Bets That, In Hindsight, Seem Reckless
Some housing bubble news from Wall Street and Washington. MarketWatch, “Bank of America Corp.’s first-quarter profit fell 77% as credit-loss provisions jumped $4.78 billion, driven by weakness in home-equity loans as well as credit extended to small businesses and home builders, the company said Monday. In addition, the bank said it had increased its loan-loss provisions to $14.89 billion as of March 31, compared with $8.73 billion a year earlier — a function of tightening credit markets and a sluggish housing market.”
“‘Credit quality deteriorated in several areas, most notably in regions that have experienced the most significant home price declines, which includes the former high-flying areas such as California, Arizona and Florida,’ said analyst Walter O’Haire.”
From Bloomberg. “National City Corp., Ohio’s biggest bank and subprime lender, said today in a statement the net loss for the first quarter was $171 million. National City posted three consecutive quarterly losses as homebuyers struggle to repay loans.”
“National City lost about 83 percent of its market value in the past year. The lender will raise $6.37 billion selling convertible securities. ‘Shareholders continue to get penalized,’ said analyst Gerard Cassidy. ‘It’s another major company going to the capital markets to enable them to survive in this incredibly deflationary environment.’”
From Reuters. “Swiss bank UBS AG released on Monday its ‘Shareholder Report on UBS Writedowns’, a document that might be better named ‘How Not to Run a Bank.’ The report is part of a forensic exercise ordered by Swiss banking regulator EBK in the wake of UBS’ $37 billion in writedowns on the subprime crisis — the biggest by any bank.”
“Analysts said some of the most disturbing passages relate to UBS’ apparent belief then that it was immune to the same problems that were facing the broader market.”
“‘The various parties involved with the portfolio were aware of the content of the portfolio and the deterioration in the subprime markets generally. However, those persons seem to have believed that there would not be an impact on the highly rated ABS in the portfolio,’ the report said.”
“The report also offers a clear warning sign to regulators wondering whether their attempts to forestall a systemic collapse through massive liquidity injections would pose a moral hazard, or entice others into more risk-taking.”
“UBS admits as much, saying specifically that its traders abandoned caution, knowing that they could always exchange their assets against government bonds as collateral at a central bank.”
“‘Further comfort was taken from the continued acceptance of the respective assets as eligible collateral with the relevant Central Banks,’ UBS says in the report.”
The Observer. “British expats desperate to return home are having problems selling their Spanish homes due to plummeting house prices, the strong euro and potential buyers being put off by press reports of illegal building practices.”
“‘We’re amazed at how difficult it’s been to sell,’ says Maureen Renno of her four-bed apartment at Calahonda, near Marbella on the Costa del Sol. ‘We thought it would go really quickly, but it’s been on the market for over two years.’”
“Maureen and her husband, both retirees, sold their home in Horsham, West Sussex and moved to Spain four years ago, buying their property outright for €325,000 (£262,000). Maureen, however, found it hard to settle in Spain and began pining for home and her family. After two years, the couple decided to put their flat on the market and move back to the UK.”
“They were shocked to discover that, instead of appreciating in value, their apartment was worth, at best, only what they had paid for it two years earlier. The glut of new-builds in their area was stifling the sales of older properties, as investors were seeking to buy off-plan.”
“After several months without any interest, the Rennos dropped their price to €299,000 and moved back home. Now living in rented accommodation costing £900 a month, the couple are running out of savings. ‘We need the money from the Spanish property to be able to buy in the UK,’ explains Maureen. ‘Without it we’re stuck.’”
“Maxine Crooknorth, from East Sussex, decided to move to the Costa del Sol with her six-year-old son in 2005 in search of a fresh start. She bought her two-bedroom, golf course apartment for €247,000, paying half of the purchase price upfront. She believed she would be able to comfortably afford the remaining mortgage and that the property would be a great investment.”
“‘It seemed like a good idea to buy then,’ she says. ‘Everyone was saying how good Spain was, how cheap the lifestyle was and that property prices would go up. In hindsight, I bought at totally the wrong time.’”
“Within a year of moving into her new home, Crooknorth discovered that, as a single mother, she was not able to find work as easily as she’d thought. The cost of living was also higher than expected, and within months she was in financial difficulty. She struggled on until her only option was to sell her home.”
“Nine months ago she put the apartment on the market for €265,000 based on the valuation she was given, but has since had to drop the price to €220,000.”
“‘I’m finding it quite a struggle,’ she says. ‘But I can’t really drop the price any more because all my equity is tied up in it and it’s a lot of money to lose. I can’t rent it because the payments wouldn’t cover the mortgage, but if I don’t sell soon I’ll be facing repossession.’”
“‘There is a lot of property for sale right now,’ she says. ‘Lots of people are desperate and there are some real bargains.’”
The Washington Post. “If you thought buying a new home was expensive, wait until you see how much it costs you to back out of the deal. With appraised values coming in below the contract price, buyers have to come up with more cash to follow through on such a deal. Sometimes walking away from a purchase is the least painful, most financially prudent option.”
“As you might imagine, builders don’t relinquish that money gladly. Builders typically ask for 10 percent of the contract price as a deposit, said Harvey S. Jacobs, a Rockville real estate lawyer. ‘If you can get away with paying less, great,’ he said. ‘But they ask for 10 percent.’”
“In addition to the cash deposit, builders frequently ask buyers to sign a promissory note for an equal amount of money, Jacobs said. If buyers are willing to forfeit $50,000 to walk away from a $500,000 home sale, maybe being on the hook for $100,000 would keep them in the deal. ‘I’m definitely seeing more letters saying, ‘We’re going to enforce your promissory note if you don’t close,’ Jacobs said.’”
“What’s more worrisome, Jacobs said, is that many people don’t even realize they have signed such a note, just one page among the many included in a sales contract.”
The Arizona Republic. “Instead of mailing in their monthly mortgage payment, a growing number of homeowners are sending lenders their keys. The growing trend, called ‘jingle mail,’ is pushing up foreclosures and alarming market watchers, particularly in metropolitan Phoenix, where home prices have dropped 18 percent in the past year.”
“Foreclosures across metropolitan Phoenix climbed to a record 2,365 in March, according to Information Market. That is more than quadruple the number from a year ago.”
“Joan Shaffer is turning in the keys of the north Phoenix Tatum Ranch home she bought with her daughter in late 2005. They put nothing down on the home, took out a loan that let them pay less than they owed each month and now their loan is $200,000 more than the house is worth.”
“‘We paid $585,000. It was the peak of the market, but no one told us,’ said Shaffer, a real-estate agent from Colorado. ‘We would probably have to spend the next 20 years trying to get right on the mortgage. That’s crazy.’”
“‘Even if someone put 5 to 10 percent down but bought in the Valley during ‘05 or ‘06, they are likely upside down now,’ said Brett Barry of the north Phoenix office of Realty Executives. ‘I don’t advise people to walk away, but how do you convince someone to keep paying when they owe so much more than their home is worth? They can’t sell, and their lender isn’t going to forgive $100,000 in principal. It’s not good.’”
“Investors started the walk-away trend, but it has spread to the typical homeowner. Housing analyst RL Brown said he is hearing about young families who bought during the peak and are now walking away from houses as the interest rates on their loans reset and payments increase.”
“‘Instead of calling it a foreclosure, these couples are saying, ‘We’re giving it back to the bank,’ and then moving a couple of blocks away and renting a home for half their mortgage payment,’ he said. ‘These people are finding it easier to walk away.’”
The Star Tribune from Minnesota. “In the rush to find blame for the nation’s current housing crisis, the easiest targets have been the lenders and mortgage brokers who peddled predatory loans. But across the country, from the desert suburbs of Las Vegas to the treeless subdivisions of Wright County, many homeowners face a predicament of their own making.”
“Now, with home prices falling and mortgage payments rising, panic has set in. Investors are dumping houses on the market before prices collapse further, or simply turning the keys back to the lender. That, in turn, is dragging down values for even longtime homeowners, wiping out the equity they’d built up over the years.”
“Officials estimate that up to half of all houses that have gone into foreclosure during the past year are owned by investors. ‘You had people buying houses here that they have never even seen,’ said Dean Zachman, a sales agent in St. Michael. ‘They took bets that, in hindsight, seem reckless.’”
“Bruce McAlpin, a real estate agent in Monticello, said he was asked several months ago by a lender to evaluate a house in the early stages of foreclosure, in a new housing development called Norin Landing in Otsego. He estimates the house is worth $500,000, though an investor bought it in 2006 for $1.375 million and never lived in it.”
“‘I’m still looking for the gold chandelier, but it’s not there,’ he said.”
“Many of these investors are hardly the struggling home buyers portrayed as victims of the nation’s foreclosure crisis. ‘Once regular people stopped buying houses, builders had to create their own market,’ McAlpin said. ‘They preyed on people who weren’t savvy real estate investors.’”
“Norm Imholte, a truck driver from Freeport, said a builder paid him $50,000 for agreeing to buy a $425,000 house in St. Michael. The builder told him the house would be sold within 30 days and Imholte wouldn’t have to worry about making a payment.”
“Imholte bought a new truck with the cash, but the house never sold and has since slipped into foreclosure. He recently got a call from a state Department of Commerce official investigating mortgage fraud. ‘I never had any business owning a $425,000 house in Wright County,’ he said.”
“Other investors are clinging to their houses in the hope that the Wright County real estate market will bounce back to its pre-2007 peak. ‘I can’t sell these now,’ said Michael Morland, who bought two houses in separate subdivisions in Otsego. ‘But if I can’t get rid of these for a profit in five years, then I’m in trouble.’”
“For Bradley and Sarah Collin, buying real estate in Wright County seemed like a ticket to a better life. The couple and their three children, were living in a crowded trailer park in Blaine, when Bradley saw a newspaper advertisement touting real estate as the next quick way to make money.”
“With no money down, they could buy properties in a fast-growing new subdivision in Otsego known as Otsego Preserve. They would get $5,000 in upfront cash for each house they purchased.”
“The Collins were also told that home values in Wright County were appreciating at 8 percent a year, much faster than the national average. At that rate, the Collins could make $24,000 a year for every $300,0000 house they bought in the county. They were told that rental income would cover their mortgage payments until the houses were sold.”
“The couple purchased four houses — each for about $300,000 — hoping to quadruple their profits. The Collins received a $5,000 check after each closing. The cash payments were not disclosed on the mortgage statements sent to the bank, which Collin says he has since learned is illegal.”
“But the houses were rented for only eight months, and the income was never enough to cover the mortgages, Collin said. The couple, out of the trailer park and in an Andover rental, stopped making payments on the houses a year ago, and now owe more than $120,000 in back payments to the banks.”
“Creditors hound the Collins at all hours of the day. In a single day recently, the Collins received 175 telephone calls from banks and collection agencies.”
“‘They ask you, ‘Well, do you have any family members that you can borrow from? Do you have assets like cars you can sell? What kind of TV do you have?’ he said. ‘It’s not like I have a Lamborghini parked in the driveway that I can just sell and make everything go away.’”
“On a recent weekday evening, Collin visited his foreclosed houses, which are now listed for $160,000 to $170,000. The house had recently been vacated by a family that had ‘trashed the place,’ Collin said. ‘There was dog piss. There was rotten food. The smell was unbearable.’”
“Collin says it will take years for him to restore his credit record to the point where he can buy a house. And the guilt of not paying his bills could linger longer still.”
“‘All these mortgage companies are going down because of people like me who don’t pay their mortgages,’ he said. ‘I’m partly responsible for that.’”
“…found it hard to settle in Spain and began pining for home and her family.”
Yeah, right. It certainly couldn’t have been pining for those guaranteed re-sale profits that were going to make a return to the homeland profitable and foolproof.
Wait . . . we have a guy in a trailer who could “buy” $1.2M in houses?
This beats the strawberry picker!
“‘All these mortgage companies are going down because of people like me who don’t pay their mortgages,’ he said. ‘I’m partly responsible for that.’”
PARTLY????
Minnesota: Land of 10,000 Subprime Mortgage Brokers
Don’t forget them.
And: “‘I never had any business owning a $425,000 house in Wright County,’ he said.”
But he took a $50,000 cash payment from the builder to buy the house. I’m sure he thought he had all the business in the world doing that.
Where are the ambitious prosecutors who could be making cases just by reading their local paper? Plenty of monkey business to go around.
What coast is Wright County on? I think all of the news from my home state blows the heck out of the argument that the bubble was only on the coasts. The REIC loses another battle. Where’s Eva Braun?
I tell you, it’s awful there, especially downtown Mnpls, it’s just one condo project after another going down. N Mnpls is just one huge foreclosure. WCCO had a piece on the problem and they showed all the foreclosed houses on one street highlighted on red on the map - about 2/3s of them were red. How can you expect to have poor folk with minimum incomes to pay 70-80K for 75 year old, run down 2/1s and NOT expect this?
if it sounds too good to be true…..
This beats the strawberry picker!
The strawberry pickers in Plant City, Florida were buying houses worth much more than the $1.2. It was a great time to be a strawberry picker during the housing boom! Now is the time to be a strawberry picker!
OMG..I’m eating some fresh strawberry shortcake with whipped cream.
I’m a could be a “Mortgage Fraud Enabler” today
“Maureen and her husband, both retirees, sold their home in Horsham, West Sussex and moved to Spain four years ago, buying their property (a 2 bedroom apartment) outright for €325,000 (£262,000).
Hello? That’s more than the average price of a house in the UK today (£191,000), and way more than it was four years ago. In a country with half the per capita income of the UK. How many greater fools did they think were out there anyway?
UK house prices
they sure are the greater fools because they learned nothing from this experience. They are going to buy back in the UK market that has just started to crash! (at least if the UK government will allow that - noet yet apparently).
If they sell ASAP in Spain (requires nothing more than a realistic asking price, Spanish median sales price is still climbing!) and keep renting for some time there they can buy back in the UK AND pocket a nice profit
“‘We paid $585,000. It was the peak of the market, but no one told us,’ said Shaffer, a real-estate agent from Colorado.
YES, Ask an Expert! They can tell you what and when to buy!
Buy now, or be “priced out forever”.
You’re an idiot, giving financial advise to more idiots, and the sad part is the Federal Government agencies who should have provided oversight to keep idiots from tearing down the financial system were staffed with bigger idiots………GreenSpan, Paulson, Bernanke, come to mind.
“It was the peak of the market, but no one told us”
What!?!
Dio
My sentiments exactly….. though it is truly a tragedy that she reproduced !!!
““‘We paid $585,000. It was the peak of the market, but no one told us,’ said Shaffer, a real-estate agent from Colorado.”
Haaaaaaaa…..
That has to be in the top ten of the wall of fame.
“We paid $585,000. It was the peak of the market, but no one told us,’ said Shaffer, a real-estate agent from Colorado”
And I bet that your NAR soulmate, Suzanne researched this one FOR YOU Dummy
What is the qualification to be a real-estate agent? Seems to me she should have a special duty to stay there and stick it out. No one told us, my ass. Make her stay there. I know, too late. Sigh.
“‘We paid $585,000. It was the peak of the market, but no one told us,’ said Shaffer, a real-estate agent from Colorado.
Just hang on to it a few more years and watch what happens to the price you paid. Better yet, sell it to some other realtor, now is not a good time to buy, it’s a great time for these types of realtors to buy!
Mental note: Do not use anyone named Shaffer as a buyers agent in Colorado.
“That, in turn, is dragging down values for even longtime homeowners, wiping out the equity they’d built up over the years.”
Oh, those poor, poor longtime owners who sweated and labored and strained over years to build that equity.
I suspect that a lot of long term home owners don’t care about long term equity, but are concerned about their property tax increases as a result of the higher valuation created during the bubble.
I agree hoz….
Hoz, kind sir.
Would this be the same for crop land taxes? My oldest son just returned to SC after visiting with relatives in Walworth County. Son commented that BIL said that rent on the black dirt that he owns (but no longer farms) is equal to the taxes. Therefore, no return on the land, other than any appreciation he may get and does not cover land payments.
This comment is third person so don’t know if it is corret.
I happily sold the land that I purchased for $700 during the downturn in 1988 for $3000 in 1995. Couldn’t stand the taxes even then!
Is there an SRS for Europe???? These people are even more moronic than Americans…
I know a lot of Europeans. And no, they are not nearly as dumb as most Americans. Not by a mile.
I’m a peein’, you’re a peein’; I guess that makes us a Euro-nation!
I call shenanigans on this comment. Europeans are no smarter or dumber than Americans. Your observation is at best selection bias at worst typical knee-jerk anti-Americanism — maybe the Europeans you have met are smarter than the Americans you have met, but sorry, you don’t get to slander 300,000,000 people based on that sample size. And before you start quoting statistics, please compare ALL of Europe to ALL of America. So don’t just tell me about the great educational system and statistics in in Norway or Germany or whatever. Include the millions of illiterate, marginalized, outcast Roma; the Pomacks of Southern Bulgaria in their remote mountain villages hours from the nearest town; the Albanians whose public school system is in shambles; the massive Muslim slums in France; and peasants in Portugal and Spain.
You go girl! (or guy) There may be different prevailing values here that could be construed as being more ‘intelligent’, but those values often have their dark underbelly.
– Eli in Holland
“We paid $585,000. It was the peak of the market, but no one told us,’ said Shaffer, a real-estate agent from Colorado.”
I use to smoke. You might get lung cancer. No one told me.
They don’t ring the bell at market tops, bee-yatch.
It’s too bad the shoe-shine boy didn’t tell her it was the peak of the market.
Yes but nobody knows when we’re at the peak of the market. It’s unknowable. For housing or for anything else.
The problem was not the time at which he bought, but the price at which he bought. Whether it was at the top of the market or not.
Er, “she”.
But what they did know (or should have known) was that prices had never been higher.
There was a risk that they were buying at the top of the market.
At least today, there isn’t that risk (there’s the knife catching risk, but not the risk that you bought at exactly the peak).
What-an-idiot…
Let me tell you something, NOBODY is going out of their way to tell anyone else how to make money. Some people might give you the concepts, or the ideas.. But nobody is going to ring a bell that tells you when to buy and sell.
God, this person is a real mental midget.
“God, this person is a real mental midget.”
She’s a realtor. “nuff said.
so the plans for pols to stick the taxpayers
1. hitlery 2. bama 3.mc
how about a high small claims court limit of 75k and loser pays w no $ from the taxpayers
Any tax increases should be leveled at home owners. If you own a house, you get to pay for the bailouts. It only seems fair.
Agreed!
“‘We paid $585,000. It was the peak of the market, but no one told us,’ said Shaffer, a real-estate agent from Colorado. ‘We would probably have to spend the next 20 years trying to get right on the mortgage. That’s crazy.’”
again another used house salesperson with no business sense
Over the weekend, my husband and I stayed with my sister and her husband in her inlaws’ (his parents’) “$1.5MM vacation home” in Park City. I know it’s only right to leave the place as clean as you found it, but after being subjected to a terror-filled 20 minute search for a single bottlecap we later found in the dumpster outside, it was all put into perspective. This was not a weekend getaway. It was an attempt to pass off daddy’s failing flip as a symbol of their wealth. I soon figured out that $1.5MM was the wishing price, not the value and it has been on the market for nearly a year. He just recently fired his Realtor after about 3 showings.
Note to showoffs: when your guests are filled with terror, worrying that they might have left a fingerprint behind when the group leaves on Sunday morning, it’s no “vacation” property. At least it isn’t my idea of one. My poor little sister’s attempt to convince us that she married up flopped about as hard as the investment. Not to mention that it insults me and my husband to some degree. The guy’s a doctor who invests on the side like a get-rich-quick hobby.
Oh, and this is the same sister that told me this before her wedding to this hack: “His dad’s going to help us get into a townhome. He said he’s made lots of money in the boom and it’s been great for them, but it ran up prices in the long run and look what it’s done to his children! They can’t afford a decent home now! So he’s going to help us out with the downpayment and hook us up with a discount when we get married.”
I wish so much that I had told her that if Dr. ComeToJesus really is going to be a dear, and dutifully repair the economic damage he’s done to my generation, I’ll need my share of it in a cashier’s check, or something guaranteed. He’s going to be writing lots of big checks to all the first-time homebuyers he’s theoretically screwed over, and I’d imagine his keeping-it-honest, do-gooder bank account might run dry pretty quickly.
I’m such a snot.
A snot AND a flake. I guess the clarification should nest below the actual post.
Clarification: “The guy’s a doctor who invests on the side like a get-rich-quick hobby.”
Her father in law is.
Her husband is the SON of the doctor who is waiting for his dad to hook him up with a six figure job. Her marrying-up was supposed to be a pedigree thing. Her husband’s just a spoiled pot head.
(You’ll see this once again below as an independent comment). Sorry, I’m a little foggy after all the weekend “vacation” madness.
“waiting for his dad to hook him up with a six figure job.”
One more thing…my closest friend lives in The OC (California) with his wife and 3 kids. They rent a 2 bedroom townhouse, and live rather frugally. They are saving money by being frugal, probably for a down payment, but also as an emergency fund. They drive a mini-van and and older VW ‘golf’.
He makes ’six figures’ as well (about $140K/year).
’six figures’ doesn’t get you as far as it used to…
I hear that. We’re total DINKs but just live off one of our incomes to be safe. However, I hate that we seem to live off the larger income ($4k take home). Look around Salt Lake and tell me what you can get for a fourth of that (a third if we are ballsy). Apparently, if I lost my job and our household income was reduced to just my hubby’s, that would officially make us white trash, from the looks of the houses in that price range. Although I prefer the term Ghetto Fabulous.
Six figures doesn’t get you very far, and it still requires two educated corporate professionals to bring it home.
It has been humbling, teaching us that we are not entitled to a house on the East Bench just because we have degrees and good jobs. We have dear friends and fun family and that’s more than most. Yay for us and yay for this blog.
I make six figures and try to live as if I make $35,000. It’s actually easy once you remove status symbol purchases.
Yeah, we make low six figures (wife+me combined) and we try to live the same way. The big mission is stay healthy so when the house is paid off and we have time, we are able to enjoy it.
Could you clarify the bottlecap? And why you needed to find it in order to leave the place clean? This makes no sense to me.
Ha ha… that’s a good story. He noticed two bottles in the trash can but only one cap. That meant there was a discarded bottle cap under a couch or on a coffee table or something, and so technically there was a piece of litter/garbage unaccounted for and the new realtor was supposed to show the place.
However, the funniest part was what we think it was REALLY about. Notice my handle denotes our Utah residency. You know the rest. It was a Bacardi Ice bottlecap. We’re all 26-ish, but drinking doesn’t fly at any age in his conservative family. To be fair, we were guests and if there are house rules, I believe in respecting them. I’ve talked about this on here before, but I was raised with the LDS value of AGENCY, to live and let live and forget dogma. Other LDS kids weren’t so lucky and end up having to hide their own use of agency.
But that’s all for another blog, and we all know Bacardi Ice is “b**ch beer” anyway.
So leaving a 6 pack of Mike’s Hard Lemonade in the fridge is a no-no
“The guy’s a doctor who invests on the side like a get-rich-quick hobby.”
Not to get into stereotypes, but most MDs I know (and I know a lot of them, including my spouse) really don’t have a handle on the behind-the-scenes of investing. If they have extra money (many spend what they make), they invest it on the advice of ‘financial professionals’ or on things that ‘everyone knows goes up’ (like real estate). In the long run, it usually works out, because you throw so much money at the problem, you’re bound to have at least *some* of it left after 20 years.
But maybe you should have a talk with her sister, and remind her that “making it” doesn’t mean you have flashy cars, houses, etc. Making It means you have freedom, to travel, to spend time with friends and family, give to charity, etc., and not have to worry.
“talk with her sister” should be “talk with your sister”…even when I proofread my posts, I get it wrong…
I think a lot of doctors by into the hype that if they are doctors they must be the smartest thing around and cannot possibly do wrong. Conventional wisdom seems to be that if a doctor is doing it, it must be right. That’s idiotic advice to for anyone but when you are actually a doctor who believes it, it seems it can be very expensive advice.
blueprint,
Well exactly. What I’ve found over the years is that rather than just opening an account at Fidelity or Merrill or wherever and getting garden variety market returns, they solicit ( and then reject ) any and all advice and go right ahead with THE most long-shot bio-tech/medical device they can latch on to!
If it “hits” I’ll never look at another bladder!!
Well how about THIS.. for some conventional wisdom!? Yeah, uh Doc, the FDA DECLINES 90% of all patent applications! So… now with their tail firmly between their legs they have to latch on to “the NEXT” big medical break-through and so it goes… And all this because they can’t admit that when it comes to investing they’re no smarter than any of the rest of us! I know a lot of old, broke Doc’s. No offense.
I remember my professor telling me that to be a doctor, you just need the ability to rote learn……….you have to actually think to invest, don’t you?
Not all doctors are arrogant assh*les. I can find idiots in any profession, guaranteed. This country has proven that even a cretin can be president if he knows the right people.
I think people just have high expectations of physicians and are much less forgiving if they screw up.
I’ve known a couple doctors that were generally good, normal people. I’m not characterizing ALL doctors, just an unusual frequency.
It is noticeable that doctors seem to have a disproportionate amount of arrogance. It’s not surprising considering the way they are held up as some kind of godlike creature in our society.
If I recall, they are trained to project an air of authority in the same way that a banker wears a nice grey suit - to give the appearance that he’s trustworthy with your money.
Yep, that Jimmy Carter was (and is) a real cretin.
I’ve always hated working with doctors directly or indirectly (I’m a graphic designer), because they think they know everything (whereas most of them are completely design-inept), and they are cheaper than just about anyone.
SLC,
Not at all. I’ve been through a very similar circumstance with my oldest daughter and there have very definitely been some uncomfortable moments! Same shell-game “we’ll hook you up later” type stuff really just using relatives as “built-in buyers” to enable them to cover their tracks and investing missteps. It really bugs me but there’s not a lot I can do?
Clarification: “The guy’s a doctor who invests on the side like a get-rich-quick hobby.”
Her father in law is.
Her husband is the SON of the doctor who is waiting for his dad to hook him up with a six figure job. Her marrying-up was supposed to be a pedigree thing. Her husband’s just a spoiled pot head.
Man, that makes the story OH so much better.
“Norm Imholte, a truck driver from Freeport, said a builder paid him $50,000 for agreeing to buy a $425,000 house in St. Michael.
————————————————————————–
Well Norm now you can proceed with that name change to “Norm ImanIdiot”
Note the guy purchased a new truck. Truck prices have fallen about 30% recently due to lack of demand and gas prices. I was looking to trade up in trucks and found a lot of company, yet my current truck is worth less. Sounds like the housing market, but thankfully I owe this one outright so I’ll just keep her a few more years.
I was sitting in the car tonight, waiting for my wife to finish shopping and briefly listening to “Road Dog” on Sirius. The caller was talking about diesel costing him 85 cents a mile. Ouch. Then I got home and read that refiners are cutting back production because there’s not enough profit:
http://tinyurl.com/4u744f
Is anyone awake out there? I suppose these days, with the emerging statspolizei, tar and feathers would be considered a “terrist” crime.
“Once regular people stopped buying houses, builders had to create their own market”
That line’s a keeper, wish I’d thought of it myself.
I remember all those “charities” the builders setup which basically gave people their down payment. Of course they charged more for the house. It’s all good.
“The couple purchased four houses — each for about $300,000 — hoping to quadruple their profits. The Collins received a $5,000 check after each closing. The cash payments were not disclosed on the mortgage statements sent to the bank, which Collin says he has since learned is illegal.”
I heard a bit about this action of paying people off the street just to buy a home…but the media seems to finally be writing about it. Have there been many articles detailing the kick-backs to people right off the street?
Wilson,
I had been communicating with a realtor in Las Vegas and he was very actively and aggressively pushing a “cash back at close” system. I wasn’t really serious about it because it was WAY too early in the correction and besides, anyone that’s securities licensed can’t have their name associated with anything like that.
But I wanted to learn more about how this was going to unravel? It was being promoted as a way to have the deal make sense. By giving you 50k at the close you supposedly would be able cover the neg. cash flow until “the market recovered”. They were really pumping “The Manhattan” a project so far south on The Strip most people wouldn’t even consider it the strip. The units were supposedly facing “Central Park” but it looked like there were several “phases” left undeveloped and even with the 50k back at close with the way prices are dropping you’d need every… likely illegal dime of that just to break even?
Not surprised you say that about Vegas…I think this is going to pop up everywhere in the media now. I’m curious if developers are going to find themselves in legal problems as a result…
The “Manhattan” Project? Oh yeah, I heard about that one. Blew up bigger than anyone could imagine, but that fallout afterwards. . .
Cash back at the sale is absolutely common in the car sales world.
The dealer sells the car “at invoice”. However, after the sale, the manufacturer “refunds” the dealer several hundred dollars. This amount is called “Holdback”.
It allows the dealer tell to tell the consumer that he’s not making much profit, while in reality, after the dealer is “refunded” the holdback amount, he makes out like a bandit.
Just Google “dealer holdback” and you’ll get some interesting links. The first one, Edmunds, says it’s perfectly normal, nay, absolutely necessary! But there used to not be Holdback back in the late 80’s, early 90’s.
Neuromance - the practice as you describe it is true, but it has existed for a long, long time. A buddy of mine had, in the 1970s, a fleet dealer’s license with GM. He could buy any car he wanted, so long as he ordered five or six of the same model with the same options. Might’ve been a 10-car minimum. So he hooked up his clients and friends with great deals on loaded-up cars - I bought one, as did my daddy and my brother-in-law. It was all perfectly legal, and “holdback” was part of the transaction - money that we saved. I remember seeing it listed on the paperwork and have a copy somewhere in storage. I wouldn’t be surprised if holdback existed at least as far back as the 1960s or even earlier. To this day, it is a negotiable point - there’s no reason at all not to mention the term when negotiating with a car seller.
Financing of cars is done through either the seller’s loan affiliates or third-party lenders, but I think it safe to conclude that they all know about holdback as hidden profit for a seller. The only time it would be a no-no, IMO, would be if it were (1) a very large amount; (2) kicked back to the buyer; and the kickback not disclosed to the seller. I think that is unlikely in car deals and far less damaging than the equivalent in a home loan. In the first instance, everyone in the transaction knows the asset will depreciate. In the second, most did not know - it is just now dawning on them.
I recall this offer going around at my daughters place of work. The mortgage broker would pay you $15,000 for your good credit to buy a home but someone else would make the payment. My daughter was smart and said no.
She’s stuck between a rock and a not-as-hard place. The rock is repossession. The not-as-hard place is dropping the price. Your call, lady.
This is typical of the mentality fostered during the boom. Truthfully stated, the sentence would have begun with, “But I WON’T really drop the price…” [emphasis added].
“Collin says it will take years for him to restore his credit record to the point where he can buy a house. And the guilt of not paying his bills could linger longer still.”
ROFLMAO What guilt? these people got paid 20,000 for this. I am sure that was the biggest win-fall of cash they have ever seen and now they are living for free in a new house. This is the most pathetic version of a sob story yet and all they have to do now is unplug the phone to relieve their guilt.
All they have to do is stop pre-paying their cell minutes.
“What’s more worrisome, Jacobs said, is that many people don’t even realize they have signed such a note, just one page among the many included in a sales contract.”
I find it amazing that people who are making a large investment in a house don’t take the time to read the documents they are signing.
One word sums it all up: STUPIDITY!
Re: Bank of America and the credit crunch.
I applied for a BofA credit card and got a rejection. My FICO is 780+, household income of $200K+, and pay off our credit card bills each month, renting so no mortgage payments and no car payments. The reason of the rejection: “You already have enough credit.”
I wanted the credit card because of the perks. If I cannot get a freaking credit card, who can nowadays?
You are too good!
They rejected you because they saw that they could not make any money off you.
I can!
I have $120K income and owe $180K on a house that is soon to be worth no more than $150K. I have about $30K in credit card debt ($7K at 10% and the rest at 4-6%).
Because I carry a balance, they make more off of me, so they are willing to extend their limited resources to me.
Yeah, me too. I carry CC debt with them like an idiot, so they make money off me. Hence, they upped my limit without me even requesting it.
Darrell - for me, an unexpected plus from the credit crunch is that I have stopped receiving annual unwanted increases in my credit line. What I already have is at least twice what I’d request. If I plan to go buy something big, I can always pre-pay in order to register a credit balance. This makes me a “deadbeat” in cc parlance, but I’ve been with all of my issuers for 35+ years so I suppose they understand me by now. All have related business (banking, insurance) that make them money.
They can spot someone who will pay their bill off every month a mile away. You would not be a profitable customer.
I carry a balance once in a while because of missing a payment. They do charge me a late fee and minimal interest charge. I guess that’s not enough to worth their effort.
I thought it was all about the credit crunch.
You do not have a 780 FICO is you miss a payment once in a while. Maybe a 680.
If you want to prove otherwise, post your name, birthdate, and social security number and I’ll verify your FICO for the board.
az
the missed payment might fall into a short grace period whereby the lender doesnt report it promptly to the credit agencies, but is happy enough to collect some hefty late fees w/no credit ding.
then again I could be mistaken, but it seems like a plausible scenario.
I exact FICO number score is 781. Missing a payment in a rare blue moon and paying off the balance right away did not affect my FICO at all.
It only hurts your credit if it’s 30 days late. You can be one day late, get a late charge and interest starts accruing, and no hit to your FICO.
I had a high FICO score (800+), many years of paying my bills. And then a week later I checked and my FICO dropped about 60 points. I later found out that every time you check your score they lower it. I thought FICO was based solely on how well you pay your bills, I now think the rating is whimsy and does not have much useful information.
I had a high FICO score (800+), many years of paying my bills. And then a week later I checked and my FICO dropped about 60 points. I later found out that every time you check your score they lower it.
This is incorrect. Checking your own score is called a “soft” inquiry, and does not go on your report. Thus, it does not affect your score.
I thought FICO was based solely on how well you pay your bills, I now think the rating is whimsy and does not have much useful information.
It doesn’t have enough information to determine who is going to pay back much more than they have ever paid before, but then it was never intended to do that.
Count me as another one of those unprofitable customers.
“They can spot someone who will pay their bill off every month a mile away. You would not be a profitable customer.”
This is not particularly true. The CC company makes 2%-3% on every purchase. I have a BoFA Rewards CC with a high max. I charge most of my purchases including purchases at grocery stores, restaurants, travel, cable bill, PayPal purchases, etc and pay it in full each month. I get 1% cash rebate on total.
Visa makes the 2-3% transaction fee. Visa doesn’t carry the debt. BofA only gets paid on interest. It costs them to maintain your account if you never pay any interest.
If you don’t mind my asking, how much credit do you currently have? I have enough credit to buy a Lambo on my cards; I just wonder how much credit you need to have before they think it’s too much. My credit score is high 700s, and I have a few cards pushing 6 digit limits (one from BOA). Suprised to hear your experience, in my experience, even though I don’t carry a balance (ever), they seem willing to extend so much credit that I could crush myself with it and not bat an eyelash. I just wonder why we are having different experiences, my only thought is that perhaps you have even more available credit?
Credit lines:
Amex: $50K
Amex Platinum: no credit limit, zero balance
Citibank: $35K
Fidelity Visa: $30K - I think this was bought by BofA.
BofA: $20K
Discover: $8K - used for gas purchases w/ 5% rebate
WaMu: $16K
Lexus Visa: $16K
That’s $175K total unsecured credit line.
In the name of heavens what do you need all that for??? We’ve got a comfortable income and we still have just one card with a $4000 limit for an absolute drop dead emergency. Isn’t it kind of overboard to 175,000K in unsecured credit? No wonder the bank turned you down!!!
No sh*t! I just applied for a new card (first new CC in 10 years) and wondered if I wasn’t being profligate, with having two CCs and all. Who “needs” 8 ??
Im ok with just one debit card & one credit card. however, the tab down at Moes is getting a bit large.
damn his salty peanut n pretzels. someone should have warned me. wah wah wah. I want a federal bailout too.
Each card has its own merit. We (wife and I) mainly use the Discover card because of the 5% rebate for gas and groceries. The AMEX Platinum is great for getting hard-to-get concert tickets. And so on and so forth. The rest are stashed in a safety deposit box. You’re right, that’s why BofA turned me down ;-).
When my primary credit card disappeared one afternoon when I was driving 1000 miles from home, the secondary one suddenly came in very, very handy.
I’m glad I don’t have 2 hundred grand in available unsecured credit - I’d be so tempted to withdraw the lot, move to Thailand and change my name.
One, with 35K limit. I’d never live on it… that’s a black hole/absolute disaster. I’d eat Top Ramen and peanut butter first.
I think BoA had a security breach. I had a BoA card that I never called to activate. Last week they called to say there was suspicious activity on the card. They shut the card off and said they would send a new one. This week I get two new cards each with a $2k higher limit and both cards now earn Worldpoints. I don’t plan on activating either of them.
But if I can’t get rid of these for a profit in five years, then I’m in trouble.’”
Michael Morland, let me give you some free economics business advice, you won’t be in trouble, that is the good news, the bad news is you will be totally upside down and in financial ruins that nobody will be able to help you in 5 years. Have a nice day!
“With no money down, they could buy properties in a fast-growing new subdivision”
Speaking of no money down, do any of you in the mortgage business have a handle on how much buyers are now relying on FHA backed mortgages, with 3% (or sometimes less) down, especially in California?
Locally (Cali central coast), people have been crowing about how the market is still humming, due to price reductions and the abundance and ease of getting FHA backed loans (and thereby not having to put 5%, 10%, 20% down).
Has the volume of FHA loans gone up? Also, what is the magnitude of the risk of insuring them to the government, when people are only putting 3% (or less) down in an environment of continually declining house prices?
ease of getting FHA backed loans ??
Thats the buzz around here also….GMAC is positioned to be a major broker for it….
“Creditors hound the Collins at all hours of the day. In a single day recently, the Collins received 175 telephone calls from banks and collection agencies.”
Everyday I get calls for someone named Albert something. Albert has used my phone number for all his loans. If Albert used his own number, he would be able to do a workout plan with his creditors.
you need to handle ‘Albert’s workout for him. try to really stick it to those banks.
Who in their right mind would answer the phone 175 times in one day ?
Maybe the Collins’ thought it was opportunity calling…again?
Who in their right mind would keep that phone number?
Collins needs to get Skype.
Man, Unplug the freaking phone! Or better yet cancel the thing.
Anthem (N) AZ Observations:
One of my neighbors is way upside down on his house, with a total mortgage debt about about $480k. He found someone (can you say knife catcher?) to buy his house on a short sell for $220k, and then rent it back to him. If the bank takes it, the cost per sq ft will be $82/sq ft.
IMO this is too early for this price to happen, which is roughly a 2001-2002 price, but it would represent what I hope is close to the bottom. I just don’t forsee the prices going much lower than this per sq ft price.
Am I smoking crack or are we getting close to the beginning of the big crash, lets say maybe the 4th inning of this thing?
Oh I would be VERY careful of that. He said “he found someone” and I’m willing to bet that someone found him!? With steep price cuts like those there’s plenty of room for “equity skimming” and when this someone isn’t forwarding those rent payments to the lender your friend could well find himself out in the street with no house, no credit and no friend. I’d talk to the guy on the side. IMHO
From my friend’s standpoint, he’s already stripped the house and is ready to move out. He would’ve mailed in the keys but this “investor” came along and I’m not sure how who found who. I try not to ask too many questions about these embarrasing situations.
No offense, Lip, but if your “friend” “already stripped” the house he didn’t own, I’d re-think the closeness of your relationship. Depends on your ethics, I suppose, and there is no ethics-qualification on this board so … whatever.
“If the bank takes it…” You think they’ll take a $260K hit? Doubtful. Not at this stage.
“‘Credit quality deteriorated in several areas, most notably in regions that have experienced the most significant home price declines, which includes the former high-flying areas such as California, Arizona and Florida,’ said analyst Walter O’Haire.”
No price is too high for that type of exceptional analysis. Only the finest minds in our banking system, never lacking in foresight.
Norm Imholte … a truck driver from Freeport, said a builder paid him $50,000 for agreeing to buy a $425,000 house in St. Michael … bought a new truck with the cash … house slipped into foreclosure … He recently got a call from a state Department of Commerce official investigating mortgage fraud.
Bradley and Sarah Collin … purchased four houses — each for about $300,000 — hoping to quadruple their profits … now owe more than $120,000 in back payments to the banks … recently received 175 telephone calls from banks and collection agencies.
I remember a few years back, I used to wonder, “Who the hell is “buying” at these bubble prices.” Now, thanks to Ben, I read about some of them.
…Not to mention the NY cabbie with 8k/month payments, and of course the babysitter with mortgages on properties over one million.
You and me both. I recall having SO many conversations where I basically just gave up on which house that friend, co-worker or neighbor was talking about!
What made things so damn confusing was that they used the terms and applications for “primary” “second” “vacation” and “investment” home interchangeably! “Oh, I’ll be moving into my s-e-c-o-n-d home and my priamry is now “investment” property..” and dude, do you really expect me to keep all this straight? You keep flip-flopping back and forth and I don’t think YOU can keep it straight!
“The report also offers a clear warning sign to regulators wondering whether their attempts to forestall a systemic collapse through massive liquidity injections would pose a moral hazard, or entice others into more risk-taking.”
“UBS admits as much, saying specifically that its traders abandoned caution, knowing that they could always exchange their assets against government bonds as collateral at a central bank.”
Hello. Is anyone at the Fed paying attention to this story? Because your policies suggest you don’t very well understand the role of central-bank-induced moral hazard in encouraging stupid gambles.
An important caveat is needed in all of the bailout proposals being floated in DC. Not only should all 2nd homes/ investment homes be excluded, but ALL homes owned by any investor/ flippers need to be excluded. The fliptards deserve to lose every cent and piece of real estate they own (including their primary residence).
GD,
I happen to agree, but I seem to have lost a post there explaining just how confusing all these doofuses were? Primary, second, vacation and investment were all just loose terms specuvestors used to describe a property at the moment based on the market and their mood at the time. If my primary is doing the best, I’ll dump it and move to my…. Remember most people that owned “specuvestor” properties also likely owned a home and were not renters so good luck to all of getting to the bottom of THAT shell game!
I agree with DinOR - how are a grossly insufficient number of “determiners” (not “deciders,” mind you) supposed to keep up with the volume involved? I know of several cheaters who own three or more properties and I guarantee they are claiming most or all as principal residences for property tax purposes and hoped to be able to work the same scam for capital gains. I’m very happy that the latter will now not work for them, but I’m pissed that the former runs up the property tax I’ll pay when I buy back in.
Reminds me of Paladin - I hope he accomplished enough in his fraud-detection to make him feel properly fulfilled. His efforts were a real cheerleading rush for many of us a year or two ago.
“‘They ask you, ‘Well, do you have any family members that you can borrow from? Do you have assets like cars you can sell? What kind of TV do you have?’
A. No, they all died(sniff) can I borrow $100K off you ?
B. I have a classic Yugo almost running.
C. Black & White 13 inch, you interested ?
D. Hey, why’d you guys lend me money when I have no way of paying it back ?
Seriously, I could have so much fun with creditors calling.
My friend called his bank and told them that they wouldn’t even want his house. He says he is still fixing it up since the San Diego fires ‘07.
He is from a real estate family, his sisters are blond Rancho Santa Fe Dyson realtors. No income and 3500.00 a month bill.
Eye yie yie.
I had one of these jerks calling me last year.
His firm had bought some ancient claimed state tax liability (I wasn’t even a resident at the time,) that had been accruing 8% for the last fifteen years (making no effort to contact me, of course.)
He called several times, and my replies went from polite to “screw you”:
1. It’s bad faith, time-barred, etc. I’m not paying.
2. No I’m not going to re-age the debt by making partial payment.
3. So, you wasted your money buying this ‘debt’ for 25bps or so, wasting your time calling me isn’t going to make it a good trade.
4. Oh, you want to speak to my lawyer? Suing me will get his attention. Anything else is just posturing.
Guy hasn’t called since. But, I guess buying old debt for $2.50/$1000 is a business model that works
Mo - LOL. Letterman-quality.
Lets check in on what the Cool Kids are up to..
2005 Cool: High Debt Worth Individual
2008 Cool: Home Disowner
No worries…
Maureen and her husband, both retirees, sold their home in Horsham, West Sussex and moved to Spain four years ago, buying their property outright for €325,000 (£262,000). Maureen, however, found it hard to settle in Spain and began pining for home and her family.
Who buys a house in a new country before they’re even sure they want to stay? This is what renting is for.
My Cornish cousins looked upon Spain as a nice place to visit, but they certainly didn’t want to live there. (Truth be told, County Cornwall has a nice little Mediterranean climate of its own. My cousins even had a palm tree in their yard.)
At the risk of overposting in this thread, I agree 100% with JB — I have a buddy who moved to Mexico about weight years ago. Great place, low cost of living, great weather and, most important for our age group (old farts), very good affordable medical care. We’ve visited the place and liked it a lot, me being more enthusiastic than my wife. But no matter how excited I could get over this or any other place, I’d rent first to be sure “it’s the one.” In my case, a rental of six months would be the absolute minimum for a trial period.
Once the world gets back to understand the inevitability of the long-term mean in price increases, it won;t matter if you rent for a month or six months or a year or two. You won’t be worse off for the “trial” and almost always will be better off with he the decision that results therefrom. IMO.
But the cost of living was cheaper, and the real estate was supposed to appreciate. You know, cash flow.
From the Merc: Tighter rules on financing condos
For example, starting May 1, AIG United Guaranty, a major private mortgage insurer, no longer will write coverage on condominiums in hundreds of ZIP codes across the country that it designates as having “declining” market conditions. The ban is irrespective of applicants’ credit scores, assets or equity stakes. Even in the healthiest real estate markets, United Guaranty will require buyers to put at least a 10 percent down payment into the deal, and will reject applications on units in condo projects where more than 30 percent of the owners are investors, not owner-occupiers.
I guess that just brought the value of condos down even further.
Sorry, I was responding to my own post regarding the San Jose Merc today, which didn’t get posted. Fannie Mae on Condos:
“For example, starting May 1, AIG United Guaranty, a major private mortgage insurer, no longer will write coverage on condominiums in hundreds of ZIP codes across the country that it designates as having “declining” market conditions. The ban is irrespective of applicants’ credit scores, assets or equity stakes. Even in the healthiest real estate markets, United Guaranty will require buyers to put at least a 10 percent down payment into the deal, and will reject applications on units in condo projects where more than 30 percent of the owners are investors, not owner-occupiers.”
“Now, with home prices falling and mortgage payments rising, panic has set in. Investors are dumping houses on the market before prices collapse further, or simply turning the keys back to the lender. That, in turn, is dragging down values for even longtime homeowners, wiping out the equity they’d built up over the years.”
That’s the myth that needs to be debunked thoroughly. Owners don’t “build up equity” - they pay down their loan’s principal. The market, not the owner, gets to decide how much, if any, equity has been “built up.” Even those with completely paid off mortgages are not immune to being underwater, as the woman who paid cash for her house in Spain demonstrates.
That’s right, it makes no difference about “equity” except wrt to bank loans. Market value can chop 1/2 off your cash purchase, nobody cares that you paid cash.
Yes! They’re slipping “Own a One Bedroom Condo [in Clinton Hill]” glossies under the doors in my neighborhood. Bosch appliances and stainless cabinetry. Maple “Microstrip” hardwood through out.
I think I’ll wait about 14 years.
“Bruce McAlpin, a real estate agent in Monticello, said he was asked several months ago by a lender to evaluate a house in the early stages of foreclosure, in a new housing development called Norin Landing in Otsego. He estimates the house is worth $500,000, though an investor bought it in 2006 for $1.375 million and never lived in it.” Here’s an example deal of satisfaction on both sides. The seller nearly doubled his income and the investor must have been contented as well. He must have been..he must have had a reason to be overinvesting this amount..I work as a realtor in Toronto for a long time and I’m only hoping for a jackpot like this..
>> “The house had recently been vacated by a family that had ‘trashed the place,’ Collin said. ‘There was dog piss. There was rotten food. The smell was unbearable.’”
Did he not want renters?