A New Level Of Money-Losing Suckitude
Some housing bubble news from Wall Street and Washington. HedgeFund.net, “Wall Street expected jack squat from Merrill Lynch. But that didn’t stop Merrill from reaching a new level of money-losing suckitude. For the first quarter Mother Merrill posted a loss of $2.14 billion…sprung from a $6 billion Q1 writedown the Wall Street firm blamed on its subprime mortgage exposure.”
From Bloomberg. “CIT Group Inc., the commercial finance company trying to escape a cash squeeze, said it was unprofitable for a fourth straight quarter and cut its dividend after failing to staunch losses on home and student loans. Losses in home and consumer lending units totaled $248.5 million as CIT set aside $150 million for expected costs tied to bad mortgages.”
“The lender stopped originating subprime home loans last year. CIT may have more than $4 billion of holdings tied to subprime mortgages, according to a March 17 report by Standard & Poor’s.”
The Associated Press. “The nation’s largest mortgage insurer, MGIC Investment Corp., paid out more claims with more homeowners defaulting on mortgages. The mortgage insurer incurred $691.6 million in claims during the quarter. By comparison, MGIC’s payouts last year totaled $870 million, which was a 42 percent increase over 2006.”
“At the end of March, MGIC had $221.4 billion insurance in force, compared with $178.3 billion at the same time last year.”
From Reuters. “The phenomenon of ‘walkaways’ or ‘jingle mail,’ shows every sign of gathering pace and having a substantial impact. Wachovia went so far as to change its models on how quickly loans will go bad in the face of what it called ‘unprecedented’ changes in consumer behavior.”
“‘I don’t know where the tipping point is,’ said Don Truslow, chief risk officer at Wachovia. ‘But somewhere when a borrower crosses the 100 percent loan to value, their propensity to just default and stop paying their mortgage rises dramatically and really accelerates up.’”
“He added, ‘It’s almost regardless of how they scored, say, on FICO or other kinds of credit characteristics.’”
“Regions Financial, a large U.S. bank active in the Southeast, on Tuesday announced that nonperforming assets had nearly tripled to $1.2 billion, driven in part by deterioration in its home equity loan portfolio.”
“The bank’s CEO, C. Dowd Ritter, gave analysts a similar picture of how borrowers react when confronted with steep drops in home valuations. ‘As they started to sell it or refinance, they realized that valuation was 40 percent below what it was that 18 to 24 months ago and they are walking away from those homes in those markets,’ he said.”
The NAHB. “The mortgage credit crunch has spilled over into land acquisition, land development and home construction (AD&C) lending, increasing the challenges faced by builders in the current housing downturn.”
“‘This credit crunch actually appears to be worsening despite the concerted efforts of central banks here and abroad,’ Bob Mitchell, former president of the National Association of Home Builders (NAHB), told the Senate Small Business Committee. ‘It would be ironic and tragic to have the positive work of the Fed undone by bank regulators taking a totally different vision and approach when it comes to lending matters.’”
“Banks have become so wary about lending that credit costs are being pushed up despite sharp cuts in official interest rates, and that is adding to the risks of an economic downturn, the vice chairman of the Federal Reserve said on Thursday.”
“‘It is reducing the values of some assets and tightening credit cost and availability across a wide range of instruments and counterparties, despite considerable easing in the stance of monetary policy,’ Donald Kohn said.”
“Asked after his speech whether this meant rethinking how regulators rely on credit ratings as they review capital standards, Kohn said that this was certainly up for debate.”
“‘I think part of the work-list for the regulators is to reexamine the extent to which we ourselves are relying on these rating agencies to gauge the risks that you guys are taking,’ he said. ‘I think there was far, far too much reliance on credit ratings all round.’”
“Housebuilder Taylor Wimpey said its 2008 results would be at the low end of expectations based on current conditions in British and U.S. markets.”
“‘Market conditions in the UK have weakened since we reported our preliminary results (on March 6), with first-time buyers and investors facing particular difficulties,’ the company said in a statement. ‘Sales rates remain significantly below those of the equivalent period of 2007 on a proforma basis, with higher levels of cancellations being experienced.’”
The Edinburgh Guide. “Would-be first time buyers face the ‘hardest struggle ever’ to get onto the property ladder in Scotland according to a new report from housing charity Shelter.”
“The Index shows that in Scotland, while the average weekly income of working households has risen from £548 in 1997 to £851 now (a 55% increase) - the average first time buyer property has rocketed from £38,845 ten years ago to £108,446 at present.”
“Shelter Scotland is holding a summit ‘The Scottish Housing Bubble’ to look at the prospects for the Scottish housing market.”
From Money Extra. “House prices for first time buyers throughout the UK have risen 200% in a decade, Shelter has revealed. The average first time property price has rocketed from £52,674 to £159,494, with house price to income ratios doubling from 1.72 to 3.4.”
“The figure is even higher in London with first time buyers facing a crippling 250% increase to almost £260,000.”
The London Stock Exchange. “The manager of one of the UK’s largest estate agents has issued a gloomy projection for the future of London’s housing market. Mark Anderson of Hamptons said that he perceives that prices in the capital have already slumped by 15 per cent, having hit ‘unsustainable levels’ at its peak during last summer.”
“Mr Anderson said the falls had not shown up in housing market indices yet because these tend to be based on mortgage approvals rather than completions. The decline will however become apparent in months to come, he told City AM.”
“Richard Lee spent 5.3 million pounds ($10 million) buying 20 rental homes across the U.K. with just 150,000 pounds of his own money. Today, the properties are worth about 60 percent less and owned by the banks that financed the purchases.”
“Lee was one of thousands enticed by one of Europe’s top five best-performing residential property markets during the past decade. Now repossessions are mounting and properties stand empty as many investors fail to find the tenants needed to cover their mortgages after a building boom flooded cities, especially Leeds and Manchester, with apartments.”
“‘Buy-to-let investment was a bubble inside the housing market bubble,’ said Michael Saunders, a London-based economist at Citigroup Inc. ‘It’s turning out worse than I thought.’”
“Buy-to-let investors who were behind on their mortgages by three months or more increased by 25 percent to 7,584 in the fourth quarter, according to the London-based Council of Mortgage Lenders. Repossessions rose 26 percent to 1,247.”
“The skyline of central Leeds is dominated by construction cranes erecting high-rise condominiums, 60 percent of which were sold before completion to buy-to-let investors, according to London-based real estate broker CB Richard Ellis Hamptons International.”
“Thousands more apartments are being built in the center of the city, where two-bedroom homes lost 12 percent of their value in the past two years, according to Hometrack Ltd. Brokers report average rents for these properties have dropped by about 20 percent and about 13 percent of city- center apartments are empty, according to Leeds City Council estimates, based on local tax returns.”
“‘Twelve months ago, development was an easy way to make your fortune,’ said Tom Bloxham, chairman of Manchester-based Urban Splash, which develops derelict sites. ‘Today, it’s a disaster zone.’”
“City center condominium developments like what’s happening in Leeds represent Britain’s ‘mini-Floridas,’ said Alastair Stewart, who tracks homebuilders.”
“Lee, 37, bought an apartment in Manchester for 239,500 pounds in October 2005. An identical property in the same building sold for 115,000 pounds earlier this year, said Lee, who has surrendered his keys to the bank.”
“Lee also purchased 17 properties, most of them in Leeds, in late 2005. He said he expected to earn a steady income from renting to students. After the transactions were completed, Lee said he realized he had overpaid for the properties. He said 15 hadn’t been refurbished as promised, the tenants occupying the homes had left and rental-income projections were wildly optimistic.”
“‘The valuations were 15 years ahead of their time,’ Lee said. ‘The biggest genius in the world couldn’t have got those loans to work.’”
“Once he has dug himself out of his current financial difficulties, Lee will consider getting back into the business. ‘Would I do buy-to-let again?’ he said. ‘Without a shadow of a doubt. This time I’ll ensure I’m in control of all the levers.’”
“Lee estimates his properties are worth about 3 million pounds less than he paid for them. The banks will probably ask Lee to repay the money when the homes, now in their possession, are sold. He doesn’t have the money, he said.”
From Macleans. “It seemed like a good idea at the time. But an Ontario plan to give away up to $20,000 each to thousands of first-time homebuyers has become a surprising disappointment.”
“As the program was rolled out across the province in 2007, Ontario municipalities planned for a deluge of applications. But it hasn’t materialized.”
“Across the province, cities are struggling to find people interested in the cash, and bureaucrats admit they might not be able to give away all $36 million by next year. It may actually be possible to fail at handing out free money.”
“Huron County, a rural municipality on the shores of Lake Huron, was given 17 grants of $8,900 each. After more than half a year of trying, Don Brisson, manager of housing services for the county, has managed to hand out just five.”
“Asked why interest in his free money seems so sluggish, Brisson is stumped. ‘Maybe we need to promote it more,’ he says.”
“Such problems come as no big surprise to housing policy analyst Michael Shapcott of an urban issues think tank in Toronto. Shapcott has been watching with concern as a growing gap between home prices and incomes in larger cities reduces housing affordability across Canada, despite low interest rates.”
“‘Most renters who could afford to switch to home ownership have already made the move on their own over the past decade,’ he says.”
“Those who remain as tenants likely face serious income barriers and realize a few thousand dollars won’t help them make their monthly mortgage payments, even for a house priced below $208,000.”
“‘These folks probably understand the fundamental issues better than any well-intentioned government official,’ he notes.”
The Quad City Times. “Caught off-guard by their adjustable rate mortgage, an already-strapped Rock Island couple found themselves struggling to pay bills and make their house payment. Peggy and Dennis Wilson — she a data-entry clerk and he a warehouse supervisor — turned to Rock Island County Economic Growth Corp. for financial counseling after their house payment jumped from $633 to $744.”
“They cut things out of their budget and tightened their purse strings to make their house payments. ‘It was a very stressful year for us,’ said Peggy Wilson. ‘You think you are going to lose your dream.’”
“DeShana Forney, executive director of the Illinois Housing Development Authority, announced Wednesday that the Illinois Homeowner Assistance Initiative has a pool of $310 million, up from $200 million when the program was created in February.”
“‘I’m on a tour of the state to let people know state resources are available,’ Forney said.”
“Through budgeting, the Wilsons weathered their financial storm and are considering refinancing. When they signed the documents at closing, they didn’t know they were getting into an adjustable rate mortgage. They went to a bank that offered mortgages with only $500 down. The couple was approved in an hour.”
“its models on how quickly loans will go bad in the face of what it called ‘unprecedented’ changes in consumer behavior.”
Translation: We never thought the average consumer would learn to be as sleazy and corrupt as our business models and CEO’s !
What is so unprecedented?
They only bought for a profit, and since there was a free embedded put option in the contract, they are exercising that put.
I posted a link the other day to another board where a dude was thinking aloud the benfits of walking away.
I think this would be a great weekend topic: let’s discuss the prime jingle-mailers. We’ve only seen the surface here.
Yeah, I remember, and I commented on it. Great find.
It basically shows that what matters is price/rent not price/income at the prime end.
That dude could easily pay, and his business seemed to be going fine too.
Why would he keep paying? No incentive.
Faster,
the incentive to keep paying is potentially ruined credit. If you have a foreclosure doesn’t it ruin your FICO score and make it virtually impossible to get another mortgage, car loan or credit card?
Likely, but only for some period of time. If you’ve already got a car and credit cards, those may not be of much concern. You probably won’t get another mortgage for a while but earning six figures (which is what you’re doing by walking away when your mortgage exceeds your house value by that much) may be worth it.
True, but his choice IIRC was throwing $100K at a sinking ship, or just walking.
Besides, as a calculated guess, he’s going to be fine.
Who exactly are lenders going to lend to in the upcoming days, FICO or no FICO?
Whatever. This whole FICO thing was a scam from day one.
The only people who have great scores are either the losers or the ones who don’t need credit. The only people who have crappy scores are the people who are losers or the ones who don’t need credit.
What a “brilliant” system where both ends are totally unpredictive of anything!
Faster,
What’s really insane is that they have a whole “kid gloves” list filled with politicians, actors and basically anybody with access to the media and those accounts are handled to the “t”. That’s why you won’t see Bruce Willis on tv talking about how they totally screwed up his credit/accounts etc.
Now… Bruce L. Willis of Joliet, IL? Yeah, screw that guy. Let him fight like the rest of ‘em!
My only problem with jingle mailers is if they had a reasonable mortgage and some equity to begin with and then screwed themselves by either refying into an exotic loan or sucking all the equity out and now want to walk away.
Why?
Only when the lenders get screwed good and proper will sanity return. This should be obvious to anyone.
Why? Did the lenders force people to screw themselves making bad financial choices?
Bad and improper.
Crazy:
YES the lenders forced people into the loans by not saying NO in the first place……then by hiring the cutest dumbest little chicky poos who always had a smile and used their sex appeal to get the wussie guys to sign…………cue suzanne
-
The “put” option will now be exercised…..
As in…. I’ll “put” my keys on that granite counter top… & leave this albatross behind!!
lol
That was “pay the mortgage or they foreclose on the house.”
This isn’t the first time this has happened… its just the first global time…
Got Popcorn?
Neil
Mo,
I think that a lot of the problems we have in the finance world are because hucksters have been able to sell software ‘modeling’ human behavior…especially to the government.
That’s why eggheads like Greenscam had been able to deny any bubbles because they paid more attention to their computers and not to history. Even Bernanke, as an ‘expert’ on the Great Depression has overly relied on largely unproven models of human behavior and multivariate statistics in his policy making.
The more I read here, the more I actually believe that Wall Street should be placed under regulatory lockdown and the Fed stripped of its power to do anything else but be a watchdog. It should have the ability to adjust interest rates only once a year, and then only with the approval of all of the reserve governors and Congress.
I’m still not convinced we should abolish the Fed entirely, but I can see the advantages of doing so more and more…
In the immortal words of our pal, HAL:
“Let me put it this way, Mr. Amer. The 9000 series is the most reliable computer ever made. No 9000 computer has ever made a mistake or distorted information. We are all, by any practical definition of the words, foolproof and incapable of error.”
http://www.palantir.net/2001/sounds.html
Makes you wonder about the computer models of “Global Warming” predicting the next 50 to 100 years ….. and the Believers completely destroying the economy in the meantime!
Garbage In = Garbage Out
“It seemed like a good idea at the time. But an Ontario plan to give away up to $20,000 each to thousands of first-time homebuyers has become a surprising disappointment.”
Bring us more victims. We need more victims.
I like Canadians. They do generally appear to have a brain in their skull, as opposed to the eyes rolling back like a shark at the sign of money.
I, err, hate to admit it, but you’re giving us too much credit (as are the banks). Greed and stupidity are plenty common here. I doubt many people have heard about that wasteful program.
Ontario is entering into a housing downturn, though, and that is pretty well publicized. I think there is more fear about buying right now, and $20,000 is not a big discount on a half-million condo…
These suspicious giveaways only scare the people. They smell desperation when the REIC begs you to buy.
REIC = Department of Home-Land Security
I don’t know where the tipping point is,’ said Don Truslow, chief risk officer at Wachovia. ‘But somewhere when a borrower crosses the 100 percent loan to value, their propensity to just default and stop paying their mortgage rises dramatically and really accelerates up.’”
“He added, ‘It’s almost regardless of how they scored, say, on FICO or other kinds of credit characteristics.’”
——————————————————————
Tell Watchoverya that I’ll give similar advice for far less than Mr. Truslow is being paid.
Like DUH!!!
What Truslow at Walkallovya won’t admit is how many FBs were enabled by his bank to go up to or over 100% LTV when they initially signed up.
Dude, zero down loans, 80/20’s, 90/10’s, etc. are upside down on day one, as are many of those made with bad appraisals. Don’t act so surprised.
Ruinis inminentibus musculi praemigrant.
I think the key phrase here is:
“regardless of how they scored”
There’s such a wealth of information there. Firstly, ahem FICO is a joke. Sorry. So many people during da’ boom have been able to re-fi themselves into a slimmer, more fit and attractive FICO you! Dodging huge swaths of c/c, auto loan and 1st and 2nd payments and “smelling” real good to the bank.
Secondly, d1ckhead didn’t realize this was about momentum, *not stupid fabricated fico scores? The banks were lending against the property, not TO a person. C’mon, you knew that.
Thirdly it also shows that their containment model is breaking down. When people w/ 750 fico’s get under water evidently they kick and scream just like any other air breathing mammal? Shocking. FICO System = Stupid.
good summation, DinOR. spot on target.
WHen you can pay companies to jack up your FICO scores, you know it’s a crock o’ sheeiiiit. Same as the SAT educational complex, bleeding parent’s bank accounts with $700 tutorials to make sure little mr/miss can ace their scores, and then get rejected by the Ivy school of their choice.
Yep, they all study for the test any never really learn anything.
“So many people during da’ boom have been able to re-fi themselves into a slimmer, more fit and attractive FICO you!”
LMAO!
Not quite. FICO still rank-orders people by propensity to default—all else being equal! That’s exactly what it was supposed to do.
FICO does not have any knowledge of income, or prospective loan size or collateral value in the score.
Banks knew this, but they just got dumb and confused FICO scores with underwriting. FICO doesn’t do all their work for them.
My understanding is that CountryWide had a system called “DeskTop UnderWriter” that basically allowed the mortgage monkey to keep plugging numbers in until they got the desired result. Of course BEFORE sending it down to “underwriting”. So Ms. Ex-Stripper could pay off your credit cards etc. and the NEXT time you went to re-fi your FICO score would have been manipulated to appear much better than it really was!
Well who actually paid off those car/cc loans? The market appreciation did (but we’ll make sure you get credit for it) I think that was ‘where’ I was going.
I agree.
FICO was supposed to reduce the chance of default of someone who had some meat in the game who *also* qualified for the loan.
When they threw out the process FICO was designed for, they should have thrown out FICO. Oh wait… that process made sense…
FICO only says how likely you are to pay back debt up to a DTI of about 38%. Anything beyound that and its a worthless number. But rewrite the rules to limit today debt load to 38%… and we have a funny thing… FICO works!
But don’t forget the down payment either. Historically people fight to defend their life’s savings (which for anyone under 35, that is what their down payment represented). Also… they forgot cash out refinancing has always had a high default rate!
DUH!
Its not FICO that’s broken… its the whole system.
Oh well. We’re returning to sanity. What did you say about spending and jobs?
Got Popcorn?
Neil
OT but…Watching lots of folks shopping in grocery stores not buy all the stuff they put into their carts. Even had a coworker email me, it happened to him/her today. If my coworkers are counting pennies, then what about all the other folks… FICO scores mean nothing when you can’t buy groceries. Just filled up today for $60+ and that is only for one paid off older model, the other much older paid off model will have to sit their with 1/4 tank.
And 1 hr drive to visit friends will be paid by friends Co which is paying for gas. Otherwise, not going, staying home. Fico schmiko.
Correct. FICO scores do work reasonably well for their intended purpose. Making payments on relatively mundane debt loads.
I have a high FICO score for these mundane payments. But if you loan me a $1B ARM, it is highly likely that I will be subprime. The FICO score just wasn’t built for that kind of thing. I simply do not have the earnings or assets to support the debt load.
Fair Isaac loved all the FICO attention during the heyday of the housing boom, but they will learn to regret not stepping in and pointing out its inappropriateness for this amount of leverage. The damage to their the credibility of the score, (which you can kind of see from the posts here saying that it’s worthless) will be substantial.
I’d contend that multiples of income loaned (with increasing risk beyond 3x income) combined with the degree of negative equity might provide a better measure of the willingness to walk away.
For loans of more than 3x income, the borrower is stretched to the hilt to make the payments. In that situation, once equity goes increasingly negative it’s time to run, not walk.
SDGreg,
Precisely. Regardless of income and resources nearly all of us can be brought to that “tipping point” Wachovia couldn’t seem to find their @ss with both hands in a phone booth!
Yes, when you get people paying 4-6-10 x their annual income for a home (regardless of fico) you’re creating a recipe for disaster. Has anyone seen Stanley Johnson lately? When did those commercials start running? 2004? Earlier? And they’re gonna stand there and tell us they had no idea this was coming? Please.
Like my house?
Like my car? It’s new.
We even belong to the country club.
Somebody help me….
It was all supposed to be so fricken funny wasn’t it! Big laugh.
I remember that - it WAS funny, and to me it still is. I remember thinking it was a portent of the future. I think it was right about the time I discovered this blog.
We have been referring to that commercial an awful lot lately, so here’s the YouTube link:
http://www.youtube.com/watch?v=hn5EP9StlVA
MacAttack,
Can you recall ‘about’ what time those commercials came out? It’s just a haze to me. Along with the couple sitting in their p.j’s at the kitchen table as bankers wait to be “interviewed” while they’re laughing their asses off! Remember that one?
I’d love to put together a montage of all the old ETrade, AmeriTrade, Lending Tree commercials and call it “Self-empowerment run amok” and really just let it speak for itself.
Funny, the point of the ad seems like an afterthought to the scenario. What a classic though. I recall wondering if that’s how people were doing it. LOL
Thanks for posting the youtube link…I didn’t know what people were referring to. I don’t have cable, but the few times a year when I see commercials, they seem kind of…crazy. If I watch TV for a couple of days, than they start to seem normal. It’s the John Berger experience.
Did you see the old man one, where the couple is rolling their eyes at their (grandpa?) in the living room. I think that old man lives in my heart. We only have one remote control, and that gets confusing!
http://www.youtube.com/watch?v=angJGfCSuUI
Ameriquest’s only redeeming value was it’s hilarious TV ad series, “Don’t Judge Too Quickly.” Though in hindsight, it’s clear they should’ve been a lot more judgemental than they were.
THE BEST commercial was the line “or just walk around with pockets full of cash, IF that’s what you’re into?!
I rhink it was Countryfried??
Old model - People buy homes to live in, therefore you don’t walk away.
New model - People buy homes to make big $$$, therefore you walk away if you’re losing money. The banks helped create the change in mentality yet they’re surprised by the result.
great point
I don’t think it was just the banks. EVERYBODY talked about how much their house was going up in value and how they were able to live high on the hog on equity. Reminds me when I would tell parents everyone else got to do it, they would answer if they all jumped off a building, would you do that, too. Anyone could have gotten into a loan for just about any house they wanted but I bet there are plenty of people on this blog that can attest to resisting the temptation.
The California Gold Rush of the early 2000’s didn’t have a lot of winners…
To succeed you needed to sell your overvalued crib, move somewhere else (in or out of state) and downsize to just one house, avoiding the temptation of buying 2 houses for what you sold your house for back in the Golden State.
The losers in the neo-Gold Rush merely got loans on their claims, which turned out to be Glory Wholes, in the end.
Couple that with…
“‘I think part of the work-list for the regulators is to reexamine the extent to which we ourselves are relying on these rating agencies to gauge the risks that you guys are taking,’ he said. ‘I think there was far, far too much reliance on credit ratings all round.’” ..and it is no surprise that a FICO score doesn’t mean much to J6P. FICO is an end to a mean - it was used as a conduit to purchase that golden money machine commonly known as a housing investment. When housing is reduced to its simplest form (a box to buy and sell) and the ‘investor’ is bleeding all over the loan papers, of ocurse they run for the bandages.
The real damning assumption lies with lenders who expect J6P to roll over and play dead as their personal economic status told then to run. Fool me once…
For decades lenders knew that investor loans and low down loans were the highest risk . That’s why low down loans had to have mortgage insurance and investors had to put more money down and pay a higher rate .
Why are the Lender Talking Heads acting like these defaults are a new behavior that they are discovering in human behavior for the first time ,that they now will put into effect risk models for this?
Lets face it ,Wall Street and the lenders just trashed long term prudent lending practices and ignored risk models . In fact ,the faulty lending created a market and pushed fake prices to the sky.I would like one lender to justify their lending and explain how they expected people to pay the loan ,or explain how borrowers were going to pay the adjusted up rate .Do these risk models have income increases in their models to justify ability to pay adjusted up rates on these toxic loans?
The industry should of been barred from offering no down loans and there should not of been any acceptance of their faulty risk models .
I think when a industry has the power to bring a Nation down financially or cause a Great depression ,or create a false demand market ,than that industry has to much power if they are not regulated even more than in the past .We especially need more regulation because we live in a World now that is ruled by greed and desperation with one Ponzi scheme after another . Add to that, many people are desperate for good jobs and retirement funds and medical cost funds and you name it .
Just like with the 1929 investing on margin with stocks ,rules were enacted after the crash in order to prevent it happening again . Somehow the real estate industry managed to get around the lessons of the Great Depression and managed to turn housing into the same kind of risk that the margin buying of stock was in the late 1920’s.
I really think that the people of the United States of America should have a class action suit against Wall Street and the Lenders for falsely inflating values by fraudulent appraisals and faulty defective loan lending . Any liar loan borrower should be thrown into the lawsuit ,along with the NAR and the CAR ,and all the bad actors that contributed to a this Bad Faith Ponzi Scheme . But ,true Justice will never prevail with this absurd housing boom and all we are going to hear is how the poor industry or the poor borrowers need to be bailed
out .
Wizard,
Well exactly. How would everyone feel if we belonged to a small, closely held credit union and everybody went down to get low-int. loans to buy stocks or commodities or whatever? At some point the directors would have said, wait a minute, what’s going on here?
Hey guys, that’s not why we’re here.
But when you have specuvestors buying 8 homes in PHX claiming each as “primary” on super low homeowner (not comm.) rates we’ve not only mispriced the risk.. we just did it x 8. Small wonder huh?
“I would like one lender to justify their lending”.
The rationale of pushing financial problems forward by deregulating lending unites 3 parties, who should actually have different agendas in a balanced system. Credit is a loophole.
Deregulated credit satisfies the consumer who gets to gratify an immediate want and/or need. It satisfies the seller, who gets to sell, and even sell at a premium. It satisfies the government, which gets increased taxes from the transactions of the consumers and sellers and, as a bonus, it allows a bridge between big labour and big government (strikes and labour disputes tend to happen when people are actually short of available cash and/or food).
It isn’t surprising that this whole thing has gone on as long as it has. Which major group had the real incentive to stop, especially once it got going? (Ever seen Yes, Minister?)
It’s hard to put in place the right amount of regulation at the large, global, scale we’ve got suddenly going on. The large scale abstracts simple cause and effect, which we tried, unsuccessfully, to replace with “models”. A lot of people took advantage of this to go after what they wanted. Some of those people were our leaders, or bosses, or our neighbours. It’s like when Bear Sterns failed and the rationale wasn’t that they were too big to fail, but they were too intertwined to fail. At a micro level: how many of us on these boards have family members who flip, or who are a step from bankruptcy. A bunch of us! How many of us have jobs supported by overconsumption? Maybe some of us do, and don’t even know it!
I am beginning to think this isn’t about housing at all, actually. The housing bubble is a symptom. Just like Enron was a symptom, or climate change is a symptom. The underlying illness is a pattern of behaviour, or of thinking, which is being magnified by globalization.
So, I don’t think a lender could adequately explain this. I think the best they could do is: well, everybody else was doing it. This is just a big mess like any other mess. It’s going to look really hard, and then it will suck cleaning it up, and then when it’s over, we’ll forget about it and move on. Then some future generation will be bored to tears studying about it
ella ,I just got back late and caught your post that I enjoyed a lot
I agree with you so much that so many parties benefited by this faulty lending that it developed a life of it’s own and crazy faulty lending became the norm.
The bubble market provided a lot of jobs at the time and a lot of funds for purchases of other products such as cars and you name it .
All the corporations, the media , the advertisers ,and you name them, were pushing this bubble for a reason . Have you every seen so many people that had so much money to spend in such a reckless way by using their perceived equity in their homes.
The problems in America have been building for a long time and I agree with you that this housing bubble was a sign of the underlying problems in American that have not been addressed .
‘But somewhere when a borrower crosses the 100 percent loan to value, their propensity to just default and stop paying their mortgage rises ….”
What a MORON !!!
So, is it true the LIBOR rates are fudged by desperate banks? This isn’t too good for those ARM rates, is it?
Pricing of risk - missing in action since 2002.
Good for the borrower, bad for the lender. The rates published by the BBA may be 20 to 30 BPs below actual rates.
“From Macleans. “It seemed like a good idea at the time. But an Ontario plan to give away up to $20,000 each to thousands of first-time homebuyers has become a surprising disappointment.””
I’m from Ontario and have never heard of it. Brisson might be right about promoting it more. Since I pay taxes here, however, I’m glad it isn’t getting used and they can put that $36 million against provincial debt (bit over $100 billion.)
What is this BS about giving people money to buy a house . I don’t care if your a first-time home-buyer or a third time home buyer ,save your own money to buy a house . When I was young it took me a long time to save my first 20k to buy a house .
because when you chain a person to a house, he has become anchored to a large set of taxes, fees, & other obligations.
just think about the long, long list of payouts a homeowner has to make to live a normal, modern life. nothing fancy, just the regular litany of things like prop taxes, homeowners insurance, loaninterest & more insurance if holding a mortgage, then add all the extra fees that hitch a ride onto the water, telephone, electricity, gas, sewage, waste pickup. Add some cable or direct tv, broadband, home security monitoring systems, lawn maint company, pool upkeep, and more for lots n lots of extra taxes & fees added on to every bill. No way around it. If you receive a needed service, the city, county, school, state, & other special taxes are added on to yer basic bill. Lets not forget the salesmen who LOVE to doorknock as homeowners usually have a higher income than apt renters. And law enforcement absolutley loves people in a house as it makes em easy to find in case you might end up on the wrong side of the law. In fact, here in Sacramento the Sheriffs Office will not even take an anonmyous call unless you provide yer name, phone number & address. Want to report a drug dealer? Good luck keeping out of the system, which can be accessed to seek revenge. Which makes me laugh so hard about the #1 illegal immigrant support system excuse used for not enforcing immigration law;
“the p pp pppp poor illegals wont call the po-lice to report serious crimes if they are worried about getting arrested for a little thing like illegal residency”.
HA! gimme a break, I LIVED among the illegals for years in a declining apt complex to save money & lemme tell ya they wont call the police for ANYTHING, so this weak idea about non-enforcement to encourage crime reporting is bogus! completely bogus !!!
Back to the point, a house is perfect money generator for so many financial, govt, and other leeches. THATS what its all about; perm placement of a taxpayer to a 30-yr location he cannot easliy change, modify, or escape.
THATS also why Paulson is going apeshi*t over peoples sudden awakening that owning a house no longer worth the hassle, and getting rid of it is not the stigma it once was. His corrupt system for private enrichment is crashing around him. he knows it. we know it. and soon enough everyone will know it, and it scares the hell out of him.
lets face it; when you own a home, you are the perfect target for the tax & fee collectors.
May be, but you don’t have to bite. For example, I live in a manufactured home, on a gravel road, with basic Dish (no cable) - no broadband, no lawn maintenance, nothing but electric. Even in town, folks have options.
aqius,
Well said. I can’t get enough of it! I’ve preached this for years (mostly to deaf ears) but you somehow say it better. Maybe that’s because I call it “herpes”. (It may get better from time to time but it never and I do mean NEVER goes away). When you (as I foolishly allowed myself to be forced in to) an HOA you then multiply and amplify that effect!
That’s why I say, I seriously doubt any kind of a sizeable home is in our future? Maybe… a 3/2 ranch on a dinky lot where I will contest my tax bill on an annual basis, if anything at all. Other than that I’m thinking apt. or mobile home in Vegas/PS and a nice rental townhouse here in Oregon in case it stops raining.
Aqius,
Your last sentence says it all. Yep, that’s me with a big “Bummer of a birthmark Hal” target on my back!
“because when you chain a person to a house, he has become anchored to a large set of taxes, fees, & other obligations.”
That’s the backbone of LBJ’s Great Society!
Our government has programs to give first-time homeowners money too. They even have a program to help people on Section 8 buy homes.
That poor NAHB guy sounds a little lost with his baldfaced faith in the CBs. The HBs and banker men used to be the best of friends, but it sounds as if the banker men have moved onto to greener pastures.
“‘Most renters who could afford to switch to home ownership have already made the move on their own over the past decade,’ he says.”
This should be the criterion for ’subprime’ homeownership.
No… I think the comment was accurate. Most of the people who could have afforded a home bought one.
I’m getting to know my competition by their HBB user names.
Seriously. What fraction of homes were bought with a down payment liberated from mommie and daddy’s equity? How many ‘upper middle class’ people do you know who already have 2+ homes?
Yep. Not much competition for that ski condo in three to five years… Or maybe it will be a beach front townhouse… hmmm…
Yes. I’m a vulture.
Got Popcorn?
Neil
The Wilsons can’t come up with an additional $111.00/mo to “keep their dream” house? wow, some serious living beyond their means going on there……….
This is why it’s so amusing for me, living in Bay Area, to listen to Dave Ramsey. Most of his callers are from the flyover country, and the problems they have sound so tiny and toy-like. A typical conversation would involve a caller with a Southern accent, facing a bankrupcy on a 40K house, which immediately makes me giggle. I mean, how poor you have to be not to afford a $500 a month payment?
It’s not that I haven’t seen how the rest of America lives, it’s just the differences in prices are unbeleivable.
Just goes to show you that you can go broke in all kinds of places and in all kinds of houses.
I know what you mean. I sold a house in WV last month for $35K and the people buying it were complaining about coming up with the 10% down the bank required. It was hard to sympathize when the total sale price wouldn’t be 10% down here.
what a horrible term, ‘flyover country.’ as if there is something better on the coasts!
I agree. A colleague of mine in NYC admitted a few weeks ago, “the joke is on me.”
Having lived in places like Chicago & NYC as well as rural Tennessee and Ohio, I can say that, personally, it doesn’t matter anymore where you are. In fact, I feel bad for the people that say you have to go other places to “experience” excitement.
Cool, intelligent people live everywhere. Deal with it, L.A.
There is a Metropolitan Opera and Carnegie Hall in rural Ohio?!?
Wow, totally didn’t know that.
(I know what you mean, and I agree.)
So, my bank will probably be bankrupt soon. Further, I need a small loan (am a student). Is it good or bad to apply for a loan from an imminently bankrupt bank? Should I bother to search for a bank which will be more likely to survive?
I’m having flashbacks of loft parties in Williamsburg.
“Wassup, man! KILL WHITEY!! Hey, where can I put my [messenger] bag?”
The world needs less hipsters and more “average” people, in my opinion. Hipsters are like little boomers; they just ride freewheel bikes instead of driving Hummers or European cars.
Yes, it’s related to the bubble, I swear.
There is a Metropolitan Opera and Carnegie Hall in rural Ohio?!?
No, but the Kennedy Center in DC is a 7 hour drive away. Get a hotel room next to the Metro for two nights, and in one weekend you could take in whatever new exhibits the Smithsonian coughs up, dine at one or two fine restaurants, and see a world class show at night.
I had co-workers who worked in Northern Virginia who didn’t see the Washington Monument for months at a time. You’d get more city culture if you live in Zanesville and do the DC weekend thing once every six months. And just one month of mortgage savings would pay for the travel. [$250 total hotel, ~$120 total gas]
I walk to the Met and almost always pick up tickets from people trying to dump them a hour before the show.
Try doing that with a 7 hour drive.
Not everyone cares to spend their life driving, or mowing lawns, or spending every waking hour at Home Despot.
Uh, what? I’m not sure if you intended to say that this is how people that live 7 hours away from coastal city USA live, but that is how it came off.
I have met so very few people who actually make regular use of the cultural assets that they claim give value to their existence in NYC or SF.
Another point, the cultural opportunities in Louisville really aren’t that different than in NYC or DC. I do love the concentration of art that one finds in a place like NYC, but great art and many unique exhibitions can also be found at the Toledo art museum. In fact, one of my most rewarding experiences in an art museum was in Toledo: I saw people from all walks of life, from moms with mullets to mechanics, enjoying a fine exhibition. In New York or London, it’s usually just a bunch of tourists and students.
All said, I love major cities, I expect I’ll end up living in Chicago for a good chunk of my life. However, what I really hate is when people act like SF or wherever is somehow ‘better’ than Gainesville, OK. It’s just different.
“moms with mullets”
We cover every angle here at the HBB don’t we?
Don’t be a Hat3r!!!
Everyone in London, Paris, Rome and Milan wants to live in rural Tennessee and Ohio, dontchaknow?
London and Paris are like Michael Jackson and (I forget the other’s name) in the ‘96 summer olympics. Lots of hype and very little substance.
Centralization of financial markets has to happen somewhere. Real estate folks love the concentration of fools.
Shhhhh!!!! Stop that!
I have lived essentially the same life in every city that I have lived - I go to work, I go home, I eat some dinner, I exercise a bit, I watch some tube, I go to bed, I wake up and do the same thing all over. On the weekend I might mix it up a bit and throw in some drinks and dinner with friends or go grocery shopping or catch up on all the things that I couldn’t get done during the week. Maybe a few times a year I might get to take advantage of the specific amenities of the region, but most of the time I am just living. That said, the only real difference between the smaller less expensive cities and the larger expensive cities is that things are easier and cheaper in the smaller less expensive cities - oh, and the people are generally nicer and less affected.
Regarding the whole BS culture argument, how often do people really go to museums and art galleries? I have been once in the past year - and I live in DC!
I’d take a small-mid sized city with good jobs and affordable housing over this cesspool anyday!
I think when people pay $10 for a taco and 1/2 million for a condo, they have to justify their existence somehow: hence the, “the life in location X is just soooooo great. i would be miserable in the less-expensive and friendlier location Y.”
“I have lived essentially the same life in every city that I have lived”
This is exactly the opposite sentiment of condo marketers. Living in an old pickle factory is transformative, duh.
I’m with Ostriches: The difference between DC and a mid-sized city (e.g. Louisville), is that commutes are longer, traffic is worse, and people are ruder in DC. With modern communications, I see no advantages to living in the DC metro compared to Louisville, only disadvantages.
Also, you can visit the museums only so many times before it gets boring. Actually, it gets boring real quick.
If you’re living in D.C. and not taking advantage of the cultural offerings then you probably are better off small town USA. I personally loved my time in D.C. and “living” to me meant taking in as much as possible. Same goes for living in New Orleans, which while not as nearly as expensive as D.C., certainly comes with a set of problems and expenses (insurance is thru the roof) that you won’t have in Louisville or Zanesville or Chickasaw. But it comes with a variety of experiences and opportunities that you you won’t get in those places either, and I love those experiences and opportunites, so I make my financial and career adjustments accordingly and responsibly. Virtually everyone here agrees with the basic premise of this blog, that the housing bubble is a epic scam of greed and fraud and ignorance, but I do get peeved with those who seem to believe the solution is a one-size-fits-all response.
One of the reasons I live in Los Angeles is that it is the hub for alternative spirituality. I am big into yoga and you can see the top, world-famous yoga teachers here for the price of a regular class, on a weekly basis. I want the opportunity to go see famous kirtan singers in concert. I like that I have a new age church within a few miles that is filled with thousands of people on Sundays. If I had to live in a small town where everyone expected me to be a Bible-loving Christian I would be absolutely miserable. I could not live in the average American small town…it’d be like living in prison. I’m sure there are some progressive small towns but they are rare. It’s not just the museums we have here. It’s the actual ongoing experiences and people you meet and interact with also. I don’t just go to work and come home and watch TV. I take advantage of what LA has to offer to ME and it is absolutely worth it.
dingojoe: There is no culture in DC. OK, that’s a bit of a hyperbole, but not by much. Sure, there are the museums, but those are rather static. As for shows and plays, I can see those in many large and medium-sized cities. I did see Bob Mould play for free in the park near American U., and that was cool. Otherwise, what culture there is is scattered throughout the metro area and a pain in the butt to get to.
Really, I had much more readily accessible culture when I lived in the KC/Lawrence area.
Well I can appreciate that too, but it doesn’t make Dave’s principles any less sound. They’d need a Venture Capital version of Dave for the BA?
Dave, I just re-fi’d my house and took 1.5 mil. out to provide bridge financing for a start-up and it barely covered the legal and filing fees…? Huh? Your house was worth, what!?
I’m pretty sure Dave’s not ready for that, but that’s not his audience. Besides BA people don’t talk about their problems, not in public.
Besides BA people don’t talk about their problems, not in public.
I’ve heard several people at work whining out loud about the plummeting values of their “investment” properties in Stockton or Merced. I find that behavior tacky, but it also feeds my Schadenfreude so I’m cool with it.
Yeah, you and Barack get such a laugh from the “little people” with their petty five-figure problems and bitter attitudes.
Hey, maybe that’s not what you or he meant, but I guarantee that that’s what people heard.
Something about the “Bay Area”, either living there or flying in to give a liberal fundraiser speech while denegrating the very voters you need, makes people such self-righteous a$$holes, doesn’t it?
Although I do agree with you about how sad it is for people to get hung up on $500, I can tell you that there’s more “soul” in one trailer park in Mississippi than there is in the whole San Fran penninsula, but you already know this, since you’ve seen how the rest of America lives.
“I can tell you that there’s more “soul” in one trailer park in Mississippi than there is in the whole San Fran penninsula” Also a lot more inbreeding…
I think the point is something like: in a Mississippi trailer park, people are living their culture, their past, and their future.
In San Francisco, people are living other people’s cultures, pasts, and future.
There would be just as much inbreeding in SF as MI, cept’ just about the only people doing the deed nowadays in SF are gay.
I live in flyover country (Mobile, Al) and I can tell you its pretty much the same here as anywhere else in the US. I’ve spent a LOT of time in other cities (and even lived in Chicago for 3 years). The big difference is scale. You can run short $500 (here) or $5000 (there) but the end results is still the same.
God I love Mobile. It isn’t flyover country to me, it’s a destination! I went to Mobile for a college bowl game and was absolutely blown away by the greatness of the people and the culture in the city.
Nice mischaracterization of BO’s subject AZ but lets post the truth with the actual quote.
“But the truth is, is that, our challenge is to get people persuaded that we can make progress when there’s not evidence of that in their daily lives. You go into some of these small towns in Pennsylvania, and like a lot of small towns in the Midwest, the jobs have been gone now for 25 years and nothing’s replaced them. And they fell through the Clinton administration, and the Bush administration, and each successive administration has said that somehow these communities are gonna regenerate and they have not. And it’s not surprising then they get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations.”
Sorry but people heard the truth from Obama in a very succinct way and it was like a breath of fresh air to millions. People have been trained to think of their govt. in an indignant, ignorant and skeptical way as a means to advance the cause of crony capitalism, even at their own economic peril. The smoke and mirrors of the supply side liars plain won’t work anymore and you can deny BO’s truthful words until the muslim boogeyman gets you but it won’t change the fact that millions of people of average intelligence and means have been cast aside like garbage and told that if they just work a little harder, they’ll be rich too. And don’t forget the brainless obligatory flagpin that falsely identifies your patriotism.
I doubt that most people heard what Obama said. What they heard was the reaction from newscasters, who are desperate for anything interesting to say, and from his opponents, who are desperate to bury him. I grew up in upstate New York, and people there are very aware of how they’ve been left behind in the new economic order. First the manufacturing was outsourced–the steel mills, the car body plants, etc. Then, the internet buzzards like Adelphia scorched the landscape. And the people who live there, whether highly educated or not, are clearly aware that they’ve been promised plenty in the new world order, and zip has arrived.
So using the word “bitter” was toxic? I promise you, they’re not tap dancing over their economic prospects.
az_owner,
you are bitter, and have an inferiority complex. You are bitter, because decades and decades of voting for your pseudo-religious rightwing plutocrats gave you nothing in return. You feel inferior because deep inside you know that the coasts are better - they have much more educated population, much more culture, produce a much bigger share of the national product, and support the poor states like yours through federal re-distrubutions.
To claim a trailer park has more culture is like claiming that a stinky outhouse has a better smell.
Wow, I didn’t mean this to be a some sort of cultural commentary. I’m sure there are good people everywhere, it’s the prices that are funny. Here, you can’t get a dog house with land for $40K.
“This credit crunch actually appears to be worsening despite the concerted efforts of central banks here and abroad”
Because in the end the credit crunch is but a symptom of the rampant overbuilding that occurred.
(Yes, I am in the building industry, so this info is first hand)
There is so much out there that it is not even funny. Commercial builders built as if only homeowners were going to live in speculative houses. So they overshot the commercial building requirements by just as much.
And…
Novice speculators occurred not only in housing, but in commercial spaces as well.
I’ve been following the commercial real estate on Craigslist, and noticing that prime commercial space is available all over town, indicating a significant vacancy rate. Also, the cost of renting seems to be slowly dropping. It won’t be long before we see the commercial real estate going on the market as the owners default…especially if they can’t rent out spaces as the economy tanks.
I’ve worked out of my home for as long as I’ve been in business. Just can’t see any more reason to add the overhead that renting another space would entail.
I don’t think that the commercial RE-ers take the growing popularity of working from home into account. But our numbers are growing all the time.
For the first quarter Mother Merrill posted a loss of $2.14 billion…sprung from a $6 billion Q1 writedown the Wall Street firm blamed on its subprime mortgage exposure.”
I don’t know why we don’t talk about the big investment banks more on the HBB. They will be bleeding their toxic level 3 assets over the next two years.
“Why should I care?” you may ask, since you are mainly interested in buying a home…well you should because how well these banks do will determine the cost of your future mortgage.
On the downside: A total financial meltdown would likely make traditional mortgage borrowing very difficult.
On the upside: A total financial meltdown would likely make irresponsible mortgage borrowing very difficult.
Unfortunately, it seems that a Wall Street meltdown would put everyone’s investments at risk. What say you guys? I’m really thinking cash (as in FDIC insured treasuries and CDs) is the best and safest strategy until these markets come clean about the extent of their toxic waste…short term of course.
I don’t feel safe investing, until I know what I’m buying.
The higher yield investments right now carry more risk than the yield . Mortgage backed investments were always a low risk investment in the past ,but now its a horrible investment in this declining market (unless the borrowers put 20 to 30% down on the loan ).
I guess Wall Street/Lenders?rating agencies have to put in their risk models in the computers that borrowers walk now if real estate doesn’t go up .
“I don’t feel safe investing until I know what I’m buying.”
Ditto.
“‘I don’t know where the tipping point is,’ said Don Truslow, chief risk officer at Wachovia. ‘But somewhere when a borrower crosses the 100 percent loan to value, their propensity to just default and stop paying their mortgage rises dramatically and really accelerates up.’”
How come this behavior didn’t happen in the past when 20% down was the norm and 10% down was the absolute minimum?…..a self-answering question……
believe it or not they had 0 down & neg am in the regan days
just no one was wacky enough to do it
10% down would eliminate almost all of the current bs
Oh, the eighties had some wackiness, right? Assymetrical hairdos, shoulder pads, S & L crisis, US becomes the world’s largest debtor nation…whoops.
In a related matter, MSNBC says the Delta-Northwest merger marks “the end of cheap fares.”
http://www.msnbc.msn.com/id/24184456/
“U.S. airfares have plunged more than 50 percent in real terms since 1978 — giving rise to $49 flights and turning a form of travel that once was the province of the wealthy into the great proletariat pastime…But when the CEOs of Delta Air Lines and Northwest Airlines sealed their merger accord with a handshake on April 15, the moment probably marked the end of the era of cheap travel. ”
That era could exist only because of cheap oil, investors willing to lose money over and over, and labor that went from overpaid and overstaffed to probably underpaid and understaffed. People and airplanes need to be replaced, and investors are unwilling to lose money on them.
Relevance? I was shocked (believe it or not) to find out a couple of years ago that non-wealthy people actually lived in one metropolitan area and owned second or investment homes an airplane ride away. Even an ocean away it appears. That makes no sense to me at all.
IMHO, peak oil will make this credit catastrophe look benign.
Cinch
Starting next month, the airlines will have to compensate passengers up to $800, if they inconvenience them in the same fashion, as what’s happened the past week.
You almost get the idea that the government wants to shut them all down, and is putting the screws to em’, as of late.
If you only knew……..(rant on).
The commercial aviation business in the US is in the process of having a Chernobyl-like meltdown. You heard it here first.
-Article in the WSJ a few months back; Northwest Airlines was having trouble recalling baggage handlers and ramp agent, etc. Why?
Target and Best Buy paid better.
-Maintenance is being outsourced to Central America and the Far East….where there is little or no FAA oversight, no drug testing, no alcohol screening, no monitoring of quality control. Meanwhile, the FAA is beating up on AA, Southwest, etc., because they are attempting to keep an “in-house” maintenance program under FAA regs going.
-At the same time, there is a worldwide shortage of experienced pilots and maintenance technicians. Many in the US are joining the new “Gold Rush” in aviation jobs overseas. (I know for a FACT that I could double my current salary by going to Hong Kong, Taiwan, or Singapore……I’d go in a heartbeat, except for my family issues here)
-No “new blood” coming into the aviation maintenance end of the business (a local state college has approx 150 guys in the pilot training program……and 15 in the AMT/mechanic program). The pilot job still has a little bit of prestige attached to it. NOBODY wants to be an aircraft mechanic anymore…….for the same amount of training, you can make twice the money working in a car dealership, and you don’t have to worry about getting your certificate pulled by the FAA’ “guilty until you prove yourself innocent” enforcement policies, the lifetime liability tail, the screwy hours (nights and weekends mandatory), and the 60-70-80 hour weeks of “Mandatory Overtime” because there are not enough trained bodies to fill all the open positions.
Something like 90% of the current FAA Airframe and Powerplant mechanics would NOT recommend the job to a son or daughter. (Why do I still do it? Because I’m good
at it, and changing careers at 50 is not the easiest thing to do)
-Something that no one else has mentioned…….the FAA is having the same problems with finding experienced help. They are sending out “inspectors” who, in many cases, don’t have a clue as to what they are looking at (some are former administrative staffers who have never worked on an airplane before). In fact, they are doing OJT, and the airlines and general aviation are training them.
None of this will be a problem, until there is a crisis/catastrophe/meltdown of the system. Then it will cost three times as much to fix it, as it would have for Government/Management/Labor to have done the right thing to begin with.
To me, it should have been apparant to everyone that a system that makes it cheaper to FLY a trip than it would be to drive it, would be unsustainable.
(Rant off)
When I lived in Virginia in 2005 , there were two guys from New York who bought close by, because housing seemed cheaper to them. They commuted to New York daily by way of National Airport in DC, and said the commute was shorter than if they lived in New York. I don’t know, but it made me raise my eyebrows.
“Suckititude”?!? Is it so bad they have to coin new words?
I just received my (free) monthly copy of Trader Monthly in the mail. I’d never pay for that rag. It contained my very own guide to fine cigars and a flier from a Palm Beach realwhore trying to hawk 2700 acres of land in N. Florida for **only** 15K (taxes) in carrying costs a year. I just LOL at this stuff. I guess there are no women traders in Trader Monthly’s world, unless they smoke cigars too
Is that the one with the “100 Most Paid Traders”?
BWAHAHAHHAHAHHHHHHHHH!!!
Here’s the “sociological” read on that rag. At the very beginning, they have all the absurdly expensive stuff. Towards the end, you have relatively cheap stuff (fancy liquors, etc.)
Total anchoring.
The stuff at the end SEEMS cheap compared to what’s come before but it’s just crap. After all, if I wanted to I could’ve afforded a $30 bottle even when I was a student back in the day. Who gives a crap?
BWAHAHAHHAHAHHHHHHHHH!!!
We’ve been using “suckitude” for many years now. Usually in reference to one’s golf game. First time I’ve seen it in applied to a companies financial performance, but it works.
Banks are surprised at Jingle Mail? Heck, my 6 yr old could have figured that one out if I explained it to her in a simple way. Just like the idiots building the houses next to the landfill. She figured out that wasn’t a good place to live when asking, “Do you want to live by the garbage dump? No, it stinks. She was 4 then and had better judgment than most of these retards.
I can top that one. Here in Tucson, there’s a big development going up on the southeast side of town. One of the lead developers is…
…Habitat for Humanity.
To the north of this development, we have the Davis Monthan Air Force Base. One of the busiest airfields in the Southwest. Directly south is Interstate 10, which offers 24/7 traffic noise. To the south of the highway is the local landfill.
Talk about location, location, location.
While I was volunteering on another Habitat worksite, I caught wind of the plans for this development. And, for some reason, I just didn’t have a good feeling about the place.
Unintended pun? “I caught wind of…”
They are going to get the CIT kicked out of them…
“The lender stopped originating subprime home loans last year. CIT may have more than $4 billion of holdings tied to subprime mortgages, according to a March 17 report by Standard & Poor’s.”
Not every pun you make is funny, but keep trying.
Many are good.
M.G.I.C. = Money Gone, Implosion Coming
“The nation’s largest mortgage insurer, MGIC Investment Corp., paid out more claims with more homeowners defaulting on mortgages. The mortgage insurer incurred $691.6 million in claims during the quarter. By comparison, MGIC’s payouts last year totaled $870 million, which was a 42 percent increase over 2006.”
“At the end of March, MGIC had $221.4 billion insurance in force, compared with $178.3 billion at the same time last year.”
“Lee also purchased 17 properties, most of them in Leeds, in late 2005. He said he expected to earn a steady income from renting to students. After the transactions were completed, Lee said he realized he had overpaid for the properties. He said 15 hadn’t been refurbished as promised, the tenants occupying the homes had left and rental-income projections were wildly optimistic.”
Stupidity combined with greed can be very expensive.
“‘The valuations were 15 years ahead of their time,’ Lee said. ‘The biggest genius in the world couldn’t have got those loans to work.’”
The “biggest genius in the world” would never have overpaid for 17 properties.
“the tenants occupying the homes had left and rental-income projections were wildly optimistic”
Multiply that eighty bagillion times across univ towns in the US. Couldn’t happen to nicer people.
Agreed. I live near the University of Arizona, and the delusion level of some of these investor/landlords is not to be believed. Renting to students is like renting to Section 8 tenants. (Translation: You’re dealing with world-class house-wreckers.) Yet these I/Ls insist that they’ll get rich.
The Quad City Times. “Caught off-guard by their adjustable rate mortgage, an already-strapped Rock Island couple found themselves struggling to pay bills and make their house payment. Peggy and Dennis Wilson — she a data-entry clerk and he a warehouse supervisor — turned to Rock Island County Economic Growth Corp. for financial counseling after their house payment jumped from $633 to $744.”
If $111 increase in your monthly bills sends you in a panic, you really need to take a good look at your life.
Oh I don’t know? Even though I live in OR I’m a native to the Land of Lincoln and I can honestly say most midwesterners can’t make that up by skipping Starbucks 2 days a week. Hell, they’re not going there now!
Tanning sessions? Nope.
Manicure? Nope.
There just isn’t a lot of “fat” for them to cut out. In ways, in ways.. I wouldn’t mind it so much. You should see what they call… “traffic”.
The NAHB. “The mortgage credit crunch has spilled over into land acquisition, land development and home construction (AD&C) lending, increasing the challenges faced by builders in the current housing downturn.”
ADC Credit Crunch, per NAHB: Refusal of banks to finance property construction and development when the bankers figure out that the requested loans are unlikely to be repaid.
Bring back debtors prisons. Bring back the stocks. Bring back the soup kitchens. We’re in for a wild ride boys.
“No Soup For You!”
Soup Nazi
aladinsane, stop acting like you’re in the gazpacho.
“Banks have become so wary about lending that credit costs are being pushed up despite sharp cuts in official interest rates, and that is adding to the risks of an economic downturn, the vice chairman of the Federal Reserve said on Thursday.”
I received some interesting mail yesterday. I think it was my first serving of credit crunch.
I have a credit line, that my bank offered me a couple of years ago. I have never borrowed more than about 2% of the available line, and I’ve never borrowed from it without repaying in full within the week. I also have a credit card with this bank, which I use a lot, but pay in full every month.
Every month or so they send me letters saying: use your credit line and your credit card! Come on, take a vacation (accompanied by pictures of beaches or ski slopes); buy an expensive consumer product (accompanied by pictures of shopping bags, TVs, etc.).
Yesterday, I received a letter which says that although they are happy to provide me with a credit line (and they congratulate me for having one), they would like me to careful about my credit usage. There is a little checklist on the form, asking me to consider any poor credit habits I might have. They include a little booklet which is full of tables and graphs showing the danger of letting credit pile up and **how to accurately calculate what a person can realistically pay back based on take home pay (in thousands per month)**. The estimates were not optimistic!
This was clearly a mass mailout (I don’t owe them anything), and they’re not taking the line away…but the amount of money and attention that went into that package told me that this is a real concern for them.
Just out of spite, please charge every expense this month on that CC.
Long ago and far away, somebody got married to their one and only dear spouse, lived in their one and only dear house, worked their job into blissful retirement, and everyone lived happily ever after.
Now, the times, they are a changing.
Get married or not, get divorced, remarry, man and man, woman and woman, man and woman, all the same; own the house, disown the house, play, stay, walk away; got a job, had a job, quit the job, where’s the jobs?
Retire me at the market, fill or kill, all or none,
fast market, nothing done.
A penny saved is about it.
Would you like fries with that?
Wasn’t it Keynes who said,
“In the end we are all dead.”?
Tyler Durden from FIGHT CLUB: “On a long enough timeline the survival rate for everyone drops to zero….”
The quote is actually “In the long run we’re all dead.” He was responding (supposedly) to a question about long/short term consequences of his monetary theories…He’s basically saying, let the next generation figure out the mess we leave them…Sound Familiar?
believe it or not they had 0 down & neg am in the regan days
just no one was wacky enough to do it
10% down would eliminate almost all of the current bs
Only back then, these types of loans were for the sophisticated investors (usually wealthy) using these types for cash flow purposes. But they had the means to pay in full if needed. They weren’t for anyone who could fog a mirror or even the dead (remember our homeless dead FL former dude that owned 5 houses).
“Remember our homeless dead FL former dude that owned 5 houses”
I think of him every single day.
“HedgeFund.net, “Wall Street expected jack squat from Merrill Lynch. But that didn’t stop Merrill from reaching a new level of money-losing suckitude.”
Well, there ya go. Real literate commentary from Hedgefund.net. That says it all for the smartest guys in the room.
“Lee estimates his properties are worth about 3 million pounds less than he paid for them. The banks will probably ask Lee to repay the money when the homes, now in their possession, are sold. He doesn’t have the money, he said.”
____________________________________________________________
The countries may be different, but the housing bubble drama doesn’t vary much from place to place…
“The countries may be different, but the housing bubble drama doesn’t vary much from place to place…”
and keeps popping up in unexpected places. It’s like Waldo.
Regarding FICO score and credit history, lenders are hereby warned and informed that: Past performance is no guarantee of future results.
joey,
You’ve no idea what you’ve just said. The former CFO @ GMAC said the exact same thing. What you’re looking at (many times) when you see someone with an enviable fico is simply a person that hasn’t had their turn in the barrel yet! What he looked for was what he called “emerging credit”. People that had been through a divorce, down-sizing or major illness and yes, while they’ve gotten behind and had some problems, they’re being ADULT about it. He said those people are a MUCH better credit risk than Mr. State Job etc. In ways he said they are mis-pricing risk by giving low cost loans to people that really haven’t proven how they’ll conduct themselves when the going gets tough!
With all the jingle mail, across the FICO Spectrum, I guess they’re finding out just how meaningless their little system is.
Talk about payback.
Joey, I love that line. From now on it truly is every man, woman, and child, and bankster for him/herself.
It is about time that the (m)asses started giving the fine line ability to change the terms at a moments notice to the shysters called banks.
For too long these gutless gazillionaires have teaken advantage of too many people, good and bad people. Well, time to take back the advantage and tell the bankers, “Ya’ know what, screw you and the golden parachute you dropped in on!”
Let’s use computer models to evaluate consumer reactions instead of just basic common sense.
Well, my model tells me Jane and Jim will keep paying a $8000 mortgage on a $900K balance, even though home is now worth $400K. They won’t want the stigma of walking.
Common sense tells me Jane and Jim are walking when they realize they have been bent over the coals, stressed about that $8000 payment on the $6000 income (made up by cash advances from ScrewU Payday loans) and they finally realize that is the only option, credit score be damned because everyone else is now walking, so who cares.
One more thing for Jane and Jim. They are the last ones in the new neighbors of vagrants, homeless, squatters, etc. They decide to go rent a small apartment in da’ hood, deciding it is safer there.
really doesn’t a high fico mean you’re a little smarter with money than average person? so why wouldn’t you therefore be MORE likely to walk away from an overpriced depreciating asset?
luckily i am done trying to make sense of lots of stuff.
This current credit-based economic system is finished, over, done, just nobody realizes it as yet. I was just listening to some local news and Hillsborough County, Florida, has some ungodly millions of unpaid property taxes. And I’m sure we’re far from the only ones. The gas prices, the food prices, you name it. Wall Street’s toast, the Fed is toast. At this point, it’s all camoflagued holes and it’s all done with mirrors. There will be a new system, this one is so unworkable, that all the king’s horses and all the king’s men, couldn’t put Humpty together again. So, we’re got to be part of the solution. WE on this blog know what we’re doing for the most part, so it is up to us to work on the new system. If not us, then who?
Palmetto, as usual, couldn’t agree more. In fact, if J6P ever woke up and decided to walk from all his obligations, the world economy would die as it should.
This system is so broke, corrupt, FUBR, worthless, smoke and mirrors, etc., that it should die.
Heck, my good ol’ home state of NJ is virtually broke and so is my current state of CA. Taxes on homeowners are gonna get a lot more onerous (sp?). Better to be a renter right now.
“This current credit-based economic system is finished, over, done, just nobody realizes it as yet.”
Yes, you’re right. A lot of problems have been masked by credit, and when this comes to an end, it is going to be unpleasant. There will be some unintended consequences. Opportunities, too, of course!
Liberal politicians are going to have to rethink taxation as a cure-all balm, because the taxable base can’t bear the cost of everything. Conservative ones, who are quite keen on credit as a stop-gap in place of government handouts, (ie student loans instead of grants) are going to have to find a new solution, too.
Being cynical and apolitical has been popular for awhile, but there has got to be an increased appetite for optimism and political debate. This is going to be tough on poor old Gen X!
HIEROGLYPHICS:
masquerding as yield curves.
1. Australia- its really a capital “W”
2. Germany, 1 & 2’s are inverted; 4 &5’s are inverted.
3. UK the 10’s and 15’s are inverted.
——-
random thoughts:
Hyperinflationary: Australia trying to defend the value of the commodities is losing the battle, they cant print that fast.
German economic slowdown is accelerating.
The pound is about to roll over as the UK version of the housing bust is getting underway.
enjoy the show people, global economies are shatting on circular blades moving forced air.
You are funny tonight Voz! I’m going to shoot pool - last time for a while, alas.
I dont normally look at those, but after the scuttlebutt hit the wires about the manipulations in LIBOR…I thought it was worth a peeky-poo.
I have a sneaking suspicion that when the Euro/Yen carry unwinds….people will be looking for rope to hang themselves with.
The nation’s largest mortgage insurer, MGIC Investment Corp., paid out more claims with more homeowners defaulting on mortgages.
Medical insurers facing a payout will take the time to scrutinize the customer’s application and health history, and will rescind coverage retroactively if any inaccurate information was provided. Can mortgage insurers do the same thing by checking the mortgage application for accuracy, and if so, isn’t it their obligation as publicly traded corporations to do so?
Serious shit is going down. But I wonder if those of us waiting to buy are going to have a happy ending. The train of thought seems to be…wait until the implosion has taken down prices, buy, and then have the home of your dreams for a reasonable price. Of course some are not looking to buy at all, and others are looking to make a profit out of it, but what if all of us are wrong about how this plays out?
What if interest rates shoot up and make it impossible for most of us to buy? What if rents go skyward, hammering us before we can buy? What if inflation gets out of control and people start piling into real estate to convert their dollars into something before they become worthless? What if something else hits us that we aren’t expecting? There are a lot of possible outcomes, and happy ending doesn’t have to be what happens for most of us.
I’d like to hear opinions about what those other outcomes could be, and how we might know how to spot it and deal with it.
Wachovia went so far as to change its models on how quickly loans will go bad in the face of what it called ‘unprecedented’ changes in consumer behavior.”
Have any of these banksters ever considered replacing their deeply flawed black-box models with knowledgable human beings?