Bits Bucket And Craigslist Finds For May 4, 2008
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Does anyone on here remember a study/story in CA that found that communities that just built residential housing lost tax revenue in the long-run, unless it was supported by a commerical or industrial tax base? I used it in a debate with relatives and now they are challenging me to find the study. I’ve spent some time googling and no luck. Hoping one of the HBBers can help!
I doubt this is exactly what you’re looking for, but it might be a good start…
http://smalltownproject.org/2005/09/23/exploding-the-big-myth/
http://cssd.ucr.edu/conferences/PDFs/fanniemaefoundationarticle.pdf
Probably not exactly what you’re seeking, but if does mention the issue peripherally:
“Finally, California’s restrictions on property tax increases instituted by Proposition 13 in 1976 leave cities fiscally impoverished and dissuade them from encouraging housing construction for new residents whose service needs are greater than the local tax revenues they generate.”
This report, prepared in May 2002 for Fannie Mae, was titled “The Great Housing Collapse in California”. It was focused on the lack of housing production. I expect the next report that has a similar title will be about a bigger collapse and will focus on much more than housing production.
BINGO….. I see so many housing developments nowhere near anything commercial, like even a supermarket. Our country expanded by creating communities along rail & transportation lines.
This is what is so disturbing about today’s planning. We have tons of unused rail lines but most developments are not walking or biking distance to the trains. And those that are used like in Westchester, CT, long island, very few places you could live without a car. Lots of places have waiting lists for the monthly parking spaces.
So that is why i never understood why Atlanta Miami even LA as they expanded outward didn’t have tons of mass transit and industrial parks along the rail lines to make commuting to work easy….EG Queen Creek AZ
Luckily, transportation decisions are local like schools.
100 years ago Seattle (for example) was a city contained by natural features (similar to say, San Francisco) and was served by a few electric trollies. The electric trains went the way of the dodo bird as technology improved, allowing much greater number of people and great expansion of the city at reduced cost via roads and gas vehicles. In the 1970s or 1980s, technology again improved to the point where the electric “trains” returned. Via shrouding much of the city with a network of electric trolly lines. These were electric busses, not trains, however. Sorry.
At no point did Seattle have the mind-numbing population density allowing productive land to be taken out of service to install passenger trains or subways. They did take out one street downtown for several years to build a pass through electric bus tunnel under that main street. And for the Worlds Fair in 1963, they had a futuristic overhead monorail connecting downtown with what became a sports arena and convention center a few miles away. I think I rode it once. Did they remove it recently? IIRC, never very economically viable.
Just wondering how far you big city dwellers walk to work? I used to commute 22 miles one way from North Seattle to a Boeing plant south of Seattle. I walked 1.5 blocks, total. To a bus stop under a freeway underpass near my house. I got on the express bus whose next stop was outside my Boeing building inside the Boeing plant. I lived in the city for 5 years as a student without a car. The bus system in Seattle is very convenient. Unless you get on the wrong express bus with the similar name and end up one stop later 10 miles away at the county line…
Now for new trains: My own little Texas city of 30,000 is spending an additional 1% sales tax (removing the relative incentive which brought considerable business to the city) to in part fund a train from DFW airport into the city 5 miles away to connect it to Dallas like we already are connected to Ft. Worth. Yippee. I don’t intend to still be here in 10 years when they finish that 5th mile.
I read in “Best Laid Plans” that Portland OR planners tried really hard to encourage or even mandate development along light rail lines, but buyers just weren’t interested. Go figure.
So, anyone care to guess how far down YHOO opens on Monday? What a bunch of jokers over there; I can’t believe that the deal didn’t get done with MSFT, it’s just amazing to me! They were trading at ~19 when MSFT made the bid, and, seems like they wanted to get ~37 a share?? That’s crazy.. And, from reading the letter, they have threated (YHOO) to destroy the value of the company should a proxy battle take place.
Well, hope all the Yahoo shareholders are happy about this, IMHO, the stock will fall 50% at the open on Monday.
This is just another example of the bubble mentality. Unwilling to sell for a reasonable price, and thankfully MSFT didn’t chase them up, so now you can choke on it trying to find someone else willing to pay you 2X your share price. Good luck with that.
I’m just reading the press release. Yang must really be a genius. It does wreak of the housing mania. Everything that every FB has is worth its weight in platinum. Yahoo hasn’t been a force on the Internet since I was MinnesotaBoy and that’s been years. But still they want premium pricing for their $hit. This is like sellers holding firm in Compton.
“We remain focused on maximizing shareholder value and pursuing strategic opportunities that position Yahoo for success and leadership in its markets,” Bostock said.
- I wish I could write stuff that funny. A Clinton running for President must be giving these bozos flashbacks of grandeur.
MSFT was their great, white hope, IMHO. GOOG can’t buy them, or even if they could, would take a long, long time to get the blessing on that one.
They will continue as an independent company, I don’t mean to say they will be bankrupt, but, honestly, their business model is slowly failing; and they lose MKT share every day to Google. Even at $17, I don’t think that I would buy them; especially after such a display of ineptitude on their part to push MSFT away from the table. Those guys better be wearing their armor on Monday, they likely just wiped out some BIG dollar stock options for many of their employees (typically options vest immediately when a change of control happens, as well as the huge increase in price, I am sure many were going to be retiring very soon after the acquisition).
Oh well, that’s why I stayed away from that whole mess; I thought about trading MSFT, but thought better of it. Too much like horse racing for my like.
The point was made on CR that Yahoo is stronger globally than you might think based on their US performance.
A bit like Ford, which would have been the world’s second most profitable auto maker a few years back if they hadn’t had a North American division.
I don’t dispute that (don’t really know), but, if this is true, why was the market valuing them at ~17 bucks before the MSFT thing hit the wires?
The fact is, they were willing to pay almost 2X what the market thought they were worth. That’s, almost always, a deal you have to take. Anything can happen tomorrow, they could fall to 8 bucks a share, or GOOG could be bought by Buffet and disbanded, running their price to 800 a share. However, IMHO, the most likely thing for them is that they don’t see this company valuation again for at least 2-3 years.
And in the largest market in the world Baidu is kicking everybody’s a$$.
If we could just get rid of all american industrial/service workers from our business model!! We’d make billions on those plants on the backside of the moon…..just make it somewhere else and have the sheeple in the USof A mortgage their souls to pay for it. This will end very badly.
Hubris. Yahoo! has been going the way of the dinosaur for awhile now. Yang is arrogant, unethical (look at his behavior regarding Yahoo! and Chinese dissidents), and just plain greedy.
I wouldn’t be surprised if Yahoo! goes the way of AOL in a couple of years.
I think yahoo has the best and easiest to read and navigate business financial section….no weird graphics and charts..just very plain.
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I wouldn’t be surprised if Yahoo! goes the way of AOL in a couple of years.
Let me ask the next question: what do the HBB prognosticators see for MSFT come Monday?
I’m hoping for a nice pop in the share price.
I’m guessing a decent pop as well. However, I have only really followed this through the MSM, so I don’t claim to be an expert on it. However, my thought is that everyone is going to be relieved (MSFT shareholders) that it’s over, and that should lead to a decent rally.
All IMHO, of course. When TX gets up (lol) she can give us a much more learned opinion.
I have a straddle on it. It was expensive. I’ll probably make enough for a pizza with three toppings.
BTW, I’m glad it happened. I like Yahoo independent. I’ve had my Yahoo email address for 12 years and don’t want Microsoft f***ing wth it or me.
Hear, Hear! My sentiments exactly, As I read this thread it was starting to look like I was the only one. Yahoo is simple, clean, efficient and works. Everything that MSFT bloatware is not.
I’m also glad the Yahoo will not be subjected to the microsofting it probably would have gotten. There are reasons why why Yahoo has been successful in the space and Microsoft has not.
The interesting question is: what does MS do now? They have failed multiple times at going it alone on the web, so now they have some choices:
1. Try again to do it internally (likely fail again)
2. Buy AOL from Time Warner (no hope there)
3. Exit the space (probably their best option, but not likely)
Any other ideas?
Amen to that one. msft has screwed up hotmail yearly. And yhoo hasn’t.
my goog results are 5x yahoo
wouldn’t it be cheaper for msn to just give free classifieds/dating/employment ads/auction
etc and achieve those results ?
Twilight….
http://www.atimes.com/atimes/Global_Economy/JE02Dj05.html
Thanks for the link. I never before realized that Milton Friedman was the inventor of the money tree which makes taxation unnecessary to cover Uncle Sam’s bills.
The most powerful of the latter-day pagan gods that have guided the destinies of humanity for the past two-score years is irredeemable debt. Before August 14, 1971, debts were obligations, and the word “bond” was to mean literally what it said: the opposite of freedom. The privilege of issuing debt had a countervailing responsibility: that of repayment.
On that fateful day all that was changed by a stroke of the pen. President Richard Nixon embraced the woolly theory of Milton Friedman and declared the irredeemable dollar a monad, that is, a thing that exists in and of itself.
According to this theory the government has the power to create
irredeemable debt - debt that never needs to be repaid yet will not lose its value - subject only to a “quantity rule”, for example, it must not be increased by more than 3% annually. This idea is so preposterously silly that “only very learned men could have thought of it”.
If the thief is thieving modestly, then he will not be detected. It never occurred to the professors of economics and financial journalists that a modest thief is an oxymoron, a contradiction in terms. How did they get to believing in irredeemable debt? The explanation is most likely found in Schiller’s dictum: “Anyone taken as an individual is tolerably sensible and reasonable. But taken as a member of a crowd - he at once becomes a blockhead.” Economics professors and financial journalists are no exception.
“… and declared the irredeemable dollar a monad, that is, a thing that exists in and of itself.”
But the value of this dollar “monad” lies in what it can be exchanged for, which is everything for sale priced at a dollar (which includes gold).
When they used to clip the coins they had to leave enough to allow it to stack… no more.
Not one to defend Nixon and Friedman, but Nixon’s closure of the gold window was simply the culmination of post-WW2 policies (e.g., Marshall plan, containment of communism), addressed in the 60’s by Professor Robert Triffin.
“A fundamental reform of the international monetary system has long been overdue. Its necessity and urgency are further highlighted today by the imminent threat to the once mighty U.S. dollar.”
Robert Triffin
November 1960
Business
American media On the brink
May 1st 2008 | NEW YORK
From The Economist print edition
Some of America’s most venerable newspapers face extinction, unless they evolve
I’m not at all surprised. I read the Sunday NYT for years but dropped it 3 years ago. Places like this are far more informative. In fact, this is the best housing blog there is. Although I don’t comment that much I’m probably one of the originals here.
That is very true as more of them layoff their workforce..check your local paper and you will start to see that alot of articles are being PURCHASED from the AP…..
“Print is dead”
Dr Egon Spengler
The LA Times is now competing with the web sites of the local television news stations. They’re firing high priced anchors to focus on their web sites.
I spent a few hours on the phone with Yahoo and they’re going to get into local news in a big way this year. If you think it’s rough now…
Print is dead?
reading online news, although I like it, is spreading the ever ubiquitous “secretaries spread” and also bad vision and a sore shoulder. I prefer taking the paper With me.
That being said, the journalists imho are no longer using the same 5 Ws and one how’s with any real insight or searching.
Just the usual People mag short attention span insights.
Again, it’s always and forever a bottom-line issue. Investigative reporting? Not enuf any more to be recognized - too expensive. Acting as the Fourth Estate by actually reporting? No, silly, an advertiser may pull his $$$. and on and on.
People mag pretty much defines what the media has trained the great unwashed to want - and it worked!
“But some of the fall in revenues is actually due to the economic slowdown in America, and especially in the housing market, which contributes a large slice of classified advertising. Media General, for one, is particularly exposed to parts of America where the property market has slumped most, through papers such as the Tampa Tribune in Florida.”
Who would have thought that becoming whores for the most whorish industry in the country might have negative repercussions. Most of the fish wraps are no better than propaganda pieces anyway.
I love how “activist” hedge funds are demanding spots on Boards. That should really fix something. The problem with these papers is that they wanted to push agendas, mostly corporate, and it has come back to bite them. So now some hedge fund d!cks are going to turn that around.
I hope Sam Zell loses his rear. You know he won’t but it would be nice. An LBO for a newspaper seemed like a good idea? In the age of debt, just keep piling on the debt. It will be okay.
This is just a microcosm of what is wrong in this day and age. Now back to American Idol and Dancing With the Stars.
RE: This is just a microcosm of what is wrong in this day and age.
Not to fear-Britney has her underpants on today!
Newspapers used to shape opinion, but now they give us yesterday’s news today, and nobody under 35 buys their print edition copies anymore, readers of which were forced to look at all the advertising.
When you read a newspaper online, there really aren’t many ads, are there?
To borrow a German phrase, they are quite simply toten hosen. (meaning dead socks, i.e. boring)
Too early in the morning for translations, make that “dead trousers”, but you get the gist…
make that nobody under 35 even reads the news anymore, I am astounded by the cluelessness of the kids today. I’ll bet most of them don’t even know more Americas Died in Iraq then at 9/11.
Now back to American Idol and Dancing With the Stars….. So true!
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nobody under 35 buys their print edition copies anymore
I’m not sure I agree with that, aNYCdj. Well, besides myself (under 30 and read the news), I think a lot of the “younger” generation keep up to date, at least on a superficial level, via meta news sites like fark and digg. I think they make it easy for one to get an overview of what’s going on in the world, and from a variety of sources (with different biases).
Surely that’s not as good as knowing what’s up in depth, but it’s better than just browsing the headlines of the fishwrap at the coffee shop.
Nor do they realize that more Americans died in single battles in WWII than died in 9/11 and Iraq combined. Just sayin’.
“Nor do they realize that more Americans died in single battles in WWII than died in 9/11 and Iraq combined. Just sayin’. ”
Just a rough guess but about a half million US soldiers died in WWII. 900 died just in one torpedoed ship ferrying newly trained troop out to africa. Another 1000 died when a ship was sunk by a japanese sub right before japan surrendered. In Iwo Jima how many died just the first day: was it 5000 on that beachhead? How many died in D-day first day losses?
Both Iraq and wwii have one thing in common: wars faught largely over oil. The German and Japanese needed that black gold to fuel their war machines.
Wars are in large part fought over strategic access to or lack of vital recurces., WE are seeing china making deals to secure oil supplies worldwide. All US strategic moves in middle east are largely over oil.
Western economies may be striving to get away from an oil based economy but that black gold ain’t going away.
War equipment -ships, planes,tanks- need lubrication and fuel. Whoever has the mineral strategic resources has the power. Who dosen’t becomes a second-third rate power.
Oil access, $120.00 oil prices, dwindling peak oil, western democracies need for oil from sometimes unstable & unfriendly Eurasian/Middle Eastern sources. This is the great overriding issue of the early 21st century, which will result in more middle eastern conflagerations and flash points, and a probable war with Iran down the road.
This will go on regardless of who gets elected to the white house. Regardless of the howls from the ‘get us out of Iraq’ crowd. Anti-war protesters become impotent as the American citizenry reels from paying $4.00 -$5.00 gas , the great recession of 2008-2009 , and 10% inflation and demand their right to cheap oil to fuel their suv’s , rv’s, and V-8 trucks.
The Battle of the Marne was very costly in terms of casualties. In fact, it was a precursor of what was to come. Some 250,000 French soldiers were lost and the Germans suffered about the same casualties. The BEF lost just under 13,000 men. However, Paris was saved and the Germans expected outcome of the Schlieffen Plan had faltered. Now years of trench warfare was to dominate the Western Front.
September 6th - September 12th 1914
7 days and over a half million men dead. Most kids nowadays don’t even know who was on which side.
RE: I am astounded by the cluelessness of the kids today.
58% from a recent high school sample couldn’t place Canada on a world map.
But they all know their ghetto gang signs and how many hits their MySpace site got yesterday.
Most of em’ are doing time for Grand Theft Auto IV, letting violence and crime rot their brains in a most subliminal fashion.
Question my daughter asked me (again) about a week ago:
“Where’s Israel?”
Maybe you should get off HBB and spend more time with her =P
“58% from a recent high school sample couldn’t place Canada on a world map.”
Let’s be fair. It isn’t easy to find Canada since it is tucked so far down on the map.
“58% from a recent high school sample couldn’t place Canada on a world map.”
So what? we have the best high school football/hoops teams and cheerleading squads in the world. Beat that, you losers!
“nobody under 35 buys their print edition copies anymore”
S–t! I was going to dispute that and use myself as an example. I buy and read papers - International Herald Tribune is a favorite though it’s almost impossible to find on the West Coast.
But then I realized that I’m in my 40s now and slipped into a deep blue funk.
Sigh….
Laughing boy,
You are only getting better. 40s, 50s and older only gets better and better.
For sale: Local homes left in shambles
“Watkins and Truong found one of the worst properties they’ve encountered on Yukon-Ruffsdale Road in Ruffsdale, Westmoreland County, a four-bedroom house.
They found debris throughout, such as wood piled on the floor, plaster ripped from walls with large holes and some of the wiring pulled loose.
“Most often we find properties have been trashed or have nonworking appliances, clothing, broken and damaged furniture or garbage on the premises,” Watkins said. “That’s not always the case since some houses are spotless, but the vast majority have these items left in them.”
http://www.pittsburghlive.com/x/tribunereview/news/westmoreland/s_565725.html
Uncle Ben’s converted price
Finance & Economics
Global monetary policy
Ben’s bind
May 1st 2008 | WASHINGTON, DC
From The Economist print edition
Disentangling the links between the Fed, the falling dollar and the soaring price of the world’s commodities
“Could the culprit be the Fed? Advocates of this idea point to two channels. First, by slashing real interest rates, the Fed has encouraged speculation in commodities by reducing the cost of holding inventories. Second, by pushing down the dollar, Fed looseness is pushing up the price of dollar-denominated commodities.”
What if the Fed’s efforts to restart the U.S. mortgage lending market by throwing massive amounts of below-interest loans into the coffers of Megabank, Inc inadvertently triggered a new dollar carry trade into grains and oil? At least the resulting commodities inflation won’t show up in core CPI, which excludes the volatile food and energy sectors.
The Case for a Newer Deal
By ALAN S. BLINDER
Published: May 4, 2008
http://www.nytimes.com/2008/05/04/business/04view.html?_r=1&ref=business&oref=slogin
Because securities firms are now under the Fed’s protective umbrella, they must start operating as safely and soundly as banks. That means both closer supervision and less leverage.
How much less? You may recall that Bear Stearns ended its life with leverage of around 33 to 1, meaning that just 3 cents of capital stood behind each dollar of assets. That won’t do any longer. Leverage of 10 or 12 to 1 is more typical for a bank. We should all take a deep breath here, because sharply reducing the leverage of securities firms, to bring it close to that of banks, will be a major change in the financial landscape. It will, for example, substantially reduce the profitability of investment houses and, therefore, reduce their scale. But that’s the price you pay for access to a publicly financed safety net.
“Next, we should resist calls to scrap the “originate to distribute” model, wherein banks originate mortgages, which are then packaged into mortgage pools and turned into mortgage-backed securities that are sold to investors around the world. This seemingly convoluted model has given the United States the world’s broadest, deepest, most liquid mortgage markets. And that, in turn, has meant lower mortgage interest rates and more homeownership. These are gains worth preserving.”
WTF? How do they just not get it? And they wonder why the POS New York Times is facing extinction. This is the extent of their insight. Scrap the f—ing securitization process and the market may return to normal. Of course the securitization process may have already scrapped itself since foreigners will never again be so trusting. But the PTB still want Fannie and Freddie to swallow this $hit up en masse. Hey, Chris Dodd, “f=ck you”.
I think you’re right, the process is already dead but it’s still rolling because it doesn’t know it’s dead, the markets have spoken and they’re not buying securitized mortgages any more.
This is a situation similar to the military always planning to fight the last war. The foreign buyers are all seeing the bubble collapsing in Europe as well. They don’t need any more grim reminders that these were just plain bad investments.
No matter WHAT Wall Street wants, they’re not going to get it this time, particularly since those foreign investors have now switched from buying CDOs to buying the banks and brokerages that issued them and are now crippled. Soon enough those new investors are going to go “activist” and force their own rules changes which will be very bad news for the powers that be IMO.
Hey NYC don’t forget I’m a securitization attorney.
Securitization lowers risk of default for investors through the pooling of loans with the first loss falling on the residual pieces and creates economic efficiency by turning the majority of the loans into weekly floaters to take advantage of market demand and fluctuating interest rates, not to mention derivative product plays securitizations allow.
They do have value, and promote economic efficiency. The trouble was in valuation of the asset pool and lack of due diligence (i.e., default risk was not modeled properly by the rating agencies). Not in the concept. They worked just fine in 1998 when they were using more conservative models. So well in fact the demand for them is what helped cause this mess. I know, as I was working on them back then as well. Just like everything else, we need to get back to normal, not act irrationally.
It like saying mortgages themselves should be done away with because they are performing badly. Securitizations are only as good as the asset pool. Don’t confuse the two.
Tim, we need to get back to normal, not act irrationally…that is so 1998…
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They worked just fine in 1998 when they were using more conservative models.
Can humanity go down this path and not have it end up like this every time? Giving an AK-47 to every family should, in theory, make each and every family safe. That is under the assumption that it will be used as intended.
I understand you are a securitization attorney, thus you believe in this concept. But I see a world in jeopardy because of this beast. As long as securitization exists the politicians and bankers will think they can contain its most harmful elements. Others will understand how it can be manipulated for huge personal gain at the cost to society. I am not convinced that we can effectively control this process. This is based on experience, not theory.
The problems you refer to arose from the bubble and excess debt leverage. One can go debate in circles whether securitizations caused the bubble or the bubble infected securitizations, as the fact is that their relationship is symbiotic. I dont think it really matters now what caused what, if the market understands the risks and prices the paper effectively securitizations still serve a valuable purpose. Clearly, investors didnt understand the risk and the paper was not priced realistically in the last 5 years. Ppl just got an education. That will control the market far more than any intervention. Even with perfect knowledge and pricing, securitizations still have value, i.e., efficiently taking advantage of fluctuating interest rates and world demand for short or long term paper, together with risk minimization. Get rid of the dumb money and bad models and we can move forward. It doesnt make sense not to take advantage of financial products available. The players just need to smarten up or get out of the game.
NYC also note that my world is one of munis and not subprime or even any single family home mortgages for that matter. I understand the anger that they were used in a manner to mitigate responsibility in the those sectors. Do you feel any differently about the muni world?
Thanks for your thoughful explanantion, Tim. Always good to see different points of view and thoughtful criticism on here.
dont mean to tread on your thread, but your request for data points on munis is interesting. Why are many munis who have significant unfunded pension liabilities issuuing bonds at say 5.75% in hopes of investing those additional debt obligations at a ^% return or better going forward?
Isnt this the “borrow long” and invest “short” strategy in the face of the failures of borrow short and lend long that has crippled the ARS in the middle of the US housing bust?
pensionaire got your tounge? Securitized Financial Engineering Sector Sunday Strategy Session?
Let us broil the dark matter of the existing products reality so hard that all the new formulated go long investment bond moneys can snatch up those horribly mispriced aged financial engineering products…helluva game you got there timmy boy….and im jsut a dumb hillbilly.
And if only crack cocaine users would only use a little of the stuff and live within their budgets, they could enjoy it more.
It seems that these tools are too easy to abuse by promising high interest and low risk.
Trying to separate repayment risk from a loan via paper-shuffling is what roiled the credit markets in the first place.
No matter how much obfuscation is put between a loan and it’s default risk, the relationship will always exist.
The ‘tranches’ and ‘pooling’ all just appear to be ways to obfuscate the risk of default on a particular loan.
Lack of transparency is a major reason why we’re here today.
As someone noted some time ago on this blog, regarding pooling bonds of differing pedigree, “Mixing turds and raisins leaves you with turds.”
But they’re sold as raisins. And they look like raisins because of the obfuscation.
I agree with Tim–securitization is not fundamentally a bad thing.
For example, I would happy buy into an MBS pool with the following characteristics:
- less than or equal to 50% LTV (because I think housing will continue to sink–even 20% down is no guarantee against losses
- independent, arms-length appraisals
- full doc
- high credit score
Of course, there is no such MBS pool out there. But if there were, the market for them might unfreeze.
“Of course, there is no such MBS pool out there.”
Probably not. It seems the point of securitization is to try to get high interest rates with low risk.
Trying to turn lead into gold - modern day financial alchemy. Trying to turn high interest subprime loans into low-risk, reliable truly prime loans by somehow combining them.
BailoutWatch: I Can’t Even Keep Up
By Rich Toscano
Wednesday, April 23, 2008
I’d like to hear more of this in the MSM.
“In general, trying to keep far-underwater homeowners in their homes is often of little help to them. People who owe significantly more than their homes are worth would in many cases be better off walking away and freeing themselves from a potential lifetime of over indebtedness. Keeping them locked into their unreasonably huge mortgages benefits the lenders more than the homeowners.”
I’d feel better about “teaching them a lesson” if I thought they were actually learning it. I’m concerned that many seem to be taking it like a losing lottery ticket or a “sure thing” horse race loss.
Does anyone have a link to polls showing the political approval rating for these myriad proposals to bail out the perpetrators who created the mortgage market mess? I am guessing the approval rating is in the neighborhood of twenty-percent, based on my recollection of news articles.
Someone should make a comprehensive list of Senators and congressmen who vote in favor of bailouts, to make it easier to throw out the bums in the next election cycle.
I think we need to have a write-in candidate from the HBB. Just to make a point.
Ben Jones for president!
Most Americans oppose a mortgage bailout, both for borrowers and for lenders. They oppose bailouts for homeowners by a roughly 2-to-1 margin (53 percent to 29 percent). They oppose bailouts for lenders even more strongly, “by a 4-to-1 margin,” according to pollster Rasmussen Reports.
CEI earlier explained why mortgage bailouts are a terrible idea here, here, here, here, here, here, and here.
http://www.openmarket.org/2008/03/28/most-americans-oppose-mortgage-bailout-for-borrowers/
“Does anyone have a link to polls showing the political approval rating for these myriad proposals to bail out the perpetrators who created the mortgage market mess?”
They polled the Boyz on Wall Street and received a 100% approval rating on all of their suggestions. That is really the only poll that counts for Hillary, Barney, Chuckie Schumer, Bush, McCain, Cheney, etc. The rest is all just noise to them. You and I are just noise to these a$$holes.
Wow, that’s an excellent article, thanks for posting it up. That guy is ON the ball with this, and very quickly shows how, and why, all these bailouts are a bad idea.
Again, thanks for the post.
This sounds ominous and contagious.
NATION’S HOUSING KENNETH HARNEY
Credit crunch continues to spread
May 4, 2008
WASHINGTON – Like a spreading infection, restrictions on credit are moving into new and more specialized niches of the mortgage market.
PB, all these loan restrictions are a replay of what happened in the early 90’s. No more cash out, a limit of 4 loans/person on housing, higher down payments. All these moves to “prudent underwriting” just show you how goofy the last 5 years have been!
I’m shuddering just thinking about what’s next in the pipeline for us in terms of crisises or bubbles. How many more systemic shocks can the vast vacuous (hey, that rhymes!) body of American consumers take before they start to realize that they’re REALLY in trouble here ? Even the dumbest of organisms have a self preservation function built in - when will it kick in for the average consumer?
“crises”? Too DERN early for spelling questions…
Good point PB, With the money spigot being slammed shut on crazy loans, the prices & sales will fall further, it will take months for this to work its way through the “system”
MGIC, the largest private mortgage insurer, recently eliminated coverage of all “option ARM” loans that have either scheduled or potential negative amortization features that increase borrowers’ principal debt rather than reduce it monthly. During the boom years, option ARMs were wildly popular in major metropolitan markets across the country. MGIC’s new ban is nationwide.
The company also no longer will insure cash-out refinancings using limited documentation, temporary rate buy-downs on investment real estate, and nontraditional credit applications to buy second homes.
Why the continuing rollbacks and how long could they continue? Lenders and insurers are carefully studying the sources of their greatest losses from mortgage vintages between 2003 and 2007. Where they see inordinate risk, they are reacting much as they would to a disease: They are eradicating it.
RE: Credit crunch…
Tsk, tsk…even the roof is caving in the “La-La Land” of Neiman-Marcus and Gucci.
http://www.boston.com/business/articles/2008/05/04/downscaled_hopes_for_an_upscale_mall
I apologize if this was posted before, but thought it was important. Check out the comments (not linked to the HBB, obviously). A bunch of whiners complaining about how the gov’t isn’t helping them pay their mortgages.
***************************
“A key committee in the House of Representatives late Thursday passed legislation that would make up to $300 billion in federally insured mortgages available to borrowers facing foreclosure.”
“Under the principle provision in the bill, the FHA will guarantee a new loan to a troubled borrower if the existing lender will agree to accept a short payment (i.e. less than the outstanding balance of the loan) in full payment of the old loan. The new loan would be limited to no more than 90 percent of the property’s value and must have terms that the borrower can reasonably be expected to pay. When the borrower sells or refinances the home the borrower will pay from any profits either an exit fee equal to 3 percent of the original loan amount or a declining percentage of any net proceeds attributable to home appreciation (from 100 percent in year one to 50 percent in years four and beyond,) whichever is larger. The government, therefore, would only be at risk if the borrower defaults on the new loan in which case he would lose the house.”
“House Financial Services Committee Chairman Barney Frank (D-MA) waved a bit of a stick in the face of loan servicers, saying that “Servicers should put a pause in some foreclosures until they can wait to see exact details of this as it moves forward. If after this we continue to get very little participation by services, I can guarantee you that the servicer industry will look very different a year from now than they do today. If after everything we do in this cooperative way falls short, then you are going to see legislation that puts some very real restrictions on the role of servicers and give many more rights to the borrowers.”‘
“Supporters estimated that the bill might help as many as 1.5 million borrowers who are in trouble with their existing mortgages.”
http://www.mortgagenewsdaily.com/522008_FHA_Short_Pay_Loans.asp
BTW, this might help explain all the empty houses I’m seeing without any activity or listing. They’re “pausing” foreclosures.
Sounds like our dear Mr. Frank is issuing quite a threat (regulation!!!).
I definitely would not consider buying a home until this issue is resolved, particularly after last week’s data release of an incredible figure of 18.6 million vacant homes dotting the U.S. landscape. My impression is that lenders are waiting to see how the bailout legislation resolves before taking action, but on the face of it, the problem appears much too big to bail.
Lets see, even if builders stopped building (fat chance) those 18 million houses are what, a ten year supply? Maybe the bailout consists of giving them away for free
Houses for everyone!
Borrowers rights? Right to steal?
I have been biking through my extended neighborhood in the evenings this last week. A reasonable number of homes for sale. However there are, what appears to be, a greater number of houses that are unoccupied.
One method I use to tell if houses in newer developments are unoccupied, is to look on the roof for satellite dishes…
We were in Vegas a couple weeks ago, and either nobody watches tv in Henderson, or there are more empty houses than you can shake a stick at.
“If after everything we do in this cooperative way falls short, then you are going to see legislation that puts some very real restrictions on the role of servicers and give many more rights to the borrowers.”
It looks like Barney Frank wants to destroy what’s left of the mortgage market. Why write any mortgages when you don’t no what king of changes may be imposed, in the future? He’s openly threatening the mortgage industry. It’s becoming very risky to write mortgages.
Mortgage contract have become meaningless.
Got cash? You’re gonna need it if you want a home. Say so-long to the mortgage industry for the foreseeable future if this is enforced.
LOL. Yeah, why not just make foreclosure illegal? That would “solve” the problem, right?
Of course, that would push interest rates to 20%, but.. Ha.. We have FNM for that, we will secure these “no-foreclosure” loans using govt money.
Brilliant!
This legislation would make mortgages effectively unsecured debt!
He’s saying mortgage holders have to accept these losses crammed down on them or there will be legislation to block the rights of lenders to their collateral.
“…legislation to block the rights of lenders to their collateral…”
Wouldn’t that be illegal? I am not an attorney, but wouldn’t this constitute a violation of time-tested principles of private contract law? Is Frank some kind of communist?
“then you are going to see legislation that puts some very real restrictions on the role of servicers and give many more rights to the borrowers.”
If servicers are restricted enough and borrowers rights are increased enough, it becomes so difficult for the lender to take possession of the collateral, that it becomes effectively unsecured.
Heads we win, tails you lose.
The more they screw the lenders the more the lenders will screw future buyers by tougher lending requirements. This will drive down prices even further as nothing will sell. Prices are simply unaffordable for new entrants. Thus, no matter what you do they will fall in price unless the government gives massive amounts of cash too new buyers, and that’s not going to happen. I see no governmental purpose for keeping houses propped other than preventing economic collapse on a massive scale, that’s why I view targeted wallstreet bailouts as acceptable, and anything else stupid and sometimes illegal.
“Is Frank some kind of communist?”
YES!!
“I see no governmental purpose for keeping houses propped other than preventing economic collapse on a massive scale, that’s why I view targeted wallstreet bailouts as acceptable, and anything else stupid and sometimes illegal.”
Which targeted bailouts would those be? That’s one heck of a slippery slope. Would Bear be an appropriate “targeted” bailout?
This is starting to remind me of the BofA kid that I talked to and she was telling me how great all of the structured finance products worked. I asked her how she could say that when the entire financial system was on the brink due to those products. In short her conclusion was that some people just went too far. I think a lot of this stuff, by its very nature, is destined to always go too far. Let A make a loan to B and have A hold onto that loan until B pays it back. Is it so bad to have a simple financial system? We might have fewer billionaires but we may have a stable society.
Bear was bailed out and the system still teeters. No bailout is removing the risk of failure. It is increasing it.
“Targeted bailouts”
What does that mean? Give monies to Megabank Inc on the assumption that it will go back to the housing market, only to discover that a new carry trade into grain and oil has been set off?
“targeted bailouts” to prevent a collapse of the entire credit market, aka a “Panic”. Makes sense to me.
If I may inject a different view, it’s possible this legislation will have a good side effect (unintended, of course) in that lenders will have very high capital requirements and require low LTVs to make future loans given Frank’s “reforms”.
Congress can’t force the mortgage industry to lend, just like they can’t force buyers to buy. Making mortgages into effective non-recourse loans will disincentivize their securitization, and potentially destroy the HELOC market.
Heck, it might even make it so that people won’t consider residential real estate as a profitable investment, but simply as a place to live.
Yes, apparently you get much farther with the carrot and the wink/nod than you get back with the stick.
“A wink from a pretty girl at a party rarely leads to climax, Karl. But a man is a fool not to take a suggestion as far as it will go.” - Oberst Radl, “The Eagle Has Landed”
I also have to point out the misleading characterization of the FHA guarantees as “insurance,” a term which properly applies to future losses due to unforeseeable random contingencies. In the case at hand, the loss of housing market values which would purportedly be insured has already occurred, but nobody knows the magnitude of losses thus far due to a lack of price discovery. How can one insure against a loss of unknown magnitude which has already occurred? The only way to price this “product” would be to obtain price quotes from private insurers, but I don’t believe that is what the Congresscritters behind the legislation have planned.
RE: $300 billion in federally insured mortgages available to borrowers facing foreclosure.”
Frank’s bill is little more than the funneling of an enormous sum of taxpayer money designed to continue the looting of the system by the mortgage origination sleazebags.
Under FHA/HUD underwriting guidelines, mortgage originators are allowed to pick their own appraiser from a “FHA/HUD” list of approved appraiser (qualifications…can you breathe).
Everybody certainly remembers “Victor the Appraiser” who would appraise gutted, vant multi-unit buildings for a $$$ half mil 100% guaranteed mortgage for Tony and the boyz.
The scamming and conning when all this mess reverts to the Feds which be the final act, because the only thing in the world the morons at FHA/HUD care about, is how many more days, minutes, and hours they’ve got until they can retire.
There are no words to describe the dispicability of Barney Frank.
This announcement seems somewhat misleading to me. What is a counselor going to say that will fix the problems of a homeowner who in recent years became accustomed to kicking in a third income to the family budget through liberated home equity, only to learn recently that the value of said home is off by a double digit percentage from the bubble top? “Sorry to hear you have lost over $100,000 in the market value of your house.”
Help’s on the way
May 4, 2008
The Housing Opportunities Collaborative will hold a free counseling clinic for financially strapped homeowners 10 a.m. to 3 p.m. Saturday at Joslyn Senior Center, 210 Park Ave., Escondido. Information: (619) 282-6647, ext. 373, or housingcollaborative.org.
They say the turnout for these shin-digs is huge.
More FB idiots hoping the magic fairy will show up and make all their problems go away. God forbid they actually have to live in rentals and learn to live within their means.
Imagine that - living within your means. The mother of one of my son’s friends came by to pick him up after she got off work. I went out to coordinate an overnighter for the two and she was sitting in her car balancing her checkbook. She had a thick stack of bills ( the top two were Visas) and she was trying to figure out what to pay.
She told me that even though her husband had just been payed, they were completely out of money (this was on the first). They have a small house out in the sticks, she works as a office clerk, he runs the Co-op, they eat out all the time, buy their kid almost anything he wants, travel on vacations, etc - All on probably $35,000 net a year. What a bad situation to be in - first of the month and already out of money.
They’re nice people, but like too many Americans (especially out here - “puttin on airs” is incredibly important in small southern towns) they’ve subscribed to the American Dream and now they’re paying for it (literally).
Maybe they just find themselves short at the beginning of the month because they are contributing so much to their retirement accounts. Seriously, it’s possible. Now, if you will excuse me while I go milk my unicorn.
I have a friend who hasn’t been paid for a few months after a year of shaky income) and the family is hurting. It is inconceivable to me that the wife’s income (though small) can’t pay for most of their essentials. I guess it could if it weren’t for the fully loaded credit cards.
God forbid they have to pay back the money they borrowed.
Changing values
U.S. moves to insulate appraisers from pressure to cook the numbers
By Emmet Pierce
STAFF WRITER
May 4, 2008
As the U.S. economy struggles to recover from the ongoing housing slump, the appraisal industry is undergoing changes designed to improve professional standards and reduce the temptation for appraisers to overvalue homes.
Now Freddie Mac and Fannie Mae, the largest mortgage purchasers in the U.S., have agreed to shield appraisers from outside pressure in an arrangement with New York Attorney General Andrew Cuomo and the Office of Federal Housing Enterprise Oversight.
The recent pact settles an investigation into loan purchases made by the two mortgage giants. In part, Freddie Mac and Fannie Mae have agreed to stop purchasing loans from lenders who use in-house appraisers.
I know and all the mortgage brokers are freaking out about not being able to “assist” the appraisers anymore…slowing getting closer to extinction…
“I worked for Bank of America for a number of years as a staff appraiser,” Lackner said. “They don’t want bad loans and they have to keep up their reputations.”
If that’s true, then why would BofA buy Countrywide, which clearly engaged in appraisal abuse?
Also, of all the fraud prevention measures mentioned, none of them seem designed to prevent appraiser “blacklisting” for those who don’t toe the line…they are focusing on “education” mostly, and blanket laws that say you can’t influence an appraiser (just like lobbyists can’t ‘influence’ Congress, right?).
Give me a break.
The “comp” method of evaluation is the problem.
Appraisals should be based on underlying fundamentals. Price to rent, price to income for the demographics of the house, demographics of the house vs. demographics of the area, etc.
No more having all houses in an area go up JUST because some fraudster overbid a house down the street to make room for cash-back at closing.
No more building 1 million $500K+ houses in a town where only 100K peope make more than $100K a year.
Well said, Darrell. The “three recent comps” appraisal method just means that three idiots who overpaid make it possible for anyone else who buys in the area to overpay, with the lender on the hook for the excesses.
Looked at my loan papers today. My appraiser included her 15 year resume from starting out to appraisal business owner, her license, that she had personally appraised the 3 comps and attested that she wasn’t pressured to meet any particular price.
Do they still even do all that, or did the banks stop asking?
Appraisers are supposed to use three methods in measuring the value of a SFD. They’re all on, or were on, the standard SFD appraisal report form. One of the methods is “gross rent multiplier”, another is land value plus construction cost less depreciation. After estimating values through each of the 3 methods the appraiser is supposed to arrive at a final value and provide justification for any weighting.
HOUSING SCENE LEW SICHELMAN
FBI warns of spike in mortgage fraud
May 4, 2008
WASHINGTON – Good news! There are no new mortgage frauds. But the bad news is that the old schemes are becoming more intricate, and the criminals who work them are more active than ever.
“Mortgage fraud is so easy, even a cave man can do it,” says Scott Broshears, the FBI’s mortgage-fraud coordinator.
No wonder fraud has become the f-word in the home-loan business.
We’re #1!
We’re #1!
We-re #1!
….Florida…holding the distinction of being #1 for Mortgage Fraud..THREE YEARS RUNNING!
I’m so proud of my old state! Just brings tears to my eyes…
I’m so proud of my new state. Brings tears to the eyes to see her grow up and take the title from CA. Everyday, just about, something hits the news that makes me, well, just so proud to be a Floridian.
What, no teacher/student sex scandal today? How about a voting scandal, or some govt corruption? Oh well, must be a slow news day.
How about a teacher and student sex scandal involving realtors, cash-back deals, and foreclosed houses?
I think every criminal in America has to move to Florida at least once, so he or she can pick oranges along highways while disposing of dead bodies, only to discover that picking oranges along the highways is a crime for which they might actually get prosecuted.
We watched an acquaintence go from a mild mannered citizen to a huge mortgage fraudster in 2005 & 2006. They bought 4 new houses (2 in each name). They each bought 2 at the same time so they could get Alt-A liar loans claiming owner occupancy for each loan. The lenders would not know they could not occuppy four homes, since it is common for applicants to apply for home loans with two lenders (though I never have). They submitted fraudulent closing docs and used bumped up appraisals to pull $100,000 to $220,000 out per house. They garnered almost $600,000 cash. Their argument was they were not criminals, because there was no victim. They were going to pay the money back! No one would find out.
They spent lavishly. Big trips, new Mercedes for each, one house in Lake Tahoe. They even quit working!
Today: They have lost one home already, 2 more are in default and the loan on their residence will reset in 2009. The loan balance will be $108,000 higher, meaning the Option Arm payment will jump from $4150/mon, to the new amortizing payment of $5800. Add $1250 for tax/ins/HOA for $7050/mon. They will lose the final house too.
The boyfriend recently had his car repossessed and took his old car back from his sister. The credit cards are maxed out. The FBI and the IRS have contacted him. The back taxes alone, with interest and penalties are going to exceed $350,000. The four properties they financed 100% each for over $3,000,000 are now worth less than $1,500,000.
These folks had great jobs in 2004, 700+ FICO’s and were living a good life. Now, assuming they stay out of jail, they will be paying a huge economic price for many, many years. And so will all the neighboring home buyers from 2005 & 2006 who bought similar homes around them thinking the comparable prices were reality. There are plenty of victims to go around.
How many appraisers are going to wake up with horse heads in their beds?
That nested in the wrong place. In response to Jingle’s post I wanted to write, “I hope they hang these motherf-ckers”. Appalling is not harsh enough.
They can still sell that Reno house. Just glue the pictures to the walls and the cups into the cupboards.
Until the government admits that the housing bubble was a crime wave and a Ponzi-scheme, that was financed by Wall Street ,the proper remedies will not be proposed .
First ,any talk of bailing out people that engaged in any form of this real estate investment scheme that was financed by fraud in lending is condoning crime to begin with .
If the powers don’t treat this real estate lending crime wave as the big con job that it was , than they should be impeached for being in bed with Wall Street .
I have had enough of borrowers acting like they are victims when they just bought into a myth that real estate always goes up ,(which was the sole reason the borrowers were willing to go on bad loans and buy more house than they could afford ).
Let the market crash and let the chips fall as they should and fix the system so it can never happen again .
these peoples and their ilk that have placed the iceberg dead ahead, they should be placed in the same internment camp with Jose Con-saco for their own protection so they can shank each other for top bunk privi’s.
looking for dead money monday morning QB’s to get the selling underway early.
These people are hurting RIGHT NOW and need Messrs. Barney Frank and Chris Dodd to distribute government assistance to them right now.
After all, it’s in the national interest to rescue these people’s and their lenders “investments” and keep house prices propped up.
I for one am happy to stay priced out of the market and continue to pay for these people’s and lender’s financial wellbeing. The very people who keep me priced out of the market.
Yes. Very happy. *eye twitch*
The item about real estate investing can be found about half-way down the linked page. Quite hilarious!
The front porch
News and notes about real estate and our built environment
May 4, 2008
…
A GOOD INVESTMENT – LATER
Despite the persistent gloom and doom about the slumping housing market, more than two thirds of Americans still think real estate is a good investment – but not necessarily right now.
Housing recession hits state revenue
BLOOMBERG NEWS
May 4, 2008
The worst housing recession in 16 years is pinching revenue of U.S. states, including Florida and California, because of lower sales and real estate-related tax collections, according to Standard & Poor’s.
I don’t feel sorry for Florida..after Andrew in 1992..the only thing that state could focus on was construction, construction, construction…real estate was its number one priority..and company after company left since the state would not give any good concessions…now here in GA…I see tons of companies that once called Florida home…
FL deserves no sympathy at all. They did absolutely everything wrong during this bubble. I seriously think that we will see a book about how the housing bubble unfolded, and I think that FL will be a case study in how to screw up your economy as completely as possible.
There’s just not a single mistake that they didn’t make.
Oooh come on you guys!
The Florida legislators are working hard on the important issues…
——————–
Conservatives’ issues roiled, then fizzled
By Joe Follick H-T CAPITAL BUREAU
Published Sunday, May 4, 2008 at 4:30 a.m.
TALLAHASSEE — While they did not fix an inequitable tax system or lessen the risk of billions of dollars in state losses in case of a major hurricane, Florida lawmakers this year invested anguished hours on emotionally volatile subjects such as abortion and evolution that left supporters and opponents drained.
And, in the end, the sound and fury generated almost no legislation. A bill allowing Florida residents to bring firearms to work and store them in their vehicles was the single major socially conservative bill to be approved. —>
read the rest at Heraldtribune.com
Florida is doomed.
MICHELLE SINGLETARY
Mortgage registry could help end fraud
May 4, 2008
There are lots of proposed remedies to prevent another mortgage catastrophe like the one we’re going through now. Most of the suggestions I’ve seen won’t fix the loopholes that allowed so many borrowers to take on mortgage loans they couldn’t afford.
What a wasted effort…99% of these people who commited mortage fraud didn’t move from state to state..they learned the system’s loopholes, learned what the “lender” wanted and gave it to them…you want to fix the problem you need to do alot more than have someone “register.” Someone just created another dumb job for themselves..guy on the top of this idea probably earning high 6 figure salary..
bet michelle loved the CRA and 2002 anti redlining ,but you’ll have to wait 20 years for pols to admit race based lending was a bad idea
I guess no one has sense enough anymore to solve problems the simple and easy way. Mortgage fraud never happens when credit checks (which show prior mortgage obligations) and income verifications are done on borrowers. Sigh.
Question for the blog.
This is the front page article in today’s local newspaper:
http://canberra.yourguide.com.au/articles/1236892.html
This is likely to go ahead, given the current politics here, so there’s no point ranting against it. (And, to be fair, I have heard worse suggestions.) My question is; what are the ways in which this initiative can be gamed by the REIC?
I want to write a letter to the editor, or even an op-ed, pointing out potential pitfalls so we can get reasonable constraints BEFORE the whole thing gets FUBAR.
By way of background, unemployment rates and housing vacancy rates are both about 2%, so rents are high and prices are even higher. The territory government has an absolute monopoly on residential land rezoning/release, and is heavily reliant on property taxes (which in Australia are only levied on the land value, not the house) for income so there is a massive vested interest in keeping prices high.
The most obvious immediate pitfall will be the speculators who will bid up housing values after being given a subsidized rental price, especially if there is a purchase option. I can’t believe land values aren’t influenced by the housing on them???
From what I saw of Canberra on my one visit there, it has limited appeal as a real estate speculator market…unlike Sydney or Melbourne. It seemed almost sterile, and the weather not as pleasant.
I’m also considering the McMansion possibilities.
Agents telling people that now they don’t have to buy the block, they can get a 400sqm house instead of 200sqm (1sqm~=11sqft).
It appears to this outside observer like the banking industry is on Fed-provided life support, even as some corners of the financial press are making suggestions that the end to the so-called credit crunch is in sight.
Fed opts to lend to banks as alternative to rate cuts
By Dan Seymour
ASSOCIATED PRESS
May 4, 2008
NEW YORK – The Federal Reserve’s decision Friday to lend more to banks may be a sign that policymakers want to avoid cutting interest rates any further as they combat a credit crisis that is far from over.
Same as Japan.
They just zombified the banks. No more loans really being issued, and the balance sheet continues to get repaired.
Remind me of for how many years home prices kept dropping year after year in Japan; was it fifteen years straight, or more than fifteen years?
18, isn’t it?
Although a significant percentage of the decline was in the first five years but the prices just kept on dropping.
I am currently living in japan and after doing some studies on rural depopulation its amazing how homes are prices. Want big house? just go live in country where there is no train station or jobs and be a dirt poor farmer.
In the cities I see nothing but building of apartment blocks and houses even though I know the cost must be outa whack. I think there will be another drop in home prices
Scam artists move in as foreclosure crisis builds in Salinas
Salinas residents increasingly don’t know to whom to turn
By CLAUDIA MELÉNDEZ SALINAS
Herald Salinas Bureau
Article Last Updated: 05/04/2008 01:32:31 AM PDT
Blanca Arias bought a three-bedroom, two-bathroom home in East Salinas for $595,000 two years ago. The cabbage harvester and her husband were struggling to pay $4,300 a month, but when she received a notice the payments would climb to almost $5,000, she decided to phone her bank.
“I was calling and calling, they told me to wait, and finally they told me they couldn’t help me because they were helping those who were not making their payments,” Arias said in Spanish.
“Foreclosure scams are happening so much,” Bernal said. “People are coming in saying they paid $4,000 to $10,000 for loan modifications, something they could get done for free. Then I call their bank and they tell me there’s no such modification. At that moment, (the homeowners) become untrusting.”
And these stories are bound to get even uglier. But the problem is that people making harvester wages were given 595k homes in the first place.
More impetus for precautionary saving…
As economy sours, have plan for your insurance needs
Most consumers depend on their employer for their health, life and disability insurance. But according to a recent report by the Center for Economic and Policy Research, this year’s recession will cause at least 4.2 million people to lose their health and life insurance coverage.
Direct link here
My plan if I lose health insurance is to get a fake ID that shows me to be an illegal immigrant. Then I won’t have to worry about paying for medical care.
Use it or lose it. I’ve heard from two sources in the cruise and travel industry that most of the cruises leaving the US are booked to 98% capacity for this year.
Less than half foreign travelers, the rest US citizens. Most of the USrs paying cash. One had met their “paid booking quota” for the year 75% by the end of the first quarter.
Burning through the last of the HELOC money, one last hurrah? All inclusive to avoid looking at unpleasentness for 7-10 days back in reality land?
Local “open house” signage seems to be dying off. I think folks are giving up.
BUt what are they having to do to the cruise prices to keep the bookings up?
My wife, I, and 3 kids are doing a 4 day cruise out of LA. My wife paid $600 for this cruise 3 years ago. We booked it for $380 per person, but have been watching the rates. Last week they dropped the rate to $300 per person. We called up and got the $400 refunded to us.
If everyone on the cruise is paying half price, I don’t know HOW that are paying for gas for that giant ship!
Charge the foreigner double when they book overseas…
“If everyone on the cruise is paying half price, I don’t HOW that are paying for gas on that giant ship!”
Such is the problems inherent with running a capital intensive business.
Attached to the giant ship is a giant financial alligator that needs to be fed. The only way to make a profit (or minimize the loss) is to keep the ship operating at or near full capacity.
This can only be accomplished in this cash-short credit-crunch enviornment by price adjustments.
Those who have the cash get the a great bargins. They ultimately are the ones who call the shots.
99% of those ships are registered OUTSIDE of the USA..chances are they are getting their gas from someplace ALOT cheaper than the USA..maybe South America??
But with the dollar 30% weaker than it was 3 years ago, not only is the cruise company getting half the dollars, it is getting far less than half when converted to whatever local currency they pay the workers in.
I’m sure they are hoping that alcohol sales, photo sales, casino revenues, excursions, etc. will make up the difference. I’m not sure those sales are holdng up either.
Congress goes extra mile for homeowners
State’s reps cross party lines on bills
By Lisa Mascaro
Sun, May 4, 2008 (2 a.m.)
http://www.lasvegassun.com/news/2008/may/04/congress-goes-extra-mile-homeowners/
Democratic Rep. Shelley Berkley, who supported the tax provisions from her seat on the House Ways and Means Committee, said the housing package “is perhaps one of the most important pieces of legislation to help the homeowners in Southern Nevada and throughout the state of Nevada.
“Any relief we can provide people who are losing their homes and people who are unable to make their mortgage payment … will be a great benefit.”
Addressing critics who call it a bailout, she said, “We’re bailing America out.”
These kind of comments are starting to make my stomach churn. Our representatives are sounding more like NAR reps each day. It should read something like: We’re bailing (irresponible) America out (at the expense of all responsible Americans).
From the bits bucket a few days back:
me: and room if we need to take in family for a bit (referencing a thought that we’d bought at 30-year house that could hold more people as we made ‘em or relatives needed help.
someone else: You’d be surprised how quickly a decently furnished, comfy house with meals, cable TV, wifi, and free aircon can destroy the work ethic in ordinary people.
========================================
Oh, sure. But it’s been done with this group (a very small group, the rest would go to others or haven’t been spoken to in nearly two decades) and there’s no major problems with such a situation. No one has an over-their-head or time-bomb mortgage. It would take some extraordinary disaster to really set up such a situation.
Actually, one has a ticking-time-bomb if their house doesn’t sell, but I feel confident we’re ready for it. And if it means free baby sitting
…
Bears Wrong About Housing
http://www.smartmoney.com/aheadofthecurve/index.cfm?story=20080502-housing-market
IF YOU WANT TO know how smart I am, read my columns. If you want to know how stupid I am, read the comments section of my columns, where readers get to rip what I say to shreds. Used to be that when supposed “experts” like me talked, all people could do was listen. Now they can talk back, and their ideas can compete with mine head-to-head on the web.
LOL. People should stay out of the kitchen if they can’t take the heat.
“The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.”
Bertrand Russell
Awesome! The quote immediately brings to mine Robert Shiller versus David Lereah. But it bears reflecting on who is still in his post circa 2004 and who has moved on to something different. Blessed are the meek, for they shall inherit the earth.
Bwhahaha…. Another fantasy filled dream by none other than one of the 3 stooges, Don “boy lust” Luskin. Should there be any wonder why Luskin, Cocaine Kudlow and Jerry Boylover are such buddies in public and private?
Back during Cuomo’s (Sr) tenure at HUD they decided to forbear on foreclosures and to give counseling to the homeowners to allow them to do a workout.
They allowed them to pay less and over a longer period without actually modifying the note. There is precedent for what is happening now.
I received a watch list of homes so handled. The end result was simple, delayed foreclosures. The differences were myriad on a macro basis. Expanding economy and plentiful jobs plus an upward moving housing market.
The current situation is much worse dynamically and I expect the same result. Delayed foreclosures. This thing will drag out for years upon years. Death by a thousand cuts.
But we can delay the house price drops long enough for the builders to crank out a few more million excess houses so that the bottom is even deeper, more costly, and puts recovery that much further out.
Precisely!
Mario Cuomo was at HUD??
This reminds me of back in the day when I got myself into trouble and Mom said, “wait till your father gets home”! Now that was the longest day. Actually I had more than one.
28 Houses In 51 Minutes: No Buyers, No Bidders
Marc Fisher
http://blog.washingtonpost.com/rawfisher/?hpid=topnews
Twenty-eight houses sold in 51 minutes, each auction the final spin in a harrowing death spiral for 28 families that believed just a year or so ago that they had found security and comfort.
On a blustery spring afternoon at the edge of a parking garage in Upper Marlboro, eight people stood in a semicircle in front of the auctioneers whose job it was to sell off the houses those 28 families couldn’t pay for anymore. Each person in the audience — all professional house buyers who travel the circuit of courthouse auctions — spent the hour glued to a cellphone, awaiting instructions from anonymous investors.
At the end of the hour, all eight buyers, even the ones who had blank bank checks in their hands, stood up and silently walked away.
Still overpriced–even at auction.
Silent, but deadly.
Oooh, good article, qaxy.
This particular bit of it quite enraged me:
‘Most of the families whose houses were sold on this day came here from Africa and Central America. They own small businesses and work for the government and sell cars and toil in the hospital. These houses were their dreams. They were more committed to the idea of riding the American wealth elevator of real estate than to the ideals of democracy: Of the 28 people whose houses were auctioned here, one is a registered voter.
A passerby stopped to watch the auction for a few minutes. When Blair called out for bids, the visitor perked up: “Take food stamps?”
Wha…? WHA…!? Fook that!
“professional house buyers who travel the circuit of courthouse auctions”
Not that they’d talk, but I’d love to see a spotlight put on these people by the media. Then maybe the little guy would get the big picture regarding the relationship re: keeping up with the Joneses vs knowledge and patience.
Would anyone please be able to post a link to that excellent chart that shows when Alt A and prime ARMs change their rates in the next few years? I’m trying to convince a niece to hold off buying a house until at least 2010 and the rate changes in these mortgages are one of my prime arguments. (Actually, I’d like her to hold on to 2012-13 at least, but I don’t think that’s possible!)
I’ve tried to search for the chart in the archives and can’t find it. Thanks a lot.
pulled this little tidbit from naked capitalism, “Money Manager Capitalism…financial arbitrage”
“Now, however, with acute inflationary effects prevailing throughout global markets for food, energy, and commodities, one should be prepared for the likes of problematic supply bottlenecks and shocks, hoarding, trade frictions and interruptions, and generally heightened geopolitical instability.”
—
the machinations developed for the virtual world will also get targeted for dislocation creating opportunity for those with access to “real” information, as I consider the supply side shock of information transmission the greatest threat. sunday morning tinfoil hat off/
Read the post underneath that one which upset me far more.
http://images.google.com/images?hl=en&q=ARM+reset&btnG=Search+Images&gbv=2
Google images “ARM reset”.
Alas I was unsuccessful in persuading a recently-divorced friend from a purchase; hope you have more luck with these charts than I did.
The Condo Owner’s Dilemma
If You Want to Move but Can’t Sell, You May Not Be Able to Rent, Either
http://www.washingtonpost.com/wp-dyn/content/article/2008/05/02/AR2008050201722.html
…Now Moss, 33, wants to find a tenant for her condo while she waits out the economy. But the condominium association allows only 20 percent of the units to be leased at once, so Moss is on a waiting list. If she tries to rent the unit without permission, she could face a $500-a-month fine.
Md. Comptroller: foreclosures will hit local budgets hard
The effect of the foreclosure crisis will hit hardest at local budgets, according to the state’s chief tax official.
…Local revenue will be particularly hit in 2009 and 2010, Franchot said.
“We’re in a real mess,” he said.
…”It’s not their fault,” Franchot said during a recent visit to The Frederick News-Post. “The responsibility for the foreclosure crisis rests with Washington. The last several years of Washington have been like the Wild West. Anything goes. And that lack of regulation has a price that we’re going to pay for years to come.”
The bill O’Malley signed will lengthen the foreclosure process from 15 to 150 days, and require a lender to wait 90 days before filing a foreclosure action. It also strengthens prohibitions on mortgage fraud.
http://www.wtopnews.com/?nid=25&sid=1397948
A good article about the global food crisis:
http://www.truthout.org/docs_2006/050208H.shtml
Here are some excerpts:
“The larger backdrop to this perverse food market situation is the global financial system, which is now teetering on its flimsy axis. What began as a localised housing loan collapse in the US in 2007 has unravelled into something far more serious, as people realise that the emperors of the global financial system have no clothes. The world economy is living on debt that no one can pay. While central bankers and Lear jet executives try to patch the holes and restore confidence, the underlying truth is that the system is close to bankruptcy and no one in power wants to take the necessary tough measures: not the IMF, nor the World Bank, nor the leaders of the world’s most powerful nations. Not much more than public relations glitter can be expected from the G8 meeting in June.
Similar problems lie at the heart of the food crisis: an ideologically driven elite has forced countries to wrench open markets and let the free market run, so that a few megacorporations, investors and speculators can take huge payoffs. Many countries have lost that most basic power: the ability to feed themselves. This loss, coupled with the corruption that plagues our countries and trading systems, shows that neoliberalism has lost any legitimacy that it might once have had. It is a measure of how out of touch these ideologues are that many now openly call for more trade liberalisation as a solution to the food crisis, with some even proposing that the rules of the WTO be changed to prevent countries from imposing export restrictions on food.”
” Profit increase for some of the world’s largest grain traders
Company Profits 2007 (US$ million) Increase from 2006 (%)
Cargill (US) 2,340 36%
ADM (US) 2,200 67%
ConAgra (US) 764 30%
Bunge (US) 738 49%
Noble Group (Singapore) 258 92%
Marubeni (Japan) 90* 43%*”
http://www.youtube.com/watch?v=Jd2Gj4WbmtA
A Canadian report on how Canadians are flocking to Phoenix to buy property. You may enjoy the Canadian real estate agents and their plane ride. This bubble may have started in the US, but from the look at things, it is going to be worldwide phenomenon.
UBS to Layoff 8000…
May 5 (Bloomberg) — UBS AG may cut as many as 8,000 jobs as it grapples with the biggest credit writedowns of any European bank and a 12 billion-franc ($11.4 billion) first-quarter loss.
Switzerland’s biggest bank, which had a 3 billion-franc profit a year earlier, is set to spell out plans for layoffs when it reports detailed results tomorrow. The company will probably say it’s eliminating between 2,500 and 3,000 jobs in its investment bank, more than 10 percent of the division, two people familiar with the matter.