The Crapshoot And Jackpot Of Homeownership
The Glendale News Press reports from California. “Local home foreclosure rates have continued to rise, led by a baffling eight-fold jump in La Crescenta filings during the month of September, compared with a year ago, according to experts and a report prepared for the Glendale News-Press by RealtyTrac. With La Crescenta’s unemployment rate of 5.9% well below Glendale’s 11.1% and Burbank’s 10.4%, the figures were surprising, said Paul Habibi, professor of real estate at the UCLA Anderson School of Management.”
“‘I would expect that in a Palmdale-Lancaster kind of community,’ Habibi said. ‘That’s puzzling.’”
“The rise in La Crescenta foreclosure rates was likely a result of residents struggling to pay increasingly unmanageable mortgage payments during the recession, said Marcella Theisman, an agent in La Crescenta. ‘When they bought, they bought at the top of the market, and when the property values fall, either one can’t afford it, or they can’t see the sense in trying to pay more than the property is now worth,’ she said.”
“Buyers are eagerly seeking out low-priced properties that may have been in foreclosure, but they are frequently disappointed by the low number of homes on the market, said Dan Soderstrom, a real estate agent in Burbank. Much of that problem is because banks have not followed through on foreclosures and listed properties for sale, Soderstrom said.”
“The short supply of homes and the growing demand that has been fueled by a federal $8,000 tax credit for first-time home buyers has compounded the problem, he said. ‘I’ve got nothing to show buyers,’ he said.”
The Wall Street Journal. “When do borrowers walk away from their homes? More often, it’s when the bank can’t go after them. The research, by Andra Ghent of Baruch College and Marianna Kudlyak of the Richmond Fed, raises the possibility that strategic defaults may be more of a problem than believed by some analysts and economists. The authors conclude that ‘a non-negligible portion of U.S. mortgage default is in fact strategic.’ It’s not that borrowers can’t pay—they just decide it’s no long worth it.”
“A commonly cited 2008 paper by the Boston Fed downplayed the effect of negative equity on foreclosures and concluded that borrowers don’t usually walk away from properties just because they’re upside-down. But the Richmond paper notes that the study may not be applicable nationally because it looked only at early 1990s defaults in Massachusetts, a recourse state.”
“The researchers note that just 11 states, accounting for one-quarter of the nation’s housing stock, could be considered non-recourse. Still, two of those are states that have some of the biggest negative equity and foreclosure problems: California and Arizona.”
The Christian Science Monitor. “California, the state which has led the nation in home foreclosures, has finally seen a significant drop in the number of mortgage defaults and house repossessions. But many economists say the trend is less about improved economic conditions than about banks holding off on foreclosure or renegotiating loan agreements.”
“‘It’s not out of the goodness of their hearts,’ says Andrew LePage, DataQuick senior analyst. ‘Foreclosures are expensive and the more homes you dump on the market, the more you drive down prices and it becomes a vicious cycle.’”
“A state moratorium on foreclosures was in effect through most of the last quarter, and has just been lifted. ‘Now that the moratorium has been lifted, there should be a tsunami of them [foreclosures] coming shortly,’ says Chuck Cochran, a real estate assessor based in the San Fernando Valley. ‘A lot of properties are due to hit the market, which could push prices down another notch.’”
“‘There are lots of unknowns at the moment, especially in California,’ says Jed Kolko, real estate specialist for the California Public Policy Institute. ‘Among them is that there is no way to know if what the government is doing to help people renegotiate more comfortable mortgages will have a permanent effect or only a delaying one.’”
“The DataQuick study released this week showed that while most foreclosure activity was still concentrated in affordable inland communities, the foreclosure problem has continued to slowly migrate into more expensive areas. Default notices are rising fastest in the affluent counties of the Bay Area – San Francisco (up 72 percent over a year ago), San Mateo (up 58.5 percent), and Marin (up 65.9 percent).”
The San Francisco Chronicle. “The Bay Area locales where homes sell the most above asking price tend to be relatively affordable, according to a report from ZipRealty released Friday. The highest offers (measured by sales price-to-list price ratio) were clocked in the East Bay’s 94608 ZIP code, which includes Emeryville and part of Oakland. Homes there on average sold for 105.65 percent of the asking price in the third quarter, said ZipRealty. “The homes are in the $200,000 to $300,000 price range. I’ve been writing offers there like nobody’s business and getting beat out, often by cash offers.”
All-cash offers are the telltale mark of investors. David Kerr, a Zip Realtor who specializes in the East Bay…said…’I've seen the same house picked up at a (foreclosure) auction go back on the market and sell higher than the highest comparable sale in that area because it’s been rehabbed.’”
“The third ‘hottest’ Bay Area ZIP code, 94606 in central Oakland, is similarly affordable with a median price of $279,000, he said. Of both ZIP codes, Kerr said: ‘Homes here were selling in the $400,000s and $500,000s at the height of the market and now you’re picking them up in the $200,000s and $300,000s.’”
The Monterey County Herald. “By the time real estate agent Becky Jones drove up to a foreclosed home in Seaside on Tuesday, there wasn’t much left except the walls. ‘It was absolutely stripped,’ said Jones. Most of the wood floor was removed. There were no light fixtures, no appliances. Even the kitchen sink was gone.’ Jones didn’t have any problem getting in — the doors to the home were gone, too. A retaining wall in back of the five-year-old home was gone as well.”
“‘I’ve never seen anything like it,’ said Jones, adding that she has ‘handled foreclosures for years.’”
“Seaside acting Deputy Chief Judy Stradan said…reports of former tenants or owners taking property from foreclosed homes are not uncommon. ‘It’s happening all over, city after city,’ she said.”
The North County Times. “Dan and Colleen Spence…waited nine months for Bank of America to approve their bid on a Temecula home. When the letter came, the bank wanted to close on the property in 10 days. No problem for the Spences, who sent $2,000 in ‘earnest money,’ had the home inspected, and then —- nothing. ‘We’ve had silence for a month,’ Dan Spence said. ‘We don’t know what’s going on.’”
“Frustration can be heard in Spence’s voice, and he’s far from alone: Buyers and real estate agents say short-sale purchases have become a crapshoot of delays, reversals and occasionally, the jackpot of homeownership. Real estate agent Jeannine LaChance had a recent deal fall through. The bank had approved her buyer, but then a new buyer offered a higher bid. When the new, high bidder walked away, the bank returned to LaChance’s client, but demanded more money.”
“‘They think the market’s going up,’ she said. ‘I think they’re crazy.’”
The Press Enterprise. “Sales of existing U.S. homes surged a record 9.4 percent in September as Americans rushed to take advantage of a tax credit for first-time buyers before it expires next month. Marty Rodriguez, owner of a real estate brokerage east of Los Angeles, said half of her transactions last month were low-priced foreclosures and short sales. ‘You have so many buyers in that lower price range,’ she said. ‘Sometimes my agents are writing five offers for one buyer on different properties just trying to get one property — and not getting accepted. It’s a little crazy.’”
“Aldo Martin, 28, of Covina had to put offers on 16 houses before having one accepted this week. ‘We’d go look at eight houses and if we liked five of them, make offers,’ said Martin, a sales supervisor. ‘Your odds are better. We got aggressive.’”
“The Realtors’ association and the National Association of Home Builders are lobbying to extend the first-time homebuyers credit on concerns that demand will wane after it lapses. ‘The work of stabilizing the housing market won’t be done’ when the credit expires next month, Senate Banking Committee Chairman Christopher Dodd said during a panel hearing. ‘We still need to use every tool at our disposal to fix this problem.’”
“However, some analysts say the tax credit may not be as critical to the housing market as real estate agents suggest. The Realtors association has ‘an incentive to talk up the effects of the credit as it is urging Congress to extend it, and it therefore may be exaggerating the credit’s effects,’ wrote Nomura Securities economist Zach Pandl.”
“One potential roadblock to an extension also emerged this week. There are concerns that some of the 1.5 million applications for the tax credit are fraudulent. The Treasury Department’s inspector general for taxes questioned the legitimacy of some 100,000 claims for the credit, potentially including some illegal immigrants and 580 people under 18.”
The Desert Sun. “When will there be true economic recovery in the Coachella Valley? Try 2012. And that’s only if everything’s done right. That’s the prediction from John Husing, an economist who has studied the Riverside and San Bernardino counties region for more than 40 years, and recently that of the Coachella Valley.”
“During his 2009 Coachella Valley economic report in Indian Wells on Friday, Husing used one word to express what the valley’s been through: ‘Arrggh!’”
“Fueling that frustration, Husing said, is the fact that the valley has suffered unprecedented job losses in the recession. ‘We’ve lost 130,000 jobs’ in this area and in two surrounding counties, he said. The unemployment rate has topped 14 percent, and is rising to levels close to those recorded in Detroit. ‘That’s not pretty,’ Husing said. ‘It’s a rate that is somewhat comparable to what was going on in the middle years of the Great Depression.’”
“The good news is the valley’s median home prices likely hit the bottom in the third quarter, he said. Looking ahead, Husing said a return to economic prosperity will require diversification of the economy and a housing market recovery.”
“‘The last major shift in the California economy in this last cycle was housing,’ Husing said, citing some $10.6 billion in lost building permit activity, $8.3billion of it being residential. To Husing, that’s lopped $21.2 billion out of the region’s $110 billion economy. ‘That means one of the targets you have to worry about is how to get that (construction) sector back to work,’ he said.”
“Husing’s 2009 report on the economy said he’s seen pent-up demand for homes, mostly because of high affordability. The valley’s affordability level, once at 10 percent, is up to 63 percent. Sales volume is up, and the median prices are back to 2002 levels.”
“Still, Husing said one yet-to-be-resolved piece of the valley’s economic puzzle is that a portion of the 35,498 homes that were sold in the valley are in danger of being worth less now than what is owed. ‘How many homes are upside down’ and in danger of default that have not yet shown up? Husing said. ‘That’s a huge piece of the challenge.’”
From Bloomberg. “The California Public Employees’ Retirement System, the biggest U.S. pension fund, and real estate adviser MacFarlane Partners severed ties as the fund reviews the performance of its investment managers. Calpers put more than $1 billion in the urban program. MacFarlane also helped the pension fund pay $970 million in cash and property to Lennar Corp. for a stake in LandSource Communities Development LLC in January 2007. The 15,000-acre (6,000-hectare) tract north of Los Angeles, known as Newhall Ranch, filed for Chapter 11 bankruptcy protection in June 2008 after failing to restructure debt.”
“‘Large institutions increased allocations during a period when real estate prices were frothy and along the way got involved in riskier investments, whether it was land or opportunistic funds,’ Craig Leupold, president of real estate consultants Green Street Advisors in Newport Beach, California, said in an interview.”
The Manteca Bulletin. “Is the era of the McMansion in Manteca giving way to a small is beautiful period? The Manteca City Council put its official blessing Tuesday on Winters Colonial Estates – a new neighborhood dubbed as workforce housing a stone’s throw or two from where the city’s first McMansions went up along the perimeter of Woodward Park.”
“The project on five acres is a radical departure for residential density south of the Highway120 Bypass. Instead of four homes per ace that is typical of subdivisions south of the Bypass, there are eight homes per acre – the maximum allowed under the city’s zoning rules. The typical pre-McMansion Era Manteca neighborhood has 6,000-square-foot lots or five homes per arce.”
“Those five acres will yield 40 homes with five different house plans ranging from 1,151 to 1,466 square feet with a mixture of single and two-story layouts. Mayor Willie Weatherford, in approving the project, noted ‘we need smaller homes in Manteca especially in this economy.’”
The Recordnet. “Higgins Ranch, a 505-acre property near Camache Reservoir and once slated for development, is going on the auction block for the second time at less than ranchland prices. The bank-owned property was offered this past spring but failed to receive any bids at the $1,175,000 minimum price. The reserve price is $750,000, said John Rosenthal, president of the Portland, Ore., brokerage conducting the auction.”
“‘The banks have gotten realistic. They’ve dropped their prices,’ Rosenthal said.”
“The cut in price reflects today’s weak real estate market. ‘I don’t care what you do today; people expect a discount,’ he said.”
“It’s hard to make a comparison because of relatively few sales in the region in a volatile real estate market, but the most recent ranchland sales going back to last year range from $1,650 to more than $3,000 an acre. At the auction reserve price, the Higgins property is $1,500 an acre. It is leased for grazing at $841 a month. The property with frontage on Highway 12 near unincorporated Wallace is affordable for pasture land, its current use, said Randal Edwards, an agricultural appraiser in Hilmar. ‘That’s a below-market price,’ he said.”"
‘When will there be true economic recovery in the Coachella Valley? Try 2012…That’s the prediction from John Husing…The good news is the valley’s median home prices likely hit the bottom in the third quarter, he said. ‘
So we’re 2 or 3 years from an economic bottom, but house prices will have stopped falling this year? I’ll take 5 bucks against that bet Husing.
P.S. …did Husing exactly SAY which year’s third quarter would see the valley’s median home prices hit bottom? hahahahaha
Ben, I agree. I think it’s rather short-sighted to expect even a modest recovery in 2012. California is experiencing a depression not a recession.
More than a few Coachella Valley retirees are hurting financially, and no doubt a lot of them are cutting back on their spending. Even if they are spending for big-ticket items, they’re probably finding cheaper bargains elsewhere.
A couple of months ago I briefly looked at Palm Springs and Cathedral City home prices, and the homes still seemed to be overpriced. That was my general impression. Granted, those two cities comprise only a small part of the valley.
still seemed to be overpriced.
Nailed it!
Also, considering the majority of work around here is service industry, so avg incomes have got to be around $25,000-$35,000 at best. So, housing should be on average around 130-200 max.
Manufactured properties are going for cheaper, but sticks/stucco are still to high. And it is coming into high season now, snowbirds are flocking into the area and so are/will infestors who think much is so “cheap”.
Before the huge upswing, I ventured around model homes in devs that were then around 350k and even after drops are still hovering around 600+ to over 1mill. same house, maybe more granite?
My wife and I went to Palm Desert a couple of weeks ago, and aside from getting a great deal on 3 nights at a resort, we drove down Palm Canyon and were amazed at how many businesses were shuttered completely. Never saw anything like it in my life.
If you think the Coachella Valley is overpriced–look at Humboldt county on the north coast. Palm Springs looks like an absolute bargain. Our foreclosure rate is by far the lowest of any county in the state, and despite the carnage elswhere–small neighboring Oregon towns to the Central Valley–things have barely dropped here and I would definitely suggest this is the most overpriced place in the US right now. But people keep buying here. I’m trying to leave, as I know home prices here won’t drop by any substantial degree–too many stoners buying property and turning them into grow houses. In fact, this is probably the only place in the nation that has seen rents actually go up in the past 3 years–probably 10-15% based on what I’ve seen.
“The researchers note that just 11 states, accounting for one-quarter of the nation’s housing stock, could be considered non-recourse. Still, two of those are states that have some of the biggest negative equity and foreclosure problems: California and Arizona.”
Why don’t underwater California and Arizona homeowners just walk away en masse if it is perfectly legal to do so? Why help Megabank, Inc rape and pillage Main Street any more than they already do?
That is a simple question to answer. Why walk away when you can live there nearly indefinitely without making a payment. These people have already “walked en masse”, they just happen to still be in their living room.
I live in an inexpensive 2 bedroom apartment in Tempe, AZ and these clowns are sitting in mcmansions with less monthly out-go.
I used to think this would eventually catch up to the banks.
What you are describing does happen, but IMO it is just a fraction of the foreclosures. I just repo’d a house west of here that had probably been empty for two years. The guy (from CA) could have hung out there all this time, but it was a second house, and was in BFE anyway. (Probably sounded good when he thought it would make him rich).
What’s likely more common is, these FBs get away with renting to someone when they aren’t making payments. I don’t think I would bother paying rent if that was the case. I know, some posters here will say ‘they can evict you, blah blah,’ but I’d take that chance.
But you know, this life isn’t fair stuff is pretty old hat really. I used to prepare income taxes, and if you think the housing bubble is messed up, spend a couple of years involved in the tax tar-pit and you’ll wonder why you bother paying taxes.
I hear you ben, life has never been fair, its probably not going to start now.
I live based on my own ethics and understanding of the world. I can’t complain for missing the huge profit boat (I thought the market had gone crazy and that things wouldn’t sustain three months, let alone three-five years). I also can’t complain about missing the giant wave of forclosure, bankruptcy, and ruined credit for those left holding the bag.
Its annoying when they rub in their position, living for free (or collecting rent on a home they have no intention of keeping), but I’ve still got my savings and good credit… Maybe soon things will be normal again with the FB out of his mcmansion and housing affordable to all with the money or credit left to buy it.
I can dream. Prudence might just end up paying off for me in the long run. I’m going to be ok either way.
Life isn’t fair, and further, those who try to play by the rules are probably just too dumb to figure out how you can game the system.
I guess that makes me pretty dumb, because not only do I try to play by the rules, but I prefer living in a society where everyone else does as well. I suppose that is what I like so much about LDS society — not that they are perfect, but at least they strive to live and play by the rules of society.
I guess the rules mean funding hate on 8 here in CA.
Plus, I hear they let black people go to heaven now… which is nice of them.
Always the focus on sex.
focus on sex?
“I guess the rules mean funding hate on 8 here in CA.”
They claim to have nothing against gays, but do believe that gay sex is wrong (I suppose it is not that hard to find passages in the Bible that clearly state this?). So if one thinks of the Bible (and other scripture) as their ‘rules’, and literally interpreting the Bible as ‘hateful’, you could accuse them of ‘funding hate’ by sticking behind their scripture-based belief system.
If I were gay, I would question the nonprofit status of an organization that openly orchestrates top-down political action campaigns. Being a religion somehow makes political action compatible with nonprofit status in a way I fail to grasp.
All religion is man-made. Unless you believe in an imaginary friend. Therefore most religious guidelines that seem proper to you are merely common sense (”though shall not steal/kill/etc.”).
This does not validate religion, per se, but exemplifies the vacuum in the lack of a non-religious philosophy in the modern era.
In the past, we were guided by principles of the englightenment and the age of reason, also the rennaissance. Today there is no equivalent. Hence when people want meaning in their life, they head off to the imaginary friend.
I can understand your fondness for LDS. One of them actually told me that they do not believe in an omnipotent God, and if Jeebus came back, he’d just have human powers and be nothing special. I prefer that my family’s favorite dog came back before Jeebuz came back though.
Not all Mormons strive to play by the rules. No! In the Southwest, there’s thousands of polyamous marriages. Especially in rural communities.
If Mormons do play by their set of rules, they better do it on their on turf.
I remember reading about a Mormon woman who owned a very successful and lucrative West Hollywood restaurant with a huge percentage of gay and lesbian customers. Her very generous gift in support of Proposition 8 didn’t sit too well with her customer base. I would imagine this woman is now in an unemployment line. Talk about biting the hand that feeds you.
Many restaurants, especially in California, are no long lucrative enterprises, and to alienate your customer base is a huge no-no.
In regard to societal rules, “Why play by the rules?” Life isn’t fair, because so many of the societal rules aren’t fair.
Many of the rich and powerful don’t play by the rules. As Leona Helmsley would say, “Little people play by the rules.” I’m glad to hear the IRS is finally going after rich folks who try to evade paying their fair share of taxes.
“…thousands of polyamous marriages…”
Anyone involved in a polygamous marriage is not allowed to follow the rules of the LDS church. If you broaden the definition of ‘Mormon’ to include those who take their directions directly from God, then these polygs are arguably following the rules which God dictated.
If I were gay, I would question the nonprofit status of an organization that openly orchestrates top-down political action campaigns. Being a religion somehow makes political action compatible with nonprofit status in a way I fail to grasp.
IMHO the “churchs” that apply for and get tax free, non profit status should lose their status, once they start in on politics. Which they do. So, yank their tax free status. They have to play by the rules, just as we do. Oh,oops. I forgot, do as I say, not as I do are their rules.
Not against faith, or spirituality, just over the ‘religists/churchs’.
“I used to think this would eventually catch up to the banks.”
It’s catching up to the TAXPAYERS right now, courtesy of the bankrupt FDIC and morally bankrupt Congress not following the law.
Take the example of Partner’s Bank, taken over by the FDIC on Friday.
As of September 30, 2009, Partners Bank SAID they had total assets of $65.5 million.
The FDIC estimates that the cost of the takeover to the Deposit Insurance Fund (DIF) will be $28.6 million - a LOSS of 43% on currently “reported” aseets.
Again, we see that the FDIC refused to step in and close this institution when the firm’s Tier Capital Ratio (based on an actual market value for assets) went below 6%, 5%, 4%, 3%, 2%, 1% and flat.
Indeed, the FDIC not only allowed all of the firm’s Tier Capital (that is, their EXCESS CAPITAL) to be wiped out, but then allowed the bank to continue to operate until it’s asset base was destroyed to the tune of 43% of “face value” before stepping in and closing the institution.
Prompt Corrective Action - a LAW, not a suggestion - is supposed to prevent this outcome. It is being wantonly and willfully ignored by the OTS, OCC, The FDIC and CONGRESS.
This level of loss is unconscionable and Sheila Bair, along with everyone involved in bank regulation at The Fed and the various Treasury departments (OTS, OCC and FDIC) must be held to account for their willful and intentional blindness.
“Mark to Myth” is not just a myth, it is a willful and intentional lie.
Again I ask:
What is the actual value of assets in our nation’s banks - including the really big ones like Bank of America, Citibank, JP Morgan and Wells Fargo?
How can anyone possibly believe, given the overwhelming history of the last two years in this crisis, that the nation’s banks are claiming and carrying their assets at anything close to their actual value when we continue to see, week after week, losses to the deposit insurance fund proving that close to half of the claimed “asset value” in these seized banks is a pure, unadulterated fiction?
(Credit to K. Denninger)
Aren’t the Congress, the Fed, and other branches of government exempt from following the law when there is a financial crisis in progress? (Similar reasoning applies to executive powers during a time of war…)
The other day Ben asked about the Milwaukee Journal’s objectivity on reporting on the housing boom/bust. They are getting much better and here’s a really amazing story about a good bank in trouble that I know and once used.
Easy Money | How the Subprime Market Unraveled
Tosa bank lost gamble on shaky loan deals
Waterstone’s lending went from sleepy to risky
By Cary Spivak of the Journal Sentinel
Posted: Oct. 24, 2009
Tosa bank lost gamble on shaky loan deals
Lenders abandoning foreclosed properties
Measure would block felons from getting mortgage broker licenses
More
Like many other real estate investors, James Miicke saw his fortune collapse with the mortgage meltdown. After borrowing more than $5.5 million to buy or refinance 49 properties mostly in Milwaukee’s central city, he wound up bankrupt.
But unlike speculators who got most of their loans from out-of-state subprime lenders unfamiliar with the central city properties they were financing,Miicke traveled no farther than Wauwatosa for most of his loans. His lender of choice: Wauwatosa Savings, now called WaterStone Bank, which soon found itself on the hook for millions in unpaid loans.
…Those rules emphasized the appraised value of the real estate, not the creditworthiness of the borrower or the likelihood that a project would succeed. In fact, Gordon said, if an appraisal came back higher than anticipated, the institution would sometimes increase the size of the loan.
…The underwriting standards helped the bank ramp up efforts to lend in the central city and elsewhere, bringing in new customers such as Timothy Brophy Jr. and increasing lending to others such as Miicke.
Brophy and Miicke are both well known to Milwaukee building inspectors. They were the first two landlords ever arrested in Milwaukee for not paying building code fines. Miicke - who later was convicted on a heroin charge and sentenced to 10 months in work-release jail - still owes $362,915 in building code fines, and Brophy owes $174,263, city officials said.
…
Wonder how 10%+ unemployment is affecting these sleepy banks?
Are you people really so naive? rules have been broken since Eve ate the apple for crying out loud. If you live life waiting to rewarded for being good boys and girls you will never be happy.
Hey hey Miicke your so fine you blew my mine, hey Miicke, hey Miicke..
Will try again to post an excellent story of a local Milwaukee area bank in trouble.
I try earlier but I had some confusion with hot coffee, just getting out of the shower, the doorbell and a send button. My bad — !
I know the bank and have used this bank. The story is a good read of greed and how to ruin a good little bank.
Watchdog Reports
Easy Money | How the Subprime Market Unraveled
Tosa bank lost gamble on shaky loan deals
Waterstone’s lending went from sleepy to risky
http://tinyurl.com/yf6kx95
What I don’t understand is why the states just don’t change their civil codes since it’s become such a problem.
As I’ve mentioned before, ALL mortgages are intrinsically “recourse”. It’s the particular state’s civil code that takes a suit for the deficiency out of the jurisdiction of said state’s courts. This is just a simple statute: the state could just pass a new statute bringing suits for deficiency judgements back into their state court’s jurisdiction.
I’m surprised that lending institutions have’t leaned hard on the legislature in places like CA and AZ to repeal such exemptions.
Professor; AZ tried.
http://www.azcentral.com/business/realestate/articles/2009/10/22/20091022fore.html
oops! i mean Dennis
That article was so poorly written that I didn’t understand what was going on.
Eventually all my replies to this question are going to show up, and I’m gonna feel silly. But here goes.
AZ legislature passed a new law restricting non-recourse status to homeowners who have continuously occupied their houses for six months. This was to have taken effect for foreclosures starting after 9/30/09. Then REIC got its friends in the legislature to repeal the law in some tricky process. AZ Bankers Association brought suit challenging the constitutionality of the repeal, on some technical grounds.
Tom Lindmark’s Instablog of July 27, 2009 explains that a new Arizona law restricts the non-recourse status to homeowners who have continuously occupied their houses for a six-month period. Thus, the infestors would be vulnerable to deficiency judgments. What the azcentral.com piece describes is an attempt (by the REIC) to repeal the law, and a lawsuit by the Arizona Bankers Association to contest the constitutionality of the repeal because of some technicalities. I don’t know where any of this stands now.
I personally am impressed with the studies cited in Ben’s post indicating that “strategic” defaults are legions. The full text of the WSJ piece also indicates that strategic defaults appear to be associated mainly with higher-priced properties. Thus accounting for the excellent performance of my AZ trailer-park clientele (although they’re really not underwater yet).
(trying again; my Internet connection spastic)
A July 27 2009 blog explains that the AZ legislature passed a law restricting non-recourse status to homeowners who have continuously occupied their houses for a six-month period. Thus, infestors would be vulnerable to deficiency judgments. The azcentral.com piece (to which Krazy Bill posts a link) discusses a repeal of that new law. REIC backed the repeal, and now the AZ Bankers Association has brought suit challenging the constitutionality of the repeal, on some technical grounds.
Why don’t underwater California and Arizona homeowners just walk away en masse if it is perfectly legal to do so?
Just tell them not to walk in the direction of Colorado, please.
“Buyers and real estate agents say short-sale purchases have become a crapshoot of delays, reversals and occasionally, the jackpot of homeownership.”
I would like to thank the Fed, Megabank Inc, the defunct GSEs, the NAR, and all the other scam artists in the Real Estate Industrial Complex for turning what used to be a rational avenue for households to gradually and prudently build wealth over time through a home purchase into a crapshoot with the occasional jackpot. Heckuva job, boyz!
Everyone these days call their forclosure “strategic”, it makes them look less like a deadbeat…
Speaking of which, someone in my office finally lost their house! 11 months payment free, he didn’t get forclosed on, he helped the bank find a buyer under short sale and the deal finally went through. They hadn’t even started forclosure proceedings but my coworker decided it was better on credit if he short sold while the iron was hot.
One down, EVERYONE ELSE to go………..
Where do you work anyway? Can I too live rent-free if I work there?
The government also helped in the falling prices when the IRS stopped issuing 1099’s for the forgiveness of debt on a short pay. There was no incentive by the seller to get a higher sales price to save on taxes. This opened the flood gates to lower prices.
“The government also helped in the falling prices when the IRS stopped issuing 1099’s for the forgiveness of debt on a short pay. There was no incentive by the seller to get a higher sales price to save on taxes. This opened the flood gates to lower prices.”
Yet another “unintended” result of government policy.
My hairdresser (Bay Area) just spent a year in her ex-husband’s house rent-free before the bank finally foreclosed. Then she got $2,000 “cash for keys” to leave the house in good order.
There’s every incentive to act irresponsibly. Meanwhile anyone who is managing to save in this economy is rewarded by 1% rates and bailouts for everyone willing to take on more debt (C4C and FTBC).
The middle class is screwed, and the gov’t knows it, hence the desperation to prop up home prices and slow the crash however they can. Flat/declining wages, rising costs, evaporation of pensions and other safety nets were all disguised for the last decade because of the fake “wealth” of the housing bubble.
Housing has indeed been one of the cornerstones of wealth for the middle class, but it’s been over decades of ownership, not just 2 or 3 years, and also in the form of being mortgage free by the time retirement came. My parents stayed in their house for almost 30 years, had it paid off in 20, and did maintenance but few upgrades. They made do with what they had. Now they are comfortably retired, and they did this on fairly modest incomes.
Today’s FBs have little hope of achieving this with debt levels at 10:1 versus income and entitlement expectations.
The $2000 cash for keys story reminds me to repeat my story of my last repo (in 2003), wherein I paid the FB’s $200 to sign a quitclaim deed instead of (my) paying $3000 for foreclosure. The FB’s had abandoned the property anyway, they couldn’t pay the electric bill (in PHX in July, when you REALLY need it). They didn’t know how much FC would cost me, and I waved $200 cash in their face as they were picking up personal stuff from the trailer in preparation to escape to the home of a relative in Vegas. They said they would sign, I ran to Office Depot and picked up a quitclaim deed form, we went to a notary and PHEW I didn’t have to pay for the FC.
Good one! A spoonful of sugar makes the medicine go down.
“‘I would expect that in a Palmdale-Lancaster kind of community,’ Habibi said. ‘That’s puzzling.’”
It is really that puzzling? He is a learned professor at UCLA’s graduate school and really cannot put the pieces together. Got to love higher education (maybe they named it higher since they are often on drugs)
Crapshoot and jackpot is everything that has gone wrong with homeownership in the bubble and bust era. It is based on price appreciating and borrowing against it.
The original ideal was to LOCK IN your housing costs, by getting a self amortizing fixed rate mortgage you could afford and paying it off. Then your housing capital cost would be fixed, with only the operating cost going up, until the mortgage was paid off, and the fixed cost dropped to zero.
What ever happened to that idea.
It WAS a great idea when people stayed at a job for 10-20 30 years.
I own 1/3 of my moms house but did I really want to go today to grind off a couple of layers of paint on all the wrought iron railings? Glad it rained!
What ever happened to that idea.
“What ever happened to that idea.”
1. Housing bubble price inflation
2. Deflation of inflated real estate prices halted on a permanently high plateau of affordability by Fed intervention
3. Purgatory between inflation risk and deflation risk viability of fixed cost dropping to zero highly questionable
affordabilityunaffordabilitytrying to understand your point number 3. I get the “purgatory between inflation risk and deflation risk” but not the rest. ??
Chalk it up to poor editing on the one-shot chance…trying again:
3. Purgatory between inflation risk and deflation risk make the viability of fixed cost dropping to zero highly questionable
I’m not sure if my point is entirely related, but I do think we’re about to see a huge dropoff in sales, like a cash-for-clunkers on steroids? Why? Not just because of stealing “normal” demand from the future, but I believe a lot of people bought now with the idea that interest rates are going up soon, thus creating even more demand than normal. I believe rates will go up, and that will only kill demand (and hopefully prices). My money, literally, is on waiting this out at least another 8 months.
“The rise in La Crescenta foreclosure rates was likely a result of residents struggling to pay increasingly unmanageable mortgage payments during the recession, said Marcella Theisman, an agent in La Crescenta. ‘When they bought, they bought at the top of the market, and when the property values fall, either one can’t afford it, or they can’t see the sense in trying to pay more than the property is now worth,’ she said.”
People ought to pay attention here. La Crescenta is a good community that I’m quite familiar with. It is staunchly middle class. You live there when you can’t afford La Canada just over the hill. These are signs the middle class in L.A. is going to suffer real soon. This depression is just getting started.
Yeah, I was taken back by this major front news page in the Glendale News Press, especially since they depend on their real estate advertising in the weekend edition big time.
The writer I believe is fairly new to this paper (I have lived in Glendale for 33 years and been reading it for a long time) and he had written about how inventory was really low approximately a week ago.
I guess he did not really believe the real estate agents’ B.S. because if you look closely at the article, Realtytrac.com did it exclusively for the paper (and I take it for the story.)
I like this guys writing even though he works for a small news paper such as the Glendale News Press (although it is owned by the Tribune Corp., which also owns the Los Angeles Times).
Didn’t LaCresenta burn up last month?
I’m a La Crescenta renter and long-time HBB reader. Just wanted to mention that La Crescenta seems to have a lot of young families who themselves grew up in the area. I suspect a bunch of 20- or 30-somethings bought their ARMs here around ‘06 to be near their relatives. A majority are also close-knit 2nd-generation immigrants who bought into the “American Dream.” Now they’re getting hammered. Definitely some schadenfreude here, but then again, there but for the grace of God, go I…
2 years ago, I couldn’t convince a friend there that there was any way that his house would go down in value. He’d lived in that general area most of his life before buying. One day, he was talking with a neighbor who mentioned that there were several homes nearby in foreclosure. He was shocked. When he mentioned it to me, I pointed him to one of the foreclosure tracking sites. He freaked out. I just looked at some of the comps for the area and he’s probably underwater now on a house he can hardly afford. Sad, really.
There was a classic Flip this House episode from either La Crescenta or La Canada. It was a wizened old flipper who was pretty funny and had no end of problems with the flip.
That area used to be quite nice back in the 1960s. It is conveniently located, to be sure.
The Balcony of Southern California.
A retaining wall in back of the five-year-old home was gone as well
They took a retaining wall? Nice stone, I guess. What jerks.
“The Realtors’ association and the National Association of Home Builders are lobbying to extend the first-time homebuyers credit on concerns that demand will wane after it lapses.”
Translation: Without injections of other peoples’ money to sweeten the deals, there is little demand for real estate at prices for which sellers will part with their Garage Mahals.
What do you get if you cross a crapshoot with a jackpot?
A crackpot!
If only Olympiagal had posted the above, everyone would be ROTFL. I guess I just don’t have the correct delivery.
The Canadian press does not seem to face the same porcine beautification incentives as the US press faces…
Foreclosures expected to rise in the U.S.
Janet Whitman, Financial Post Published: Friday, October 23, 2009
…
Since the U.S. recession began in December 2007, seven million Americans have lost their jobs. More than two million homeowners have been given relief on their mortgages so far this year, but another 3.3 million people are 60 days past due on their monthly payments.
According to some analysts, more than six million U.S. families could face foreclosure over the next three years.
In the second quarter of last year, only one out of every five U.S. loans in the foreclosure process occurred on “prime,” fixed-rate mortgages, which typically are the safest mortgages available. By the second quarter of this year, however, one out of every three foreclosures was on such loans.
“Our forecast is for unemployment to hit 10.2% by the middle of 2010 and foreclosures are going to rise right along with it,” says Michael Fratantoni, a vice president in research with the Mortgage Bankers Association. “It’s hitting a much broader swath of homeowner. And prime, fixed-rate loans are more difficult to modify.”
…
‘Foreclosures are expensive and the more homes you dump on the market, the more you drive down prices and it becomes a vicious cycle.’
So instead, banks prefer to hold on to homes through an unprecedented period of market decline and lose money on their REO falling knives? Somebody please help me out here: Is it rational to hold on to real estate when the market is steadily dropping?
I’ve had two lines of thought on this subject… Both may be flawed and I’m not sure which is more correct…
One thought is banks are no longer on the hook for these homes (having packaged and sold them to “investors”). If this is true what incentive does the bank have to move forward quickly? They are operating more as mortgage servicers and would rather let those homes sit while they deal with the smaller pool of homes they actually have some skin in… This may be wildly incorrect…
my other opposing thought is perhaps the bank is liable to all these bad loans, and the difference between viable and massively bankrupt is purely their ability to mark these loans to fantasy. As long as they hold onto them they can pretend the coffers are full and only realize small losses as they slowly liquidate the less damaging properties creating an artificial shortage and holding prices higher… Again, this idea may be flawed as well. Perhaps its a mix of the two ideas. Perhaps its something wholly different. Thoughts?
Most people dont know the fact that servicers have to pay the mortgage amount to the bond holders on time even when they dont receive their payments from home owers
Servicers get compensated for this only when the foreclosure happens and house gets sold. i.e the bond holders get sales price-adv paid- foreclose fees- taxes if any etc.
So I dont think servicers have any incentive to hold on to the house for long, unless they want to collect more by way of late fees, foreclosure expenses etc.
The bank can put acrued interest on their books as ‘Income’. No reason to foreclose ‘this quarter’! Take the hit in 2010 or 2011.
“Somebody please help me out here: Is it rational to hold on to real estate when the market is steadily dropping?”
No more logical than it is to hold on to pets.com when it’s at $75 (and going to $0) because you bought it at $150, but it’s hard for people to recognize, and then realize, their loss.
YES…if you intend to die in that home and pass it on to your kids.
————————————-
“Somebody please help me out here: Is it rational to hold on to real estate when the market is steadily dropping?”
How many REO homes is it possible for one banker to die in?
“At the AUCTION reserve price, the Higgins property is $1,500 an acre. … is affordable for pasture land, its current use, said Randal Edwards, an agricultural appraiser in Hilmar. ‘That’s a below-market price,’ he said.”
So in other words, it’s being offered at AUCTION, for below market price……
“I don’t think that word means what you think it means” Inigo Montoya, Princess Bride
The HBB has been over the definition of “market price” a few times. Some assert that the definition of “market price” is the value for which it would sell at auction. If so, then why doesn’t everyone simply sell their homes at auction and get on with life?
All of you guys still hoping for a bargain property and for your prudence to pay off don’t get it. The banksters won, we lost. You are still saying the same pathetic hopeful stuff as when I was on this blog 5 years ago. The govt will print as much money as it takes, throw it at lenders, give housing stimulus bribes to buyers, give FHA loans, whatever it takes to prop up housing values. The game is rigged.
Yes, Bernanke is playing a game. He’s dangling a carrot in front of folks to buy a house that for the most part is not in their best interest. He’s not living in the present. He’s living in the past.
And while Bernanke is focusing his attention on home sales and prices, he’s ignoring senior citizens, and other folks, with reduced incomes due to low interest rates.
If people were receiving more income from their Certificates of Deposit, that would stimulte the economy. But he doesn’t want to do that. His priority is to lure gullible people to buy homes that they really don’t need.
Anyway, I fail to understand why so many “currently” employed people, in their 20s, 30s, and 40s with minimal guarantees of future employment, want to own a home in this crazy market. Sure, homeownership was a great ride but it’s history. In most markets across the country.
If you’re retired with a comfortable income, buying a home makes more sense. But even then, homeownership has risks.
And then there’s the issue of shoddy construction. It is a huge problem. And if you’re fixing structural defects on a regular basis, you can kiss a lot of money goodbye.
“If you’re retired with a comfortable income, buying a home makes more sense.”
You totally lost me there.
1) Retirees generally don’t have incomes (they live off accumulated savings, in the form of pensions, investments, etc).
2) Buying real estate under any circumstances is a risky investment.
3) Buying real estate when you are too old to make up potential future investment losses seems foolish.
4) Buying real estate in the current high-price, high-risk environment also seems foolish.
5) Layering 3) on top of 4) seems exceedingly foolish.
Please explain what your point was?
Comfortable living? I was speaking in terms from the income side of the equation. For example, a retired couple with an annual income of say $400,000 derived from 30-year U. S. bonds.
A working couple, even a high-income working couple, has no guarantees of future big salaries. Buying a house does involve a bit of risk for them. And a couple with modest incomes are taking on a lot of risk. Almost no job is safe today.
Most people have an income. You declare that income on an IRS form. Retirees are not exempt from leaving that line blank. You’ve got to put a dollar sign on that line with a number of zeros behind it.
I do agree with you that buying real estate is risky. Just because you pay cash for a house, doesn’t negate other risks. If you’re very rich, there’s no worries. Who cares if you lose $2,000,000. That’s just pocket change for some rich folks. But if you’re not so rich, they are risks and worries.
I can’t see why an older couple in their 80s, or 90s would buy real estate. Unless they want to give it to the kids or grandkids. Even giving it to a charity has some risks. A charity generally wants cash. They don’t want a house.
“For example, a retired couple with an annual income of say $400,000 derived from 30-year U. S. bonds.”
Oh, I see — you are talking about a vanishingly miniscule slice of the US retiree population. Suppose their 30-yr T-bond portfolio yields 6 percent. That means they hold
$400,000/0.06 = $6.7 million in Treasurys. How many Americans are in this position?
I mentioned the word comfortable implying no money worries. And an income that has no risk.
Yeah, I may have set the $400,000 income too high. But a $100,000 income doesn’t go that far in some parts of the country. Rent in Manhattan can be $5000 a month.
Nursing homes can run over a $100,000 a year. In 10 years, that cost will most likely exceed $200,000.
There’s still a lot of rich folks around. Before the recession, there were over a million millionaires.
Many friends and associates of George W. Bush.
“Many friends and associates of George W. Bush.”
Who constitute a vanishingly small slice of the US population, and all of whom are already housed, and not in need of purchasing another home.
So your point was???
“The banksters won, we lost.”
1) Do you believe the banking industry is exempt from the
Sherman Antitrust Act?
2) Do you believe the banking industry is not engaged in price fixing activities?
3) Do you believe the banking industry is above the rule of US federal antitrust law?
If you answered yes to any of the above, then I get your point.
If not, then what is your point?
Hello, lainvestorgirl, long time no hear! I take it that West LA’s high prices are hanging in there and depressing you. If popcorn doesn’t work for you, take a little Prozac.
‘All of you guys still hoping for a bargain property and…don’t get it. The banksters won, we lost. You are still saying the same pathetic hopeful stuff as when I was on this blog 5 years ago.’
Except that now almost everything said here about the housing mania has been proven to be true, to the surprise of almost the entire world! No small thing, says I. (BTW, how many FBs are on your block, versus, say 5 years ago? Are you one of them, or are you glad you are not? And what’s this “we” crap; got a mouse in your pocket?)
‘The govt will print as much money as it takes, throw it at lenders, give housing stimulus bribes to buyers, give FHA loans, whatever it takes to prop up housing values.’
If you think this is possible, as many trolls did in 2005, I say the same thing as then;
GO BUY A FREAKING HOUSE ALREADY! HELL, BUY 2!
As for me, I think they cannot, so we’ll see who is right; how about that? Does it get any simpler?
‘The game is rigged.’
Ah yes, the ‘life isn’t fair’ thing twice on the same day. I suggest you go back and ask mommy and daddy why they told you such lies. You know, a long time ago, the trolls would come on here and say, “you bitter renters won’t be happy until someone GIVES you a house.” While they were just being trolls, there is something to it.
This is the biggest financial disaster in the history of man. (I’d repeat that for effect, but readers here knew that in 2005, so ya know). Do you really expect to just go forward like it’s any given Sunday? This period will challenge all of us more than ever. I’ve tried to tell people for years, including yourself, to get your g@ddamn act together and THINK/ACT, cuz the shit is gonna hit the fan.
That is all…
$400,000 house even at zero percent is $13,333.33 a year…plus 2%taxes 8,000 insurance, $1000 repairs $1000…..23K+ a year $2K a month…oh Dont forget the heat and AC McMansions are not cheap.
‘The govt will print as much money as it takes, throw it at lenders, give housing stimulus bribes to buyers, give FHA loans, whatever it takes to prop up housing values.’
“Except that now almost everything said here about the housing mania has been proven to be true, to the surprise of almost the entire world!”
I confess to a degree of shock at the lengths to which intervention has been employed to thwart market forces that were driving housing prices down towards affordable levels. But I suggest the interveners, and those like lainvestorgirl who have declared the game over just one year after the sequel to the Great Crash of 1929 may themselves have severely underestimated the extent to which market forces may push back.
P.S. As a comparison of where we were and how far we have traveled, I note that once upon a time, bailout was such a foreign concept that its use was even discouraged on this blog. I don’t believe we have seen the last of the bailout backlash. I am still trying to get it out of my own system with only mixed success.
‘its use was even discouraged on this blog’
As was/is whining. I recall having to plead with posters that is THE HBB, not the Bailout blog, or the “life isn’t fair” blog.
BTW, just who has been “bailed out?” Certainly not the corporations whose names I see on the sign-in sheets at the houses I work on. Will BOA survive, the Fed, or the other countless corporate names you guys never even heard of? Why do I still see Lehman Brothers all the time, and what ever did happen to Bear Stearns?
And why the record number of FBs, foreclosures, annual/quarterly losses? But never mind those, we should expect, no demand, that LA investor girl be able to pluck houses up for free like fallen rose petals.
It ain’t gonna work that way. I do a bunch of business in a county where houses cash flow - right now. But what about the economy? Will rents continue to fall? Will financing become even harder to find?
If you just want a house to live in, we’ve hashed out those metrics a million times since 2005. If you want to make some serious bucks out of this crash, it’s going to take risk and nerve and action. But, if you want the monster-under-the-bed to go away and a just and equal world to play in, I can’t help you and I doubt anyone can.
If I ever whined that “life isn’t fair”, either directly or indirectly, I apologize.
P.S. I still have the same bottle of lotion on my desk that I had there a couple of years ago…
Just to be clear, (and I’ll shut up), there is a difference between pointing things out and activism and whining. I watched the Obama Deception for the first time the other day, with someone who voted for the President and wasn’t familiar with the various organizations involved. I didn’t think the film made a clear connection with the one-worlders and the filmmaker is prone to exaggeration. But it was hard to deny the connections with Goldman, etc. It brought up this;
There are facts, there are opinions and there is truth. They don’t always mesh, but that doesn’t mean we shouldn’t look for truth or have opinions. So explaining this film to someone who wasn’t familiar with the Bilderbergers and the CFR and the Tri-lats was difficult. Yes, these groups exist and have too much influence, etc. But is the film a complete examination of the matter? I doubt it.
If there is one thing I learned from the housing bubble, it’s that these people can be wrong. And if they can be wrong, they are human, thus subject to all the mistakes and variables we all face.
In short, they aren’t all-powerful. Should they be reigned in? Probably. Will this turn around and bite them in the ass? Maybe. But something I came to feel a long time ago is, I have to live my life with or without this system. So I better just figure out how to function and move ahead in spite of the powers that be, or whatever.
Welcome back lainvestorgirl. Glad to see you here since you offer an alternative viewpoint. However, I do have to disagree with what you posted. The market may not be correcting as quickly as it should because of government intervention, but those of us who were predicting the downturn are still very glad we did not buy in 2005. Prices in San Diego, in the areas I could have afforded to purchase (quite frankly not neighborhoods I would be willing to live in), are down 30%+. So my down and 10%+ more would be gone. Poof. Vanished. No matter how fixed the game I’m happy not to have taken that loss.
In spite of all the money being thrown at bad banks, stupid lenders, corrupt insurers and Congress cronies prices continue to fall year over year. I do not want to buy depreciating assets thus, I will continue to wait for prices to make sense relative to incomes and rents. And from the way the high end continues to fall I have little doubt I will be buying again someday. Just not today.
So call me pathetic. I don’t mind. Having been right for years now and seeing numerous people who laughed or worse at my predictions lose everything I can wait for opportunity. Most of us here believe today’s buyers are tomorrow’s foreclosures. Same as we thought the 2005 buyers were the 2008-2011 foreclosures. So far we have been far more correct than the vast majority of economists or former trolls. I’ll stick with the people who have been right so far. And yes, it’s slower than I would like because I believe we cannot rebuild a real economy until all the bad debt is wiped out, but I do not see anything that truly preventing the crash, only delaying it.
LAInvesterGirl, I too live in an area where the average sales price is approximately $700,000 for a less than 2000 sq. ft. fixer upper.
I know exactly what you mean, and believe it is not easy.
I am not joking when I say that I just offered $605,000 for a 1394 Sq. Ft. house will a “view” that needs a new kitchen and bathrooms. This is in the Burbank somewhat hills and believe me, to say that it has a view is a stretch. The lot size is 11,000 sq. ft. Asking price is over $739,000.
I emailed the offer this past Thursday and have not heard anything from the agent as of today.
The house is for me and my family, I am a real estate broker and both my wife and I understand it will probably be worth the loan amount or lower within a year or two.
However, we sold in 2005 and are tired of renting.
It is extremely frusterating in the Glendale, Burbank areas where people simply seem to have cash.
However, this is the Los Angeles area and people have cash. (period emphasized).
Foreign money abounds big time, and we just have to live with it.
lainvestorgirl,
I don’t understand your comment at all. Yes, we were hopeful 5 years ago, and yes, our prudence has paid off. In most areas, buying a house today is a much saner decision than it was 5 years ago. I’m not saying we are at a bottom, but for many people, the difference in price is enough to be the difference between eventual foreclosure and managing to scrape by. That’s huge.
Do you think this guy’s in foreclosure?
http://kansascity.craigslist.org/app/1417741160.html
Unbelievable and hilarious, ric.
Countrywide Mortgages Lead California in Defaults
By Dan Levy
Oct. 20 (Bloomberg) — Default notices on California home mortgages rose almost 19 percent in the third quarter from a year earlier as job losses and falling property prices deepened the state’s housing recession, MDA DataQuick said.
Loans originated by Countrywide Financial Corp. accounted for 6.8 percent of the 111,689 default notices recorded by MDA DataQuick. Washington Mutual Inc. originated 4.6 percent of the sour loans and Wells Fargo & Co. almost 4 percent, San Diego- based MDA DataQuick said today in a statement.
“There’s a batch of truly nasty loans that were made in mid-2006,” John Walsh, MDA DataQuick’s president, said in the statement. “It’s taking a long time to process them.”
…
Since Megabank, Inc swallowed several of the lenders who made the worst loans in 2006, and Megabank, Inc has TARP and zero-interest financing to give it indefinite staying power, plus accounting rules that enable it to hide elephants under the living room rug, is it safe to say the problem of bad loans going permanently toxic is contained?
Which Lenders Made the Worst Home Loans?
Posted by: Chris Palmeri on October 21
The worst mortgage loans were made in 2006, according to research by data provider MDA DataQuick. And those loans are begining to blow up now. According to DataQuick’s numbers, the lenders with the most foreclosure related filings in this year’s third quarter in California—-a hot bed of dicey loans were:
Countrywide (now Bank of America) with 7,583 default filings.
Washington Mutual (now with JP Morgan-Chase), 5,146.
Wells Fargo, 4,425.
Bank of America loans not made by Countrywide accounted for 1,979 more filings and World Savings, now a part of Wells Fargo, had an additional 4,237. The numbers show the extent to which just a handful of big banks are bearing the burden of the mortgage crisis.
While World Savings, formerly Golden West Financial, had the highest percentage of loans from that 2006 period default at 11.9%, its stinky loans were nothing compared to the subprime orginators’ dismal record. Here are some of the numbers for them:
The default percentage at ResMAE Mortgage was 73.9 percent, Ownit Mortgage 69.5 percent, BNC Mortgage 61.4 percent, Argent Mortgage 59.9 percent and First Franklin 59.4 percent.
Some of this bad news is circular because First Franklin was acquired by Merrill Lynch which was subsequently bought by Bank of America. If you’re having trouble getting a loan officer from B of A on the line, now you know why, he’s busy!
…
“The numbers show the extent to which just a handful of big banks are bearing the burden of the mortgage crisis.”
If only that were the case, then a few large Wall Street banks would currently be on the verge of going out of business, and the US banking system could be on a path back to a more effective, competitive model. But that is not the world in which we live. Somehow the problem of dealing with toxic assets and keeping the flow of multi-million dollar bonus payments flowing into the hands of top Wall Street bank manager’s greedy fingers became a national level concern, with the burden of funding the Wall Street rescue shifted on to Uncle Sam and Main Street. With 10 percent+ unemployment, good luck with that plan — you can’t squeeze blood out of a rock.
All of the old wamu’s here in the sacramento area have just been switched over to chase.I think the official conversion date was friday.Chase has been advertising like crazy around here.they are spending a fortune on that chase saphire card.I dont know how they do it but chase is a well run outfit.I dont think their mortgage business go out of hand like wamu, countrywide or wachovia.
Chase (JP Morgan) focused more on investment services and trading (like Goldman Sachs) than on making risky loans. The Chase banks around here have consistently paid the least in interest and charged the most fees and highest fees of any retail bank in town, while acting annoyed about having to deposit a check for me and encouraging everyone to setup brokerage accounts and buy their mutual funds.
That is how they make more money, and why I no longer do business with them. I respect them for playing the game extremely well, but I have no desire to be played by them.
http://www.pbs.org/wgbh/pages/frontline/warning/view/
Very good Frontline documentary on how the only ‘whistleblower’ was submarined by Greenspan, et al. in the leadup to the crisis.
Watch and you will see Greenspan finally admit he was wrong.
Got Popcorn. (A tip of the hat to Neil)
“Watch and you will see Greenspan finally admit he was wrong.”
Bill Gross at PIMCO had an office waiting for Greenspan; the cabal thrives.
Haha, PIMP-CO! How can Bill Gross lose billions of investor dollars on hard-core support of Lehman and every major fixed-income disaster to date, and keep moving forward like everything’s fine? Any random number generator can outperform PIMCO in picking winning investments, but I’m sure with Greenspan’s expertise they’ll be making even greater decisions.
We’d go look at eight houses and if we liked five of them, make offers,’ said Martin, a sales supervisor. ‘Your odds are better. We got aggressive.’”
File under “future victim of unfair lending.”
Record NYC Real Estate Deal Now on the Rocks
NEW YORK (AP) — It was the most expensive real estate deal in U.S. history. Now, it’s poised to become one of the biggest flops.
At the height of the real estate boom in 2006, an investment group paid $5.4 billion for a gigantic Manhattan apartment complex with mostly rent-regulated apartments.
Now analysts say the group led by Tishman Speyer Properties and BlackRock Realty may be two to three months away from defaulting on its $3 billion mortgage.
The company had pursued a strategy to aggressively convert thousands of rent-regulated apartments at Stuyvesant Town and Peter Cooper Village into luxury units that would fetch top dollar.
But tenants fought back, conversions happened slower than expected and a state court ruled last week that the company improperly raised the rent for thousands.
This is the talk of the office (We have dealings with both parties).
Boy did Met Life get the better of this deal with a lot of cashola…
But mass evicting of people to get the apartments out of stabilization was a dumb move on their part.
Tishman vastly overpaid……now they have a high turnover of the market rate apartments and at lower rents.
So is this bailout cash dumped on CA (and other states’) banks pretty much there to let banks hold on to foreclosed homes until the seller’s market returns?
If that is not the purpose of the bailout dough, what is the purpose?
Eye on the Bailout
* Recipients
* Programs
* Timeline
* What’s Here
Recipients from California
This is a listing of the 78 bailout recipients in California
The total bailout committed to California-based institutions is $34.5 billion, which is 6% of the total bailout so far committed.
This list shows only institutions headquartered in this state. Most recipients are bank holding companies, which sometimes have subsidiaries in other states. Also, keep in mind that a bank holding company might have a name that differs significantly from its subsidiary banks.
This guy seems to miss the fact that central bankers may actually believe it is in their own best interests to inflate bubbles.
A polite discourse on bankers and bubbles
By Wolfgang Münchau
Published: October 25 2009 19:25 | Last updated: October 25 2009 19:25
Remember the debate about whether central banks should prick bubbles? It was not too long ago that simply asking the question incited abuse. While pricking bubbles is now considered a suitable subject for polite conversion, there is still no agreement on what to do or how to do it. Since bubbles are already building up in several segments of the financial markets, it is time to think about this question in detail.
As I argued last week, there are some deep-rooted causes of the proliferation of bubbles – among them the size of the financial sector; the too-big-to-fail problem; and the banks’ renewed lust for risk. Governments have not been addressing these causes. Central banks will not provide the cure either, but they can address some of the symptoms. Symptoms matter.
Some economists, reluctant to let go of the comforting world of rational expectations, still tell us it is impossible for a central bank – or anyone else, for that matter – to call a bubble. This is baloney. When looking at house prices, just look at price-to-rent and the price-to-income ratios, sales volumes and credit statistics, and you know everything you need to know. Almost everything else central bankers do is more difficult than calling a housing bubble.
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Definitely belongs in today’s bits bucket.
On a side note - do you ever sleep????