This Tsunami Of Economic Insanity
Some housing bubble news from Wall Street and Washington. Bloomberg, “U.S. foreclosure filings climbed 65 percent and bank seizures more than doubled in April from a year earlier.More than 243,300 properties were in some stage of foreclosure, the highest monthly total since RealtyTrac began in January 2005. Nevada, California and Florida had the highest rates. Filings rose 4 percent from March.”
“‘Loan modification isn’t working,’ said said Ira Rheingold, executive director of the National Association of Consumer Advocates in Washington. ‘It’s extremely difficult for a homeowner to talk to a servicer and even if they do, it’s hard to get the servicer to change the terms. You get voice-mail hell, they don’t return calls, you can’t get a live person on the phone.’”
“The median price for a single-family home fell 7.7 percent in the first quarter, the National Association of Realtors reported yesterday. There were 4.06 million U.S. homes for sale at the end of March, 40,000 more than the prior month, the Realtors association said in an April 22 report.”
“‘Inventory levels have soared to unprecedented levels’ Brian Fabbri, chief North American economist for BNP Paribas, said in an interview. ‘Builders and homeowners have to lower their prices significantly to sell that inventory out.’”
From Realty Check. “So what about all the reports that borrowers are being helped, and all those programs to find and refi borrowers, and what about the word from some other sources that foreclosure numbers are actually dipping?”
“Apparently the system, that is whatever court or clerk or local bureaucratic office is stuck with recording all this stuff, is stressed. In Ohio, for example, I’m being told that it can take two to six months to get your filings in the system.”
“‘In states like Michigan, we’re hearing from some of the trustees who actually do the foreclosures that the lenders have asked them to slow down because they don’t want to process any more into a market that won’t absorb the properties back through sales,’ says Rick Sharga of RealtyTrac.”
“In Florida, a St. Lucie County court actually added a night shift to handle the massive backlog of foreclosure filings. The clerk of the courts was quoted as saying the caseload has become, ‘just horrendous.’”
“The court used to handle about forty filings per month. In January they were tracking 715 foreclosure filings. Some are reporting lower numbers because the numbers simply can’t get into the system.”
The Arlington Advocate. “With the pace of foreclosures continuing to break records, lawmakers attempted Tuesday to stanch some of the bleeding, offering a trio of bills that drew throngs of supporters to Beacon Hill. All three were sponsored by Sen. Dianne Wilkerson, D-Boston.”
“Rep. William Brownsberger, a Belmont Democrat, argued that major lenders and other large companies get federal assistance when on the verge of collapse. ‘We bail out Chrysler, we bail out Bear Stearns,’ he said. ‘Now we’re talking about neighborhoods that are going down. It’s time to change the deal.’”
“Rep. Elizabeth Malia decried what she called ‘this tsunami of economic insanity.’ ‘Allowing the termites to get fat, eventually the house is going to come down on our heads, literally,’ she said. ‘We’re rewarding [lenders] by not legislating them any further and by not protecting the homeowners and the tenants.’”
National Mortgage News. “As the fallout from the mortgage meltdown continues, pundits are scratching their heads as an increasing number of borrowers ‘just walk away’ from their homes.”
“It should come as no surprise that families who purchased homes at the height of the market would walk away when declining market prices left them upside down on their loans. This is especially true for those whose purchases were funded using 100% financing with interest-only teaser-rate ARM loans that are now resetting.”
“What is surprising is the alarming number of walk-aways who have loans a year or more away from a rate reset. Welcome to the hidden world of occupancy fraud, the ‘x’ factor in the meltdown.”
“For many years, occupancy fraud was tolerated by lenders so long as the mortgage payments were made. Speculators and investors, who played a significant role in the inflation phase of the housing bubble, took advantage of this fact by misrepresenting their intended use of the property, especially in South Florida, Arizona, Nevada and California.”
“It’s no wonder that these four states lead the nation in defaults and foreclosures, or that they sit atop the fraud indices, as these liars just walk away from their bad — and intentionally hidden — investments.”
“Does it make sense that a borrower in a 3,000-square-foot, $700,000 home in California would buy a 1,700-square-foot, $150,000 second home in Between, Georgia? Does it make sense for a borrower to own multiple properties in the same area? Of course not, especially when the ‘residence in question’ is only three miles away from the primary residence and the borrower says he’s sometimes ‘too tired to go home after working out in the gym’ (true story!).”
The Australian. “Looking to charge into the red-hot US business of sub-prime debt two years ago, Mizuho Financial Group’s brokerage poached 11 bankers, traders and salespeople, headed by structured finance ace Alexander Rekeda, from investment bank Calyon. Mizuho wanted to quickly build up its business of packaging mortgage loans into collateralised debt obligations.”
“When Mizuho releases earnings today, it will project that its losses from mortgage-related investments will total at least $US5.1 billion. ‘We wanted to take our business global,’ a Mizuho Securities spokesman said, explaining why the bank chose to enter the CDO market.”
“Mr Rekeda made frequent media appearances to promote his fledgling team. ‘The 2007 vintage of residential mortgage-backed securities is looking to be one of the best vintages in 10 years,’ Mr Rekeda said in one interview in April last year.”
“As Mizuho’s team stepped up its trading last year, signs of trouble were brewing in the market. Undaunted, Mr Rekeda and his team marched on.”
“‘There is very little trading in CDOs going on,’ Mr Rekeda acknowledged in mid-July. Nevertheless, his group put together a large CDO that month, and even managed to increase its size to $US1.6 billion from an initial $US1.2 billion, citing strong investor demand.”
From MarketWatch. “Freddie Mac…the mortgage-finance giant, posted a loss on expenses related to ‘challenging’ housing and credit-market conditions, as Freddie Mac’s CEO predicted that continuing weakness in the U.S. housing market would hurt the company’s bottom line for the year.”
“The company said difficult housing- and credit-market conditions were behind a $1.2 billion provision for credit losses taken in the latest quarter.”
The Baltimore Sun. “Home sales fell faster in Maryland than in any other state in the nation in the first three months of the year, dropping more than even in hard-hit spots of the country such as California, a Realtors group said yesterday.”
“The median price of single-family homes fell 3 percent in the Baltimore metro area in those months, which was middle of the pack in the country. In the Washington metro area, which includes parts of Maryland, the price fell 13 percent, still a far cry from the drops on the West Coast. Sales prices fell more than 25 percent in both Sacramento and Riverside, Calif.”
“Marc Witman, a partner with Yerman Witman Gaines & Conklin Realty in Baltimore, strongly suspects that Maryland home sales are falling so fast because prices aren’t.”
“‘There’s a disconnect between what the buyers expect to see and what the sellers expect to receive,’ he said. ‘It’s like the buyers are the only ones reading the newspapers. I think when you see the median price come down 10 or so percent, then you’re going to see more buyers come off the sidelines.’”
“Amna Kirmani, a marketing professor at the University of Maryland who specializes in consumer behavior, calls it the ‘my house is different’ phenomenon: ‘People are anchoring on their own love for their houses instead of anchoring on what the market is doing right now. We never think it applies to us.’”
“Some sellers, particularly those who bought in the past few years, think they have no choice. If they lower their asking prices, they’ll get less than they owe on their loans. ‘It’s a challenging time right now,’ said Keith T. Gumbinger, a VP with financial publisher HSH Associates.”
“Maryland rode the wave higher than most: Prices here rose 21 percent in 2005, according to the Office of Federal Housing Enterprise Oversight - a bigger increase than all but three states and the District of Columbia. California’s increase was just slightly smaller.”
“‘Our prices went up most precipitously, and the prices aren’t coming down’ to the extent that they are in California and the D.C. area, said Witman, the real estate broker. ‘Witman’s theory’ is the prices ran up so quickly that we need to give something back.’”
The Bucks County Courier Times. “Nervous homebuyers looked but didn’t buy during the second quarter, cutting Toll Brothers’ homebuilding revenue by 30 percent.”
“‘When we have held promotions, buyers have come out to play and put down deposits,’ CEO Robert Toll said during a conference call Tuesday with investors. ‘Often, however, a lack of confidence in the direction of home prices overcomes their enthusiasm and they don’t take the next step of going to contract.’”
“Toll also said potential homebuyers are afraid they won’t be able to sell their existing homes.”
“Sales contracts after cancellations totaled 929 homes for $496.4 million, a decline of 44 percent in number of homes and 58 percent in dollars from the same period last year.”
“‘It’s clearly a buyer’s market, but buyers can only take advantage of it if they buy,’ Toll said. ‘Sooner or later they will, but unfortunately, we can’t predict when.’”
“Toll said most U.S. home markets have weakened. But a surprising high point has been Naples, Fla., an area that’s among the hardest hit by the housing downturn. He gave the area an A-minus, while all other markets in Florida were given an F. He said Philadelphia suburbs are a C-minus, but the Pocono Mountain region is an F-minus.”
“‘You can’t give away stuff in the East right now,’ he said. ‘It’s very surprising.’”
The Street.com. “Blaming the media for the fractured state of your business is lamer than the retail industry’s fallback excuse of too hot/cold/rainy/dry weather. It is also an indication that your troubles are far from over.”
“Enter Robert Toll, CEO of the estimable Toll Brothers, flapping his gums about how media reports about falling house prices are scaring customers away from buying.”
“Said Toll, while announcing anemic preliminary quarterly results: ‘We believe there is significant pent-up demand which is growing. When we have held promotions, buyers have come out to play and put down deposits. Often, however, a lack of confidence in the direction of home prices overcomes their enthusiasm and they don’t take the next step of going to contract. They, like all of us, read the papers and watch TV, both of which keep advising them that home prices are declining.’”
“This has become quite a go-to line for the leader of an overextended company, one whose products customers can’t afford based on carrying costs.”
“Last quarter, while reporting the company’s worst results in two decades, he said: ‘Ceaseless talk of a recession continues to dampen the mood of consumers. This drumbeat, coupled with concerns over mortgages, the direction of home prices, and foreclosures has kept pent-up demand on the sidelines.’”
“Got that? It’s not that a recession is (probably) at hand. Nah. It’s the media talking up a recession, probably because they want the newspapers they work for to go Chapter 11 even quicker.”
“Let’s count the ways that Toll’s sad little mantra is misleading: 1) I don’t remember Toll crediting the media during the ridiculous housing run-up for chasing real estate advertising money with 1,423,789,678 happy profiles about people in houses that they had redecorated and were going to increase in value forever. Remember? The word ’subprime’ was literally not in the journalistic vocabulary.”
“2) Since the housing downturn began, a good portion of the media has been busily predicting its recovery. Watch The Wall Street Journal build an entire imminent recovery story on a single statistic: from a realtor trade no less.”
“Or witness The New York Times not even mentioning the role of the strong dollar in temporarily propping up New York City housing prices. Or that widespread declaration of a recovery before the downturn had hardly begun when existing home sales blipped up for a grand total of two months in a row. Usually it takes three to declare a false trend, but they made an exception for real estate at two.”
“The irony is that the media, so cowed by fear, eager to shift story lines and write real estate recovery stories and apt to report in an on-the-one-hand-on-the-other-hand fashion, which gives a free showcase to any ridiculous claim, does not call this for what it is: a hustle job.”
“Look closely at Toll’s quote at his company’s most recent disaster of a quarter. He mentions people reacting to promotions, but not going all the way to closing. Anyone in any business will tell you this: If people are getting intrigued by discounts and promotions, but not yet making it all the way to the cash register, guess what it means?”
“The discounts and promotions are not steep enough and prices have to come down by another 20%. And that ain’t the media’s fault.”
From CNBC.com. “The Federal Reserve may start using regulation or even interest rates to fight asset-price bubbles, instead of trying to limit the damage once they burst, as it has done until now, the Financial Times reported on its Web site.”
“One option is for the Fed to set interest rates higher than they would otherwise be when asset prices appear to be rising beyond levels justified by economic fundamentals, the paper said.”
“Fed Chairman Ben Bernanke, who rejected this approach in 2002 after the dot-com bubble burst and endorsed Alan Greenspan’s view that the Fed should not ‘lean against the wind,’ is now willing to reevaluate it in the light of the housing and credit crises.”
‘Rep. William Brownsberger, a Belmont Democrat, argued that major lenders and other large companies get federal assistance when on the verge of collapse. ‘We bail out Chrysler, we bail out Bear Stearns,’ he said. ‘Now we’re talking about neighborhoods that are going down. It’s time to change the deal.’
So characterizing every act under the Sun as a bail-out has only served to embolden these commies to demand more. Of course, failing to accurately assess a situation usually comes around to bite you in the ass.
By the same token, it’s worth mentioning that Massachusetts remains mired in the housing bust and will likely emerge later than Florida, where they have acknowledged there was a housing bubble and aren’t crying for state aid. This in spite of the fact that Massachusetts’ bubble popped a year or two earlier.
Absolutely, Ben. MA is in a pickle–too many run-down houses owned by too many run-down greatest gen’ers. As they pass, their estates are slow to drop the price because they own them outright and they just wait for a fool. Thankfully, the mounting foreclosures are forcing prices down.
RE: MA is in a pickle
What?
You mean you can’t run a state economy on DHS & special education services for legions of welfare deadbeats; healthcare to keep the multitudes of the Greatest Gen ambulatory; and mowing lawns for all the rest who can’t draw an early public employee retirment check?
Defeatist!
WOW..Ben and the HB wrecking crew are on a roll with this posting
Massachusetts IS #2 in the nation in education. So it’s not all bad.
Mass is awesome. Lot of wealth there, too, although the nouveau riche yuppies deserve everything they have coming.
You should see the “disability” cheats in Florida. And you should see how well they habilitate those with actual disabilities. Say you were Black and dyslexic and born in the 60’s. Too bad, you can’t read. School system just didn’t bother.
Ooo, and the bums in Florida! Let me tell you about the bums! Yankees are still pretty stingy… but Fl has hippies. Food & free beer for all! (This leaves your entire VA check for purchasing hookers and crack. Cheers.)
What the fine Rep failed to point out was that the aid, or whatever you want to call it, to investment banks and lenders was aimed at preventing an economic meltdown (i.e., net societal gain). This logic does not apply to homeowners. Sorry Rep.
By the same token, it’s worth mentioning that Massachusetts remains mired in the housing bust and will likely emerge later than Florida, where they have acknowledged there was a housing bubble and aren’t crying for state aid.
Both areas are still in the denial stage!
Bring out your debt!
“When Mizuho releases earnings today, it will project that its losses from mortgage-related investments will total at least $US5.1 billion. ‘We wanted to take our business global,’ a Mizuho Securities spokesman said, explaining why the bank chose to enter the CDO market.”
Taking the business global doesn’t mean doing moronic things.
Buffett after many many years is also taking his business global but he’s not doing moronic things. He’s sticking to time-valued stuff that he understands like buying family businesses, and keeping them around forever.
Oh, that Warren. He’s such a square.
“The Federal Reserve may start using regulation or even interest rates to fight asset-price bubbles, instead of trying to limit the damage once they burst, as it has done until now, the Financial Times reported on its Web site.”
“One option is for the Fed to set interest rates higher than they would otherwise be when asset prices appear to be rising beyond levels justified by economic fundamentals, the paper said.”
“Fed Chairman Ben Bernanke, who rejected this approach in 2002 after the dot-com bubble burst and endorsed Alan Greenspan’s view that the Fed should not ‘lean against the wind,’ is now willing to reevaluate it in the light of the housing and credit crises.”
*****
All the serial bubble riders in the Alt-A Bay Area (RE [80's] to dotcoms [90's] back to RE [00's] to alternative energy[now]) are not going to like this policy.
For it’s the only thing they know…
They are so screwed; they have no tools to understand the monumental shift.
How about enforcing laws and regulations that are already on the books to prevent fraud? Why didn’t they speak up when subprime and Alt-A securities were rated AAA, the same rating given to T-bills? How about all the liars loans and undisclosed cash kickbacks?
American paper money is still rated AAA, despite everything tied to it being of a much lower rating…
Why’s that?
“Why’s that?”
Because the supply of U.S. dollars is rapidly disappearing due to endless writedowns on balance sheets. This disappearance causes any surviving dollars to become more precious, more scarce, more in demand.
Cash is king.
They aren’t making any more dollars. LOL.
Printing Federal Reserve Banknotes could be outsourced to Kinkos, it’s not exactly rocket science.
Who is actually manufacturing dollars?
When I buy your house for 100K and you turn around and sell it for $200K, $100K in new dollars were created out of thin air. Afaik, the lender doesn’t have to ask the Fed to print money before it approves the loan..
When the RE market crashes that $100K in dollars evaporates. We are witnessing trillions of dollars evaporate.
“We are witnessing trillions of dollars evaporate.”
BINGO!
ooops..
When I buy your house for 100K should read: When you buy my house for 100K..
weird.. there was something odd about the wording that hid that error..
anyways, cash is king.. and in line for a promotion to Demigod.
I read an article once about how the ratings agencies look at prospectuses and don’t vet the operations or portfolios of most banks. They ask the banks to rate the risks of their own portfolios. Then of course the ratings agencies were buying stocks of their preference and rating them higher than deserved, presumably to maximize their own returns.
It is a very abusive, incestuous relationship ridden with conflicts of interest…not unlike some nutty, isolated religious sect somewhere in the desert.
It is a very abusive, incestuous relationship ridden with conflicts of interest…not unlike some nutty, isolated religious sect somewhere in the desert.
Not only is it a conflict of interest, but they completely failed the independence test as required by the SEC.
Because even with the bad stuff hitting that’s currently occuring, default ratios on those AAA notes aren’t any worse than other AAA paper. Values are way, way down, but the defaults haven’t been occuring.
It may be premature to declare Silicon Valley dead.
The dotcom bubble created stupid valuations on exits for VCs, and malinvestment because of it, but through venture capital, good, long term oriented companies are still created.
VCs on Sand Hill road are far different than Wall Street bankers.
Wall Street bankers trade for the day or week, or month. VC funds invest to create companies over several years.
Ohh my god. I just don’t know what to say. I agree that Hyena’s and Buzzards are different your correct. Other than that I think you have never dealt with a VC firm. Or better angel investors.
In general Wall Street is in a hurry so it just fleeces the sheep. VC’s take the time too kill companies gut them and make sausage. They don’t like to waste anything.
This has been my view from my dealings with them as well.
He’s clearly never started a company and/or been involved in VC proceedings.
Step 1: You have no product. Give us 25%.
Step 2: You have a product but no sales. Give us 20%.
Step 3: Your sales are not good enough. Give us 10%
Step 4: We own 55%. F*ck off.
Step 5: Load up the mo-fo with debt.
Step 5: Go public with Wall St. help.
Step 6: Debt makes company crash.
Lather, rinse, repeat.
“Step 4: We own 55%. F*ck off.”
LOL. I want to sit in on THAT meeting!
They generally just cut off the Chief Scientist’s balls because the “founder” generally ends up as the CS or the CTO, and the suits become the CEO, COO and the board.
Then they install a puppet CEO, and board who may or may not siphon off all the money.
It’s quite entertaining if you know what signs to look for.
I bet you I could predict most VC moves without even looking at a company’s product or prospectus.
So, what part of what I said is not true?
That VCs are different than Wall Street bankers?
You can be critical all you want about how VCs go about their business, but they are in the business to put cash into companies so that the company has a chance of actually being a company. Very few actually survive. So, to make their business work, they need significant ownership of each company they fund, and they need to be very efficient in the disposition of companies that don’t work. If the entrepreneur doesn’t like the terms, don’t take the money and/or go somewhere else. It’s very simple.
A world without venture capital means that far fewer new companies would be created.
In a world without Wall Street bankers, far fewer structured debt offerings would exist.
VCs and Wall Street bankers are different.
Kool Aid drinker……
I’m confused.
I equate Wall Street guys with hucksters trying to do whatever they can to put none of their own money at risk and taking money from the masses. Levering the firm 30x is common.
VC firms have cash that they invest in companies in the hope to create a company and a stable business model. If 1 in 10 work, they’re doing well, but they are putting lots of money at risk to own portions of companies. If the companies aren’t going to work, they don’t hesitate to scrap the plan and try again somewhere else.
Wall Street firms take healthy companies, load them with debt and kill them.
VC firms start from scratch, put cash into deals and try to create a company–if it doesn’t work, they kill the company; quickly preferably
They are not the same species.
The point though is this…venture capital is not reliant on bubbles to be a viable business.
Perhaps American paper money is still rated AAA for two reasons:
1) It’s backed by the power of the US Congress to tax the American people.
2) The US Department of Defense.
My apologies - the above was meant for farther above.
Also - who declared Silicon Valley dead?
Alternative energy, and the next hot thing, will keep the band playing for a long time.
VC’s have an ability to turn nothing into gold (or at least create the illusion; see: far more than the majority of dotcoms), as well as the ability to turn promising ventures into crap.
They’ll be in business for a long time.
the magic of OPM. 80% gets converted… 20% generates more.
Interesting anecdote.. Have a friend working at a small VC. According to him, most of the projects that get approved and funded nowadays aren’t alt-energy related, but rather, most of the business plans revolve around software and many of those revolve around MMORPGs -either for entertainment or educational purposes.
The implication above was that the Fed leaning against the wind is somehow going to significantly hurt “bubble riders” in the Bay Area (Alt-Energy, dotcom, etc.). The implication to me was that those investing in Alt-E and dotcom (VCs primarily) would not make profits or have a business without bubbles. That is not true. They’ll just make less profit sometimes, and have longer investment durations.
Frankly, bubbles are generally problematic for private equity. Bubbles brings in more money increasing competition and lowering returns, while at the same time making it more difficult to underwrite, since the robust exit available today may not be available when you are actually in the market to sell the company–so you are left guessing. In the meantime, the financial market bubbles don’t even help make a business successful, it just helps exit valuations for those businesses that are successful. Dotcom was the exception to this general rule, as time to market was so compressed that you could more likely be exiting during the same wackiness in which you were investing.
Another aside. KPCB is putting $100MM into iPhone apps. Those’ll be good businesses.
That must be why the Russian ruble is so strong lately.
How to stop a bubble?
Why not increase margin requirements as markets extend beyond historic measurement ranges? Why not start tightening the controls on leverage when p/e’s exceed, say, 25? Increase margin requirements in well publicized stages.
Why not increase the GSE mortgage conditions similarly? Demand 30% down (and more) in elevating markets when prices begin to significantly exceed benchmark ratios (and, conversely, demand 10% in depressed markets)?
The problem is THE LEVERAGE. Is there something mysterious about this historic facet to the bubble building process? Isn’t it always related to easy access to credit?
Doesn’t the FED have the tools NOW to significantly “lean into the wind” in this manner?
jag,
Absolutely agree. If you look back to the Tech Bubble by 1999 the use of Margin was at an all time high! It’s the exact same scenario Darrel in PHX described only this time it was “Do you want 20% a week appreciation on 500 shares or a THOUSAND shares!
Very legitimate point and totally manageable. It wouldn’t cost a dime. Controversely, when the market is struggling and truly under valued, they can increase limits.
Ah-ha! Just look at all the walk-aways that still have a year or more until their re-set hits! “Infestors” likely every last one of them! And what’s with all this making a distinction on “occupancy fraud”. O.Kay… if it makes you feel better put a specific name on it but mind if I call it just plain, old FRAUD! Sorry, you can’t pull that off unless you have a guy on the inside.
Wait! (Here’s my bus. card)
Funny they should mention the prevalence of occupancy fraud here in Arizona. Sheesh, I can point to numerous examples of it right here in this neighborhood.
And do you know what really frosts my cornflakes? Let’s say that there’s a house that’s being used as a rental, but it’s listed in our public records as being “residential owner occupied.” Happens a lot around here.
You’d think that our County Assessor would have set up a tips line so that we, the honest suckers who pay property taxes on what our homes are really being used for, can report some of these fraudsters for paying the lower residential rate when they should be taxed at the higher rental property tax rate.
I’m here to say that there is no tips line . And when we (meaning me and other property taxpayers) have tried to point this out to our local officials, we get the brush-off.
Thanks. I’m done ranting now.
Arizona Slim,
It’s encouraging (to me at least) that they are now starting to break it down. Believe it or not I can understand why a family guy embellishes on a loan app. on a home they intend to occupy long term. (They have no add’l RE holdings/inv. etc)
Contrast that to the freaking PIG that can’t even FIND all the rentals he own in Vegas/PHX etc!? Just getting enforcement to understand that is a major step.
Who would you report them to?
I’d say at least half of my town are now rentals. About 1/10 were bought recently to house their precious Tiffany while she was win school but now that she’s graduated, they rent them out (they wanted to sell but are now underwater). A good portion of these are still taxed at o/o rate. I’d love to turn these people in.
Jane, if I were you, I’d start with your County Assessor’s office. That’s the place that I like to hector here in Tucson. I’ve also sent e-mails to the people who are handling my property tax appeals. Both of them used to work in the Assessor’s office.
“It’s extremely difficult for a homeowner to talk to a servicer and even if they do, it’s hard to get the servicer to change the terms. You get voice-mail hell, they don’t return calls, you can’t get a live person on the phone.”
“Apparently the system, that is whatever court or clerk or local bureaucratic office is stuck with recording all this stuff, is stressed. In Ohio, for example, I’m being told that it can take two to six months to get your filings in the system.”
Well, it isn’t like the mortgage securitization system, the court system, and the deed recording agencies had armies of people sitting around waiting to manage this mess when it occured. But armies of people is what is going to be required, all paid for by additional losses for mortgage bond investors and by taxpayers.
At least in commercial real estate, properties in default and turned over the a “special servicer” by the mortgage servicer in securitized debt. I’ll bet those folks are working some OT.
“Loan modification isn’t working”
Nah… It’s just that the switchboard is mel—ting…
People don’t want to be saved.
..It’s extremely difficult for a homeowner to talk to a servicer..
There’s gotta be hundreds of thousands of FBs who even make the call because they lied on the contracts they signed are are fearful of possible consequences… So, they just lay low and take things as they come.
I think there’s a key word missing: “won’t”
There are way more “investors” than these bailout proponents will ever admit, and if they are underwater, it doesn’t matter if it’s by $200,000, or the bank makes an adjustment so they’re only underwater by $1,000. They will still walk away. That’s also why whether they’re pre-reset or not makes no difference. It’s either sell now for a profit, or walk.
yeah.. i saw the error but it seemed borderline-obvious enough.. I didn’t think it deserved fixing.
..FBs who won’t even make the call ..
i wonder if there’s a way to find out how many people are hesitant for that reason.. it’s gotta be anonymous.. cant use the phone.. can’t use direct mail.
“Amna Kirmani, a marketing professor at the University of Maryland who specializes in consumer behavior, calls it the ‘my house is different’ phenomenon: ‘People are anchoring on their own love for their houses instead of anchoring on what the market is doing right now. We never think it applies to us.’”
If their houses are so special and they love them so much, why are they trying to sell them?
I call it “beautiful lie” vs. “harsh reality”.
When someone tells you something that is in your best interest if it were ture, people tend to believe it. When they tell you something that is harmful to you if true, people tend not to believe it.
You can be rich and retire by the time you are 40! People tend to believe it without asking, “ifeveryone can do this, how will we have janitors?”.
Sorry, it was all a lie. Really, you are broke, likely to be jobless, and will never be able to afford retirement…. Despite a quick look at their balance sheet and income statement that proves it, people refuse to believe it.
Darrell in PHX,
I confront this on a daily basis. Here’s how “I” deal with it right out of the gate!
Gee, let me see here… you and the Mrs. are both 50 yrs. old and have very little if any savings. Oh…kay. You both want to retire in 10 years, right? You both make a combined income of say… 75k a year. So 10 X 75,000 is $750,000.
How did you want to spend that?
Well said Darrell. That is exactly how the corporatists have squeezed so many miles out of the lie, “If you just work a little harder, you’ll be rich too”…….. And the dummies believed it.
Isn’t it amazing how many “dream homes” are currently on the market? The high end of listings in our little town is full of “dream homes” built in the last 3 years. Why buy one of these big monsters with all the steel and granite and cherry cabinets and hardwood floors… then try to sell it two years later?
Exactly. Yes, people get work-transfers, and blah, blah, blah, but something’s wrong when you claim to a house is so “special,” and you “love” it so much, but you want to sell it after two years. If I were a potential buyer, I would find that inherently suspicious.
Groundhogday,
Not even just the “dream homes”. I see a lot of the “stuck in your cubicle, pleasant “day-dream” homes on the market too! Like Housing Wizard said yesterday, there were so many people that where the situation mandated they sell within that 2 year time frame. Perfectly applicable here. Is there a way we can take a test market and see what percentage of the inventory is 3 y.o or newer?
Check out this MLS listing for $735k. Custom log house, just outside Pullman, WA with 4000 sq ft of building and 11 acres of land. High end everything, horse barn, etc… Built in 2007!
http://tinyurl.com/4t7yt2
Who in their right mind builds this sort of ultra high end house and then decides to sell it just one year later?! In the middle of the wheat fields in Eastern Washington no less?!?!?!
Groundhogday,
That’s what I like to call a “Make My Retirement” listing! I buy a log-home kit, assemble it on what was family property, sub-divide and you get to “make my retirement” (one_mortgage_payment_at_a_time)
It does look awfully cookie=cutter to be “custom”. I love the chandelier, though.
I think flipping has taken the place of social security for the landed class…
This one near Missoula gets me. It went on the market almost IMMEDIATELY after it was finished. Custom horse property.
All I can figure is all the fighting over tile color and appliances led to the big D-I-V-O-R-C-E.
NoSingleOne,
And the IRA, And College Savings Plans, And…
those antler chandaliers are hulluscioius. the only thing I like about the property is the barn.
“Is there a way we can take a test market and see what percentage of the inventory is 3 y.o or newer?”
I did some research, pulling the top entry on each of 18 pages of auctions notices for Maricopa (PHX) AZ from yesterday.
Short answer: 3 from 2005, 12 from 2006 (peak here), and 3 from 2007.
Not a single one more than 3 years old, but 2 were pretty close.
Oh… I forgot the point of this post….
I made a post below giving origination date and original amount, but hasn’t showed up yet.
“Why buy one of these big monsters with all the steel and granite and cherry cabinets and hardwood floors… then try to sell it two years later? ”
Because it is the guaranteed way to instant riches… duh.
Since prices will go up 10% a year, buya $100K house and make $10Ka year or buy a $1 million house and make $100K a year.
Which do you prefer? $10K or $100K a year income?
Darrell,
Exactly, you beat me to it! No-brainer right? In my other post I talk about “How do you want to spend that?” and the truth is there are SO many people in their 40’s and 50’s out there that won’t LIVE long enough to pay off all the RE-related debt they’ve run up.
Time to get real for that crowd.
soylent green
Soylent Green is FBs.
Which do you prefer? $10K or $100K a year income?
lol
That mindset isn’t gone. Too many investors are going to BK with a lifetime’s worth of equity extracted from their primary home. Isn’t it funny how every newspaper expose’ shows the poor investor who bought their primary residence for $xxx,xxx but now owes $250,000+ more on it, plus has multiple underwater investments? Most made *great* money during the bubble, but its gone. The have the boat, $4/gal guzzler, etc.
This won’t be a short recession… our manufacturing was boats, billiard tables, some furniture (sadly, most went to China), and aircraft (often business jets for the hedge fund ‘elite.’) This hasn’t even started to unwind.
Got Popcorn?
Neil
furniture (sadly, most went to China),
You know, a few years back when we were buying furniture, or I should say ATTEMPTING to buy furniture, I figured that the bulk of the furniture manufacturing market was ripe for outsourcing to China, and not just because of cost. And so it has come to pass, perhaps?
When it takes 6 weeks to get a sofa, and then 2 more weeks for an “unexpected delay”, and then yet another unexplained week, you have to think that the same product could be made, albeit to lower standard, in China that same week you order it and shipped to get here in the same time on the literal slow boat.
I expected long delivery times when I lived in Europe, since especialyl on the Continent that seemed to eb the order of the day — but not when I got here to the USA where everything else seems to be based on “Instant Gratification”. And it’s sad for the North Carolina manufacturers, who (if furniture is anything like hand tools) make a far better product than the importers will buy.
I guess I just don’t understand the furniture business and why they are letting this happen.
“Isn’t it amazing how many “dream homes” are currently on the market? The high end of listings in our little town is full of “dream homes” built in the last 3 years. Why buy one of these big monsters with all the steel and granite and cherry cabinets and hardwood floors… then try to sell it two years later?”
You just described the Syracuse market groundhogday. Just goes to show you how much it’s not different here. (Are you listening Post Standard?)
It’s also amazing how many homes are out there that I must see. Nearly every home that pops up meeting my search criteria is a must see. Where will I find the time?
aimeejd,
I’m surprised at you! In today’s world, House=MEW=$$$’s! So it isn’t so much that my house… is more “special” than yours it’s that my $$$’s are more important to ME than your’s are to YOU!
Isn’t that the only reason to buy a home any more? You know, b/c it comes complete with an ATM?
“Isn’t that the only reason to buy a home any more? You know, b/c it
comes complete withIS an ATM?”There. Fixed it.
aimeejd,
Thanks, my bad.
I blame HGTV- those shows perpetuate the thought that remodels and upgrades will add some insane added value to your home. Plus, how special anymore is granite, ge profile appliances, hardwoods, etc. Ten years from now, these designs will be viewed as ticky tacky as tastes move on to something else.
Yup, just like shag carpets and avocado-colored kitchen appliances did after the 1970s. Ditto for quadrophonic sound. What a hypefest that was.
Ditto for quadrophonic sound. What a hypefest that was.
Actually, it’s called Surround Sound now. I think quad didn’t catch on because it was too complicated for people at the time. (I still have my Pioneer QX404) Now that there’s personal computers, crackberries and GPSs, the technical sophistication necessary to deal with more than two speakers is more commonplace.
lavi d,
I remember a friend that bought some “quadrophonic master LP’s” and they were simply awesome! That aside, I tend to like my sound ‘tight and crowded’ and don’t even mind “mono” recordings. Ultimately I’d love to get an old “Rock-Ola” or Seeburg jukebox. ( They really kicked @ss! )
…these designs will be viewed as ticky tacky as tastes move on to something else.
Stainless steel is the new avocado green.
Tell me about it. If you have kids it’s worse. Fingerprints have to be wiped off hourly.
Didn’t you know that a $6000 bathroom upgrade is worth $50,000? An $8,000 radon-emitting granite slab in your kitchen is worth $100,000
I totally know that- the show hosts say so and the gullible homeowners eat it up.
Not just HGTV. A&E and TLC have the “Flip this House”, “Flip that House”, and “Property Ladder”. Those were and ARE the mega BS remodel for huge gains, shows!
I loved those shows and watched them back to back, driving my husband crazy. I never acted on them though, but I’m kinda old and lazy.
Is HGTV owned by the NAR? My favorite episode was one of “Sleep on It!” where a Youth Minister and his unemployed wife, with one kid, bought an $800K house in San Francisco. I think that sums up this bubble pretty darn well.
That’s a priceless comment! Thanks.
‘It’s like the buyers are the only ones reading the newspapers.
Ignorance is bliss…for a while.
Touche!
Ben’s leaning against the unwind, now
“Fed Chairman Ben Bernanke, who rejected this approach in 2002 after the dot-com bubble burst and endorsed Alan Greenspan’s view that the Fed should not ‘lean against the wind,’ is now willing to reevaluate it in the light of the housing and credit crises.”
I’d say he’s leaning against the giant sucking sound.
“Fed Chairman Ben Bernanke, who rejected this approach in 2002 after the dot-com bubble burst and endorsed Alan Greenspan’s view that the Fed should not ‘lean against the wind,’ is now willing to reevaluate it in the light of the housing and credit crises.”
I’d say that’s pure BS. From his actions, BB is trying to fan the wind higher, not lean against it.
yes, totally agree. All talk and no action; Big Ben thinks printing more money is the solution for every problem so there is zero chance he will ever change course. The only way we will see FED rates go up significantly (as in equal to actual inflation, in the 10-20% range) is after he is removed from office.
‘The 2007 vintage of residential mortgage-backed securities is looking to be one of the best vintages in 10 years,’ Mr Rekeda said in one interview in April last year.”
Ah, yes, a most excellent vintage. Now, Mr Rekeda, help me in the basement. We must sample the cask of Amontillado…
Yes, and where’s my trowel? LOL!
Ha ha - the unintended consequence of the assorted bailout schemes - whether public or private, voluntary/mandated or even reasonable (banks trying to modify their own loans) vs. idiotic (letting lenders take a 15% hit to dump their trash on FHA or some other govt. entity) ….
The consequence is: more time/room for people to run out the clock and delay forclosure. It’s reasonable that people who would actually be qualified and are working through these bailout processes (whatever you think of them) should be spared from forclosure while working these admittedly slow processes. But, all kinds of over-extended borrowers will enter the workout/bailout process - even if they have no intention of following through - just to run the clock out further. And believe me — some sharpies will figure out the best ways to game an already over-worked system to their advantage - and they’ll even advise others as to how to do it for a few hundred bucks.
It’s got all the makings of a first-class cluster-f***, trainwreck, fiaster (fiasco+disaster). Oh, we have much much much entertainments ahead of us, fellow bubble-enthusiasts. (except for those of us genuinely appalled by this kind of stuff.)
zeropointzero,
Imagine our horror as we watched HP & BB play all their musings out in a VERY public way! Principal reductions? Loan work-outs?
Not long ago NPR did a piece on a young CA couple that are basically squatting just waiting to see what kind of “program” they will qualify for? I’ve mentioned elsewhere but it really is time for these lenders to say… “What CAN you send us in each month!?”
Funny to me that while all this was being done on commissions, fees and points we could get loans approved and funded in the time it takes get through the drive-thru window at Taco-Bell. Now all of a sudden, it’s just overwhelming…
Suck. It. Up.
–
From tthe same report: “One in every 519 U.S. households received a foreclosure filing in April. Foreclosure filings increased from a year earlier in all but eight states.”
This 519 number is misleading because there are multiple households in some occupied units. We have one foreclosure filling for 455 occupied units (this includes rentals), per month. However, there are only 51M mortgages out of 111M occupied units. So, we have one foreclosure filling for 210 occupied units with mortgages, per month. Of the 51M mortgage units 1/3rd have so little mortgage debt that we can ignore them as having near-zero risk for foreclosure filling. This brings up down to one foreclosure filing for 140 units, per month. So annual foreclosure filling rate on homes with significant mortgage is 8.6%, nationally. In the top 5 states with the foreclosure problem this rate is more like 15%.
Jas
I don’t want to imply that the Fed is playing fast and loose by taking anything for collateral, but…
You can get a Billion for a 1-ply piece of toilet paper, a couple Billion for for any old 2-ply.
“Fed Chairman Ben Bernanke, who rejected this approach in 2002 after the dot-com bubble burst and endorsed Alan Greenspan’s view that the Fed should not ‘lean against the wind,’ is now willing to reevaluate it in the light of the housing and credit crises.”
Wouldn’t the time for reevaluation have been before rapidly dropping the FFR to negative real levels (again)?
Please, you are using logic again. This is not permitted. We are talking about economists here.
–
One sign of crooks is that they keep changing the rules, or views regarding the rules, as they go along. It leads to unfair practices.
Jas
I’m bored…I think I can find the evidence of the elusive: “we’ve reached the bottom” conundrum…but, I lost my way to true location of: “ground zero” is there a declination number I have to use? … or can you just tell me which direction to head in? Would it help if a sign on to your theory that: “The stock market always goes up!” or would I be better off to hang out with some scientologists and consult their e-meter? To make matters worse, I’m all out of “Neil’s All Natural Buttered popcorn” and I’m having to munch on honey dipped pretzel sticks…
Using hindsight, it’s easy to pick out those who failed to foresee the future.
Why you human, your thinking is so illogical.
“A man begins cutting his wisdom teeth the first time he bites off more than he can chew.”
Herb Caen
Herb Caen, master of the three dots …
“The Federal Reserve may start using regulation or even interest rates to fight asset-price bubbles, instead of trying to limit the damage once they burst, as it has done until now, the Financial Times reported on its Web site.”
“One option is for the Fed to set interest rates higher than they would otherwise be when asset prices appear to be rising beyond levels justified by economic fundamentals, the paper said.”
“Fed Chairman Ben Bernanke, who rejected this approach in 2002 after the dot-com bubble burst and endorsed Alan Greenspan’s view that the Fed should not ‘lean against the wind,’ is now willing to reevaluate it in the light of the housing and credit crises.”
———————————————————————-
The Fed is finally figuring out that the free market lie and deregulation dogma is precisely the dogmatic lie everyone else has known for years?
DinOR wrote:
“Is there a way we can take a test market and see what percentage of the inventory is 3 y.o or newer?”
Let’s see. I’ll pull yesterdays notice of trustee sales (Foreclosures being scheduled). 18 pages x 19 per page = 340-ish… just yesterday.
I’ll just pull the top entry on each page and record origination date, amount. That seems fairly random, no?
10-6-2005: $238K
6-7-2007: $191K
5-2-2005: $133K (vacant lot in Sedona)
5-1-2006: $200K
5-3-2006: $180K
9-22-2006: $158K (condo)
4-27-2006: $194K
7-27-2007: $165K
12-21-2006: $172K
8-4-2005: $136K
6-23-2005: $116K (2 empty lots in Maryvale)
1-17-2006: $140K
11-29-2006: $664K (Scottsdale)
4-7-2006: $276K
1-13-2006: $204K
12-23-2006: $400K
9-15-2006: $223K
7-25-2007: $207K
Any you want me to “dig into”?
Darrell in PHX,
Thanks but I think you’ve made the point more effectively than I can ever describe! In truth be it LV, PHX or here in good old Oregon, seeing a “pre-bubble” home in F/C is much more the exception than the rule. They really jump out at you as being some sort of equity stripping scheme or massive mismanagement of personal finance. Thanks so much for dredging that research up Darrell! What a “turd hunt” huh?
Let me be clear. This is not the date the house was bought. It is the date the loan in default was originated. This may be a refi.
One slight correction. Here in Sedona, what they call “vacant/empty lots” everywhere else, are known as “HOMESITES”!
What’s the address on the “vacant lot”, buy it for the “vacant lot” price and sell it as a “homesite”. Sounds like easy money to me. Just not with my money.
“‘You can’t give away stuff in the East right now,’ he said. ‘It’s very surprising.’”
Sure you could. If you gave it away, people would line up. Your problem is that in your mind give it away = still making a hefty profit.
Don’t teaser-rate me, bro!
“It should come as no surprise that families who purchased homes at the height of the market would walk away when declining market prices left them upside down on their loans. This is especially true for those whose purchases were funded using 100% financing with interest-only teaser-rate ARM loans that are now resetting.”
Leaning into the wind probably makes more sense than other things the fed has been doing with the wind lately …
Leaning into the wind makes no sense when it’s a fan, you are about to hit.
“‘Loan modification isn’t working,’ said said Ira Rheingold, executive director of the National Association of Consumer Advocates in Washington. ‘It’s extremely difficult for a homeowner to talk to a servicer and even if they do, it’s hard to get the servicer to change the terms. You get voice-mail hell, they don’t return calls, you can’t get a live person on the phone.’”
No surprise there… combine a 400% increase in call volume with a 10-30% DECREASE in employees to take those calls… what does one expect.
A little off topic, but the rails are finally starting to come off in Canada.
I guess Canada isn’t running out of land after all..
http://tinyurl.com/6kwnup
Attention mortgage fraud gumshoes: This site might be useful.
From CNBC.com. “The Federal Reserve may start using regulation or even interest rates to fight asset-price bubbles, instead of trying to limit the damage once they burst, as it has done until now, the Financial Times reported on its Web site.”
How about the Fed overseeing fraudlent loans? Maybe if they had been doing their job this mess would never have happened.