of houses on the market
7) more houses coming on as further garbage loans go bad
I know that most economic models have to leave out a few details, but man…..
You seem to be overlooking the fact that real estate always goes up…
LOL!
I’m going with Al’s model. Agree 100%
You seem to be overlooking the fact that real estate always goes up…
For some it’s been up in smoke, but not like Cheech and Chong!
more things wrong with Yun’s model:
1) home prices are higher then most people can afford
2) most people in the last 5 years were only able to afford a home due to suicide loans
3) the suicide loans are now gone for good
9) Banks won’t be loaning, except to those with stellar credit. Few of those exist.
10)Banks won’t have much capital to lend anyhoo…
RE: This Yun guy is a real cancer. A traveling clown who pumps BS up the keysters of whoever is buying his lunch.
Last night the local evening news did a blurb on him. He was in Beantown (for dinner-BTW) pumping up the local Realtwhore (trademark) crowd.
A total chuck.
Florida datum: My landlord has been angling to see if I am staying past my lease. I have been non-committal, saying I may go month-to-month, but probably wouldn’t sign another term. He just called and said that because I was such a good tenant (I’m just a paying tenant, no more) that I could just go month-to-month and he would knock $50 (5.5%) off my rent. Also, I know my rent was already $25 lower than the previous tenant.
Hmm, gotta be pretty tough in FL when people own condos at 200+ X rent AND rents are soft. The condo sellers think they are chasing prices down hard, but their efforts are hopeless, like dropped cyclists trying to chase back to the field through a headwind. The market just keeps moving farther and farther away from them.
Tell him you’ll sign a 6 month lease for 20% off your current rent. Then post his response on the HBB.
My landlord OTOH raised my rent 25% last year.
You moved, right? Mine got raised less than 5% I do pay quite a bit in rent though, sunshine tax and all.
As a former landlord, I’ll tell you that a tenant who “just pays the rent, no more” IS the perfect tenant. The less he hears from you, the better.
That’s the way I roll.
We’re only “2nd best” tenants. We pay the rent on time/early but I have a bad habit of letting them know of problems with the building and giving suggestions. On the flip side, I don’t let water leaks go without calling. But still, I think my landlady would prefer the “I’m the just tenant acceptance of all” that I see in my very nice neighbor.
It’s nice to hear that someone is getting a good deal. Will you take it or push for more?
At least your LL is proactive, mine raised the rent in November so I moved out and it sat empty for 3 months.
why is gold down ? is it just profit taking ? down $25
too many monkeys chasing anything that moves?
see solar stocks, container shipping stocks, google, apple
I dunno, maybe it’s DiZZy?
why is gold down
Its a source of funds
True. When the bears raid the picnic, they hit every basket.
It’s part of the commodities bubble!
“Paulson said in the interview that ‘almost too much’ has been made out of concerns about homeowners whose house prices have dropped below their mortgages. He said borrowers who can pay their loans should do so regardless of whether the home value is ‘under water,’ he said. Otherwise, ‘you’re a speculator,’ he said.”
And he should know.
I guess he is using “Speculator” in a pejorative sense.
It is easy to tell who is in the hot seat these days. They are starting to show their frustration with the perpretrators.
Why is back to “normal” a 4%-6% price appreciation?
The real back to normal would be a 20%-30% price drop (at least) to put the housing down to the levels it should have appreciated to from 2001 or so.
I think Yun “knows” this too, he’s just leaving out the part about prices falling 40% in 2008 before going back to a “normal” 4% appreciation in 2009.
So for instance:
Dec 31, 2007 house value: $400k
Dec 21, 2008 house value: $240k
Dec 21, 2009 house value: $250k
Works for me.
Exactly. What do you think that joker would do in a room full of Realtors? Tell them they would be better off going into Waste Management?
And even that 4-6% appreciation number would only apply in a highly inflationary environment. Unfortunately, what we have ain’t inflation. It’s stagflation. Yuckie for everyone.
“Bernanke acknowledged this idea might be a tough sell to lenders. “Lenders, he said, are reluctant to write down principal. ‘They say that if they were to write down the principal and house prices were to fall further, they could feel pressured to write down principal again,’ Bernanke said.”
How about reducing the $80,000 in taxes I will pay this year!!! Jerk
“Federal Reserve Chairman Ben Bernanke called Tuesday for additional action to prevent more distressed homeowners from falling into foreclosure. One of the suggestions was for mortgage and other financial companies to reduce the amount of the loan to provide relief to a struggling owner.”
I already ranted about this in the Bits Bucket.
Another rape of the savers. Borrowers get bailed out and get a post-purchase “discount” for having outbid legitimate buyers.
These policies are making me want to drop out of the “system” completely. I pay high taxes, my savings are turned to trash and the gamblers get a free ride on my money. This is bad incentive for people to act responsibly.
Like I said, when Bernanke and Paulson put their two heads together, they make an ass out of themselves.
I am disgusted, too. I don’t think it’ll happen, but you never know. What the heck, the money comes from thin air, anyway. Who’d take the banking industry seriously after this, anyway?
Just as a side note, I’m reading Liar’s Poker by Michael Lewis right now. Although written in the 1980s, it definitely shows how the foundation was laid for the current crazy quilt securitization business.
That is a great book. It explains why some of us are so anti Wall Street. We read.
I don’t think it’ll happen
It won’t happen, it’s just too late in the game and I see it more as a political move to show the public the current administration is doing something to save the poor sheeple victim homeowner.
It ain’t gonna happen, so quit sweatin’.
“It ain’t gonna happen, so quit sweatin’.”
Don’t be so sure. Bailouts are becoming ever more frequent and desperate. It used to be they’d wait until it was clear the previous bailout wasn’t working before proposing new ones; now, they are throwing out everything. And, with the Dems likely to gain control, they will probably be passed.
I know what some people are thinking about wanting to leave the system entirely. Why don’t savers get a bailout as compensation for lower interest rates? Why don’t renters get a bailout for not aggravating this mess? Instead, gamblers who knowingly committed fraud on loan docs are getting hand outs and possible debt reductions, rather than jail time like they deserve. Everyone of these deadbeats is being made out as a victim. Funny, I never remember buy-and-hold 401(k) stock investors being made out as victims between 2000-02, even though many of them were not speculating in tech stocks and certainly most of them didn’t commit federal crimes (wire fraud, lying on loan docs, etc).
Ultimately, this will not stop housing from collapsing. But it allows deadbeat home-moaners to keep their homes longer, pay less for them, and share their losses with the rest of the country. Hopefully their pickups and RVs bought on HELOCs will last a long time.
How can you be so sure?
I think the banks/lenders will go to congress and say, “Unless we get some ‘incentive’ (like tax breaks) to write this stuff down 20%, we are gonna dump it for 50-60 cents on the dollar and cause you guys a world of hurt”.
Because banks CAN’T do such things in any significant numbers without failing.
I expect more muddling along, cutting dividends, capital infusions, anything possible to shore up the balance sheets of the lenders, and slowly taking write-downs when they can.
Amidst this, there will be failed banks, but many more would fail faster if they followed Bernanke’s plan…
A lot of folks here do not think things entirely through before they start hand-wringing. Imagine the tsunami of delinquencies this would create. Already we have posters here ready to say F-it to their debt. All it would take is for the latest watercooler talk to be “my lender rewarded my delinquency by reducing my principle balance a 100K” and no one who purchased or refi-ed a home in the last 5 years would make a payment. Would you?
Man, you talk about financial Armageddon! And as far as bank failures, there wouldn’t be one left standing.
“Unless we get some ‘incentive’ (like tax breaks) to write this stuff down 20%, we are gonna dump it for 50-60 cents on the dollar and cause you guys a world of hurt”.
That will never happen!
Exactly - if they want to offer an incentive, they should be rewarding borrowers who have never missed a payment. Why help the deadbeats? Foreclose them and let them go - they’re not the kind of customer you want anyway.
Actually, this is one of the more sensible suggestions. The banks have already taken this loss by making some really dumb loans. There is no question but that these borrowers are never going to pay off the principle on these loans so the bank is going to lose the money anyway.
Normally it’s better to foreclose on the home and get a new borrower, but because of the current glut and lack of sales that would just drive prices down further and increase the bank’s losses. If they could turn a deadbeat borrower into a paying borrower by lowering the principle amount on the loan it would be a lot better than encuring the cost of foreclosing and then having another home that can’t be sold on the books.
The problem with this approach is that it will encourage more people to stop paying so they can get reductions also. Still, in some areas people will need no encouragement to walk away from their loans. With squaters destroying the assets and no buyers in sight, don’t be surprised to see some banks renegotiating the principle amount.
Still, it won’t make any difference for the overall crash because too many of these loans have been repackaged and resold; the ownership is so fragmented that I don’t see how anyone could renegotiate the deal.
I don’t care because it will lower the comps of all homes to the new forgiven loan amount. What Bernake sees is the banks can rework the interest but borrowers walk anyway if they have negative equity. I think we all knew they would walk and the bankers act so shocked? I wouldn’t want to own many bank stocks these days thats for sure.
RE: These policies are making me want to drop out of the “system” completely.
As the Nike ad says…just do it.
And that’s the problem. This whole thing proves that Bernanke figures things out academically and not in the “real world”. I understand his reasoning, that is, banks would be better off writing down X amount instead of the 2 x X-amount loss recieved by foreclosing. In his “on paper” world this is a cheaper hit to the finacials and it stops the foreclosure bleed-out. But it also makes the assumption that all the responsible folks that have purchased homes in the last 5 years, that have taken the hit and made their payments responsibly, will stand by passively and watch their deliquent neighbors get a massive freebie. You think they’ll just say “oh well, best stay responsible”? Hell no! Now, instead of taking the healthy hit from foreclosures, lenders will be annihilated by a staggering amount of delinquencies. That scenario is scary indeed!
You are correct, ex-NNMB. I see no reason for responsible buyers in 2004-2007 to stand by while others are getting bonuses for defaulting on their debt. The lenders would have to write-down the mortgages across the board, IMHO.
That being said, I support this over “fixing” the rates for a period of time. Getting people into new toxic loans isn’t going to fix anything.
Forcing lenders to write-down overvalued amounts will most definitely benefit future buyers, though. Imagine how careful they will be to (a.) make loans to people who can pay them back and (b.) make sure they don’t over-estimate the value of the collateral/house. Sounds good to me!
That’s exactly right, it’s a moral hazard at the point they start bailing out delinquent borrowers. You would essentially lose the ability to enforce any contract at that point. People would just say the hell with it, on any debt.
It’s the reverse of Socialism. Screw the working class to support the rich.
In fact it’s a hybrid… privatize the profits and socialize the losses.
Socialism always screws the working class.
yeah-i cant wrap my feeble mind around that comment at all. modify the note and make part of it balloon or something in 20-30 years but knock off principal? Again-rewarding bad decision making.
The balloon would pop on sale. Most Americans typically move every 5 years. Again the house would not appraise for the sales price due to balloon. BS
Yes. What I’m getting is that the loans will technically be divided into two parts:
One part will be for the new, “written-down” principal amount — refi’d into a fully-amortizing, FRM for 30+ years (watch…the next move will be to extend the terms to 40 or 50+ years). The buyers will qualify based on their ability to pay (28-35% DTI ratios, or therabouts).
The other part will effectively be an unsecured loan that does not need to be paid until the house is sold. If they were smart, they’d have interest accrue on this amount, as lenders should get some compensation for risking the losses they do. I imagine it will be non-recourse.
I gambled to much. I spent to much on my Visa, I bought a car I cannot afford. I drank to much, spent to much on vacations etc. My phone bill is to high, I talked to much. Sorry I won’t do it again, really.
Mr Bernanke can you arrange for these guy to lower my principle too? I would really appricate this.
OK, I’m gonna be a jerk in the interest of education. Not trying to offend, simi. I know you are probably not a native English speaker, but:
“To” and “too” are completely different words, even if they are pronounced the same. The word you want here is “too.”
Also, “this” and “these” are completely different words, even if they are pronounced similarly in some dialects. (I have also seen people write “thise”.)
Paul,
Your loosing it. Around hear we play fast and lose with spelling and grammar rules, and other posters don’t knead you to point out they’re mistake’s.
Somtimes I to get frustrated trying too read some of they’re post’s, but on the internet you’ve has to take what you have gotten.
That’s dam funny.
Sweat post!
What I want to know is, if I use “to” and “too” and “lose” and “loose” properly, and don’t use an apostrophe randomly to make a plural noun, do they think I’m wrong?
Grammar/spelling errors used to bother me as well, until it occurred to me that for many of the posters (at least on tech blogs I frequent), English is actually a 2nd or 3rd language. Considering that I can barely communicate effectively in my own native language, I’m thankful they at least try. Wisdom is rare these days.
Paul:
No offense taken. When someone corrects you, typically that person is trying to help you.
If everyone agreed with me, why would I need anyone’s help!
I learned to accept help and not fight it.
Keep up the good work!
Principle=principal?
The Principal is who BB needs to visit for a spanking and suspension.
If they go down this route, I’m going to have to think seriously about trying to game the system. Stop paying my mortgage, just to see what sort of work out, payment plan, or principal reduction I can negotiate as a borrower under stress. Maybe I’ll form a little corporation, and short-sell my house to it- renting back to myself for a couple years before buying it back. I’m in no trouble with my mortgage, have plenty of equity, and am happy to stay put- but if they’re going to start giving away hand-outs on a massive scale, it would only be prudent to try and get my own piece of the pie.
No kidding - where’s my handout?
Will the war on (the rational and the) savers never end?
I suppose what I should have done a couple years ago, like everyone and their mother did around here at the time, was to buy “way too much house”…. disregarding all fundamental methods for valuing property, even local “special” places here in the land of the “special.”
Perhaps my wife and I should now also suspend paying back our Federal student loans (though, admittedly, the Fed inflation strategy certainly works in our favor in this instance).
And, while I’m at it, could I skip paying taxes, too? Could we make those optional, since every year we could buy two nice cars with what we send off to DC and Sacramento?
Today, apparently, it’s only prudent to be looking out for one’s handout.
And that’s it. Lenders aren’t as short-sighted as BB when it comes to understanding what would happen if they started writing down balances. You’d see a delinquency rate that was off the charts and bye-bye financials as we know them! BB’s plan is actually a financial doomsday plan.
Hell, I say go for it. It would be awesome to
Preach it, Chucky! Just got my property valuation notice, and dang if my taxes aren’t going up. Again.
So much for those falling house prices here in Tucson…
my county raised land and lowered structures
a shell game
Shell game? The structure isn’t worth crap — it’s the land that’s worth so much. None of those little post-war shacks is worth 400k (and the land 100k), it should really be the other way around.
The new assessments came closer to matching reality than the assessments of the last 5 years. Even then, the new Fairfax assessments still valued structure too highly. If there should be any gripe, it should be with the *total* value of the Fairfax assessment.
Having said that, I think Connelly is a crook. I like how right after the elections this fall, he announced that Fairfax would have budget deficit.
Call a title company or trusted realtor (HAHAHAHA, I kill me sometimes!) and have them run some comps. If the comps to your house are lower than the property valuation, go downtown to the tax assessors and get in the ring….
I’m trying to figure out whether this would be bad for us or good for us. Seems like it would be bad for us because it would delay the wide-spread foreclosures that we need. On the other hand, it seems like it would be good for us because it would very quickly push the collective subconcious out of the denial stage and into the acceptance phase. Even anger would be reduced.
“Even anger would be reduced.”
Anger is already simmering (amongst the non-overdrawn).
Principal reductions might boil it.
Well, we could leave the balance where it is, have the FB walk, have the GSEs and banks to insolvant, THEN beforcedto use your tax money to liquidate the assets and make the depositors and bond holders whole.
Or we could just walk from the obligations once the FDIC and GSE money is used up and go into greater depression.
I am not saying thisforegivness is a good plan.
I am saying there are no good plan. We allowed ourselvesto get into a lose-lose-lose-lose situation. Which is the best of the bad plans.
Personally, I think mine is the best of the bad plans. $2 trillion govt handout to pay down debt…. nationalize the debt. Money goes to (almost) everyone based on income (handout = annual income upto national medain of $50K, then lose 5-20% of amount above median if you make above median). Lose your cut if you already have debt foregiveness.
Combine the debt nationalization with MUCH tighter banking regulation to disassemble this debt bomb factory.
There is no solution. The end result is going to be the same no matter what. What we’re seeing is the equivalent of someone trying to figure out how to beat “tic-tac-toe” for the first time. Hundreds of possible solutions, but in the end the same conclusion - the game can’t be beat.
So grab Neil’s popcorn and amuse yourself with the relentless, pathetically amusing football humping.
it just iritates me when Bernacke comes up with this BS. Actually maybe Bernacke should convince his employer to give him/her a 20% increase i pay. yeah i like my plan better.
his/her employer to give a 20% increase in pay.
Sweet Herb Brooks reference…..
I think tic-tac-toe is a great analogy. If you’re smart, you put the X in the middle and you’re never beat - always stalemate or better. How come we had bunch of Wall Street analysis/bank types who offered to go second and then put the “O” the corner? They supposed be professionals..
Hi Darrel:
What you are describing is a national credit card that we would all be FORCED to use. I certainly hope nothing like this is ever attempted in our country. The only solution that makes any sense in our system is to allow those who gambled and lost to take their losses and move on.
BTW, there will be not bailout of the GSEs because they are too big to bail.
“Personally, I think mine is the best of the bad plans. $2 trillion govt handout to pay down debt…. nationalize the debt. Money goes to (almost) everyone based on income (handout = annual income upto national medain of $50K, then lose 5-20% of amount above median if you make above median). Lose your cut if you already have debt foregiveness.”
Wouldn’t this destroy the dollar? What about people who do not have debt? So, pay off dummies debts and force it onto taxpayers? Save the dumb lenders and force it onto taxpayers? No thanks!
Too much easy money and too many government programs artificially supporting housing caused the problem. More easy money and government programs won’t help.
Look,it was OK for some lenders to re-write some of these loans that would of shot up to 12% in a 51/2 % market ,if the borrower was really a homeowner that wants to stay in the home but they just got a creepy loan .Other than those situations ,any additional tampering with trying to make bad loan into good loans by reducing the loan balance is just nuts .
ex-nnvmtgbrkr is right on with his post above IMHO.I thought Paulson and BB said that 96% of the people are paying their mortgage . If this is only a 4% problem ,than why talk of rewarding bad behavior by loan balance reductions that would piss off the 96% that are paying their mortgage . Or could it be that we are not getting the truth from Paulson and BB?
Really ,the lenders and the bail-out people are just going to have to accept that there are a lot of bad loans that were made ,(speculator driven)and they need to take the loss and move on .
As a homeowner ,with a mortgage , I will get pretty pissed if the jerk on the other side of the block ,who won’t or can’t make his payments, gets a reduction in his loan amount while I eat it because I pay my bills .
I really thought that we would be hearing some pretty crazy bail-out ideas as this housing meltdown continued ,and it’s not over yet . The powers need to come to grips with the fact that so many of the purchases during the last 3 years of the boom were speculators or a by-product of some sort of fraud .
I would rather see the powers think of ways to get new qualified homeowners into these foreclosures ,you know,the type of people that really want a home .You can’t make a bad loan good if the intent of the borrower was short term speculation .
How come the lenders just don’t ask the government for a big loan so they can write down their losses for years in the future ‘.At least that way the taxpayers might get some interest on money that is shelled out by the government .The lenders and investment banks don’t deserve to make big money for at least 10 years while they pay back the taxpayers for the big loans they are going to need to cover their dumb losses .
“The Pasadena, California-based parent of IndyMac Bank said the delinquency rate on prime loans rose to 6.85 percent from 3.83 percent in last year’s first quarter…and late payments on home equity loans rose to 16.35 percent from 5.78 percent.”
“‘The worst in the sub-prime foreclosures is probably peaking at this point, but most of the mortgages — 90 percent of the homeowners — are not exposed to sub-prime loans. A vast number of neighborhoods are doing fine,’ said Lawrence Yun, of the National Association of Realtors.”
I guess Yun is not subject to Sarbanes-Oxley.
Yun forgot to mention the other elephants:
Alt-A
Prime
and of course, HELOCs.
Subprime is but a small subset of the overall problem.
Those with little money, i.e. ’subprime’, cannot hang on to their albatrosses as long as alt-a and prime can.
And it doesn’t include the saps that took advantage of MEWs w/o actually purchasing a house.
We heard the crash, saw the smoke followed by the howling sirens — so where are the ambulance chasers?
While there is pending action against agents, brokers and lenders, does anyone know of suits against NAR or some local “AR.” I would have thought that even the agents, brokers and lenders would try to pass on the buck.
The associations owe no legal duty to anyone but their members so any RE buyer who sues an association is likely to lose. Suing individual agents or the companies that employ them is another story.
The associations owe no legal duty to anyone but their members
Unless the intent is to deceive the public via the statue of fraud so their members can profit. Intentionally putting out incorrect and false information can be the intent in theory.
Law school teaches you to sue everyone first and then sort out the facts in discovery.
The parent of one of my son’s friends is an Indy banker. Apparently her 401K is in IndyMac stock. Luckily her kid is an independent self-starter.
I guess Yun is not subject to Sarbanes-Oxley.
No, but he and the NAR are now subject to the department of justice. Let’s see how they like that outcome!
“The Pasadena-based … said delinquency rates on prime rose to 7% from 4% and on Helocs to 16% from 6%…”
Az_lender, today reporting from (in fact) Pasadena, says delinquency rates on prime trailer-trash loans remained steady at 0.00%, compared with 0.00% at this time a year ago. Interesting that the banks never wanted these loans, except maybe to steal them from me at a 14%-yield basis.
How long before the “walk away” method of debt reduction gets put to use on student loans? I’m sure students are promised their degrees will land them better paying jobs, etc in essence that their employability will always go up. So when they don’t get high paying jobs shouldn’t they just walk away from their loans as well?
As long as you don’t mind a good scolding from Cue Ball Hank, I say go for it!
It’s not like they can foreclose on the diploma. Yet.
Actually, if you owe money on your student loan most schools won’t release your diploma, transcript or proof of graduation, so there are liens on sheepskin already.
Hah? No. You graduate from lawschool $200,000 in debt and then your school retains your diploma, keeping you from getting the job that would enable you to pay back the loan?
jokes on them as they won’t get hired w bad credit
I wouldn’t have anything to do w a deadbeat- pay your tab
Those are recourse loans, though. It’s impossible to walk away from them.
I wonder if I could I take a bunch of those credit card checks that I get each month, use them to pay off the student loans, and then claim bankruptcy? Anyone know?
Yes. Under the new rules you still may not be eligible for discharge, and the CC company may try to challenge your fresh start if you are, but there’s nothing legally prohibiting you from doing this as long as no fraud is involved.
Anyone know?
Your debt would not be discharged under the circumstances you mentioned.
Why not just take out an equity loan, pay off your student loans, then default on your mortgage?
If you don’t have any income and live in your parents basement playing on the XBox all day, what are they goig to do?
“If you don’t have any income and live in your parents basement playing on the XBox all day, what are they goig to do?”
Take your XBox away.
they can’t. Those loans are not dischargeable in bankruptcy,
I guess we need a “The College Degree Abuse Prevention and Consumer Protection Act of 2008″ to repossess the degrees of delinquent students. (I think I’m kidding, really.)
Boyfriend of a roommate did this just because he was too “busy” to keep track of his comfortable amount of money and make his payments. They docked his pay to get the money. So if you plan on living cash basis, paid-under-the-table for the rest of your life, or… to change your identity, walkaway would work.
You cannot walk away from student loans. Can you? I believe they follow you forever.
Signed,
Still Paying Off the Kids’ Student Loans (kids in question are 30 and 33)
I’ve seen it done for hardship, at least in Cali. Have to be disabled I think..there are more rules and my info is 10 years out of date.
Walking away from student loans is already a major problem and it is going to get much worse. I got myself in some pretty serious credit card debt when I was in my early twenties and working blue collar jobs while putting myself through school. I’ve since paid off all of that debt without a single late payment. I have now married a woman who is graduating from college this year with $60,000 in student loans. Her credit already isn’t stellar. If the government is going to force banks to write down prinipal for the FB’s while guaranteeing the bank’s survival I promise that they will never see a single student loan payment. I’m guessing that $60K will be about the average amount forgiven in South FL so we can just call it even.
It’s been many years since our society lifted the taboo on having stupid kids. Nobody has failing retards anymore, just specially-abled learners who get to take separate tests so everyone can get an A. Now the taboo has been lifted on being a lowlife dirtbag who doesn’t pay their bills. Who cares if you can’t pay your bills or just don’t want to pay them? Theres no shame in asking for handouts and forgiveness. This era in our nation’s history will serve as a lesson for ignoring moral hazards for many generations to come.
In the immortal words of Frank Zappa, …”there will come a time when you won’t even be ashamed if you are fat!”
We’re there.
Because the government is the guarantee-or. Unlike banks they have power to garnish wages, withhold tax refunds, and deny Federal benefits until you do something about them. Unless you are disabled, you can never discharge them in bankruptcy. Student loans are nasty, insidious debts that will follow you quite literally, until the day you die or pay them off.
I’m so glad we’re handing them out like candy to 18 years old that have never managed a checkbook. I’m not looking forward to the day those 18 year olds run the country and decide on nursing homes for their elders.
Would you feel better if they went without educations?
Heh. I’d argue that part of the issue is with all the touchy feely public education going on, students are in essence, being asked to finance their own high school educations because no real educational standards show up until college.
At any rate my point is: be nice to your kids because some day the tables are turned. Locking 18 year olds into a lifetime of debt surfdom for a degree which may or may not improve their earning potential is not the road to a happy elderly population 2 or 3 decades from now. When the hands are out looking for money and help, I think there’s going to be a whole lot of:” Where were you when I needed an education?” and “Sorry, I’m broke anyway. Payin back the government.”
“‘It’s going to make it more difficult for brokers to do what they’re supposed to do, which is help the consumers,’ said Richard Biondi, incoming president for the New York Association of Mortgage Brokers.”
No, it’s going to make it more difficult for the mortgage broker and the realtor to falsify the appraisal Richard Biondi!
They will no longer be able to blacklist appraisers who comply with the law and do not put out inflated appraisals just so they can stay in business!
You nailed it. The quote should say ““‘It’s going to make it more difficult for brokers to do what they’ve always done, which is to help themselves.”
I have felt that mortgage brokers should be prevented from doing their job, which seems to be to fleece their customers.
Both Bernanke and Yun are full of Sh*t. What business does the Fed had ’suggesting” that brokers lower the loan amounts? Where does Yun get off thinking that New England is anywhere close to a recovery? It’s still insanely overpriced, and a return to anything close to a market like the one it had would simply continue to exodus of anyone under the age of 35 to other states and continue New England’s slide into the Rust Belt.
“‘It’s going to make it more difficult for brokers to do what they’re supposed to do, which is help the consumers,’ said Richard Biondi, incoming president for the New York Association of Mortgage Brokers.”
Every piece of paperwork in a broker file is already scrutinized, qc’ed and telephone verified. The appraisals are subject to electronic valuation verification and then desk-reviewed by a human being. The need for the broker is vanishing real, real quickly. Since there is only one flavor of ice cream, you can wait in line down at your local branch of Bank of American to give them your thumb print, eye scan and then you can wait for your loan. Whatever the terms are, you’re gonna love it. Next.
they help consumers the way vampires help virgins
“Lenders, he said are reluctant to write down principal. They said that if they write down the principal and house prices were to fall further, they could feel pressured to write down principal again, Bernanke said.”
This is a telling comment on the difference between academics and businessmen who have to deal with cut throat commercial reality. The lenders are nobody’s fools and they know exactly what will happen if they write down a cent of principal: Borrowers will take them to the cleaners and capitalise on their weaker bargaining position. Eventually borrowers will end up asking them for 100% writeoffs otherwise they will walk. Everytime Bernanke opens his mouth he shows just how completely clueless he is about real life. I am actually beginning to feel sorry for him. Poor guy.
And this is why lenders will collectively raise their middle fingers to fools like Bernanke. I actually laughed myself silly this morning watching him.
Isn’t there a big risk that asking lenders to do their part will help crash home prices further through at least two channels?
1) Crammed down principle balances imply lower collateral (housing) values.
2) Lenders who feel burned by moral suasion to reduce principle balances may play the once bitten, twice shy card going forward.
It will encourage those that *can* pay to stop paying…as *they* will want a write-down as well. Pretty soon, ALL mortgages will magically become “troubled”.
The lender has to get the investor to agree. As more and more investors agree to take a loss, the value of the paper will drop proportionately. Only the investors who immediately jump on this bandwagon (and force the banks to buy back their paper as a part of the workout) will be saved from further losses. The workout will cause a cascade in MBS valuations.
You know, I think I just answered my earlier question. Once MBSs go through such a horrid turn of events, no one, NO ONE will ever want to buy another one again. That will force banks to start holding their own paper again, which will force house prices to come back down to reasonable levels.
Yes, this is yet another save that will not save housing in the end. I guess I kind of like it. Anyone who has a different angle, will you please post here? Thank you.
You got it, BV!
I’ve long advocated forcing lenders to write-down the principal amounts, and have written to a number of senators/representatives suggesting this. It is because I care about the “poor” FBs who took on more debt than they could handle? No way…but I know the FBs would be used as pawns in order to get taxpayers (that’s us) to throw good money after bad. If we (prudent types) want to end the BS in the lending industry — and not waste taxpayers’ money — we have to go along with the storyline (poor, poor FBs losing their homes, for goodness sake!) and pretend right back that we care.
Lenders are trying to put the burden of risk on our shoulders — and they’re using the “poor FB” as a tool. Taxpayers need to force lenders to shoulder the burden they took on themselves — and we need to use their arguments (stop families from losing their homes!!) against them.
What determines price is how lending standards will be used in the future, not what happened in the past. The “write-down” mortgages should be used as comps for future sales, as this is the market price (what a buyer was actually able to pay at the time of purchase), and this should be included in any new regulations.
Lenders will seriously be giving all future borrowers a proctology exam when they want to borrow money. Loose lending will be history, if we get these write-downs, and prices will drop accordingly.
Why not have the lender just change the terms of the loan verus writing down on the loan amount? Have the lender lower the rate for a longer term, 40, 50 or 60 years so the payments are lower. Why should the lender write down the loan amount? If they do that then everyone should get a write down especially those that didn’t bite off more than the could chew. This country is becoming filled with “reckless cry babies” that what others to pay for their mistakes. Prices are going to correct NO matter what they do. It’s going to be a LONG, LONG way down. Hold on.
I guess they’re not suggesting term increases because people would still just walk away from them.
It may signal the end of the 30-year fixed. When local lending institutions are compelled to hold their own paper, they will be loathe to take on 30 year interest rate risk, given ‘globalization’ and its consequent inflation. It is possible that the longest term they will be willing to go without ‘floating’ interest rates to market is 3 years. In a prior life, I was a wholesale account rep for a largish entity, still in business. My claim to fame was signing up local lending institutions by offering them (prime and DOCUMENTED Alt-A) 30 year fixed product at a favorable price. The local institutions UNIFORMLY found my product attractive, since they would NOT take on the interest rate risk of holding 30 year fixed loans in their own portfolios. That is another perspective, from feet which have beaten the street.
How much of this is managing expectations?
Let’s say he came out and said we need a $2 trillion nationalization of mortgage debt. What would the reaction be? Shock? Insanity? Disbelief?
So, they talk about workouts. Then they talk about delaying foreclousres. They do a $170 billion debt nationalization. They talk about the need to do principal reductions…..
In my opinion, they can see that trillions will be added to the U.S. debt. But, they can’t just do it. If you throw a frog in a pot of hot water, it will jump out. Put in when the water is cool, then heat it up….
We can not allow 10 million foreclosures with an average loss over $200K each. It will mean the end of the banks and the end of the GSEs.
Bigger picture. For 40 years after the end of the Great Depression, government economic policy was to flattenthe business cycle.
Then we got supply-side economics. The economy should ALWAYS be growing at the fastest rate possible and recessions are not to be allowed. This was done through ever larger amounts of debt, at ever lower rates, issued with ever lower lending standards.
Well, we are at the break point. TOO much debt for the income. We either allow the debt to default and put us into greater depression/stagflation, or we do something to reduce the debt load.
You are right that banks are not just going to write it off, but we may nationalize it.
You seem to be really rooting for this “$2 trillion debt nationalization”, but why? Why will shifting the losses from banks and FB to the US taxpayer as a whole make things any better? Are you saying that forcing non-FBs to absorb some share of the loss through higher taxes or higher national debt is better than keeping it concentrated within the guilty parties?
When you say “or we do something to reduce the debt load?”, do you mean that everyone works hard to pay off their own debt, or we somehow pile it all on top of the few Americans that have not spent themselves into a hole the past few years? What do you think those individuals will do when they see the writing on the wall?
See caveat_emptor’s post from 12:36:42 above.
Actually, it’s quite do-able. If a banker sells the mortage to a third party for 80 cents on the dollar and the third party then reduces the UPB by 20% so that the borrower can make the payment, the bank effectively just wrote down the principal. There is also nothing that stops this “third party” transaction from being an internal transfer.
Whether a bank chose so will not be due to some abstract libertarian/Calvinist sense of debt responsibility or the soapbox that you get to stand on when you sally forth such high-minded principals, but on a simple matter of what keeps a bank solvent.
As for that banks giving in to that 100% writeoff in “real life” as a result, that’s a non-realistic scenario even by academic standards.
But, why would a 3rd party do such a thing? Buy it for 80 with an obligation to reduce its value to 0.64? Who would buy?
The much more likely scenario, I think, is that they buy it for 0.64, and then negotiate with the borrower, marking it down to 0.80. (0.16 profit)
it’s not .64, it’s still .8.
For example, say the Bank has a distressed mortgage with a principal of 100K, a 3rd party buys it for 80K, then asks the borrower to pay on only 80K of the principal, effectively reducing the borrower’s payment (and debt) by 20%.
If the 3rd party is reasonably sure that he can get a steady stream of payment as a result of this writedown, then it makes perfect sense for him to do so since the present value of the new payement stream will be greater than $80K
Wow — just wow…
Dear Mr Bernake, thanks to you I have seen the light. I will no longer be making payments on my home loan as I feel “troubled” at the amount of interest I am paying. Using your sage advice I hope to reap the benefits of delinquency and lower my payments. After all, if its OK for anyone who got in over their head to still get to keep their home then who more deserving than I who have made payments on time ?
As usual, Bernanke (among other “leaders”) has seen the light several years too late.
Thanks for being last to the party and bringing such a great “solution.”
Well, it would seem to be one way to give the banks billions of extra tax breaks. (Since apparently, they get to write off the losses without the beneficiaries being taxed for it.)
Are you “cash strapped”?
Remember the 60 minutes piece on the subprime scam.
“Subprime is contained, on earth”.
Let me add a related one
“The speculation induced meltdown is contained in the economy, of the world”
I have to say that the US financial system does have the best scam artists in the world. It takes a high level of evil competence to fool europeans, japanese, chinese, arabs and indians at the same time. The funny thing is they also smoked their own drugs (or drank their own kool-aid).
I’m just laughing here. Basically we new that losses and risk were spread all over.
We see towns in Sweden (Norway?), banks in India, England, Germany, Austrailia.
Oh, the joy has been spread to all nations.
Of course we knew. That was the whole POINT of securitization. I remember my grandpa talking about it when it first came out. He said the idea was to stabilize the financial system by spreading the risk across everyone’s shoulders, so that no one person would be overwhelmed by it. Then he said that the flip side was that spreading the risk around would only allow it to grow to gargantuan proportions, and that would cause everyone to fall all at once. I asked him which point of view he thought was right. He said he didn’t know, but he probably wouldn’t be around to find out. Rather, it would be me who would bear the consequences. Turns out old gramps was smarter than I thought!
(I gambled to much. I spent to much on my Visa, I bought a car I cannot afford. I drank to much, spent to much on vacations etc. My phone bill is to high, I talked to much. Sorry I won’t do it again, really. Mr Bernanke can you arrange for these guy to lower my principle too?)
It depends. Did you do this using a HELOC against your house, and would a bank lose money by foreclosing because you owe more than it is worth? Then fine.
(How long before the “walk away” method of debt reduction gets put to use on student loans?)
We don’t have any private debt. For this to work for me, we need to do it with public debt and pension obligations.
PF, could you post the article? Requests a login. Thanks.
PPT working overtime once again today; just like yesterday.
yes I see its three o’clock, PPT standard time
Another Ambac bailout rumour. We’re saved, we’re saved!
AMBAC bailout rumor.
Funny that these rumors always come out in the last hour.
They can’t manipulate the market forever. How many more “a deal is near” rumours can they do?
But, even when the deal is done, it won’t stick. The hundreds of billions in losses are coming. If they get capital, it will notbe enough. If they split, the lawsuits will take down both halves.
Like we have been seeing for a year+, daily market moves are 100% dependant on the perception of whether or not the losses will remain hidden or if they will have to be accounted for sooner rather than later.
Oh, no!!! We have to tell the truth… DOW drops hundreds…
Ohhh, cool. Looks like losses will remain hidden a while longer…. DOW up hundreds.
I’m guessing the deal will fall through because of an increased demand for more capital, look at the abx today.
The used stock salespeople do not make any money if they were to tell the truth. Thus the lies.
The funds do not wish to see more liquidating, so the funds lie.
The comments by Mr. Bernanke this morning were the scariest I have ever heard from a Federal Reserve Governor (privately or publicly). This morning Mr. Bernanke asked banks to renegotiate downward $4T in loans. This is on top of the $450B - $600B the banks have already lost. It is all contained.
The level of manipulation is just sickening. This is the third or fourth time in the last two weeks — exact same playbook each time.
CNN almost got it right with this headline:
“Housing: Best time to buy in four years”
Should be “Housing: Best time to buy: in four years”
http://money.cnn.com/2008/03/04/real_estate/markets_less_overvalued/index.htm
You should write in to the editor right away, before too many people read the misprint.
“‘Banking is certainly one of the most regulated industries in the world,’ Bernanke told the national convention of the Independent Community Bankers of America.”
Banking itself used to be one of the most regulated industries in the U.S. Thanks to repeal of Glass-Steagal and other banking laws, not so much anymore.
OTOH, the housing & mortgage industry have *never* been regulated to any great extent –just subsidized up the yin-yang. Ask any stockbroker whose had to endure a Series 7, or any compliance officer that’s had to deal with Sarbox rules, how their “regulations” compares to a typical mtg brokers or used-house agent’s “regulations”. See what kind of reaction you get.
Yeah regulation is really bad. But without it this is what you get every time.
“It has been said that democracy is the worst form of government except all the others that have been tried.”
“It has been said that strong regulation is the worst way to manage an economy except all the other ways that have been tried.”
Can you imagine what down payments would go to if lenders actually wrote down principal. 50-60% would be the norm and I doubt you would see interest rates under 10%.
I mean its possible they might do it but god help the housing market after that.
Wow….. CNBC was just HARSH with one of their guest analysts.
He was saying to buy the home builders, and the counter attack was pretty harsh by the CNBC anchor.
Not that I’m turning bullish on homebuilders (yet), but if you look at the last cycle, the cyclical low on housing starts was something like 800k. At last check, we are at something like 750k now. Sam Zell recently called the bottom on national housing starts–he’s about as savvy as they get, and I think there is good reason to listen to him.
We’re not going to rocket up from here, but anecdotally, I know of several subdivisions that have no standing inventory, but continue to build homes to order. Every month that goes by, there are more and more subdivisions that fit into this category (which means the builder went from stopping altogether, to restarting after inventories had been worked down). Builders are building to lower sales prices (to order), or lower specification level (since they have already written down the land).
There will be more pain, clearly, as I think that not all homebuilders have taken the land hits they need to in order to be competitive selling homes with more traditional underwriting. I’d be surprised if more homebuilders don’t go belly-up. However, I think there is an argument that housing start numbers nationally have bottomed, meaning that the bottom for homebuilders as a whole isn’t far off–perhaps 2-3 quarters away.
Home prices on the other hand are a completely different discussion. There I think we have years yet to go.
I think we have a ways to go, things are different this time. I’ll go with 500k.
The PPT appears to be peddling furiously to prevent another big down day.
They appear to have unlimited ammunition…
Yes, they’re clearly the most powerful financial entity on Earth. How long do you suppose it will be before they start replacing all the Fortune 500 CEOs with remote-controlled clones, or has that already happened?
more layoffs at goldman ?
http://dealbreaker.com/2008/03/some_stuff_happening_at_goldma.php
Has anyone thought of having an HBB get-together aboard one of those foreclosure bus tours? Like, for example, this one?
http://www.azstarnet.com/business/228011
The above story is full of fun stuff like this:
Most of the houses on the trip were in newer subdivisions. They often were surrounded by several other houses with “for sale” signs out front. At one stop, the buyers were able to walk from one foreclosed home to another on the same street.
Some were far from pristine-looking. Two had swampy pools. Some had dirty walls and carpets. In one house, a telephone jack appeared to have been ripped from the wall.
“The upside to this house is you get to choose your own appliances, because the sellers took them with them when they left,” Curcio joked at one house.
The prices, in some cases, had been reduced, but there were no giveaway deals on the tour. Listing prices ranged from $189,900 for the graffiti-marked home to $394,500 for the Dove Mountain minimansion.
Two had swampy pools.
This reminds me of a house my in-laws moved into once. They were renting it from a rich bachelor who had lived in the house when he was younger. Anyway the pool had not been cleaned in quite some time and literally looked like a pond. There were frogs and something rather large (a snake I think) living in it.
To my surprise, they were able to clean it out via normal pool-cleaning methods (scooping, filtering, chemicals) and had it looking good using the same water.
The upside to this house is you get to choose your own appliances, because the sellers took them with them when they left
You get to choose your own copper/appliances/sheet rock/…
I’ve cleaned VERY bad, ugly looking pools with chemicals you can get at pool supply stores. They work far better than you’d think. The BIG rule: you can NOT over shock a pool.
“The upside to this house is you get to choose your own appliances”
Listing prices ranged from $189,900 for the graffiti-marked home to $394,500 for the Dove Mountain minimansion.”
I am so glad i found this blog.A good laugh every afternoon is a good thing.
Here is another fun idea.How about a boat tour on the Colorado?
This is a short sale not a forclosure yet….
“SELLER in trouble says to “BRING AN OFFER”
http://www.realtor.com/search/listingdetail.aspx?zp=86442&ml=3&mnp=35&mxp=34&typ=1&sid=abc9b32c47e345018bb8450d879d69b9&lid=1080164145&lsn=2&srcnt=2#Detail
While you are cruising down the river you can checkout this lovely mobile.Its priced for land value with those nice condos next door.I laugh every time I see it.
http://www.realtor.com/search/listingdetail.aspx?zp=86442&ml=3&mnp=31&mxp=31&typ=8&sid=8413d44537a64df1965e587b7666ea0c&lid=1092705437&lsn=2&srcnt=2#Detail
Heres another fun idea…how about a nice boat tour on the Colorado….
Not a forclosure yet ,,,,,,, but says SELLER in trouble says to “BRING AN OFFER”
http://www.realtor.com/search/listingdetail.aspx?zp=86442&mnp=35&mxp=34&typ=1&sid=91d5125ed88d46cd860751ac9d51e047&lid=1080164145&lsn=2&srcnt=2#Detail
While your cruisng on theriver you can checkout this lovely mobile built in 1976.its priced for the land since its next door to that nice condo project but still makes me laugh………
http://www.realtor.com/search/listingdetail.aspx?zp=86442&ml=3&mnp=31&mxp=31&typ=8&sid=8413d44537a64df1965e587b7666ea0c&lid=1092705437&lsn=2&srcnt=2#Detail
Sorry about the retyped post……the first got lost somewhere….now they are both here……..
El-Erian on CNBC:
The Fed doesnot have the tools. There are two lines that will have to be crossed. 1) Using public money to help the markets. 2) Breaking contracts.
The government will have to do both of these or all markets will continue to spiral down.
It is still amazing to me how self-interest so easily taints opinions.
But, he is right in a sense. The Fed’s lower interest rates and ability to puch equityto banks is not slowing the slide. The Treasury’s Hope and Lifeline are doing nothing.
As someone put it above, monkies humping footballs.
I don’t understand how this is even a topic of discussion. How terrifying.
So, sliding markets are not an option? Since when? They slide all the time; no pain no gain.
Just saw a CNN blurb, “Housing-Best time to buy in four years”. I think we can wait several weeks/couple months and that will change to, “Housing-Best time to buy in 6, 8, 10, maybe even 15 years.”
What is this mumble mouth trying to say in his statement about BB’s remarks?
Frank Statement on Bernanke Speech on Reducing Preventable Mortgage Foreclosures
Washington, DC - Rep. Barney Frank (D-MA), chairman of the House Committee on Financial Services offered the following statement in response to Federal Reserve Chairman Ben S. Bernanke’s comments today on reducing preventable mortgage foreclosures before the Independent Community Bankers of America Annual Convention in Orlando, Florida: http://www.house.gov/apps/list/press/financialsvcs_dem/press030408.shtml
“It is now clear that we will not be able to avert a more serious and prolonged economic slowdown if we don’t address the problem of increasing mortgage foreclosures. Chairman Bernanke’s willingness to work with us in a cooperative way, and his outline of the principles that we should be applying, are very hopeful signs and they encourage me to believe that we will be able to adopt measures that reflect this approach.”
Ummmmm…… If we don’t stop skyrocketing foreclosure, then we are fooked. We hope he can come up with an idea. We are punting to him on this one because we have no idea what to do.
Sorry about the typo in the article. It should read…
“‘It’s going to make it more difficult for brokers to do what they’re supposed to do, which is rape the consumers,’ said Richard Biondi, incoming president for the New York Association of Mortgage Brokers.”
Sorry for any inconvenience this may have caused.
“To those whose only tool is a hammer, every problem looks like a nail”.
Bernanke sees housing implode - lower rates.
Bernanke sees dollar implode - explain to Congress how lower rates help everyone.
Bernanke sees inflation explode - explain to everyone how Congress helps lower rates.
Pretty much sums up the Fed tool kit.
Have fun with this one:
http://bigpicture.typepad.com/comments/2008/03/foreclosure-pro.html
Dumb question for you guys:
If we’re in the middle of a liquidity crisis, and the financial institutions are in dire need of capital: shouldn’t those of us loaning capital to these institutions be getting paid a premium for the use of it? Why doesn’t supply & demand apply to retail interest rates? It just seems upside down to me- when cash is most in need is when rates are lowest.
I have a guess (retail depositors are little tails trying to wag the fractional reserve debt dog), but am curious what you more savy folks think.
This probably belongs in tomorrows bits bucket… maybe I’ll repost.
“Why doesn’t supply & demand apply to retail interest rates?”
It does to some of them.
You are receiving a premium!
What is a CD paying? 4.5% ?
What price can the bank obtain money from the Federal Reserve? 3%
“Comment by Hoz
2008-03-04 13:55:21
The comments by Mr. Bernanke this morning were the scariest I have ever heard from a Federal Reserve Governor (privately or publicly). This morning Mr. Bernanke asked banks to renegotiate downward $4T in loans. This is on top of the $450B - $600B the banks have already lost. It is all contained. ”
Too much debt and too little income to service it.
We can let it all collapse, then print the money needed for a liquidation of the banks and GSEs (hyper-stagflation) or we can let the losses ba passed on to depositors and bond holders (Greater Depression).
OR, we can be pro-active and nationalize a huge chunk of the debt. Something like $2 trillion needs to be lifted from consumers without becoming turned into losses for the banks.
The banks will not negotiate down the loans, but the fed may hand the people cash that can only be used to pay down debt. If there is hope of a write down, maybe people will stay in their houses long enough to still be in the house by the time we get the guts to do what must be done.
Stupidity continues….
http://www.azcentral.com/business/articles/0304sr-silverstone0305-ON.html
“Classic Residence at Silverstone, a project by Hyatt and the Plaza Companies, broke ground Thursday, the first of several developments at the old Rawhide site, which is now called Silverstone.
The venture - part of the larger planned Silverstone community - will have 270 apartments and private villas when it debuts in 2010.
An additional 700 homes and a public library will be built on the 160-acre site that once was home to Rawhide.”
Still breaking ground on new “luxury condos” for the rich Baby Boomers that are on their way.