Bits Bucket For November 21, 2010
Post off-topic ideas, links, and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
June 2025 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
Realtors group lobbies against credit-score hits once equity-line limits are cut
By Kenneth R. Harney
Friday, November 19, 2010; 12:59 PM
Here’s a credit torture scenario that might have happened to you and that now has a major real estate lobby on Capitol Hill demanding
Say you’ve had a solid payment record on just about all your accounts - three credit cards, your first mortgage, a home equity line and other important monthly bills. The last time you checked, your credit scores were comfortably in the 750s.
Suddenly you get a notice from the bank that because of “market conditions,” your equity line limit has been cut from $60,000 to $35,000, slightly above the $30,000 balance you’ve got outstanding. Then one of your credit card issuers hits you with more bad news: Your $20,000 limit has been reduced to $10,000. Your balance on the card, meanwhile, is about $9,000.
Guess what happens to your credit scores in the wake of the bank cuts? You might assume that nothing happens. You haven’t been late. You haven’t missed a monthly payment. You’re a good customer.
Wrong. Depending upon your overall financial situation, your credit scores could plunge into the upper 600s. This, in turn, could put you out of reach for a refinancing at a favorable interest rate or hamper your ability to buy a new home.
…
From the article: “Research conducted by Fair Isaac last year found that consumers who utilize 70 percent of their available credit “have a future bad rate 20 to 50 times greater than consumers with lower utilizations.”
People keep digging a deeper hole and are surprised when someone wants to take away the shovel?
We had this happen…
760 fico less than 20% utilization across 4 cards.
$7500 limit reduced to 3100 - $100 above the balance on the card at that time.
Paid it down $1000 - Bank (Chase) responded by cutting the credit line another thousand - $100 above the new balance.
Paid the card off. Chase responded by reducing the limit to $200 - I closed the account.
In the mean time, the rest of my cards sent me letters telling me I was at or near my limit on a card and they responded likewise.
My score is presumably in the tank which is OK for now since I have no use for credit.
I believe this is a bankster trick to raise interest rates and prevent the consumer from refinancing, balance transferring etc.
I know some who have had this happen, while others deeply indebted seem to be fine. It seems very random. Probably the fact I am self employed was the biggest factor given the current failure rate for small businesses.
Yep, its time to get “out of debt” and quit spending more than you make, but of course most of the folks on this weblog have already done that.
Thanks for being there Ben.
Amen, Lip. Few individuals in this country have done as much as Ben when it comes to “carrying the fire” in a very Promethian manner. This site has been a rare beacon of truth and reason amidst the dissemblers of the corporatist MSM and REIC. I would urge posters to show due gratitude by sending a donation for whatever you can spare Ben’s way. This is a resource we need to keep alive and vibrant.
As interest rates are forced downward lower credit limits shouldn’t come as a surprise.
Which is why IMHO the government’s policy of “helping” FBs by lowering interest rates is doomed to failure. The FBs can’t take advantage of low mortgage interest rates if they can’t qualify for them.
As credit limits are forced downwards, lower credit ratings for people with lots of outstanding debt should not come as a surprise. What this reflects is these individuals’ potential to default on any additional funds they borrow.
One possible interpretation of the post-2008 Financial Meltdown paradigm shift on credit scoring:
- Under the pre-2008 paradigm, more household debt was perceived as indicative of said household’s superior debt-management skills, and hence a sign of greater credit worthiness.
- In the wake of the 2008 financial crisis, when many U.S. citizens are at risk of job loss, and job loss reduces the ability of a household to make good on its credit obligations, a debt burden near a household’s credit limit indicates greater risk to any lender extending them additional credit of losing both loan and customer.
This scenario doesn’t bother me one bit. It will give people the incentive to get their financial house in order and sharply curtail their use of credit. It will also eliminate, finally, some of the “how much a month Harrys” who would otherwise be bidding against me when I buy a house this spring or summer.
I’m with you Sammy.
+1. Any incentive that eliminates competition as we’ve seen over the past 8 years is fine with me.
Sammy, the presented scenario IS that the person has their financial house in order.
This means it could easily happen to you.
I’m on the fence with this scenario. Yeah, it seems like a lot of piling on to the individual w/ continued credit cuts and instantly revised credit scores, but that person was carrying balances everywhere. If you were the lender(s), what would you do? Keep all the limits high and wait for/hope against a default?
Head they win, tails you lose.
Double secret probation.
more details foreclosures
Flawed paperwork morass could hurt banks, housing market, a report says
By Ken McCall and Tim Tresslar
Staff Writers Updated 8:47 PM Saturday, November 20, 2010
If bankers wanted to put the controversy over flawed foreclosure paperwork behind them, events last week dashed those hopes.
More than a month after allegations of flawed affidavits led some major lenders to temporarily halt foreclosures, the issue returned to the forefront. Bankers called to testify before two congressional panels assured lawmakers they were ironing out the problems and trying to keep people in their homes. At the same time, a report by the Congressional Oversight Panel, a watchdog group, warned that fallout from these practices could threaten banks with billions of dollars in losses, hurt government efforts to keep people in their homes and worsen the nation’s housing market.
In addition, a lawsuit filed by Richard Cordray, Ohio’s outgoing attorney general, against GMAC Mortgage over its affidavit practices was moved Friday to federal court, setting up a preliminary injunction hearing on Dec. 13.
In the congressional hearings, executives for GMAC Mortgage, Bank of America, JP Morgan Chase — all of whom halted foreclosures in October — detailed problems they found in processing affidavits and efforts to remedy the problem.
Thomas Morano, chief executive of mortgage operations for GMAC’s parent company, Ally Financial, said employees had signed affidavits without having a notary present and without the employee having direct knowledge of information contained in the affidavit.
“These flaws are entirely unacceptable to me,” Morano testified, adding that the company is investigating and fixing errors uncovered in those reviews. It also has improved employee training, added more people to review foreclosure documents and strengthened its policies, he said.
…
http://www.rollingstone.com/politics/news/17390/232611?RS_show_page=0
The banksters will continue to characterise the massive, systemic fraud in MBS writing and foreclosures” as a few clerical errors by some low-level peons. Already the 40 or so state attorney generals who made a big show of “investigating” the robo-signers have indicated their receptiveness to making this whole thing go away, presumably once their checks from the TBTF banks and their lobbyists are safely desposited. Another election behind them, the Republicans have abandoned all their populist rhetoric and have cravenly kow-towed to their Wall Street patrons by trying to pass HR 3808, which would retroactively forgive the robo-signers’ fraud. The Democrats, jilted by their one-time bankster pimps who have deployed their new GOP meat into what PJ O’Rourke aptly called a Parliament of Whores, made a show of voting against HR 3808, to remind the banksters that it’s time to “show me the money” if they want the slavish obedience Wall Street has started to take for granted over the last several Administrations.
Meanwhile, a tiny handful of brave journalists who haven’t sold their integrity have laid out in devastating detail the extent of the mortgage-related fraud that has gone on for the past several years. This article by Rolling Stone’s Matt Taibbi is a must-read for anyone seeking to know just how deep and wide the corruption of our financial system has become.
I so admire him, but hope he has taken steps to protect his reputation and person from the PTB. Elliot Spitzer and Alan Grayson come to mind.
That’s one heck of a read, Sammy. Thanks!
Fair Game
Trying to Put a Price on Bank Errors
By GRETCHEN MORGENSON
Published: November 20, 2010
KUDOS to the Congressional Oversight Panel for publishing a thoughtful and thorough report last week on the mortgage documentation mess. It argued that, yes, in fact, these paperwork problems may have significant implications for banks, investors and the stability of the financial system.
Since mortgage paperwork flaws became front-page news this fall, the banks caught in the glare have characterized the problems as technicalities that are easily remedied.
Their responses sound a lot like Mike Wazowski, the assistant scarer in “Monsters, Inc.,” who is reprimanded for not turning in his daily reports. “Oh, that darn paperwork,” he tells his supervisor. “Wouldn’t it be easier if it all just … blew away?”
…
Add to Portfolio
* Citigroup Inc
* Bank of America Corp
* Wells Fargo & Co
* JPMorgan Chase & Company
“* Citigroup Inc
* Bank of America Corp
* Wells Fargo & Co
* JPMorgan Chase & Company”
Does anyone besides me notice how the same banks’ names keep coming up again and again in stories about flawed foreclosure proceedings? I wonder what it is about these banks that exempts them from following the rule of law?
“I wonder what it is about these banks that exempts them from following the rule of law?”
Lots and lots of campaign donations.
Well, their customers don’t repay their loans: so they deserve our pity
“I AM THE LAW.” - Judge Dredd
I’d like to notify the writer of this article that millions of Americans who rent don’t qualify for this longstanding taxpayer giveaway to high-income home owners.
Possible demise of mortgage interest deduction may not be so bad
12:00 AM CST on Sunday, November 21, 2010
How much do you like your deduction for home mortgage interest? If it goes away, would you miss it?
It’s now clear that when the National Commission on Fiscal Responsibility and Reform delivers its report next month, it will focus on the reduction or elimination of “tax expenditures.” These are deductions from taxable income that lawmakers provide to promote one thing or another. The deductions associated with homeownership – mortgage interest and real estate taxes – are in that category. They cost billions in forgone tax revenue.
I can already hear your teeth grinding.
You’re thinking, “Sure, what else can our government do to kick the housing market when it’s down? It’s bad enough to have nitwit lenders demonstrate that they are as incompetent at foreclosure as they were at lending. Now Washington wants to take away one of the great middle-class tax breaks, too?”
…
This would adversely affect the coastal state’s tax base as real property values would almost certainly fall. I can’t see these taxes being phased out anytime soon, IMHO.
So you maintain that federal taxpayers in the Heartland states should cross-subsidize coastal states’ tax bases in order to help wealthy coastal state citizens maintain their living-large lifestyles?
Which also would mean that blacks in Kansas City and
St. Louis would be subsidizing Californians’ lifestyles.
Those who believe others to be racist shouldn’t allow those of other races to pay for their own lifestyles. Is that not right, rms?
there is no reason that RMS’s proposed results would be limited to the coastal states. Was the bubble only in coastal states? Eliminating the MID would definitely drive home prices down, and in turn the tax base as well. Actually, with some of the proposed super-sized standard exemptions offered in lieu of itemizing ($30K?), eliminating the MID (along with other stuff) might not help the fed deficit equation or the S&L tax base.
You’re really stretching it.
Just because you don’t like it hardly means that I’m stretching it.
I’d like to see these tax-gifts go away too, but I don’t see those that benefit allowing them to go away without a fight.
“I’d like to notify the writer of this article that millions of Americans who rent don’t qualify for this longstanding taxpayer giveaway to high-income home owners.”
Renter or not, most of us don’t qualify for any kind of high income home owner tax breaks.
Bailout socialism is giving way to tooth-and-nail capitalism — a promising development for the future viability of America’s free enterprise system!
Feature | SATURDAY, NOVEMBER 20, 2010
Banks Face Another Mortgage Crisis
By JONATHAN R. LAING | MORE ARTICLES BY AUTHOR
The government may have bailed out the nation’s biggest banks, but now the courts will sort out who gets stuck with mortgage losses. Banks could lose more than $100 billion.
JUST WHEN AMERICA’S MAJOR BANKS seem to be back on their feet, having paid back federal bailout money and cranked up their employee bonus programs, a new threat has emerged that could seriously affect their earnings power over the next few years.
The potential liability facing bankers arises from the $2 trillion in subprime, alt-A and option-adjustable rate mortgages that they underwrote and sold to investors, mostly as mortgage-backed securities during the home-lending boom of 2005 to 2007. The losses on the mortgages will be horrendous before the dust settles—over $700 billion on these and other so-called nonagency mortgage securities, according to New York mortgage-research specialist and broker Amherst Securities Group.
And now investors—from the federal housing giants Fannie Mae (ticker: FNMA) and Freddie Mac (FMCC) to major bond managers like closely held Pacific Investment Management and BlackRock (BLK)—are fighting back. They are seeking to put back the mortgages to the banks from whence the investment flotsam came and force the banks to eat much of the mortgage losses.
…
This issue has confused me endlessly . If the MBS holders were the true bag-holders and Banks were just servicing these accounts ,than why were
banks/investment houses bailed out ? Apparently Banks might be forced to take back these defective notes based on a variety of reasons . Why did we give a big bail-out on credit default swaps (AIG loan ) in which Goldmans was the main beneficiary ? We gave the banks money and than they didn’t even want to
lend and they went to their normal casinos and just raised cc rates and
proceeded to conduct faulty foreclosures as a servicer .
While we know that F&F purchased a bunch of the junk paper at a higher
value than it deserved ,what was really bailed out with the Tarp Bailout ,simply increasing the Banks reserves or what ?
“Why did we give a big bail-out on credit default swaps (AIG loan ) in which Goldmans was the main beneficiary ?”
That is a nice example of a self-answering question.
Because a lot of them drank their own kool aid.
And it’s not just the CDOs, but the derivatives, the hedge funds, the other securitized paper, etc. They had bought into everything and like a a game of Jenga, pull the wrong stick and it all comes down.
The Mortgage-Relief Con
How “mortgage assistance relief” companies prey on homeowners facing foreclosure.
By Timothy Noah
Posted Friday, Nov. 19, 2010, at 6:01 PM ET
You’re behind on your mortgage payments and the bank is threatening to foreclose. Then one day a letter appears in your mailbox from something called the Residential Relief Foundation. The envelope has a picture of the Great Seal of the United States, so it must be the feds, right? The Great Seal is on the letterhead, too. “Due to the current foreclosure crisis,” it begins, “the Federal Government has urged all mortgage banks and lenders to allow qualified borrowers to modify their mortgages. Residential Relief Foundation is currently assisting homeowners seeking relief on their delinquent mortgages through the Loan Rewrite Initiative Program.” This program can reduce your monthly payment by “as much as 40%” and “eliminate all delinquent payments and fees.” Call this toll free number for a free consultation!
Great Seal … “Federal Government” … “Loan Rewrite Initiative Program.” Huh, you think. That must be some federal program to help homeowners facing foreclosure.
But, of course, it isn’t. It’s a private company that’s just gotten busted by the Federal Trade Commission, which alleges in a complaint that it engaged in various deceptive practices. …
My spam folder gets these scams too; imagine the struggling peeps blindly adding their vital information to phony website.
Stupid is as stupid does.
Desperation is the mother of financial stupidity, and vice versa.
Don’t bother looking up that quote on Google, as I made it up off the top of my head.
Avoid some mortgage modification issues, get help before signing up
November 21, 2010
NASHVILLE, Tenn. — Sherrie and Troy Pardue weren’t in any danger of falling behind on their monthly mortgage payments, but when Wells Fargo offered them the opportunity to delay payments after last May’s devastating and historic floods, they saw a way to gain a little financial breathing room.
The Pardues interpreted the paperwork they received from the bank as meaning they had permanently modified their loan. But they hadn’t. Wells Fargo expected payment to be brought fully up to date after 90 days.
In the confusion, the Pardues made one of the biggest mistakes homeowners can stumble into — trying to navigate through the complicated mortgage modification process without professional guidance. The result was a damaged credit rating, late fees and a threat of foreclosure.
Thinking they had joined millions of homeowners who have been able to get deferred payments or lower monthly payments through the mortgage modification process, the Pardues were horrified when they began receiving letters from the bank threatening foreclosure because of the missing payments.
“I expected not to make two payments and wait for more information. I thought, ‘This is great — money in hand.’ I started receiving foreclosure information that I thought was just random (junk mail). But it was my own foreclosure,” said Pardue.
…
So who offers “professional” guidance? Realtors?
In the confusion, the Pardues made one of the biggest mistakes homeowners can stumble into — trying to navigate through the complicated mortgage modification process without professional guidance.
If the MSM was anything but the corporatist shills that they are, we would see investigative reports into the symbiotic relationships between the banksters and the “professional guidance” providers who together are trying to extract every dime they can from homeowners.
Oh look - a free lunch!
What could happen?
Mortgage deposit could mean saving two years’ pay
21 November 2010 Last updated at 04:51 ET
Banks and building societies have told the BBC that they are not expecting any significant recovery in mortgage lending next year.
And that comes as figures show the number of new mortgages being taken out hit a 10-year low last month.
New vetting procedures for applications could deny many borrowers the chance to buy the homes they want unless they can save up two years’ pay for a deposit.
…
Gee, if I’d save up two year’s pay, I wouldn’t have NEEDED a mortgage.
Once upon a time you could buy a house with two years pay.
You still can if shop around and don’t want to live on sNob Hill or live some insanely overpriced metropolis.
Well, 2-4 years pay anyway. (median at ~32K)
When was this ever true? Could you elaborate? Isn’t the median income about $45K and houses about $200K? When was this ratio 1:2?
While 2x annual pay is extreme, (unless this is “net” take-home pay, which would only about 1x gross annual income), I think the general concept is great.
The idea that providing a zero down-payment environment for renters to buy a house is completely misguided. Houses cost money to maintain.
Renters pass the cost of repair/maintenance/insurance/taxes/and improvements to the owner.
If someone doesn’t have the wherewithal to “SAVE” 10% or more of the cost of the house, the can’t possibly afford to keep it up. Most of the used ones will need a new roof within 10 years, a major expense.
If your potential buyer has no savings, but likes to spend every dollar earned on their “lifestyle”, then lending them money to buy a house is a sure way to loose money. The house will slowly decay, as they strip-mine future value by spending current repair/maintenance funds (which they don’t have).
I have been viewing the results of the lending madness of the prior decade. LOTS and LOTS of houses aren’t worth looking at, even at their highly discounted price. Why?
Five years of maintenance-free living. And crappy “do-it-with-illegal-alien-labor projects. The houses are basically junk that will take a lot of time and money to bring up to a decent residential property.
HOUSES ARE AN EXPENSE.
If you can’t save for the down payment, you can’t keep up the house.
Stay a renter and continue to screw your property manager out of their money. It’s a whole different story when you need to come up with the money to replace the carpet you and your pets destroyed.
Here in the US of A, we should get FHA out of the housing business. No more ZERO down loans or 3% with owner assistance. If the current owner wants to finance you and gamble that the payments will off-set the damages, let them do this type of loan. Otherwise, at least a year’s earnings sounds about right. It will also make the “tenant” have a vested interest in maintaining the property. That helps everyone, including their neighbors.
HIGHER downpayments are good.
“…we should get FHA out of the housing business.”
Where would private mortgage lending interest rates settle in the current jobless economy?
Who cares? I am sure they would be somewhere around 4 to 5%, with a 20% down-payment. If the go up, the “price” of the house would naturally go down. No one, except the government would accept a zero interest rate environment for their hard earned money.
You will never get the FHA, or HUD for that matter, out of the housing business. It’s the back door for Wall St. to game real estate.
…and believe it or not, they really do help some deserving people.
It’s part of Wall Street’s way to privatize the profits and socialize the losses.
+1
21 November 2010 Last updated at 04:00 ET
Mortgage lending will not recover in next year - banks
Banks and building societies have told the BBC they do not expect any significant recovery in mortgage lending next year.
A new vetting process for mortgages could “cement in place restricted… lending”, denying many the chance to buy the homes they want, they added.
The warning comes after figures showed new mortgages last month, at £12.4bn, were the lowest for a decade.
First time buyers are most affected by the lending drought.
Mortgage lending is barely a third of the level of three years ago, said BBC personal finance correspondent Simon Gompertz.
For first time buyers, many who could easily afford the monthly payments on a mortgage are prevented from buying because deposits are so high, he added.
The average down payment for new buyers is 24% of the price.
…
Housing Counsel
Condo groups facing unpaid dues push for foreclosures
By Benny L. Kass
Saturday, November 20, 2010
Foreclose - or else. That’s a new message being sent to banks by a lawyer representing condo associations in Florida. Increasingly, the associations are stuck in unpaid-dues limbo when banks delay foreclosure on a unit owner, not wanting to assume the liability for unpaid condo dues and taxes. And this lawyer’s strategy could have implications for troubled loans throughout the housing market.
Condominium associations face serious financial problems when unit owners stop paying their condo fees. Association budgets are established on a yearly basis and are based on the assumption that a large percentage of owners will be current with their payments. But as more owners are facing financial problems of their own, they opt not only to stop paying their mortgage but also to skip their condo fees.
…
So, how’s that “investment” working out for you, bubble buyers?
Banks owing HOA fees. That is awesome.
This happened in both the 80s and 90s slowdowns. Condo owners got caught in a trap when other owners refused to pay their share. But still the condoes were snapped up w/o a care in the world during the latest bubble because it was ‘different this time”……eeeeh boy.
Yep. Condos are poetic revenge for all invovled.
St. Louis Fed President Bullard: Opening Remarks
“Past, Present and Future of Government‐Sponsored Enterprises” Conference
St. Louis, Mo.| Nov. 17, 2010
It is my pleasure to welcome you to the Federal Reserve Bank of St. Louis’ research conference on the “Past, Present, and Future of the Government‐Sponsored Enterprises.”
The role of the housing market has been central in the recent financial crisis. Mortgage financing, in particular, turned out to be an exceptionally weak link as the crisis unfolded.
The U.S. government has often modified the structure of housing finance after a crisis. For example, before the Great Depression, a large fraction of mortgages was relatively short term (five‐to‐seven
years). These loans were mostly non‐amortizing balloon mortgages, with low loan‐to‐value ratios of 50‐60 percent.
The intervention of the government changed those terms in favor of fixed‐rate mortgages with longer maturities (20‐30 years) and higher loan‐to‐value ratios (80 percent and above). In 1938, Fannie Mae
was established to create a secondary market to provide liquidity by buying primarily FHA‐insured loans. In 1968, Fannie Mae split into a private corporation (Fannie Mae) and a publicly‐financed institution (Ginnie Mae). To provide competition for the newly private Fannie Mae, Congress established Freddie Mac in 1970.
The extent of Congressional meddling in this market has been astonishing to the point where one can barely identify what the private sector outcomes would be in the absence of intervention.
…
The extent of Congressional meddling in this market has been astonishing to the point where one can barely identify what the private sector outcomes would be in the absence of intervention……….
No. I can tell you exactly what the outcome would be. Steady-state house prices, slowly increasing with the amount of inflation embedded into the system by the Fed’s interference in the markets.
No housing bubble. No foreclosure “crisis”.
That would be the outcome, moron.
“…moron.”
Is that the credit you give someone with the temerity to speak up with an independent voice against a political sacred cow? I think you should run for political office yourself, given how easy you seem to think politics is.
“Steady-state house prices, slowly increasing with the amount of inflation embedded into the system by the Fed’s interference in the markets.”
I think that was his point. With 70% of mortgages (I think that’s the number I read) being provided in some aspect by F or F, the absence of them would indeed make the market unidentifiable as compared to now…
Let’s go to 50 years and 110% LTV! That would enable almost everyone to “own” their own home.
WHoa you say: isn’t that kind of a high LTV ratio?
Que the RealtorTM: Actually Bob, that is significantly lower than the LTV levels currently prevalent in some coastal states. And this might also reduce the extreme dip we’ve seen lately in average square footage statistics. I think this is something the government should definitly look into! (Slithers off muttering… 6% of 110% of something is… YEEHAA, I can keep the Benz!)
All part of Wall Street’s and their politician-lackey’s efforts to privatize the profits and socialize the losses.
It’s a heck of a gravy train for the plutocrats.
WSJ Blogs
Developments
Real estate news and analysis from The Wall Street Journal
* General Growth In the Dark, Briefly
* Foreclosure Mess Slowed September Home Sales
* November 5, 2010, 12:53 PM ET
Hoenig to Realtors: Wean Housing Off Government Intervention
DJ Newswires Bradley Davis reports:
The boom-and-bust nature of the housing markets in recent decades needs to be addressed by weaning the market from “governmental intervention and public subsidies that have distorted the market,” said Federal Reserve Bank of Kansas City President Thomas Hoenig at the National Association of Realtors conference in New Orleans on Friday.
“The American public, including aspiring homeowners and those of you employed in the housing industry, might be best served, over time, by reducing or removing these subsidies as part of our national policy,” said Hoenig, who has led the Kansas City bank since 1991 and faces mandatory retirement next year. Hoenig was the lone dissenting vote Wednesday in the committee’s 10-1 decision to launch a new round of bond-buying, or quantitative easing, to support the economy and has been consistent in his message: Interest rates need to go up. (See Real Time Economics)
One subsidy worth reconsidering, Hoenig said, is the tax deduction offered for interest paid on home mortgages. U.S. officials might decide the deduction makes sense, he said, but the deduction must be looked at as a subsidy–it’s not free, he said. Especially in light of growing budget deficits, subsidies to encourage home ownership, and ones for agriculture and energy, all need to at least be examined, he said in response to an audience member’s question.
Fannie Mae and Freddie Mac, with their implicit government guarantees, also must be reformed, Hoenig said. (Easier Said Than Done)
“Had these institutions been held to stricter financial standards, far fewer households would have suffered the tragedy of foreclosures, the lost home equity and the loss of personal savings and wealth that today continues to hold back our economic recovery,” Hoenig said.
…
I agree with Hoenig. No tax subsidy for buying a house. It’s ridiculous, and encourages people to go deeper and deeper into debt.
After all, the higher the loan, the bigger the pay-back.
Personally, I think all borrowing distorts the markets. Just think about it. For you new-car buyers, how many of you would really be willing to pay $40,000 for that new car if you had to pay for it out of “savings”, instead of the $500/month for the next 7 years?
Probably not many.
Closer to 600 per month.according to Excel’s PMT function at 5% interest (565).
Personally I can’t see paying $40,000 for a new car. I guess some people just gotta have that status symbol.
No tax subsidy for buying a house. It’s ridiculous, and encourages people to go deeper and deeper into debt.
The other effect it has is to deter people from paying off their mortgages. I was talking to a co-worker a few years ago about the lousy returns I had been getting from 401(k). I said that it might have been better to pay off my mortgage early instead of putting so much into the 401(k). Her immediate reaction was “You would lose your mortgage interest deduction if you did that.”
‘…how many of you would really be willing to pay $40,000 for that new car if you had to pay for it out of “savings”, instead of the $500/month for the next 7 years?’
Don’t give the banksters’ lobbyists ideas!
“…how many of you would really be willing to pay $40,000 for that new car…”
And how many of those new $40,000 cars would have to reduce that price (or find cheaper ways to manufacture them) in the absence of such borrowing?
Take it a step further….(and I’ve used this example for a long time on this blog…. and some just don’t get it)
$100/pair Nikes wouldn’t exist but for credit cards.
I agree with you to a degree, but c’mon - all this luxury ’stuff’ existed, and was in demand, generations before the mass expansion of credit. Take the car example - how long have expensive sports cars been available? Luxury sedans?
So let’s just forget the lowering of standards by the big banks so they could loan to anyone with a pulse and collect all the processing fees before packaging the mortgages up as toxic CDO and making another killing from their sale?
A scenario created and fueled by the repeal of of Glass Stegall?
Yeah, once again let’s blame everyone but the real culprits.
And never forget to ask the most important question: why would anybody want to take something away the benefits the average person?
What if the Fed is wrong, and deflation is in the bag no matter how much they print?
Off the Charts
After the Fed’s Action, Watching Inflation’s Trajectory
By FLOYD NORRIS
Published: November 19, 2010
Following Japan’s Path, So Far
THE core rate of inflation fell to a record low in the United States last month, rekindling fears of deflation and warnings that the Federal Reserve might have to take even more aggressive steps to keep inflation as high as it wants it to be.
“In the short run, disinflationary forces in Western economies, especially the U.S., appear too powerful to be overwhelmed by the recent loosening of monetary policy,” said Richard Batty, an investment strategist at Standard Life Investments, a Scottish firm.
Since the collapse of the housing market in the United States and the beginning of the global financial crisis, the Federal Reserve has made avoiding deflation a major priority, recalling the experience of Japan after its bubble burst in the early 1990s. The Fed has set an annual inflation target of 2 percent or a little lower, but is not getting it.
The latest figures, released this week, showed that overall inflation in consumer prices was 1.2 percent in the 12 months through October, while the core inflation rate — excluding food and energy — rose just 0.6 percent. The previous low for that index, of 0.7 percent, came in the 12 months through February 1961, when the economy was in recession.
As the accompanying chart indicates, the core inflation figures are charting a path roughly similar to one shown in Japan 15 years earlier. That has been true despite a much stronger reaction by the American central bank, which was determined not to make the same mistakes the Japanese made.
…
“What if the Fed is wrong, and deflation is in the bag no matter how much they print?”
Well, uh, this would sort of make cash the king, would it not?
“Well, uh, this would sort of make cash the king, would it not?”
It most definitely would.
What if “deflation” is confined to the value of your house, your stocks and bonds and your earnings, your 401k and IRA savings, while the cost of FOOD, gas, oil, commodities and taxes increase rapidly?
The rigged government accounting for “inflation” doesn’t count things where the price goes up. So what is really happening to the value of your cash?
In the short-term, I am with you. I am mostly in “cash”, awaiting some key reversals, but I don’t think paper will be king when the price accelerations get going later when the trend reverses back.
There’s just too much new paper. It’s the only thing of which there is in abundance.
Stocks, bonds and salaries are not included in the CPI.
“What if “deflation” is confined to the value of your house, your stocks and bonds and your earnings, your 401k and IRA savings, while the cost of FOOD, gas, oil, commodities and taxes increase rapidly?
The rigged government accounting for “inflation” doesn’t count things where the price goes up. So what is really happening to the value of your cash?”
Exactly Diogenes.
Except it’s “what if”, but “is.”
I love the timeless consistency of your message.
It depoends on how the distribute it. If they give it to the banksters they’ll just sit on it or lend it to Uncle Sam.
Now if they actually gave the 600 Billion to individual adulsts (~ 200 million) that would be $3000 per adult. Then the question is what would they do with it? Spend it? Pay off debts?
Probably little of both…spend on deferred items and put the rest on a Credit card
Most people i know, even me need things like 2 new tires, maybe a new suit, memory for the computer or a laptop/netbook…
I don’t think a whole lot will spend it on lap dances…but then i could be very very wrong
———–
Then the question is what would they do with it? Spend it? Pay off debts?
The FED will tax savings accounts one of Ben bernakes ideas from his helicopter days
Many companies like to do reverse stock splits especially pre IPO
makes the new money more likely to buy they get a better deal
Well the FED can do a reverse currency split old currency in savings accounts gets down rounded to say a 10 to 1 reverse split and shiny new employees are made whole with a 10x raise
so your 100 bucks is worth 10 bucks and your trillion dollar debt is a 100 billion. I wonder what China would think of this? Do you think interest rates would go up? Price of gas now 30 dollars a gallon. maybe 10 to 1 is a bit steep?
FHA Auditors Predict Further Home Price Declines
Published: Tuesday, 16 Nov 2010 | 9:46 AM ET
By: Diana Olick
CNBC Real Estate Reporter
The bad loans of the housing boom are still bad, but the new loans from today’s tighter mortgage market are so much better that they’re offsetting the trouble. That’s the message from the Federal Housing Administration in its annual report to Congress.
…
…the auditing firm (Integrated Financial Engineering of Rockville, MD) decided that home prices would, in fact, deteriorate.
It’s not like we haven’t been saying that all along, but it’s interesting to hear it from such an important entity projecting the future financial health of a major government agency.
Short version: the latest knife catchers are shell shocked.
America in numbers
One nation, divisible
As America undergoes dramatic, uneven changes, it may become harder to govern
Nov 18th 2010 | chicago
…
The first decade of the 21st century was not kind to America’s middle class—real median household income was 7% lower in 2009 than it was in 2000. The gap between rich and poor widened (see table). And the young are doing relatively badly in education.
All these trends are enough to shake a nation. Just as important, however, is that they are playing out very differently from one part of the country to another. Of course, some variation is inevitable; but as the fault lines that criss-cross the country widen, finding political consensus becomes ever more difficult.
…
(DennisN’s excellent comment from late yesterday follows below:)
That story inspired me to go get some of the data from the Census Bureau website. Their median state income data, averaged over the past three years in a list ranking states from highest to lowest, is instructive.
You might think that California is a “rich” state but is bracketed between Minnesota and Nevada at #13. Iowa and New York are tied at $50K.
The difference in median income between #1 NH ($66,654) and #50 MS ($36,650) is less than a factor of two. Using the old metric of 3x income for house prices, the difference between a MS house at $109,950 and a NH house at $199,962 is striking. I’d guess it’s easier to buy a house in MS at that price than it is in NH.
The vast majority of median incomes lies in a bracket between about $45K and $60K. Such small differences would make the observed differences in cost-of-living seem very odd indeed.
Thank you for your kind words. The link to the Excel spreadsheet is at
http://www.census.gov/hhes/www/income/statemedfaminc.html
Most of the spreadsheet is a field of asterisks showing which groups of states have differences that are not statistically significant.
Iowa and New York are tied at $50K ??
Yeah…I saw this yesterday but did not comment…
Hmmmm…I can understand NY but Iowa ?? Here is why;
This may come as a shock to you but by percentage of Iowa’s gross domestic product (GDP), GOVERNMENT has now become Iowa’s largest industry according to a new report released by the Council of State Governments’ (CSG) Midwestern office.
That’s why the early Iowa caucuses are so important a tool in determining who should be our next President.
San Diego, where home prices are five times or so as high as in Iowa, is just barely ahead of them at $60K in average annual household income.
But things are different there!
Yeah — I guess they don’t give librarians $200,000+ pensions in Iowa. See more on this in a long post which I hope Ben will let through when he has a chance to review it. Or, if you feel up to deciphering a semi-literate “rush transcript,” have a look at this.
You could apply the savings from the Iowa tanning salon toward the San Diego mortgage.
Good find PB.
Not only has median income fallen, but inflation has continued unabated in the real world, as well.
This means an even larger loss of purchasing power.
Shadow Stats has some very good inflation tables and uses the official rate for comparison.
From yesterday: “As I see it the Country is getting a entire breakdown of morals because of the economic situations that many different groups
face .”
The breakdown of morals, IMHO, is not because of the situation we’re in; it’s because of the people we’re dealing with. The Great Depression was a FAR worse situation than we have now, and, while morals did slip, it was not a total breakdown.. In the GD, people borrowed money from their neighbors/local banks/friends, and would do anything that they could to pay them back.
Today, people borrow money from Wall St. And Wall St is doing everything is possibly can to f**k the little guy in the most painful way possible. We are dealing with institutions that are totally amoral, they would kick Granny on the street if she had a mortgage balance of 100 dollars and forgot to submit her last payment. How do you expect the people to react to dealing with a “business” like that?
What has happened (finally) is that people are realizing that big business does NOT play by the same rules that they play by; and now the “little guy” want’s to start to play with the big guys rules. This is, IMHO, a good thing; why have one side of the transaction have such power over the other?
If banks want us to behave morally, I strongly suggest that they look in the mirror and lead by example. Otherwise, don’t give me the “you promised, it’s your word” crap when people continue to walk away… Those people? To quote the immortal words.. “They learned it by watching you..”
“you promised, it’s your word” - the mortage or deed of trust is either recourse or non-recourse under State law. Morality has nothing to do with it.
If morality has nothing to do with it, then the banks have no right to invoke it.
Ummmm, guilt; A great motivator.
It isn’t about invoking right or wrong, it’s about getting the FBs to pay up.
That is the point. Just as FBs should have no right to say “but the bank refuses to work with me” unless of course the bank is legally obigated to (and I am against post closing retroactive changes in the law in such regard). The deal was priced based on the law at the time the contract was entered into.
Ever since the catastrophically-misnamed “Great Society” the boomers, herded by their MSM border collies and slavishly adhering to their DNC talking points, have enthusiastically endorsed ever-new and expanding categories of “victims.” These victims, of course, all must have their woes and injustices allieviated out of public funds - borrowed from future generations, of course. That way the boomers salve their tender consciences, but stick younger generations with the tab.
We are now seeing the logical consequences of boomer moral relativity (”if it benefits me or feels good, it must be right”) and the pathological victimization syndrome that says you are never responsible for your own poor decisions, and someone else must be made to pay for them. While the boomers may have counted on being long gone from this earth when the proverbial chickens came home to roost, it looks like they will not escape the coming reckoning as they had so blithely assumed.
Oh, PUH-LEEZE, the “rule of law” is a COMPLETE joke in the US of A at this time. It is capriciously enforced. I mean, just for starters, witness the hordes of illegals pouring across the border and being rewarded for breaking the law, in many cases. And yet Arizona is punished for trying to enforce it.
Face it, the rule of law is a joke, as long as you can get around it by whatever means. Must be a real heartbreaker for lawyers.
FBs can and should do whatever they want, if lenders can do whatever they want.
Ah, here’s another one: members of Congress are exempt from body scans and groping by the TSA. If anything, they’re the one group that the US should be worried about, the one most devoted to wrecking the country. We don’t need terrorists to do a job that Congress does with gusto.
Yeah, rule of law, bwahahahaha!
Wesley Snipes makes mistakes with his taxes through bad money management and they hound him and send him to prison. Timothy Geithner, a member of the Fed, makes mistakes with his taxes and he gets appointed Secretary of the Treasury.
Rule of law. Bwahahahhahaha!
Snipes filed bogus returns claiming over $11 million in refunds and used frivilous tax protestor type arguments.
Geithner failed to pay employment taxes on a housekeeper and his 2.9% medicare tax on self employment earnings. Total tax bill = less than $10k.
Can you see the difference between the two?
Palmy,
I find your anger inspiring this rainy Sunday morning.
I hafta admit, I’m kinda pissed right now.
The moral hazard of people seeing Banks behavior and Wall Streets behavior and lack of enforcement of the rule of law, and this you
get off the hook if your politically connected is the very factor
that is responsible for the over-all breakdown in morals and
moral .
“A society that does not render reward and punishment in
a just manner is doomed to fail.”
(author unknown )
Oh, PUH-LEEZE, the “rule of law” is a COMPLETE joke in the US of A at this time.
As this continues to become more and more evident to J6P we will see the level of overall corruption skyrocket.
When I lived in Mexico in the 70’s and 80’s no one bothered to retain lawyers. It was always much easier to bribe someone.
Heck, I recall when I got my first Mexican driver’s license. There were several windows in the office that I had to work my way through. One to drop of the application, once for medical condition, one for eye exam, one for written test, etc. Each one had a “tip” jar, where I dropped a few dollars worth of pesos at each station. Needless to say I didn’t take any tests and proceeded straight to the photo station to get my picture taken.
Palmy, Palmy, Palmy,
I mean, just for starters, witness the hordes of illegals pouring across the border and being rewarded for breaking the law, in many cases.
Serfs such as yourself fail to see the bigger picture. Those “illegals” are the wage slaves the corporatists need to drive down labor costs and pad the bottom line of their quarterly shareholders’ report. The race to the bottom, along with accounting fraud and the creation of ficticious values, is the very basis of our casino economy. You, peasant, need to pay less attention to matters that don’t concern you, like public policy written by and for our Statist overlords, and more attention to the bread and circuses the MSM has generously offered up for your viewing pleasure, i.e. DWTS.
‘Oh, PUH-LEEZE, the “rule of law” is a COMPLETE joke in the US of A at this time.’
… which explains why we need to reinstate a rule of law in order to save our country from near-term dissolution.
I see Wesley Snipes as a patriot though. I don’t care what you others think of him.
“Snipes filed bogus returns claiming over $11 million in refunds and used frivilous tax protestor type arguments.
Geithner failed to pay employment taxes on a housekeeper and his 2.9% medicare tax on self employment earnings. Total tax bill = less than $10k.”
What’s the threshold for felony? It used to be only $50, but perhaps with inflation, it is now somewhere over $10K?
Wesley was an idiot. His income bracket has more loopholes and deductions than J6P’s ever will.
I’m with Eco on this one. And enough with how Snipes was some sort of victim - complete BS. Do a little research on what he tried to do before you make yourself look like an idiot for supporting him. It wasn’t a little ‘oops’ on his 1040, it was a deliberate tax evasion scheme. He simply did not want to pay taxes on his $40M or so. He’s a greedy, DUMB criminal. I can’t figure out the patriotic side of it …
Question. Economically speaking mortgage lenders should have tighter lending standards in non-recourse States. I have not spent any time researching it, but based on my general reading in connection with the real estate correction I have seen no evidence that this was the case. Perhaps it may violate some anti-discrimination legislation. Does anyone know if the banks even considered this, or whether they are prohibited from taking into account? Seems like a pretty big mistake if they were not prohibited from discriminating and were making no money down loans in inflated non-recourse markets upon the same terms as in recourse states. It used to be that it may not matter because the right to sue someone that couldn’t afford to pay their mortgage for a deficiency was given close zero value (i.e., it wasnt cost effective to chase down ppl that can’t pay their bills), but when we are talking huge mortage amounts with no money down in a declining market, even those with the ability to pay in non-recourse States may rightly make the decision to walk away en masse.
The banks didn’t care if the lending standards were sound or not because the banks weren’t planning on keeping the loans. Banks wrote the loans then immediately offloaded the loans to somebody else.
Recourse, non-recourse - what did the banks care? Collecting wasn’t the banks’s problem; Collecting was the problem of the smucks who ended up with the loans.
Until … something happened.
I agree that the originating lender may not have cared if he intended to immediately get the loan off his books through the securitization process, but if you don’t understand this stuff you shouldn’t be buying the paper. I cannot imagine a mortgage backed securities buyer not demanding a break down of the LTVs on the underlying assets as well as a breakdown as to the States and cities where the applicable properties are located to access geographic risk. That is one of my major problems with the buy backs. If you didn’t do any due diligence in buying you shouldnt be allowed to complain (unless of course there was fraud or incorrect information was supplied).
“… but if you don’t understand this stuff you shouldn’t be buying the paper.”
I agree. That’s why investors depended on Moody’s and Standard & Poors to rate the paper.
Moody’s and S&P spend a century or so establishing a reputaion of trust. Who’d ever think they would so readily flush such a reputation down the toilet.
At any rate I agree that due diligence in handling his own money is one’s own responsibility.
Just part of the “the next quarter is all that matters,” management style that has become prevalant in the last decade or so. Their reputation and the trust of bond purchasers was a comodity that could be converted into cash. And so it was.
With respect to the S&P, Moodys & Fitch, my personal belief is that they are not being vigorously attacked and that the government will protect them because it is another, but in some aspects bigger and more dangerous, version of the “too-big-to-fail” concept that applies to banking. There are trillions of dollars of debt that becomes subject to default and acceleration upon rating downgrades or loss of ratings. Any major shock to the ratings system would have a greater impact than Lehman’s demise. Pretty much all debt sold on the secondary market has various degrees of ratings downgrade triggers and resulting consequences.
A defense Moodys and S&P used is they merely evaluated the numbers that was supplied to them by whomever it was that they rated. The numbers were screwed up thus the ratings were screwed up.
This reasoning may fly well in the Ivory Towers but doesn’t fly well in the Real World. It did not take an advanced degree to sense that something was very wrong with the numbers and hence something was very wrong with the ratings derived from the numbers, as the investing schmucks later discovered.
IIRC the rating companies were taking the bottom - the most risky - tranche and subjected it to their rating systems and anointed the top tranch (taken from the bottom tranch) with an AAA rating because, compared to the other tranches in this bottom tranch, the top tranche was the one least likely to fail.
But the schmuck investor did not know this; All he knew is the tranche he was buying was rated “AAA” by the rating companies.
A defense Moodys and S&P used is they merely evaluated the numbers that was supplied to them by whomever it was that they rated.
ISTR that they DID tell securitizers how their bonds would be rated. It’s as if the fire insurance company told homebuilders that the rates went down 5% for every smoke detector. So the builders built firetraps with bad wiring but 2 smoke detectors in EVERY room, sold them, and proceeded buy insurance on the houses that they sold.
They should have REALIZED that their models were wrong and that the risk levels were increasing (heck, WE realized it and we don’t have access to the loan-level information) BEFORE things got completely insane.
Wall street? Banks? Ratings?
It’s amazing how easy it is to look the other way when the money train comes rolling through your station throwing bags of money
at you. All you have to do is not notice the
train. Pretty simple.
Or different rates, but those don’t seem to be in evidence either. In a normal market, “strategic defaults” aren’t really a problem, and most forclosees don’t have a pot to piss in. Getting a judgement isn’t worth the cost. For all the whining about ruthless borrowers that they’ve done, they STILL don’t seem to be pursueing borrowers or selling the bad mortgage debt to collection agencies. So this would seem to be another case where actions speak louder than words. They’re happy to try and shift blame, but they behave in a way that indicates that they don’t think that the FBs have assets worth the trouble of seizing.
Whether the banks or lenders were in recourse or non-recourse states, they recently(2000-2008) based their past loans and mortgages lending models on the projection trends that people would always pay regardless of what happens and they figured that they could write off a few of their expected losses if caught and still make a bundle like big insurance companies try to do.
Unfortunately, their late great greed models were based on faulty pattern and trend assumptions during the “Good Years” rather than the old sound risk management principles to avoid this Perfect Storm.
Oooops!…The waves are getting higer and everyone is bailing.
“It’s every man for himself…banks too!”
Hey Ben
It’s ME, mikey, I’m not Eddie.
Let me in…let me in !!
Rules are for suckers, everybody else gets a bailout.
At least as long as there’s a stupid taxpayer that does the bailing. Once that well runs dry it’ll be a real game changer.
The rule of law has pretty much broken down. Bailouts for incompetent “to big to fail” business, forged documents to conduct foreclosures, fraudulent AAA ratings on toxic waste, etc.
How many people have gone to prison for trillions of $$ worth of fraud? NONE. So there’s really no law anymore that actually gets enforced when it comes to financial fraud. So expect the rate in various frauds and swindles to increase in quantity and magnitude. If you’re too small to get a bailout, simply create your own bailout. Quit paying your mortgage and challenge the bank to produce the original papers. Lawlessness has always be a trademark of banana republics but that’s where we’re heading.
Heck, Mike, you said it much better than I did. Whenever I hear someone bloviating about the “rule of law”, I sneer.
I agree Palmy….I call it the “selective” rule of law….
And, the most glaring example of this is how the rule of law is applied to groups like police, DA’s, judges & politicians…
yea, you get the justice you pay for.
As Joan Didion famously said, “I suspect we are already there.”
You cannot continue to sue those without money - at least not profitably. Lawyers know this of course as it’s the source of their livelihood.
Now, if you were in the field of law, would you encourage and support the fleecing of the taxpayer at the behest of the Political Class? You bet you would, particularly if you afre a member of the Political Class yourself.
That the taxpayers are the bagholders should come as a surprise to no one. They are providing the funds that the Political Class (which includes lawyers suing individuals and entities at a rate of $400+ an hour) will later distribute among themselves - sometimes through massive lawsuits.
But you can aggravate them all you want……Right now in NYC they usually take a few months of calling before you get sued, then you file an answer and its 3-4 months before a court date…..you plead broke, and they give you another court date a YEAR away……extend and pretend that you might find a way to pay this debt off…..unless you file BK in the meantime.
You cannot continue to sue those without money - at least not profitably. Lawyers know this of course as it’s the source of their livelihood.
There is another angle to this morality lense. The core of this crisis is not the fidelity of the banks or the borrowers. Too much money was borrowed and lent, much more than could ever be paid, and all to get a piece of the speculative action. The redemption was supposed to come from infinite expansion and growth. Belief in that fantasy was nearly universal. Promises based on fantasy cannot be kept, regardless of moral compass. The sorting out is just details.
The fundamental moral failure in this mess was the original borrowing to gamble. It has always been wrong, even when you’ve got a “sure thing”.
“The fundamental moral failure in this mess was the original borrowing to gamble.” To clarify, are you implying that those that paid much more than historical ratios between home values and salary, especially those that bought multiple homes, investment property or with the intent to flip, should share at least equally in the blame (setting aside actual fraud on the lender side). And perhaps, just perhaps, the bankers are not all demonic monsters, but may have been operating under the same delusions and misconceptions no matter how crazy it seemed to us? I am not disagreeing, but I get flammed even if I even come close to make such statements. It warms my heart.
I think that there are plenty of people here who think the FBs are guilty. But there’s just about nobody who thinks that the banks are blameless.
“I think that there are plenty of people here who think the FBs are guilty. But there’s just about nobody who thinks that the banks are blameless.”
Exactly.
When I assign guilt to the parties in play I assign most of the guilt to the money “professionals” and pseudo government regulators. With the FED being the enabler.
I have never viewed FB’s as victims as they are so often portrayed by the MSM.
“I have never viewed FB’s as victims as they are so often protrayed by the MSM.”
The MSM needs readers and viewers to keep them alive. Many of these readers and viewers are FBs, or are related to FBs, or in some way have sympathy for FBs.
It does the MSM no good to alienate these readers and viewers. It does the MSM a great deal of good to add support to these readers and viewers. The MSM has a large financial interest in keeping these readers and viewers reading and viewing. This is why the FBs will never be blamed by the MSM for the woes they have brought on to themselves.
FB’s don’t have organizations, Realitors do
and they post the ads.
I thought the role of the media was to help us sort out the truth of the matter by giving us an un-biased presentation of the facts.
Are you saying this isn’t so? What about the Constitution?
Freedom of the Press? Tell me, oh, tell me, the Press is giving us the true story! Please.
The gambling FB’s were part of the problem and some of those
people were outright fraudulent IMHO . But ,it’s the Lenders
responsibility to underwrite loans and prevent fraud .The fact
that the originators encouraged fraud and would change loan applications to conform to the underwriting guidelines is fraud .
There was no problem for anybody to get a loan ,even a 15
dollar a hour cherry picker could get a 700k loan .
The security investors were going on the ratings as well as the
long term reputation of the USA mortgage market in the past
being stable ,risk ratings being accurate ,and lenders actually underwriting loans and preventing fraud . Further , the new development of creative low down loans and teaser rates and stated income loans in which the underwriting was not based
on a long term ability to pay ,but some stupid short term teaser rate, was a change in the underwriting from the past .These
were faulty loans going in simply based on real estate going up .
Not only did the industry have no right to determine risk based
on faulty new loan underwriting that you didn’t have to show ability to pay long term ,in spite of it being a long term loan ,but they created loans that would get around having PMI insurance
and the stricter underwriting associated with low down loans in the past . These were”gamblers loans” based on real estate going up because there was no long term history of risk factors on
such underwriting that increases in real estate will make it possible for a unqualified person to pay the loan .So the design of the loans was as faulty as run-a-way breaks are for a car company .Countrywide loan bundles were having 85 % default rates .
The fact that MBS security holders are wanting buy-backs for a
variety of reason is heating up legally . If you add all the leverage and faulty credit default swaps bets that were based on using these faulty loans ,it was one big fake and defective loan
market that raised prices beyond true market value had the lending not been faulty . It’s a Ponzi -scheme.
There are still millions of people who blame “da po’ folk.”
Et tu John Mauldin?:
“(T)his thought on what we can do to shore up home prices, from one of my favorite thinkers on the housing market, John Burns. Now here is a program that would work and also save taxpayers money. ( http://www.realestateconsulting.com/content/our-proposed-rental-solution)
“Proposed Rental Housing Solution: Falling home prices don’t help anyone, and anyone who says we can let the free market take care of things is saying that it is ok for taxpayers and the banking system to lose many more billions of dollars, virtually assuring another recession and maybe worse. To boost housing demand and limit supply, we propose the following:
” 1) Create an Apartment REIT: Distressed sales need to be kept off the market. Rent out the Fannie, Freddie and FHA REO (owned properties through foreclosure). These properties currently comprise 42% of the 562,000 REO and a large percentage of the 5.1 million homes currently in the foreclosure pipeline (already 90+ days delinquent or in foreclosure). This is best accomplished by contracting with an outside firm (competitively bid of course) to manage local property management firms. The rental income will be self-sustaining and the properties will be financeable in the public markets, just like publicly traded REITs are financeable. The GSEs will benefit from future price appreciation too, as opposed to being damaged by further price deterioration. The Banks, who currently own 22% of the REO, should also be allowed to contribute properties to the REIT. The Administration can keep pushing for loan mods if they want, and we heard over and over again how government doesn’t want to foreclose on people. All we ask is that you keep the distressed sales off the market.
“2) Loans to Landlords: To stimulate demand and restrict supply on non-GSE distressed sales, have the GSEs make very safe loans to individuals or corporations who will promise to rent them out for an extended period of time. The GSEs should make a tidy profit on these loans, while also helping provide affordable rental housing to those who need it.
“3) Keep Mortgage Liquidity Flowing: Housing is extremely affordable right now, but the uncertainty in the mortgage industry is making underwriting more challenging, and uncertainty in the economy is hurting buyer confidence. Stop changing the underwriting rules so everyone knows what is required, and keep the fantastic financing environment. Once the economy turns around, real buyers will return to the market. We believe that the solutions above will also help restore home buyer confidence that prices won’t plunge, which will boost demand.”
**************
John and company obviously don’t care about anyone who have been sitting this one out waiting or any of their future generations coming along after them that will have to face artificially supported housing costs despite also facing dwindling net incomes (esp after rising tax and insurance costs).
When will these people get out of the way of the markets finding their natural equilibrium? I suppose as long as they’re the ones losing value, never.
How can anybody assert with a straight face that falling priced don’t help ANYBODY? Because as you have pointed out they certainly DO help future purchasers. Again and again people act as if higher prices for RE and equities are an unqualified GOOD. Just like ANYTHING else, higher prices are good for sellers, and bad for buyers, it’s a zero-sum game.
“John and company obviously don’t care about anyone who have been sitting this one out waiting or any of their future generations coming along after them that will have to face artificially supported housing costs despite also facing dwindling net incomes (esp after rising tax and insurance costs).”
A service economy top heavy with “suits” hocking their contractual products depends on a steady supply of suckers.
We have a winner.
“(T)his thought on what we can do to shore up home prices, from one of my favorite thinkers on the housing market, John Burns. Now here is a program that would work and also save taxpayers money.”
He says this matter-of-factly as though propping up home prices is a Constitutional purpose of the federal government.
Can anyone who thinks they understand the Constitutionality of federal government housing price support measures, please share? Because such measures appear to my jaundiced eyes as an illegal redistribution of wealth from the young, the poor and the renters into the hands of the old, the rich and the homeowners, with no Constitutional basis, whatever.
* Crickets *
Sure, it’s right after the ‘right to privacy’ clause in the ‘fairness section’
Commerce clause.
But that is too glib an answer. Each of the 50 states have constitutions that grant them tremendous power regulate business and to subsidize industries. The commerce clause allows the fed to get involved when these interventions effect interstate business. Since the federal law usually preempts state law, when interstate business eclipses intrastate business you get the growth of a federal regulatory government that displaces the state regulatory governments. But all we are changing is the locus of regulatory power - governments in the US have always had these powers.
It is not explicitly written in the U.S. Constitution, but it is an unavoidable consequence of our federalist system.
“you promised, it’s your word” - the mortage or deed of trust is either recourse or non-recourse under State law. Morality has nothing to do with it.
Your right Natalie …..Lenders had no business making lowdown loans
without strict underwriter in non-recourse states. The rick factors
increased dramatically in no recourse states . They just didn’t underwrite
loans for risk ,simple as that .
“”In our time, the curse is monetary illiteracy, just as inability to read plain print was the curse of earlier centuries. ”
— Ezra Pound”
Which implies those who are not monetary illiterate end up with the illiterate’s money.
I’m not sure it really implies that. That’s like saying the literate will end up with the illiterates’ books and magazines. I have plenty of my own, already. I don’t need some more.
So, I’m thinking I might end up with their stuff, too, when I realize, they don’t HAVE ANY, because they are illiterate and would never bother to acquire any.
So, going back to the money thing. Does being financially illiterate make someone not want to acquire any money? It must be so.
The financially illiterate are the guys who jump into investments that promise a guaranteed 10 percent-plus return, who feel that buying a dot com stock at two-hundred times earnings is a bargain, or buying a seven-hundred thousand dollar McMansion in Fresno is a sure way to get rich.
They buy high, and then years later they sell low because … because they are financially illiterate.
All a financially literate investor need to do is exercise patience and the financially illiterate will eventually sell out to him all his holdings at a bargain price.
What about government intrusion, to give people “do-overs”.??
One of the things I am finding interesting is the art and jewelry business here in the Monterey area and elsewhere.
Jewelry businesses are bringing in cheap stuff to stay in business and many in the business for 10-40 yrs are going under while saying things are great right up until they shut their doors. Diamond pricing has gone up to pricing seen in the Carter years which is crazy. My daughter was looking for an engagement ring and found it is far better to buy a second hand one than a new one and then have the ring custom made.
Art prices controlled by a few dealers for some select artists in their stable are trying to hold pricing artificially high while inventory builds akin to the housing market.
I know a former art gallery owner (Front St., Maui) who now manages a Gamestop video game store.
He often speaks about what a scam the art business was in general.
P.S. He’s a friend of a friend who I basically have no use for.
Welcome to the luxury market where supply and demand are bad words and not mentioned in polite company.
Flying somewhere over the holidays? Know someone who is?
President Obama says we just have to understand the new scanners and pat-downs are for our protection. Not everyone agrees.
Listen very carefully Mr. President: You’re on the wrong side of this.
Obama said he’s told the U.S. Transportation Security Administration: “You have to constantly refine and measure whether what we’re doing is the only way to assure the American people’s safety. And you also have to think through, are there ways of doing it that are less intrusive.”
At this point, that agency and counterterrorism experts have told him that the current procedures are the only ones that they think can effectively guard against threats such as last year’s attempted Christmas-day bombing. A Nigerian man is accused of trying to set off a bomb hidden in his underwear aboard a flight from Amsterdam with nearly 300 people aboard.
Mr. President. Let’s get something clear here.
First: That Nigerian boarded a flight into the US without a passport. He did so because someone from our Government overrode the protocol requiring that he have one, like everyone else. But for that act, which someone in your government took, he couldn’t have gotten on the plane.
Second: He was on a watch list. He had been reported as a possible threat and was coming from a high-risk nation. Had he presented his passport he likely would have been denied boarding.
Third: The bad guys already have figured out how to stick a bomb up their ass. Such a device will not be detected by the “full body” X-ray machines nor by an “aggressive” custody search. Therefore, the claimed procedure is worthless.
Fourth: The latest attempt was in a toner cartridge. You’re not seriously suggesting that a terrorist is going to surreptitiously shove a laster printer toner cartridge down his pants, are you?
El-Al gets this right. Instead of trying to stop bombs, they focus on stopping terrorists.
Metal detectors and profiling - aggressive profiling - are more than enough. Such procedures have kept El-Al explosion-free - entirely - along with being hijacking-free.
Forcing a woman to remove a prosthetic breast and display it to a TSA screener is both idiotic and demeaning. So is grabbing people’s crotches and feeling up their breasts.
(From K. Denninger)
A better summation cannot be found. SCReW the TSA. Another useless, burdensome governmental boondoggle.
“Listen very carefully Mr. President: You’re on the wrong side of this.”
How do you guys know for sure that the new TSA measures don’t address some attempted act of terrorism which the government does not want to publicize, out of fear that it would inspire repeat attempts?
“How do you guys know for sure that the new TSA measures don’t address some attempted act of terrorism which the government does not want to publicize?”
The key word above is “government”.
The current “government” is a crime in progress.
Why isn’t Chertoff himself being arrested for trying to enrich himself via Rapidscan machine sales to the TSA, a clear conflict of interest?
Why are our Congrescritters exempted from these outrageous measures?
Why? Because it is just another looting of the public and just another purposeful degradation of Americans brought to us by a handful of criminals in power in Washington. That’s how we know.
2 words: Cheney. Haliburton.
Israeli methods require lots of people and they have to be both smart and well-trained. So, you are talking about replacing the TSA people and all the security contractors with at least twice as many people, all of whom have a relevant college degree and spend additional months learning to do the job well. With the volume you are dealing with at US airports, you might be talking about getting there 4 hours ahead of time even for domistic flights. The last time I checked, the Israelis charged everyone a fee of several hundred dollars to leave the country in order to help pay for these services.
Thousands of
Sexual
Assaults
If we don’t get off, you don’t get on
As long as a good looking young female inspects my scanned image, I’m okay with the backscatter scan. I’m in good enough shape (low body fat and athletic) give the nice looking young woman the full monty.
Bill, do you fly much? ‘Good looking young female’ is not exactly the prototypical description of a TSA drone.
I fly every three weeks. Actually the stewardesses are mostly aging boomers and usually older than the female TSA agents.
“As long as a good looking young female inspects my…”
That’s what I was thinking when I went in for my colonoscopy, but the doctor holding that long thing was a guy with hairy arms. Oh well, the fentanyl was great!
SNL addressed the TSA issue. Rancher, you must have ESP. LOL hahttp://www.hulu.com/watch/194728/saturday-night-live-message-from-tsa
http://www.hulu.com/watch/194728/saturday-night-live-message-from-tsa
Love it!!!
In case someone does not know what “Chertoff” references above:
From the Boston Globe Jan 2010:
WASHINGTON - Since the attempted bombing of a US airliner on Christmas Day, former Homeland Security secretary Michael Chertoff has given dozens of media interviews touting the need for the federal government to buy more full-body scanners for airports.
What he has made little mention of is that the Chertoff Group, his security consulting agency, includes a client that manufactures the machines. Chertoff disclosed the relationship on a CNN program Wednesday, in response to a question.
An airport passengers’ rights group on Thursday criticized Chertoff’s use of his former government credentials to advocate for a product that benefits his clients.
“Mr. Chertoff should not be allowed to abuse the trust the public has placed in him as a former public servant to privately gain from the sale of full-body scanners under the pretense that the scanners would have detected this particular type of explosive,’’ said Kate Hanni, founder of FlyersRights.org, which opposes the use of the scanners.
“But, when the freeze is lifted and more inventory gets dumped into the market we’re probably going to see home prices drop even further.”
South Florida Home Prices Drop In 3rd Quarter
Posted on 12 November 2010
I’m not being the bearer of bad news, unless of course you’re in the market to sell a home. On the other hand, if you’re looking to buy a home, then this article might make you smile.
The sales data released by the Florida Association Of Realtors showed home prices on a continued decline.
In Miami-Dade County, single-family home sales dipped dipped ever so slightly only down 1 percent from the same period last year, while the prices held to a similar downtrend only off 1% as well. The median home sold was $191,000.00.
However in Broward County the news was a bit more dire for home sellers. Single family home sales dropped by a whopping 18%!
The prices only dropped by 2% but don’t hold your breath for a sale anytime soon. The median home sale in Broward County was $209,600.00.
So what does this all mean? Well, with the foreclosure moratorium and some banks freezing foreclosures due to the robo-signer controversy, sales were a bit impacted by the freeze.
But, when the freeze is lifted and more inventory gets dumped into the market we’re probably going to see home prices drop even further.
Not what those looking to sell want to hear but it’ll be a Buyer’s market for the foreseeable future with Buyers, especially those with cash, pretty much having a lot…I mean a ton, of home buying options.
http://www.robinashley.com/2010/11/12/south-florida-home-prices-drop-in-3rd-quarter/ - 62k -
“…apparently riding the dog like its a small horse is FROWNED UPON IN THIS ESTABLISHMENT!”
http://www.youtube.com/watch?v=x0GsNhLt9Ds - 141k
Hilarious!
You have to love a company that identifies its customers as babies.
That’s some gall right there!
This investigative-reporting article about a family of RE investors who’ve been busted for fraud is somewhat confusingly written. I’m not exactly sure who did what to whom after reading it. Apparently they took out a long string of “liar loans” and really did lie about a lot of things, e.g. recent bankruptcies.
Between 2004 and 2006, Michael Hymas (Aaron’s father), his daughter, Shauntee, and his son-in-law, Stanley, pleaded guilty to falsifying $8 million in loan applications to purchase and flip 21 properties in Idaho and Utah.
“Ultimately, the scheme collapsed,” Assistant U.S. Attorney George Breitsameter told Judge Edward J. Lodge at Michael Hymas’ sentencing.
Hymas, 59, a longtime Meridian insurance agent, asked the judge for leniency.
“This is not me,” he told the judge. “My entire life I’ve taught my family about integrity. I put myself in a position where I … jeopardized my integrity. I didn’t mean to.”
http://www.idahostatesman.com/2010/11/21/1426536/crestwood-homes-a-house-of-cards.html
Still it’s odd that small-time scammer like these get prison terms when the big-shots don’t.
The numbers are staggering: Between April and July 2008, Crestwood owners Aaron Hymas and Justin Walker and their family members and friends filed seven bankruptcies, collectively owing more than $85 million to more than 900 creditors. More than 100 civil cases have been filed in Idaho and Utah against Crestwood, Hymas and Walker.
Holy cow…
“…it’s odd that small-time scammer like these get prison terms when the big-shots don’t.”
It is self-evident that, unlike their big-shot counterparts, small-time scammers are not ‘too-big-to-jail.’
http://www.rte.ie/news/2010/1121/economy.html
Ireland’s “leaders” kick the can down the road and beg for EU bailout. Buh-Bye, sovereignty. Let’s see how the man on the street feels about having the bankster’s bad bets and international bond-holders’ greed-fueled malinvestments foisted onto Irish taxpayers.
Another giant step toward the inevitable global revolution!
Rep. Ron Paul addresses House on TSA gropers & pornoscanners
http://www.youtube.com/watch?v=_vjrNmlU9is
He sounds pretty pissed off. Me too.
That was awesome. His point that the American sheeple have meekly submitted to all this nonsense couldn’t be truer. A tiny minority is waking up; most remain complacent zombies.
This is part of his protest against the Patriot Act, which came about after 9/11.
There are conspiracy theorists in the radical libertarian movement that the US government planned the hijackings with both Israel and the Muslims to grow the US government.
I’m not a conspiracy theorist. I just apply Occam’s razor. However, I distrust government no less than pre 9/11.
I could just about learn how to fly and get my own small airplane and be gone with this paranoia. The backscatter x-rays are no problem for me. I just would like to be able to carry toiletries on board once again.
Bill:
It was one of the clearest days in nyc i have ever seen…… I took pictures of it burning from my front porch.
There was speculation the original targets were Hassic Jews Synagogues in Williamsburg but they lost their bearings and aimed at the towers at the last minute
It could have been tens of thousands dead had they crashed in billysburg.
Going to jail and losing your job (then being blacklisted) because of your protest is one hell of an incentive to not protest.
Try it sometime. I have. It’s a real effing blast.
RP is a true patriot.
“RP is a true patriot”
Yes he is. His stock has gone up even higher in my eyes with this speech.
http://monetary-intelligence.com/goodbye-ireland-%e2%80%93-it-was-nice-knowing-you/
Goodbye, Ireland, It Was Nice Knowing You
When a homeowner borrows money from a bank to buy a house, let’s say $300,000, where did the bank get that $300,000 from? Savers’ deposits? Previous profits? Both of these answers are, sadly, incorrect. Quite surprisingly (for the vast majority of people anyway), the $300,000 was simply created out of thin air by entering the figures into a computer. Please allow me to repeat that, THE ‘MONEY’ WAS SIMPLY CREATED OUT OF THIN AIR BY ENTERING THE FIGURES INTO A COMPUTER! The ‘money’ did not exist before it was loaned to the homeowner. Yes, banks have the ability to create ‘money’ out of thin air and then lend it to their customers with interest attached. On the off chance that it still has not sunk in, please allow me to repeat that one more time, BANKS HAVE THE ABILITY TO CREATE ‘MONEY’ OUT OF THIN AIR AND THEN LEND IT TO THEIR CUSTOMERS WITH INTEREST ATTACHED! No, I am not joking with you; I really wish I was. The $300,000 will appear on the bank’s balance sheet as a liability, but the bank has not loaned one penny of its, or its customers’, money to the homeowner.
I think Banks need reserves but luckly they the banks can borrow from the FED at about 0% interest
Now the FED I beleive can make money out of thin air
most of us work for money, now if the FED can make money for free and give it to their favorites, and the rest of us work for money, but the FED makes billions out of thin air and gives it away to a few .. yea this isn’t going to work forever but for now
most of the workers are all in China now anyway
fiat currencies backed by taxpayers and promises
Bankruptcy Looming For SD?
Video published November 12, 2010
Above: We hear from City Attorney Jan Goldsmith about the bankruptcy option and other reform ideas for a financially troubled San Diego.
November 12, 2010
We hear from City Attorney Jan Goldsmith about the bankruptcy option and other reform ideas for a financially troubled San Diego.
I wonder what that will do for all those municipal bonds they keep shilling on the radio ??
Questions that must be asked at City Hall
By Union-Tribune Editorial Board,
Sunday, November 14, 2010 at midnight
To find the right solutions, you must first ask the right questions. In the wake of voter rejection of a $103 million yearly sales tax increase, and faced with an upcoming budget deficit projected at $72 million, at least some San Diego City Council members are asking the right questions.
At a budget meeting last week, Councilman Tony Young, who is likely to be chosen president of the new council that will be installed Dec. 6, said every idea that might save taxpayer money must be examined.
“I’m not sure,” he added, “why the city owns and operates five golf courses and airports, too.”
Bingo. One of the right questions.
Maybe there is good reason for the city to still be in the golf course and airport businesses. But the question has to be asked.
There are many others.
Can the city continue to be virtually alone among major municipalities in providing free residential trash collection? The free service is required by the People’s Ordinance of 1919 and has long been supported by many people and organizations, including this editorial page. But at a time when lives and property are threatened by a fire department forced to idle half a dozen fire engines every day, does free trash collection still make sense? Maybe, but the question must be asked.
The big money and the potentially big savings, of course, are attached to city employee pay, pension benefits and lifetime retiree health care. Councilman Carl DeMaio has long been raising questions about that and is pushing a number of new ideas in his “Roadmap to Recovery.” His plan is highly controversial and elements of it are legally questionable. But as City Attorney Jan Goldsmith notes in a commentary on the opposite page, city pension payments could jump from $229 million today to $500 million in 15 years. That’s right out of the city’s general fund. So DeMaio’s questions must be asked.
The point is this: Business as usual at City Hall is no longer possible. The voters’ message was that essential city services – police, fire, lifeguards, perhaps a small handful of others – are important to them. Golden pension plans for public employees are not.
…
Strange I lived all over the country and never paid for garbage pickup….and neither did any landlords unless you hired private contractors….public garbage pickup is a health issue and should always be funded from local taxes.
Can the city continue to be virtually alone among major municipalities in providing free residential trash collection
Questions that must be asked at City Hall
By Union-Tribune Editorial Board,
Sunday, November 14, 2010 at midnight
To find the right solutions, you must first ask the right questions. In the wake of voter rejection of a $103 million yearly sales tax increase, and faced with an upcoming budget deficit projected at $72 million, at least some San Diego City Council members are asking the right questions.
At a budget meeting last week, Councilman Tony Young, who is likely to be chosen president of the new council that will be installed Dec. 6, said every idea that might save taxpayer money must be examined.
“I’m not sure,” he added, “why the city owns and operates five golf courses and airports, too.”
Bingo. One of the right questions.
Maybe there is good reason for the city to still be in the golf course and airport businesses. But the question has to be asked.
There are many others.
Can the city continue to be virtually alone among major municipalities in providing free residential trash collection? The free service is required by the People’s Ordinance of 1919 and has long been supported by many people and organizations, including this editorial page. But at a time when lives and property are threatened by a fire department forced to idle half a dozen fire engines every day, does free trash collection still make sense? Maybe, but the question must be asked.
The big money and the potentially big savings, of course, are attached to city employee pay, pension benefits and lifetime retiree health care. Councilman Carl DeMaio has long been raising questions about that and is pushing a number of new ideas in his “Roadmap to Recovery.” His plan is highly controversial and elements of it are legally questionable. But as City Attorney Jan Goldsmith notes in a commentary on the opposite page, city pension payments could jump from $229 million today to $500 million in 15 years. That’s right out of the city’s general fund. So DeMaio’s questions must be asked.
The point is this: Business as usual at City Hall is no longer possible. The voters’ message was that essential city services – police, fire, lifeguards, perhaps a small handful of others – are important to them. Golden pension plans for public employees are not.
…
Because (on paper at least) the golf courses and airports generate income and the fire department doesn’t.
I don’t like it either, but there it is.
REGION: Lake San Marcos Resort in bankruptcy
Some creditors interested in breaking up the resort
By ERIC WOLFF - ewolff@nctimes.com
North County Times - Californian |
Posted: Tuesday, November 16, 2010 5:01 pm
Lake San Marcos Country Club & Resort is in bankruptcy and in danger of being broken up and sold for parts, the company’s owner said.
But some residents of the community, most of whom are retirees, said the resort has failed to maintain tennis courts, docks or other facilities that are its contractual responsibility, and they wouldn’t mind new ownership.
Much of Lake San Marcos was developed in the 1960s, with 2,300 homes, the man-made Lake San Marcos, a golf course and the resort.
Matthew Dinofia bought the resort and country club under the name Citizens Development Corp. in 2004 and enjoyed three profitable years before the economy collapsed in 2008, taking tourism with it.
Unable to make payments on debts he took to buy the property, or to keep up with maintenance obligations, he went into bankruptcy. But while some of the lenders have agreed to arrange new payment plans, two lenders have been “aggressive” and may try to foreclose, the company said in a prepared statement.
“CDC (Citizens Development Corp.) has several lenders that have been very cooperative in its reorganization process, but two creditors seem to have a different agenda adverse to the interest of that of the company, its creditors, and the community,” a written statement from Citizens Development said. “These two lenders have taken very aggressive positions and are attempting to break apart the resort thereby directly impairing the overall ability to reorganize.”
Dinofia bought the property from the original developers in a complicated deal involving $16 million in financing plus assorted stock and equity swaps, Dinofia said. Documents from the California secretary of state show that he used a slew of limited liability corporations to organize the property, including LSM Hotel LLC, which manages the hotel and is in bankruptcy, and CDC, which owns LSM Hotel and the rest of the country club and resort.
CDC is in turn owned by La Jolla Development Corp., of which Dinofia is the sole shareholder, bankruptcy documents showed. Only CDC and LSM Hotel were in bankruptcy.
The resort had record years for revenue in 2006 and 2007, Dinofia said. But bankruptcy records show revenue fell from $9.3 million in 2008 to $7.3 million in 2009, and 2010 isn’t looking promising, with $4.3 million in revenue between Jan. 1 and Sept. 23 this year.
Unable to make his loan payments, Dinofia put LSM Hotel and CDC, which does business as Lake San Marcos Country Club and Resort, into Chapter 11 bankruptcy in the hopes the company could reorganize and get its debts in order.
Two of the lenders have taken a hard line in negotiations, insisting on payment in full. Dinofia wouldn’t say for the record which two creditors were being aggressive. However, two of CDC’s lenders have filed lawsuits in San Diego Superior Court: German American Capital Corp. and Serhan Investments Inc.
Bankruptcy documents said LSM Hotel owed $12 million to New York-based loan servicing firm German American, a subsidiary of Deutsche Bank America Holdings Corp., and that CDC and LSM Hotel each owed $4 million to Serhan Investments, a San Diego-based investment firm.
Neither creditor returned calls for comment, and an attorney representing Dunham & Associates, which can claim $1.5 million in debts from CDC, declined to comment.
Lenders could potentially foreclose on the companies in whole or in part, and sell off the golf course (which has its own LLC), the hotel, or the country club —- all of which might be acceptable to some local residents.
Outgoing Vista City Council member Bob Campbell owned several properties around Lake San Marcos, including the house where he hoped to spend his retirement. He said he hasn’t paid close attention to the bankruptcy, but he said it “concerns me.”
“They’ve failed miserably to uphold their obligations and haven’t been totally candid with the property owners,” Campbell said. “On one property I own, there’s a dock associated with it. We pay $500 a year to keep the dock in good repair, but you could step right through it.”
…
Michigan Town’s Bankruptcy Bid a Harbinger, Governor-Elect Says
By Tim Jones - Nov 18, 2010 9:01 PM PT
Michigan Governor-elect Rick Snyder said a Detroit suburb’s effort to enter bankruptcy is an “early indicator” of the depth of financial trouble faced by hundreds of communities in the state.
There are “wealthy communities that are not in that different a position” from Hamtramck, said Snyder, a Republican who is a former computer-company executive.
“They simply haven’t had the day of reckoning arrive yet that is liable to happen in the next two or three years, with the way property tax revenues are going,” Snyder said yesterday in an interview at the Republican Governors Association meeting in San Diego.
…
Posted: Monday, February 15, 2010 6:11 pm | Updated: 4:14 pm, Mon Mar 1, 2010.
Explainer: Are Pensions Fair Game in Bankruptcy?
By LIAM DILLON
Since last fall, talk of municipal bankruptcy has wormed its way back into public debate at the city of San Diego.
Mayor Jerry Sanders and City Attorney Jan Goldsmith decided they’d had enough. Last month, both dismissed the idea — and Sanders used particular vigor — by saying it distracted the city from its real financial problems. Besides, they argued, it would cost as much as $300 million and couldn’t affect the city’s most crushing debt: the $2.1 billion it owes for employee pensions.
“You can’t touch the pensions, which is the big nut,” Sanders said in an interview. “Why not use that $300 million to balance the budget in the long term instead of continuing this talk about there’s an easy solution out there? I think people who say that either don’t understand it, or they’re demagoguing.”
…
Bear these people really don’t get it….the worst that can happen is you will get ….say 88% of your check and an IOU for the other 12% which you may lose anyway…….now if they cut you the full amount sure everyone’s check would bounce.
DEL MAR: Battle lines drawn in fairgrounds sale
Proponents hope to close deal before Brown becomes governor
By PAT MAIO - pmaio@nctimes.com North County Times - Californian | Posted: Saturday, November 20, 2010 8:38 pm
Supporters of Del Mar’s proposal to buy the 400-acre Fairgrounds from the state of California hope to get the deal done in December. (NCT file photo)
The battle over ownership of Del Mar Fairgrounds and racetrack is about to heat up.
Political strategists have been hired, the San Diego County Taxpayers Association is evaluating the merits of the sale, and lobbyists are lining up in Sacramento.
News of Del Mar’s proposal to buy the 400-acre complex along the city’s shoreline for $120 million last month touched off a heated debate among politicians and business leaders. Some Sacramento lawmakers want to sell off the fairgrounds and worked over the past year with Del Mar officials and Gov. Arnold Schwarzenegger’s Department of General Services in closed-door meetings on crafting a deal.
…
San Francisco Chronicle
Sunday, November 21, 2010
State deficit - let the people decide
The state of California is facing an enormous budget deficit. Yes, another one.
Five weeks ago, the Legislature passed a budget that was supposed to close a $19 billion shortfall. Now California is facing a $26 billion deficit, with $6 billion due immediately.
Gov. Arnold Schwarzenegger has declared a fiscal emergency and called a special session of the Legislature.
If this is beginning to sound a lot like 2008 and 2009, that’s because it is. The reason we keep reading from the same script is because the state of California has relied on cheap tricks and magical thinking to balance its budget over the past three years, instead of solving the structural deficit. And if Sacramento doesn’t change its ways, California will be in this situation for years to come.
At this point, everybody in Sacramento knows this. California has become the national poster child for state governments on the verge of bankruptcy. Our bond rating is the lowest of all the states. With few economists predicting a quick return to boom times, everybody in Sacramento knows too that the next several years are going to be a struggle.
So what are they going to do about it?
…
What’s really odd is that CA tax-exempt bond funds haven’t crashed in recent years. If you look at a typical fund like Vanguard “CA intermediate-term tax-exempt bond fund”, symbol VCAIX, it hasn’t really dropped in value over the past dozen years.
You do realize that every single human stays alive, and continues to be alive every single day before they drop dead, right?
Good point.
My contractor colleague at work keeps predicting doom for California. he’s in his late 30s, his wife just gave birth to their third child, and his wife loves California.
But we talk about all the white professionals with net worth under $3 million but above $700,000 and household incomes above $140,000 who would jump ship if they only did not sign the purchase agreement on a house six times their household income.
Where would they jump to? Not sure. No jobs paying anywhere close in flyover country. But if they had no RE burden, they could still take huge wage cuts and have more money after taxes and lower expenses.
I’m to be in Tampa two weeks from today. My net search on apartments (and the ratings/reviews) produced very highly rated places that happen to have attached garages, washer and dryer inside the unit and dishwasher-full kitchen for up to $876 for 1 bdroom / 1 ba. The monthly rent is 65% of my current rent in L.A. - without dishwasher and without a washer and dryer in the unit. But my hourly rate will be 8% lower than what I earn now.
Slam dunk.
“Where would they jump to? Not sure. No jobs paying anywhere close in flyover country. But if they had no RE burden, they could still take huge wage cuts and have more money after taxes and lower expenses.”
Fleeing Californians could be especially well off if they didn’t insist on living the costly California lifestyle in their new environs. Heck, they might be able to stop working altogether if they weren’t so insistent on living large.
True. The younger engineers at work drive Lexus, Audi, and BMW cars. I only saw one contractor drive a luxury car and he only lasted six months about five years ago. Ironically the contractors have the higher pay. We know our high pay does not last forever.
A contractor friend of mine said the alcoholic software manager is trying to force me to take a pay cut because he suspects I’m paid much higher than him. Well I decided not to give the SW manager the satisfaction of seeing me get paid less than him. He certainly is not worth his pay. He was a junior engineer and got his SW manager position because he’s in the Asian network at work. He’s a pro at politics and manipulation, that’s all. Otherwise incompetent. I’ll probably be back in LA at the same client site in a year or two, but the corporate HQ is going to make a big and much needed overhaul in management. When a client has ten instances of nepotism involving 24 people, or ten percent of its site, it’s saying that family is more important than the person with the right skill.
ABQ is cool, if you like the outdoors and about as mild as a winter as you can get away from the coast with out the insane summer heat you get in the deserts. If I was a large CA business, I ould relocate there. Great airport, fresh air, not too big… yes some crime. Nice house for $250k
The reason we keep reading from the same script is because the state of California has relied on cheap tricks and magical thinking to balance its budget over the past three years, instead of solving the structural deficit.”
You don’t expect us to acually work to pay for all this ?? We need to sell more muni bonds its for the children…
The federal Government will give us the money after all we have, like Hollywood, and stuff you know
Nov. 21, 2010, 11:38 a.m. EST
Ireland confirms reports it will seek bailout
Related stories
* Ireland $164B rescue in works: UK Sunday Times (9:05a)
* Ireland confirms reports it will seek bailout (12:00p)
* Tax debate sharpens as Ireland aid talks continue (Nov. 19)
* Bank exposure drives U.K. readiness to aid Ireland (Nov. 17)
By MarketWatch
TEL AVIV (MarketWatch) — After weeks of insisting that it needed no bailout, Ireland conceded Sunday that it will need a financial rescue package from the European Union and International Monetary Fund, according to media reports.
Ireland’s finance minister, Brian Lenihan, declined to specify a figure except to say that it would be less than 100 billion euros ($136.7 billion), the reports say.
The Sunday Times of London had reported earlier that Ireland would seek a package valued at as much as 120 billion euros.
Lenihan said Ireland was running a deficit of $26 billion and could not finance that amount at current market rates, the reports say.
Lenihan also said Irish officials also were seeking backing for Ireland’s debt-burdened banks.
Earlier in the day, the Sunday Times of London report said the IMF, EU and European Central Bank were preparing a 120-billion-euro ($164 billion) bailout of Ireland, requiring the country to raise taxes and nationalize more banks.
Such a plan would have exceeded the 110-billion-euro bailout created for Greece earlier this year.
Ireland may request the rescue package as early as Monday, reports say.
…
requiring the country to raise taxes ”
Thats going to happen here in the USA sooner or later. After all the tricks to extend and pretend are used up.
Nov. 19, 2010, 1:05 p.m. EST
After Ireland, spotlight on Portugal, Spain
Lisbon vulnerable to vigilantes, but Madrid may put up a fight
Related stories
* Ireland $164B rescue in works: UK Sunday Times (9:05a)
* Ireland confirms reports it will seek bailout (12:00p)
* After Ireland, traders turn to Portugal, Spain (Nov. 20)
By William L. Watts, MarketWatch
LONDON (MarketWatch) — The Irish rescue isn’t about Ireland.
Any deal between the Irish government and the European Union and International Monetary Fund to resolve Ireland’s financial crisis is ultimately aimed at cutting short the turmoil in sovereign bond markets that policy makers fear could one day price Portugal or even Spain out of global credit markets.
Portugal, which like Ireland is a small economy with a relatively illiquid debt market, is seen as the next country likely to find itself in the sights of bond traders.
“If you see an Ireland package, we would hope that contagion effects would be limited,” said Ian Harnett, managing director at Absolute Strategy Research, a financial consulting firm. “But investors appear to be picking off weak countries one by one,” leaving Portugal “very much at risk.”
Irish bond yields soared in recent weeks on mounting worries about the government’s ability to meet the cost of rescuing its crippled banking sector. European officials upped the pressure on Ireland to apply for a rescue as turmoil spread to other peripheral bond markets, pushing up borrowing costs for Portugal and, to a lesser degree, Spain.
…
REALTY Q&A
Refi to buy and rent
Why refinancing a house, renting it out and then buying another one might not be such a good idea.
Articles like this one make the dollar appear quite attractive by comparison.
The horrible truth starts to dawn on Europe’s leaders
By Ambrose Evans-Pritchard Economics Last updated: November 16th, 2010
The entire European Project is now at risk of disintegration, with strategic and economic consequences that are very hard to predict.
In a speech this morning, EU President Herman Van Rompuy (poet, and writer of Japanese and Latin verse) warned that if Europe’s leaders mishandle the current crisis and allow the eurozone to break up, they will destroy the European Union itself.
“We’re in a survival crisis. We all have to work together in order to survive with the euro zone, because if we don’t survive with the euro zone we will not survive with the European Union,” he said.
Well, well. This theme is all too familiar to readers of The Daily Telegraph, but it comes as something of a shock to hear such a confession after all these years from Europe’s president.
He is admitting that the gamble of launching a premature and dysfunctional currency without a central treasury, or debt union, or economic government, to back it up – and before the economies, legal systems, wage bargaining practices, productivity growth, and interest rate sensitivity, of North and South Europe had come anywhere near sustainable convergence – may now backfire horribly.
…
They should.
Those who bet on recent trends tend to get slaughtered. You need to look at least 1-5 years ahead to get a clear picture of investing.
five years ahead will probably be 5% yields or more on T-bills.
How does it work again?
1) The Euro breaks up.
2) The EU breaks up.
3) The French army surrenders.
The “inferior” EU members get their throats slit.
The ones next up the food chain get knee-capped.
Nov. 18, 2010, 12:06 p.m. EST
More homes enter foreclosure process: MBA
Delinquencies, foreclosure inventory decline in third quarter
Related stories
* Greater share of homes enter foreclosure: MBA (Nov. 18)
* ‘Robo-signing’ gets a closer look on Capitol Hill (Nov. 19)
* Goodbye jobless benefits, hello Thanksgiving (Nov. 18)
* ETFs’ growth fuels fear of ‘flash crash’ repeat (12:01p)
By Amy Hoak, MarketWatch
CHICAGO (MarketWatch) — A larger share of homes entered the foreclosure process in the third quarter, though the delinquency rate for mortgages dropped, the Mortgage Bankers Association reported Thursday.
Mortgages at least one payment past due or in foreclosures fell to 13.78% of all mortgages outstanding in the third quarter, down from 13.97% in the second quarter and from 14.41% a year ago, on a non-seasonally adjusted basis, according to the Washington-based MBA’s latest delinquency survey.
But foreclosure starts hit 1.34%, up from 1.11% the previous quarter and down from 1.42% a year ago. And the percentage of prime, fixed-rate mortgages entering the foreclosure process hit a record high, the MBA’s data showed.
…
Another pleasant fall weekend, another bailout (yawn).
UPDATE 1-No size fixed for Irish bailout yet-Germany’s Schaeuble
Sun Nov 21, 2010 2:32pm EST
* Confident contagion effects can be contained
* Irish aid request not yet formally submitted
(Adds quotes)
BERLIN, Nov 21 (Reuters) - An international financial bailout sought by Ireland is in the works but its size has yet to be determined, German Finance Minister Wolfgang Schaeuble said on Sunday.
Schaeuble also played down EU policymakers’ fears that Ireland’s problems might spread to other euro zone members with large budget deficits such as Spain and Portugal, threatening a systemic crisis.
Irish Finance Minister Brian Lenihan said earlier that Dublin would seek less than 100 billion euros ($137 billion) in what would be the second rescue package for a euro zone country this year.
“One cannot name a concrete figure at the moment, we are in the middle of consultations. Ireland has applied and now it is being worked on with high priority,” Schaeuble told ZDF television.
Schaeuble later clarified his statement, saying that the application for aid “has been announced, not formally submitted”.
Schaeuble added that he was confident Ireland’s debt crisis could be contained without it spreading elsewhere in the euro zone. “If we now find the right answer to the Irish problem, then the chances are great that there will be no contagion effects,” he said.
…
There’ll be more.
I’m waiting for the Aussie and Canadian fireworks. Coming in less than a year.
Also the Dutch are in there. Dutch oven, anyone?
I’d love to leave my door unlocked at night, but this ain’t Canada.
Justin Hammer
Iron Man II
http://www.imdb.com/title/tt1228705/quotes
Just under 4.5 million live in the Republic of Ireland ….$137 billion dollahs…… equals????
The World Today with Eleanor Hall
An hour of current affairs background and debate from Australia and the world every Monday to Friday, 12:10 pm, ABC Local Radio and Radio National.
Are the sovereign debt dominos about to fall?
Stephen Long reported this story on Wednesday, November 17, 2010 12:31:00
ELEANOR HALL: To further analyse the economic and financial woes in the United States and the sovereign debt crisis in Europe, we’re joined now by economics correspondent Stephen Long.
Now Stephen, you’ve talked often about the sovereign debt problems flowing from these massive GFC bailouts. How serious are the problems in Ireland and Europe now?
STEPHEN LONG: It’s unclear at the moment how serious they will be, but the situation is clearly very, very alarming and it is serious, we don’t know exactly how it’s going to end but the problems are manifest and they are bad.
The real danger, Eleanor, is that we will see a sovereign debt domino effect. If Ireland is forced to accept a bailout then market investors will target other players with similar positions with their public finances and similar economic problems and you could see a domino effect where one country after another goes down with the so-called PIIGSs economies - Portugal, Italy, Ireland, Greece, Spain - we’ve already seen the bailout of Greece.
…
“The real danger, Eleanor, is that we will see a sovereign debt domino effect.”
But, but, but…
Subprime is contained,… er, I mean:
“Schaeuble added that he was confident Ireland’s debt crisis could be contained without it spreading elsewhere in the euro zone.”
Oasis condo auction in Fort Myers flops
http://www.news-press.com/article/20101120/RE/101120009/Oasis-condo-auction-in-Fort-Myers-flops
ack Eggspuehler of Cape Coral was at an auction Saturday to bid on units at downtown Fort Myers twin high-rise condo Oasis but missed his moment as prices fell before staging a modest comeback.
“The guy sitting next to me got the low,” which went for $147,500 before prices returned to the low $150,000s for the last 12, he said.
Jorge Perez, CEO of developer The Related Group of Florida, abruptly canceled the sale of 85 units as bidding neared an end on the first 40.
The prices bid were apparently far less than Related officials had expected, said real estate brokers who attended the auction at Harborside Event Center in Fort Myers.
Originally, Related had said 125 units would be auctioned: 40 absolute (highest bid takes it) and the rest with reserves, or minimum prices the bidders would have to meet. But Perez pulled the plug after the first 40.
“The prices bid were apparently far less than Related officials had expected, said real estate brokers who attended the auction at Harborside Event Center in Fort Myers.”
Florida condo price discovery is a bitch.
Florida bitch price discovery is a condo.
Same logic, different meaning.
“Victor Vangelakos talks about today’s auction of 40 units in the Oasis Tower I and about being the only person living in his building.”
Victor was Greek’d the old fashioned way.
Condos.
Poetic justice for all involved.
A favorite Playboy cartoon of mine was published about 30 years ago.
A guy and gal are getting undressed by the bed. She says “no, I’m not on the pill. I thought you said you had a condom-minium.”
Alright NYC dwellers. Who has the best pastrami. Katz or 2nd ave deli?
(This came out Friday, sorry if it’s already been mentioned)
http://blogs.houstonpress.com/artattack/2010/11/top_five_thanksgiving_day_para.php?page=5
Top 5 macy’s Thanksgiving Day parade themed balloons that should be.
Check out #1!
* LETTERS
* NOVEMBER 22, 2010
Are Rome’s Last Days a Distant Mirror for America?
Regarding Bret Stephens’s Nov. 16 Global View “Obama’s Air Guitar”: The willingness of President Barack Obama to transition the U.S. from a leadership role to a partnership role in a new world order is a reflection of his belief in and distaste for past misuse of American power and his need to divert more resources from foreign affairs to domestic priorities.
The disturbing aspects of this moment in history are the striking similarities between America’s current direction and events that took place in the late stages of the Roman Empire. Rome was the world’s only superpower in the late second century, A.D.; 100 years later, Rome was terminally ill, weakened first by internal corruption and unsustainable spending and then destroyed by the emergence of multipolar contenders for power. During the third century of decline it is estimated that the percentage of silver in Roman coinage dropped from 75% to less than 4%. That currency debasement led to massive inflation. At the same time, historians estimate that the Roman imperial bureaucracy grew about 35-fold. Citizens of Rome demanded that emperors provide subsidized food, public entertainment and public building (infrastructure) projects. Military spending and commitments were gradually scaled back.
…
You know something just occured to me about the tax-deductability of mortgage interest. In the places I’ve lived the local township raises money through property taxes, which most people pay through their mortgage payment. If mortgage interest becomes non-deductible then more money will flow to the Federal goverment, but it will be achieved by taking money away from local governments, first by the fact that property values will go down to compensate and second by the fact that it will be harder for local governments to raise property taxes. And local goverments all over the US are hurting.
It’s also interesting that a larger percentage of property taxes goes to pay for schools / education. The Federal government loves to pass programs that the locals have to comply with so now you’ve got a double whammy of local governments being forced (either through law or through market forces) to maintain high-quality educational systems while having am important avenue of revenue choked off.
I agree the deductability of the interest distorts values; my point is that I think axing it will have pretty interesting effects for local governments. Maybe school boards wouldn’t be able to pay huge salaries to their school boards as easily and that would certainly be a good thing.