No One Saw The Tidal Wave
It’s Friday desk clearing time for this blogger. “By this point in his life, Stephen Mann should be getting ready to relax and enjoy his retirement. Instead, the retired Massachusetts sheriff’s deputy is living a nightmare. His home is in foreclosure because of four mortgage refinances he says were brokered numerous times by a Somersworth mortgage company to many different banks, and which, despite his numerous attempts, he has been unable to modify. On March 29, a Belknap County Sheriff’s deputy came to him with the 30-day eviction notice. Mann said he was baffled when the people at IndyMac told him his loan documents listed his additional income — he makes fishing lures and sells them — as $73,000. ‘I’ve never made $73,000 in my life and I want to know where they got that number,’ he said.”
“‘I know I was stupid, but what happened to Obama’s program?’ Mann asked. ‘That’s what I want to know.’”
“Cuthbert Snyder’s small home in South Ozone Park, Queens, just doesn’t make sense to him anymore. Snyder owes $309,000 on a house that’s now worth about $150,000. Last year, his bank agreed to a three-month trial of a modification to his mortgage that brought his $2,100 payments down to $1,065, but the lender refused to reduce his payments permanently.”
“Yet Snyder has continued to pay $1,065 a month, putting him at risk of losing the home to foreclosure. ‘It’s not fair to pay this for a one-and-a-half-bedroom home. It’s not worth it,’ Snyder said. ‘If they don’t modify, I will walk away.’”
“Walking away from her mortgage was the last thing on Manhattanite Jodi Romanello’s mind when she purchased a second home in Port St. Lucie, Fla., four years ago. Romanello believed the three-bedroom house would be good investment and eventually a retirement home for her and her husband. But soon after buying the house for $218,790, her real estate taxes surged, pushing her monthly housing payments to $1,800 from $1,400.”
“Romanello contacted her lender about refinancing, but was told she wasn’t eligible. Two years ago, she stopped making payments. She tried a short sale, in which she would sell the property for less than what was owed on the mortgage with the bank’s approval, but could not find a buyer. Then last year, Romanello’s husband passed away unexpectedly. In February, the bank repossessed the home, now worth less than half what she paid for it.”
“Looking back, Romanello said she had ‘a lingering bad feeling’ about walking away from her obligations. Still, she believes she did the right thing. ‘They should not have given me this mortgage at my income level,’ she said. ‘Why should I suffer the loss all by myself?’”
“In the fourth-floor courtroom of the U.S. Bankruptcy Court of the Southern District of California, which serves San Diego and Imperial counties, Chief Judge Peter W. Bowie’s docket is overflowing. Juan Flores is the owner and sole proprietor of a local business, Carpet Care 4 Less. Throughout 2007, he saw his income plummet along with the national economy. ‘My business dropped off by 50%,’ he says.”
“As his client roster evaporated, Flores started drawing on credit cards and took out a second mortgage to the tune of $57,000 in order to stay afloat. In 2009, out of options and under threat of losing his home of 10 years, Flores filed for Chapter 13 bankruptcy. But now he is behind on his payments again, and Wells Fargo Bank wants to restart foreclosure proceedings. San Diego resident Flores is still unwilling to give up, though a skeptical Judge Bowie says he is inclined to dismiss the case. ‘Have you run the numbers to see if he can meet the payments on just unemployment?’ Bowie asks Flores’ attorney.”
“The attorney informs the court that her client needs 12 months to catch up with his payments, saying the problem is a back-property-tax issue of $908 a month that will be resolved in nine months. From the bench Bowie says, ‘I can do nine months, not 12.’”
“Flores, who has run his carpet-cleaning business for 30 years, is relieved. ‘I just have to work like hell,’ he says.”
“When Charles Riley paid $330,000 for a two-story house on the outskirts of North Las Vegas, there was plenty of work for an experienced painter like him. He paid off his compressors, generators and other equipment, and took out a second mortgage. ‘We got into one of those ARM (adjustable rate) mortgages, and the second year we were in this house the (monthly) rate went up, and then it went up again, and it kept going up,’ Riley said. ‘We were freaking out. … It was crazy.’”
“‘Even if they take off the second mortgage, the loan we are paying off is $264,000, which is about $150,000 more than this house is worth,’ he said. ‘”I am like 60 percent of the people out there. Somebody has to do something to help these people out because they are struggling to keep their homes.’”
“Donna Reardon, a retired school teacher, and Jim Conroy long ago made plans to move from the East Coast to Las Vegas. Now, five years after they arrived, the couple last month received their first foreclosure notice after the bank refused to lower the mortgage or authorize a short sale of their one-time ‘dream home.’ ‘We are not going to live long enough to recoup our purchase price,’ Conroy, 56, said of the home bought in August 2004 for $211,070. ‘I blame the banks. If they weren’t making credit available for people who had no business buying a home, they (developers) wouldn’t have built all these homes.’”
“Terry Connolly said he followed ‘the rules’ in 2004 before he bought a brand new home. He calculated his income-to-loan ratio to make sure he could afford the mortgage. He researched the neighborhood, the developer and the outlook for local real estate, he said. Six years later, Connolly has stopped paying his mortgage and intends to walk away from the single-story house he purchased for $163,000; in part because it’s worth far less but also because the senior citizen fears for his wife’s safety and his own.”
“Like others who moved to the neighborhood when homes were first built, Connolly said out-of-town landlords a couple years ago, after Southern Nevada’s unemployment rate began to rise, started leasing homes to low-income tenants who receive government assistance with their rent. ‘When you do everything the proper way, and then you see it crumble around you because of what other people did — the banks, the speculators — then you start to lose any feeling that you have a moral obligation to pay the loan,’ Connolly said.”
“On a busy street in Boston’s Dorchester neighborhood, real estate agent Curtis Howe walks up to a brick townhouse that was rehabbed about 10 years ago. It’s in a part of town where properties got way overvalued during the housing bubble. Howe says the outstanding mortgage was about $540,000; the property eventually sold for $275,000 in a short sale. That is a huge drop in value, and the lenders who were on the hook for that loan lost a ton of money. ‘When a property goes into foreclosure and becomes vacant, it’s vandalized, you have plumbing issues if the property isn’t winterized, and there’s nobody to maintain the property,’ Howe says.”
“The federal government is launching a new program Monday to encourage more short sales. The Treasury Department will offer lenders and homeowners incentives totaling more than $3,000. Laurie Maggiano, a director of policy at the Treasury Department, says: ‘We’re not here to make moral judgments about borrowers; we are here to stabilize the mortgage market,’ Maggiano says.”
“Susie Gharib: Alan Greenspan said today of course we made mistakes. Tom, the former chairman of the Federal Reserve was testifying on Capitol Hill about the financial crisis. Darren Gersh, NBR Correspondent: ‘At one point, Greenspan suggested members of Congress were overlooking their own role in bringing on the financial crisis by pushing homeownership for almost everyone. Greenspan: ‘Having gone 18 1/2 years before the Congress, there is a lot of amnesia that is emerging currently.’”
“Gersh: ‘It was not the Fed that caused the problem Greenspan said. It was the government-sponsored mortgage giant’s Fannie Mae and Freddie Mac who bought up sub-prime loans and inflated the bubble…Greenspan went on, arguing that even if the Fed had tried to stop sub-prime lending, it couldn’t. The Fed had little authority over Wall Street investment banks like Bear Stearns and Lehman Brothers, who were packaging sub-prime loans and creating complicated securities. And he said, Congress would not have allowed the Fed to threaten the housing market.”
“Greenspan: ‘And if in that midst of period of expanding home ownership, no problems perceived in the sub-prime markets. Had we said we’re running into a bubble and we’ll have to start to retrench, Congress would say, we haven’t a clue what you are talking about.’”
“Fed Chairman Ben Bernanke offered a relatively downbeat view of the economy during a speech in Dallas, suggesting he was in no rush to tighten monetary policy. Bernanke said the U.S. economy still faces significant headwinds, including a housing sector that has yet to recover convincingly and an ailing employment market. ‘We are far from being out of the woods,’ Bernanke said. ‘Many Americans are still grappling with unemployment or foreclosure, or both.’”
“Thomas Hoenig, president of the Kansas City Fed, reiterated his concern that the Fed’s ultra-low interest rate policies could have unintended consequences. ‘I am confident that holding rates down at artificially low levels over extended periods encourages bubbles, because it encourages debt over equity and consumption over savings,’ Kansas City Federal Reserve Bank President Thomas Hoenig told a business group. ‘While we may not know where the bubble will emerge, these conditions left unchanged will invite a credit boom and, inevitably, a bust,’ he said.”
“Asset price bubbles are difficult to identify, but they occur ‘fairly frequently’ and policymakers need to be more aggressive than in the past in confronting them, New York Federal Reserve Bank President William Dudley said on Wednesday. The challenge of identifying bubbles as they occur ‘cannot be an excuse for inaction,’ Dudley said during a speech to the Economic Club of New York. ‘Recent experience strongly suggests that asset bubbles exist and their collapse can be very damaging’ to financial markets and the broader economy.”
“However, the New York Fed’s Dudley was reluctant to endorse using monetary policy to keep inflating asset price bubbles in check on Wednesday. Instead, he urged instead relying more heavily on regulation and verbal warnings — ‘leaning against the wind of conventional wisdom by speaking out against the dangers associated with the incipient bubble.’”
“Dudley differed from Kansas City’s Hoenig, saying interest rates, currently at a record low near zero, need to remain ‘exceptionally low’ to support a still fragile economy and create more jobs. ‘We are not getting the job gains we would like to see,’ Dudley said. ‘What that tells us is monetary policy has to remain on an easy setting,’ he said.”
“The housing market in and around Falls Church is now in boom mode, a veteran Falls Church-based real estate agent and her now-active real estate business partner told the News-Press in an interview this week. With ‘pent-up demand’ leading to prospective home buyers bidding against one another to drive offers above asked-for prices, these realtors think the outlook is bright for a widespread rebound of residential real estate values in Falls Church.”
“Falls Church-based agent Leslie Hutchison, who has been in the business for 25 years, said the current eight percent first-time home buyer federal tax credit has a lot to do with the current buying frenzy, especially for homes priced under $600,000. That tax credit is due to expire by April 30, but she doesn’t think that will slow demand. ‘It’s all about a pent-up market,’ she said. ‘Homes are no longer being sold below their market value or asking price.’”
“In addition to the tax credit…mortgage interest rates remain under five percent and many mortgages are up to 90 percent of value, meaning they require only a ten percent down payment. In addition, mortgages qualified by the Federal Housing Administration (FHA) require only a 3.5 percent down payment, and those qualified by the Veterans Administration (VA) are zero percent down. On top of this is the lesser-known fact that the federal government also offers a 6.5 percent tax credit for home buyers who are trading in their existing home for a new one.”
“(Agent) Stacy Hennessey also noted that the prospect of higher interest rates down the road is also driving a boom in the market now, and added that the rental market in the area is completely sold out. She said that the expiration of the federal tax credits program should not slow the frenzied level of home buying activity that is now underway.”
“‘There’s a lot of arm wrestling now going on among prospective buyers bidding up the value of the homes they want,’ Hutchison said, adding that real estate speculators began picking up bargains on the market months ago.”
“Charlie Rose talks to James Chanos of Kynikos Associates about the coming property bubble in China. Q: What makes it a bubble? A: What we define as a bubble is any kind of debt-fueled asset inflation where the cash flow generated by the asset itself—a rental property, office building, condo—does not cover the debt incurred to buy the asset. So you depend on a greater fool, if you will, to come in and buy at a higher price. We’re seeing behavior [we saw] in 2005 in Miami or ‘06 or ‘07 in Dubai.”
“This is high-end condos in major urban areas and high-end office buildings. Just to give you an idea, right now construction costs in China are starting to hit $100 to $150 per square foot in some cities. That doesn’t sound like a lot by Western standards, but it means a condominium basically presented to you with no floors, no walls, no appliances costs the average Chinese two-income couple $100,000 to $150,000 U.S. That Chinese two-income couple in their 30s probably makes combined $7,000 or $8,000 a year. You do the math.”
“Even if they were making $10,000 to $15,000 a year, they couldn’t carry a $150,000 condo. This is very similar to someone making $40,000 in the U.S. at the height of our bubble buying a $600,000 or $800,000 house. We know how that ended.”
“Istanbul residents can’t pick up a newspaper or turn on the TV these days without encountering ads promising potential real-estate buyers a magnificent modern life in the heart of the city. ‘We promise you a new, modern world,’ developers vow, offering ‘a glorious future’ to people who invest in one of the new high-rise residential communities that seem to be continuously under construction.”
“Others, however, say the demand for such homes is not as great as developers would like consumers to believe. ‘Why do you think there are so many ads? Because no one wants to buy these houses,’ said architect Erengezgin said, who also criticized the poor quality of materials used in much new construction, leaving the buildings with little insulation against noise or heat and structurally vulnerable to earthquakes.”
“Nizamettin Aşa, vice chairman of the Istanbul Chamber of Real Estate Commission Agents, agreed with Erengezgin about the relationship between the frequency of advertisements and the lack of demand. ‘It is the same with shopping malls. Construction companies build them without considering the results,’ he told the Daily News. ‘But now there are so many empty spaces in those malls and so many empty houses in the city.’”
“One of the Baltimore area’s most historically significant residences is headed for a foreclosure auction today, more than two years after owner and prominent businessman Stephen A. Geppi put it up for sale for $7.7 million amid the slumping housing market. He and his wife paid $4.8 million in 2004 for the 9-acre estate. The Geppis moved to another house before putting the 13,000-square-foot mansion on the market in January 2008. The estate is currently listed for sale for $3.6 million.”
“Karen Hubble Bisbee, an associate broker whose agency had the Cliffholme listing until November, said the house should have been listed for less to reflect price drops in the market. ‘Here are countless sellers, who have very special houses and had paid a great deal of money,’ she said. ‘Nobody could believe the market would drop as precipitously as it did.’”
“‘The dismaying thing to me as an economist is that 97 percent of economists never saw this coming. No one saw the tidal wave,’ said Kevin O’Brien, economics professor at Bradley University. Part of the reason economists failed to see recession looming is because changes in regulations covering home mortgages and who qualified for them was not fully understood. ‘Mortgage-backed securities did not recognize the housing bubble,’ he said”.
“Mann said he was baffled when the people at IndyMac told him his loan documents listed his additional income — he makes fishing lures and sells them — as $73,000. ‘I’ve never made $73,000 in my life and I want to know where they got that number,’ he said.”
“‘I know I was stupid, but what happened to Obama’s program?’ Mann asked. ‘That’s what I want to know.’”
Alright! Finally a story to top the Central Valley ag worker w/ $30,000 in household income who bought a $700,000+ home!
Is Ben trying to piss off everyone on the blog this morning? I don’t recall ever reading such a list of consecutive losers who should drive to the vets and have themselves put to sleep.
“‘The dismaying thing to me as an economist is that 97 percent of economists never saw this coming”
The amazing thing to me as a renter is that 97 percent of economists didn’t have one ounce of functioning gray matter between them.
+1. Actually, they do have functioning grey matter, but it’s not dedicated to independent thought. It’s given over to providing academic reinforcement to the for-profit interests of the financial services industry.
Thanks for voicing my cynicism about the economics profession.
I agree! This is just really bad today.
Longtime HousingBubbleBlurkers have watched the unfolding maelstrom of wide-eyed speculators crouching towards pretension and acting like they’re someone who is only in their dreams.
Millions of these naive hollow men went from cocktail party dandies to whiny bankrupt braggers.
They simply don’t deserve pathos. What deserves Pathos is the state of our Country; Ben is not posting anything that is NOT unusual. Sadly, millions of our fellow citizens have wandered into government produced delusion.
…and it doesn’t stop at being entitled to a house that you can’t afford. That is only the start…it’ll gets worse as we plod thru the devolution of the “American Experiment.”
These same whiners will be demanding not only mortgage relief, but free healthcare, retirement, military protection, ad nauseum.
We’re in a heap o’ trouble.
lol@cereal. My thought exactly. I frequently side with the FBs over the banks, but this collection of whiny entitled douches makes me ill.
Ever wonder why these whiners are whining?
The media loves the whiners, it is a story that they can slant to what every side they want!
When did you ever think that the people would really want to disclose that they were so stupid to buy over their income status!
Wasn’t too long ago that if you lost your home, you went away and hid from your friends, now ,you can say it was all someone elses fault, never yours.
That’s my only explanation. It goes from stupid to idiotic, and then keeps on going right through to brain dead in the articles Ben put up today.
He may have just wanted to throw us some red meat!
Here’s another news headline to really piss you off. The retartds, the ca governator will sign to give the FBs who short sell or walk, tax dispensation. I’ll have to read closer and see if ‘it’ excuses those who refied or just purchase money. If it’s for everything I will never vote for a Dem again who passed the bill.
Four times he pulled money out of his house, knowing he didn’t have the funds to pay it back, and now he’s mad at Obama?
Like a rat in a box of some environmental psycologist’s lab, he pulls the lever and gets cheese. Successfully, he has pulled the lever 4 times and got a huge pile of cheese. Now, he pulls the lever desperately, and no luck. No cheese.
So he scampers around the cage, wildly flailing about looking for another cheese dispenser. No luck. He is confused. He is perplexed.
He becomes angry. Why is the program not working? It worked before.
He claims the walls of the box to attack the lab’s scientists. He wants more cheese. Dammit! Give me more CHEESE.!!!!!
I just can’t get over people like this. They really are just rats.
He could sue whomever did the loan paperwork and put that in there, no? Seems like he has a case, especially if he didn’t sign off on it.
I’m sure he signed off on it. You mean to tell me he believed this was free money that never had to paid back?
At BEST, if the phony home valuations held steady, he would have had to sell the house to cover the debt.
I know of the relative of one coworker who had trouble understanding that the money you pulled out of your house had to be paid back. After all, it was ‘her equity’…
I am coming to believe that the concept of the government providing “services”, rather than enforcing laws and rules, along with the concept that some people are “entitled” to special services and privileges has led to an American Psychosis.
People now believe that they are entitled to a better life by special lending programs or give-aways that the government sponsors. Owning a house is now a right, and a “benefit”.
Buy a house, get a prize. It’s amazing, but sad to see the decline of the US due to socialist dreamers pandering a free ride to everyone in America. I think this delusion is greatly expanded by the free ride that most of the Wallstreet traders got from the FED. Everyone has a right to be angry.
But let’s be adults. Nothing in life is free, except perhaps the air, and with the EPA criminalizing breathing, that may not be free much longer.
“I know of the relative of one coworker who had trouble understanding that the money you pulled out of your house had to be paid back. After all, it was ‘her equity’…”
And I work with well-educated idiots who believe that their credit limit on their credit card counts as their “savings.”
People are stupid and most don’t understand the difference between debt and wealth, sadly.
It’s amazing, but sad to see the decline of the US due to socialist dreamers pandering a free ride to everyone in America.
I won’t argue with that but it begs a very important question so darn important and heavy, I don’t even know what the implications are.
But here it goes:
If the “decline of the US is due to socialist dreamers” why in the heck didn’t they do the Euro socialist stuff like universal healthcare, stronger safety nets and greater job security and pensions???
I mean why did these “socialists” socialize banks, corporations and the American Dream instead? Did this help people??
What model socialist are these? Not the Sweed, Dane nor French model. What model??
These are the most confusing socialists I’ve ever heard of and where did they get these guys from?
These are the most confusing socialists I’ve ever heard of and where did they get these guys from?
From a dollar store?
I mean why did these “socialists” socialize banks, corporations and the American Dream instead? Did this help people??
What model socialist are these? Not the Sweed, Dane nor French model. What model??
The German, National kind =)
Hint, those weren’t real socialists either.
Pbear…Thats the one quote I came away with also and yes, Ben did provide the blog with a lot of red meat this morning…
Yes and there were the fee’s, commissions buy the banks, Real Estate agents with their favorite loyal appraisers that in all “made the numbers work”. The quick easy money was made and spent. Now the very few who used “common sense” and saw what this bubble really was are sleeping better.
“‘I know I was stupid, but what happened to Obama’s program?’ Mann asked. ‘That’s what I want to know.’”
Dude, not only are you stupid, like most of the dumb masses you put your inability to deal with your poor choices in the hands of a pathetic politician whose soul goal is for themselves.
Just a typical example of what we have become, I screwed up…Now you fix it!
“what happened to Obama’s program?”
Like most issues related to O, it’s a mirage, a sleight of hand, a figmation of your imagiment. I’m beginning to think the guy is some sort of mass hallucination.
I’m beginning to think the guy is some sort of mass hallucination.
I get your drift.
Last year, I was photographing an outdoor concert here in Tucson. At one point, the band struck up the merry tune, “Change is Gonna Come.” I think the original was done by Wilson Pickett.
Well, the lawn in front of the band was filled with people who were dancing their hearts out. Didn’t take a genius to figure out that they were still on that Obama-is-President high.
Now, don’t get me wrong. I voted for the guy. But the lofty expectations — and the euphoria — have rubbed me the wrong way.
If I wasn’t so immersed in running my camera, I would have been running my mouth at the dancers. I would have been telling them to stop dancing and start working to make this city and this country better. Change is hard. And it takes time. So, climb down off your Obama high and get busy!
Sam Cook
I suggest he go back and talk to the man that was President when he got his stupid loan and overpriced house and ask him to help.
“‘I know I was stupid, but what happened to Obama’s program?’ Mann asked. ‘That’s what I want to know.’”
All of these clowns up to their necks in accumulated debt and sorrows crying, “Where is and was Obama…Help Me!”
Your stupidity and greed didn’t happen on HIS watch.
Please refer to the small wet rejection note attached to the hook entitled…
“Sorry Charlie”
(In this case, the Banksters are not looking for FB tuna with good taste but rather for FB tuna that tast good)
He was probably one of Obama’s supporters. As you may recall from some of the soundclips circulating during the campaign, many believed if Obama got elected that they didn’t need to “worry about their mortgage payment, or about paying for gas”.
“If I take care of Obama, he’s gonna take care of me!” And during the healthcare debate, i recall one of his moron followers saying that the program was great. When it was done, he would just “pay his copay and then everything else would be taken care of”. It was a great plan.
The free lunch supporters have no clue about where the free lunch is coming from. They just know they are lined up to get it. The government first needs to rob the creators of the lunches to give them away. But this is typical thinking. It’s also scary.
Two wolves and a sheep voting on who’s for dinner…
“…but what happened to Obama’s program?’ Mann asked. ‘That’s what I want to know.’”
aka…
“…but ignore all that. It’s not my fault!”
“…a skeptical Judge Bowie says he is inclined to dismiss the case. ‘Have you run the numbers to see if he can meet the payments on just unemployment?’ Bowie asks Flores’ attorney.”
Sarcasm should never be mistaken for skepticism.
“‘The dismaying thing to me as an economist is that 97 percent of economists never saw this coming. No one saw the tidal wave,’ said Kevin O’Brien, economics professor at Bradley University.”
That is pretty embarrassing.
Could it be that they refused to see it?
“Could it be that they refused to see it?”
Absolutely
Paid not to see it?
“Paid not to see it?”
You don’t bite the hand that feeds you .
I’m probably one of the last people on the blog to get around to reading The Big Short. It’s amazing the stories of people who recognized the bubble and did everything they could to get the big investment firms to follow along far enough that they’d be willing to sell CDS against it, but not so far that they started recognizing the bubble itself. The efforts Mike Burry alone went to are impressive.
The stories of the Deutsche Bank calling to buy them back near the end are hilarious.
Well I’m still finishing up This time is different. The Big Short is next on my economic list.
I haven’t read the book either, but I did read that Burry’s hedge fund returned a gain to investors so large it looked like a typographical error. I had no idea at the time that there was a way to short American subprime mortgages. Had I realized that, I would be posting this from “an undisclosed location” rather than from Tampa, Florida.
You could have (as I did) bought PUTs on WaMu, Wachovia, Golden West, or Downey among others We saw it unfold and were shown the light by the HBBrs and Ben.
Nope. If you shorted Golden West (like I did), you were wiped out when Wachovia bought them out. It was one of my biggest losses as I was shorting the finance/housing market. Some gut-wrenching moments there, and I know a lot of people who folded because it was too painful to short even though it was obvious to all of us what would **eventually** come.
“Eventually” can be a really, really long time when you’re down 30-40% on your short positions.
And that 97% percent are now telling you that things are ‘OK’…
“And that 97% percent are now telling you that things are ‘OK’…”
Thus could makes sense considering that the rich top 3% of Americans are probably paying these whores salaries in some form or another.
“Q: What makes it a bubble? A: What we define as a bubble is any kind of debt-fueled asset inflation where the cash flow generated by the asset itself—a rental property, office building, condo—does not cover the debt incurred to buy the asset. So you depend on a greater fool, if you will, to come in and buy at a higher price. We’re seeing behavior [we saw] in 2005 in Miami or ‘06 or ‘07 in Dubai.”
Another thing that makes it a bubble:
It’s different here, because…
“What we define as a bubble is any kind of debt-fueled asset inflation where the cash flow generated by the asset itself … does not cover the debt incurred to buy the asset.”
A good definition, IMO.
In theory, a good definition, but there are limitations in practice.
1.) Estimates of FUTURE cashflow can vary greatly. Are you getting in on the “ground floor” of an expanding company, or are there other reasons to believe that income will increase? The whole “dot bomb” stock market bubble was predicated on the idea that SOMEDAY these companies would be making big profits.
2.)With owner occupied residential RE the “cash flow” generated is non-cash (housing) and therefore hard to measure. Because the normal economics of homeownership are better for those who are reasonbly prosperous and stable, there is usually a real difference in the housing stock intended for owner occupation versus housing for rent. This makes estimating the equivalent rental value of O/O housing more difficult.
The “cash flow” generated by owning one’s own home can be termed “imputed rent”: It’s the amount of phantom tax-free income one’s home generates in lieu of paying rent to somebody else.
In a sense a homeowner is paying rent to himself. Tax-free rent at that.
Numbers can sometimes be fun to play with:
Suppose a person owns his home outright and equivilent rents are a thousand dollars a month. Then one could say he pays himself a thousand dollars in month after taxes in savings that would otherwise go for rent.
What if he decides instead to buy a tax-free bond that pays out a thousand dollars a month in interest and use this money to pay rent to somebody else? What would be the cost of such a bond?
Whatever the cost of the bond it could be said this is the value of the house that he has paid off and is now living in.
In a sense a homeowner is paying rent to himself. Tax-free rent at that.
As a percent of price paid for the house, what would one consider a good yearly return?
Of course during the bubble the ratio between purchase price and OER got pretty extreme. And in many markets alot of housing got built. All that excess housing is depressing rents, and therefore OER. So RE prices in much of FL are suffering a double whammy: OER is falling even as the PP/OER ratio is returning to sanity.
..the cost of the bond it could be said this is the value of the house..
I don’t think it works both ways.
Bonds are not houses. They carry different risks in type and amount, and risk is an indirect part of the valuation equation.
When something is more or less risky it’s expected returns are higher or lower, and expectation of returns directly affects value.
I lived most of my life on combotechie’s way of evaluating real estate, and so was rarely a homeowner. i had a lot of tax-free bonds all the time, from which I paid my rent.
Just now, I am considering buying a condo in Morro Bay, a condo whose asking price has dropped by 27% in the past few MONTHS (I think because the bank tried an auction and the highest bidder then forfeited his/her earnest money). I’m tempted by the huge drop, but the rent-vs-buy comparison STILL suggests renting is the better deal, particularly as a tenant pays no HOA dues or RE taxes.
It sounds more like a definition of “speculation”, with a bubble being an extreme form of speculation.
+1
Can’t a bubble expand around an asset type that has no cash flow and is so inexpensive (or participants are so wealthy) that no debt is needed?
eg. Benie babies? Baseball cards?
Why can’t it ever be something I’ve already got lots and lots of?
Maybe all the time spent hanging on this blog and observing how it all fits together could pay off in unexpected ways. I wonder.. What could I do to encourage the bubbling of a certain targeted asset..
(answering Joey) Yes. Stocks require 50% “down payment,” and the stock crashes of recent decades were not mainly due to margin calls.
“Fed Chairman Ben Bernanke offered a relatively downbeat view of the economy during a speech in Dallas, suggesting he was in no rush to tighten monetary policy. Bernanke said the U.S. economy still faces significant headwinds, including a housing sector that has yet to recover convincingly and an ailing employment market.”
Given the bust side of the McMansion craze is likely to last a couple of decades, is there some prospect the Fed will keep interest rates at recent historically low levels for that long?
Hey !!
This is the American Dream…No one here gets out alive.
That reminds me, a new Nightmare on Elm St. is coming out. I’m imagining Greenspan in a striped sweater.
Don’t these horror guys always go after teenagers who are just trying to “get some” in the woods? Maybe we can imagine Freddy (Jason? who was it?) targeting Alan and Andrea.
*buys stock in brain bleach*
“American Dream”
I got so sick of hearing that term, long before the bubble. I had ask, what exactly is the American Dream? What are we talking about here? It seemed to have several meanings, or you were just supposed to know.
I question everything now. When the media start resorting to these vague terms you got to know it won’t end well.
Whatever the fictionalized, commercialized and Hollywoodized “Leave it to Beaver” and “Father knows best” romantic American Dream was supposed to be, it doesn’t matter to us because of one simple reason….
“Charlie DON’T surf ”
wikipedia has a page on the American Dream.
A couple years ago it outlined how Realtors , by way of massive advertising and industry propaganda, absconded with the term and changed it’s meaning into something involving home ownership. The page has since been edited and no mention of Realtors is to be found..
I live MY American Dream quite effectively in rented housing. Rent a year-round apartment in Maine; my furniture and files live there. Rent an additional house near it late June-early August, right on the shore, so I can have good parties and lots of houseguests. Rent spectacular shorefront in Morro Bay CA in December and March, repeating the parties/houseguests thing. Rent a room in MB January and February to hole up and take care of my mortgage biz and get my income tax finished. Paying double rent for about half the year just beats the heck out of owning two houses. Or ANY houses.
“However, the New York Fed’s Dudley was reluctant to endorse using monetary policy to keep inflating asset price bubbles…’”
The sentence gets more interesting if you end it right there, neh?
“‘We are not getting the job gains we would like to see,’ Dudley said. ‘What that tells us is monetary policy has to remain on an easy setting,’ he said.”
How does printing money get you job gains?
Businesses more likely to borrow to expand if the credit’s cheap?
These tools only know of one way to fix problems: hand out fresh money to connected insiders (sociopaths) and hope that somehow this money will trickle down on the masses. It hasn’t worked in 10+ years, so I see no reason for it to work now.
“‘It’s not fair to pay this for a one-and-a-half-bedroom home. It’s not worth it,’ Snyder said.”
He must have thought the price was fair when he originally bought the place.
“‘I know I was stupid, but what happened to Obama’s program?’ Mann asked. ‘That’s what I want to know.’”
Inadvertently or not, his house refinance was based on fraud, and now he wants the rest of us to bail him out? I don’t think so… Next time read ALL of the paperwork, Mr. Mann, not just that number at the bottom representing your “liberated equity”.
Gah… its too early in the morning to pamper the entitlement/”no personal accountability” babies.
Lotsa red meat in today’s clearinghouse, eh?
Well, I wasn’t stupid, and I still can’t afford a house. Damn you Obama!
“‘I know I was stupid, but what happened to Obama’s program?’ Mann asked. ‘That’s what I want to know.’”
Yeah, and where was Gambler’s Anonymous when you doubled down and went for broke ?
““Yet Snyder has continued to pay $1,065 a month, putting him at risk of losing the home to foreclosure. ‘It’s not fair to pay this for a one-and-a-half-bedroom home. It’s not worth it,’ Snyder said. ‘If they don’t modify, I will walk away.’””
If it’s not fair to pay that much, why did he buy the house? If the house had doubled and he made 250k when he sold it, would it have been unfair?
it’s just stupid. if the payment is 2K and he’s paying 1K, they’re gonna take it anyway, and all those 1K payments are pissed down the drain.
The whining of all these FB’ers and Loan Owners is getting really lame and old.
Just walk away…….. save yourself and walk away.
“It’s not fair to pay this for a one-and-a-half-bedroom home. It’s not worth it,’ Snyder said.”
It never was, was it?
Exactly. Once I get to see the videotape of some loan officer holding a gun to Mr. Snyder’s head I’ll feel some sympathy.
And if the price had gone up, he would have patted himself in the back for being so financially savvy.
Cuthbert Snyder’s small home in South Ozone Park, Queens, just doesn’t make sense to him anymore
For some reason Cuthbert Snyder sounds like a W.C. Fields character, especially when he lives in South Ozone Park.
Where is Snaith when we need a funny name.
“‘I know I was stupid, but what happened to Obama’s program?’ Mann asked. ‘That’s what I want to know.’”
WHERE IS MY FREE MONEY????
I voted for obama so I expect my payoff…
Surprise, surprise! There just isn’t enough free money to go around, especially after the Wall Street banksters got theirs up front…
There’s not so much of any kind of money to go around - free or not.
A credit card debt foregiveness commercial came on while watching cartoons yesterday - during the pitch the voiceover said this: “get your credit card debt forgiven in this era of government bailouts”.
Yeah, I had to do a doubletake but the phrase: “era of government bailouts” was clear and unmistakable. So anyway, that’s what is being pitched to the masses. Let’s see how long this can go on, shall we?
(BTW - Cartoon Network is like C-SPAN, but with brighter colors)
And most of the cartoons they broadcast are ugly and unfunny. Even the new Batman cartoons suck.
Ah, In Colorado, you are so right. Depressing, isn’t it?
Thank goodness for Boomerang. Its quite telling when the CN’s “vintage” channel broadcasts better stuff.
Because of four mortgage refinances. Obama’s money is likely to ask this guy where the refi money went.
On HBB, I have asked — several times — just how many people “deserve” to be helped by a government program. That is, primary residence only, no re-fis, no income monkey business on the loan doc, medical hardship, or they had a nice fixed rate and got laid off. Apparently, not many. I guess most people think they deserve it, but few actually do.
And where does it say that Mann voted for Obama? He might be in the “get the government out of my Medicare” crowd.
I’ll bet, like most people with home equity loans, he deducted the interest even though he didn’t spend it on capital improvements.
But do you think the IRS will go after him? No. (They’ll go after me and, for example, ask to see every plane ticket receipt and meal expense receipt for the past two years before leaving me alone without so much as an apology.)
But soon after buying the house for $218,790, her real estate taxes surged, pushing her monthly housing payments to $1,800 from $1,400.”
February, the bank repossessed the home, now worth less than half what she paid for it.”
On the bright side - taxes on this house will be cut in half…
No they won’t. Not in NY or VT.
“Charlie Rose talks to James Chanos of Kynikos Associates about the coming property bubble in China. Q: What makes it a bubble? A: What we define as a bubble is any kind of debt-fueled asset inflation where the cash flow generated by the asset itself—a rental property, office building, condo—does not cover the debt incurred to buy the asset. So you depend on a greater fool, if you will, to come in and buy at a higher price. We’re seeing behavior [we saw] in 2005 in Miami or ‘06 or ‘07 in Dubai.”
“Even if they were making $10,000 to $15,000 a year, they couldn’t carry a $150,000 condo. This is very similar to someone making $40,000 in the U.S. at the height of our bubble buying a $600,000 or $800,000 house. We know how that ended.”
What don’t I think the Yuan will rise if taken from its peg to the US dollar…
“‘Even if they take off the second mortgage, the loan we are paying off is $264,000, which is about $150,000 more than this house is worth,’ he said. ‘”I am like 60 percent of the people out there. Somebody has to do something to help these people out because they are struggling to keep their homes.’”
Well, here is the “Government should always be doing more” mentality; alive and well, pointing fingers, and deeply underwater. Just like most cities, counties, states, and the U.S.A. in general.
People are “struggling” to keep “their” homes.
Really? Sounds to me like they are discovering mathematical reality. Maybe the somebodies who need to do something are the the ones who bought into situations they can’t afford. Maybe they need to move back in with the parents, live in a van under a bridge, or try that strange concept always conveniently missing from these poor FB accounts - try renting something you CAN afford.
Maybe the somebodies who need to do something are the the ones who bought into situations they can’t afford.
Of course your point is valid however the guy’s quote below is more understandable with the added context.
Somebody (The government and/or the Banks) has to do something to help these people out because they are struggling to keep their homes.’”
Many people know the government and/or the banks enabled a situation that not only promoted debt slavery, but promoted debt slavery to an asset dear to the heart and an asset that was overpriced partially due to the government and bank enabling.
And the banks and government DO share much blame with the FB. This is why Greenspan got yelled at and why Greenspan feebly fought back.
The fault lies with everybody, therefore everybody should take a hit. FB should go BK and rent. Bank should take a huge hit. Gov should provide programs to help out [insert obligatory pitch for draconian cramdown].
Instead, they are burdening those few who have NO fault in this whatsoever — us bitter renters.
Preach it, oxide!!!
This is what I am waiting for… the smoking gun memo to greenie from his “intern’ listing all the strawberry pickers and fraud deals copied from this blog in 2006….
———————
And the banks and government DO share much blame with the FB. This is why Greenspan got yelled at and why Greenspan feebly fought back.
Anyone have any thoughts as to why the housing prices in Canada are increasing as rapidly as they are?
There is a housing bubble in Canada.
Where is the money coming from? That’s my question. I know China can manipulate their markets all they want, but who is investing in Canadian mortgages? From what I understand their version of Fannie/Freddie isn’t large enough to cover the entirety of their bubble, though I could be wrong.
I think investors are buying Canadian crap mortgages because they are recourse loans.
The belief is Canadians have to pay these loans back because they can’t just walk like folks did in America. A similar problem is occurring in Australia.
The investors believe it’s different this time, you see
Oliver
P.S. I am looking for smaller mortgage brokers and banks with exposure to Vancouver, Alberta, and or Toronto. If folks have some good publicly traded names please let me know.
It is different here? Everyone wants to live here. I have to buy before prices go even higher? Banks giving money to anyone who can breath? Banks giving 10X income loans? No down payments? Liars loans? The government backstops banks for all losses? Realtors “helping” buyers getting into houses they can not afford? Appraisers “helping” buyers getting into houses they can not afford? No one sees a huge market correction coming? Housing prices always go up? Canadian banks are too big too fail and they know it? Huge bonuses for bank executives?
Did I miss anything?
“Suzanne researched this.”
“You deserve stainless steel appliances.”
“You can refinance later.”
“If you don’t snap it up, someone else will.”
“Don’t forget the mortgage interest tax deduction” (do they have that in Canada?)
“The sooner you buy, the wealthier you’ll be when you’re older.”
You can refinance later, take money out, and lower your payment.
‘Let us pre-qualify you and tell you how much house you can afford.”
lol
Did I miss anything?
The Mediterranean climate?
They are not making any more Canada, ya know.
I’ll take your (over priced) offer if you take care of my squirrels. Put it in writing.
The developers are always the first to go:
‘John Torode’s invite-only feast and dance had gained a reputation over two decades as the place to see and be seen. But last July he was busy with other matters. Piece by piece, John Torode’s business empire was slipping away. The day before the July 3 Stampede Parade, he fully lost control of his Arriva tower project, quashing his plan to erect Alberta’s tallest condo building.’
‘The next week, his nearly complete downtown office building also fell into receivership, and a court ordered him and his company to pay $7.2 million toward an expired loan on another development property. In August, with creditors starting to reach at his mountain of debts and personal loan guarantees totalling $187 million, Torode sought court protection from personal bankruptcy.’
‘Even if he drained his bank account and sold nearly all his personal property, shares in foreign racehorses and his Bentley convertible, it wasn’t nearly enough. A bankruptcy trustee estimated the businessman was only able to propose giving eight cents for every dollar he owed to anticipated unsecured creditors, court documents show.’
‘In retrospect, we wouldn’t have done as many land deals. It would have been the smart thing to do,’ Torode says. ‘But we were doing these deals in ‘06, ‘07, and things were looking good and it made sense, and . . . you know.’
“A bankruptcy trustee estimated the businessman was only able to propose giving eight cents for every dollar he owed to anticipated unsecured creditors, court documents show.’
If they ever see that eight cents on the dollar, that will be indisputable proof, that there is in deed, a Tooth Fairy.
New York multi-generation real estate families: the rest of the industry learned nothing from the past two years, and office buildings are already overpriced based on an assumption of inflation.
http://www.observer.com/2010/real-estate/boomism
Krugman: better inflate away the debt than end up like Greece.
http://www.nytimes.com/2010/04/09/opinion/09krugman.html?hp
“The key thing to understand about Greece’s predicament is that it’s not just a matter of excessive debt. Greece’s public debt, at 113 percent of G.D.P., is indeed high, but other countries have dealt with similar levels of debt without crisis. For example, in 1946, the United States, having just emerged from World War II, had federal debt equal to 122 percent of G.D.P.”
“So how did the U.S. government manage to pay off its wartime debt? Actually, it didn’t. At the end of 1946, the federal government owed $271 billion; by the end of 1956 that figure had risen slightly, to $274 billion. The ratio of debt to G.D.P. fell not because debt went down, but because G.D.P. went up, roughly doubling in dollar terms over the course of a decade. The rise in G.D.P. in dollar terms was almost equally the result of economic growth and inflation, with both real G.D.P. and the overall level of prices rising about 40 percent from 1946 to 1956.”
If inflation is 10 percent per year rather than four, we can get out of this even without real GDP going up, right Paul? I agree it’s inflation or collapse, but I’m not sure which is worse, and we may get both.
I agree it’s inflation or collapse ??
Collapse = Massive deflation…
There is a third possibility…What about 10 years of muddle through ??
Inflationists have one problem
People with no money and no access to credit and no rise in pay who are already maxed out in terms of spending can’t spend more. At some point inflation via the printing press will not increase GDP. Now throw in higher taxes and fewer services and higher fees.
“People with no money and no access to credit and no rise in pay who are already maxed out in terms of spending can’t spend more.”
What about people in the rest of the world? Give them enough dollars, and they’ll buy the U.S. out from under us.
Walk Away by J. Walsh…. a favorite.
Happy Friday HBB’ers. Walk away Loan Owners… DO IT!
Takin’ my time,
Usin’ my line,
Tryin’ to decide what to do.
Looks my my stop,
Don’t wanna get off,
Got myself hung up on you.
Seems to me,
You don’t want to talk about it.
Seems to me,
You just turn your pretty head and
Walk Away
Places I’ve known,
Things that I’m growin’,
Don’t taste the same without you.
I got myself in
The worst mess I’ve been
And I find myself startin’ ta doubt you.
Seems to me,
We talk all night, here comes the morning.
Seems to me,
You ignore just what was said and
Greet the day (solo)
seems to me,
you don’t wanna talk about it.
Seems to me
You don’t wanna talk about it.
Seems to me,
You just turn your pretty head and
Walk Away.
I’ve got to cool myself down,
Stompin’ around,
Thinking some words I can’t name ya.
Meet you halfway,
Got nothin’ to say,
Still I don’t ’spose I can blame ya.
Seems to me,
You don’t wanna talk about it.
Seems to me,
You justturn your pretty head and
You just turn your pretty head and
Walk away.
Walk Away.
With appologies to Rogers and Hammerstein….
When you walk from your home
Hold your head up high
And don’t be afraid of the dark.
At the end of the storm
Is a golden sky
And the sweet silver song of a lark.
Walk on through the door,
Walk on down the walk,
Tho’ your dreams be tossed and blown.
Walk on, walk on
With hope in your heart
And you’ll never pay that loan,
You’ll never pay that loan.
The old group “The Left My $$$ at the Banke”
And when I see the sign that points one way
The lot we used to pass by every day
Just walk away Renee
You won’t see me follow you back home
The empty sidewalks on my block are not the same
You’re not to blame
From deep inside the tears that I’m forced to cry
From deep inside the pain that I chose to hide
Just walk away Renee
You won’t see me follow you back home
Now as the rain beats down upon my weary eyes
For me it cries
Just walk away Renee
You won’t see me follow you back home
Now as the rain beats down upon my weary eyes
For me it cries
Your name and mine inside a heart upon a wall
Still finds a way to haunt me, though they’re so small
Just walk away Renee
You won’t see me follow you back home
The empty sidewalks on my block are not the same
You’re not to blame
I know this is against the grain here but I do believe Greenspan when he says congress would have ordered him to stay out of the subprime market.
Course he set things afire with low rates in 01.
I think he believes it. But I also think Congress was scared to death of going against anything Greenspan preached. You don’t question the maestro.
Listening to those senate hearings was astonishing.
They expect me to believe that NOBODY (except a few people at the Housing Bubble Blog!) figured out that a business model that depended on ever-increasing house prices was doomed to fail?
It’s not like the banks figured that they could have a few good quarters by selling 50 years mortgages to people. They built an entire industry by presupposing that house prices could rise much faster than wages indefinitely.
And nobody but some amateurs on a blog knew this was crazy?
I was watching CNN at the gym yesterday evening. What really got me lathered up was the former Citigroup execs apologizing. Sorry I can’t find the CNN link, but here’s some red meat from the La-La Land Times.
I believe I heard someone say that no one saw this financial tsunami coming. And, fortunately, the gym was devoid of humans except for me, because I really unleashed a tirade at the TV. Y’all will be pleased to know that my tirade included reference to the housing bubble blogosphere, which did see it coming.
In 1997 (Clinton) Rubin, Summers, Greenspan,Geitner, Arthur Levitt had a meeting with a minor government financial offical named Berkley Born. Ms Born told these men that they had to get the CDOs under control and regulation. Rubin said he didn’t know what a CDO was. Our Treasury Secretary by g–.It was already screwed up. Then we got Raines, Johnson, and the well meaning but wrong Community Reivestment Act. There you go down the tubes.
Again I’d like them to see how these CEO’s invested their own money. That alone will tell you what they knew and didn’t know.
We know that the tan man was selling his stock hand over fist.
We know that Hank moved heavily into treasuries before the crash.
Now let’s look at the financial moves of the top CEO’s of Wall Street. If they all invested their own money in this crap then they are off the hook, not guilty just stupid. If they bet against real estate and banks etc and then moved back in just before TARP etc (ie like Stephen Friedman, chairman of the New York Federal Reserve ) then they are guilty of fraudulantly selling toxic crap to the public and then stealing from the US gov and investors.
We won’t see this happen of course but it is the simplest way to decide who is telling the truth. Heck I’d like one congressman to ask them how they invested their own money during the crisis.
Spot on, measton.
I’m NOT an amateur.
I have an official HBB T-shirt !
“‘I know I was stupid, but what happened to Obama’s program?’ Mann asked. ‘That’s what I want to know.’”
The strategy of politicians–both democrats and republicans–has simply been to buy votes by promising Free Money to people.
Even McCain proposed to buy mortgages from people who were underwater! (He said this in Florida, as well as during the second debate, probably in an attempt to buy votes from Florida debtors.)
I’m sure that Mr. Mann knew what he was doing.
What’s also disgusting is that he, and probably the majority of people who took out home equity loans, most likely illegally deducted the interest on these loans. And there’s no pressure on the IRS to collect this money.
As I’m finishing up my taxes, with a total federal tax burden this year that well exceeds the median national price for a house, I get sick to my stomach hearing how entitled J6P feels, and how much the government is pandering to them at my expense.
As I’m finishing up my taxes, with a total federal tax burden this year that well exceeds the median national price for a house,
Dang Dude, I’d be stoked!
Next HBB meetup sponsored by Rueven! I think Ben should incorporate and hire us all for $0.01/year so it can be a tax write-off.
Speaking of meetups, I’ll be at NAB (Vegas) next week! Any HBB’ers here who want to grab lunch, tweet me (Reamworks) or something.
Wife and I are leaving tomorrow for Palm Desert OR Las Vegas…We will decide once we are on the road…Will head to the one that has the better weather…If we head to Vegas I will let you know…Lavi_d is also in Vegas…
You’d have trouble hiring people for $0.01/year and getting away with it legally.
But you can have up to 3 people on the board of your single-owner “S” corporation and have board meetings in Hawaii!
Dang Dude, I’d be stoked ??
Ditto here….Just having the ability to earn that kind of money in this environment…Most of the high earners that I know (Other than Retiree’s) their incomes are off 50% minimum…
Hey what do you know. The guy that’s a fan of Prop 13 lives in an area that allows him to be in top 1% of earners in the US. Quelle surprise!
What a great selection of articles! Call me bad, but I LOVE to read about these whiny assho… er, victims of the housing bubble. While I prudently paid my rent and socked away the leftovers into a savings account, they were gambling their futures away in the McMansion McCasino. There are a few stories that truly are unfortunate, but the majority are exceptionally funny (”Second Home,” “Investment Property,” “HELOC,” yada yada yada). Now all the McStatus seekers will have to (Horror!) rent (if they can find a landlord who will take them in with a tanked credit score). What is existence if you can’t live in a house the size of a barn? As Dr. Smith would say, Oh the pain, the pain! Excuse me while I wipe away the tears (of laughter!)
Yeah the snippets from the mouths of deluded FB’ers really amaze me. Speaking for myself but as my HBB brothers and sisters concur, how could you NOT know something really stunk baaaaad even as late as 2005???? I’ll concede that I was still trying to make the house-debtorship happen for me until late 2004 when we finally dropped it all and did a 180. These whining a-holes took the bait from the REIC. Wasn’t there ANY skepticism all? No doubts? NOTHING???? No sense of self-preservation when looking down the 30 year long barrel of financing $500,000? I’m sorry but these people were dumb and/or thought they could get something for nothing.
b..b..but my Equity…
“Horror has a face… and you must make a friend of horror”
so said Col. Kurtz, shortly before he was sharply sliced, diced and dispatched with a little “Extreme Prejudice”
What is REALLY getting my goat these days is the media’s portrayal of people losing their homes because greedy banks refuse to modify their mortgages.
First, it was predatory lending. Now it’s refusal to permanently modify mortgages. Nobody in the media EVER holds one of these d-bags to any kind of accounting.
If you are losing your house, it is not the bank’s fault. Ever.
On the flip side of the coin, the banks ‘never saw it coming’ and ‘had to lend to bad borrowers and write bad loans just to keep up’ and ‘thought property values going up 12% a year was the new reality’. It’s more common to see them called to the carpet, but usually only in the context of the ‘poor, poor borrowers’. Instead we hear about how strategic defaults are making our poor banks cry like little girls with skinned knees. If they don’t like skinned knees, maybe they shouldn’t have taken their knee-pads off. (It’s the politicians that were wearing them at the time, if you catch my drift.)
If the bank is losing a ton of money because people are walking, it is not the borrower’s fault. Ever.
It is CLEARLY your responsibility to make sure you can afford the loan and think you’ll be able to afford it going forward. If circumstances change and you can no longer afford the loan, it’s not the banks fault. If you lied, it’s not the banks fault. If you let someone else lie for you, not the banks fault. If you lose your house through having no repair cushion, no health insurance, IT IS YOUR FAULT. Do not blame the bank you d-bags!
It is CLEARLY the bank’s responsibility to not loan money to people who don’t have a reasonable chance of paying it back, or to loan too much money on an asset, and the verify income and debt level ratios and other underwriting issues. If the borrow walks and they take a loss recovering and selling the asset, IT IS THE BANK’S FAULT! Do not come begging to the taxpayers you d-bags!
The banks were forced/pressured from lawsuits from community groups to make loans to indigent people. Google “fair housing lawsuit”.
That being said, they got WAY off course, and extremely irresponsible. But our government opened the door for them, and encouraged this behavior, with GSEs to back the mortgages.
The whole idea that banks were “forced” to do anything is laughable. The percentage of loans that were made to satisfy these requirements was tiny. The banks packaged them up and sold them off to suckers just like all the other loans. So long as they could make money doing it, they didn’t have to be forced to do anything.
“Romanello believed the three-bedroom house would be good investment and eventually a retirement home for her and her husband. But soon after buying the house for $218,790, her real estate taxes surged, pushing her monthly housing payments to $1,800 from $1,400.”
Repeat after me:
“I will NOT buy real estate in Florida unless I can homestead”
“I will NOT buy real estate in Florida unless I can homestead”
Buying in FL without SOH protection is kind of like jumping out of a plane without a parachute. Sure, it’s going to be fun for awhile.. But, eventually, the bill will come due, and it’s going to hurt a LOT!
If you are looking for a 2nd home, look elsewhere.. Florida has setup a tax system that pretty much always will wind up in disaster for those owning vacation/second homes down here. If you’re not a resident; buying in FL isn’t for you.
I bet she bought that house in Port St. Lucie over the internet, without even visiting it.
actor cage walks away from his mansion,joe sixpack walks away from his single family,we are led by the example of wall street bail me out bail me out,take out equity and still cry bail me out,it was nt my fault….what a joke,we all have always played by the same rules pay or lose it,there should never me any bailout for homeowners
“Donna Reardon,.. … ‘I blame the banks. If they weren’t making credit available for people who had no business buying a home, they (developers) wouldn’t have built all these homes.’”
Lets paraphrase
“Donna Reardon,.. … ‘I blame the drug dealers . If they weren’t making
drugs available for people who had no business taking drugs, they (the
drug makers) wouldn’t have made all those drugs.’”
And whose says there is no personal responsibilty left in this country?
“Falls Church-based agent Leslie Hutchison, who has been in the business for 25 years, said the current eight percent first-time home buyer federal tax credit has a lot to do with the current buying frenzy, especially for homes priced under $600,000. ”
What, no one else is going to comment on first-time buyers potentially buying half million dollar houses and grabbing that tax credit? How many people do you know who are qualified to buy something at that price point as a first-timer?
Falls Church is inside the Beltway, where lobbyists and government drones make tons more money than anwhere but Wall Street. And the drones are increasing rapidly in number under The One, so there’s lots of energy to keep the bubble inflating.
Lobbyists yes, government drones NO. Except for the very senior management, government salaries top out around $140K, and that’s only the highly educated ones, and only then after 20 years of service. Your $140K will buy you a $350K townhome in an outer suburb…hardly the lobbyist lifestyle. I know quite a few gov workers now, and you know what they drive? Honda Civic, Honda Fit, Toyota Corolla, Honda Accord…
Sigh. And I thought they might have learned their lesson. There is always the possibility that - given the budget is hitting the wall, and income tax receipts will plummet this year again (went down 20 per cent last year), and our foreign funders may not be keen on buying Treasuries anymore - well, there will come a time that Federal contracts will not be renewed. Or cut back.
It could happen.
“‘It’s not fair to pay this for a one-and-a-half-bedroom home. It’s not worth it,’ Snyder said.”
“‘I know I was stupid, but what happened to Obama’s program?’ Mann asked. ‘That’s what I want to know.’”
——————————————————————————–
I have no doubt in my mind that had the market continued to rocket ever upward, this FB would have gladly shared his new wealth with the same bank that loaned him the money! (Sarcasm off)
You put your money down on the Pass Line and promptly crapped out!
I absolutely agree. I cannot stand to hear people whining about how the government should bail them out. You do not have a “right” to own a home. Nor should you expect a bailout if you bought a ridiculously overpriced one.
“Well they bailed out the bankers–what about me?
Our government is controlled by bankers, so that shouldn’t have surprised anyone. Figure it out, people. You are going to get “bailed out” by the Fed stealing your purchasing power through inflation/currency debasement. Soon, the house that you bought for $350,000 (with an ARM, so you could qualify with your $65,000 salary) and is now worth about $200,000 will soon be worth Ten Zambillion-Trillion-Gajillion new inflate-o-dollars!
Walk away, brother. If you can grind out a few bucks in savings buy gold and silver….
“However, the New York Fed’s Dudley was reluctant to endorse using monetary policy to keep inflating asset price bubbles in check on Wednesday. Instead, he urged instead relying more heavily on regulation and verbal warnings — ‘leaning against the wind of conventional wisdom by speaking out against the dangers associated with the incipient bubble.’”
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Does he want to keep interest rates at zero or what? Because our culture largely has replaced wages with assets, and with credit offered against the value of assets, anyone who speaks out against an asset bubble risks a very profound shunning.
It’s entertaining to see a member of the Fed protest that identifying asset bubbles is difficult, and then Chanos cranks out a definition as easily as reciting the alphabet.
Every one of these FB’s would have happily collected a profit and passed their junk purchase of an overpriced home onto the next sucker. Problem with Ponzi schemes is that at some point everyone still holding the bag loses.